G-C overpayments: How did this happen?

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GREENFIELD — While the answer isn’t clear as to why three former Greenfield-Central administrators were overpaid more than $650,000, the payments — split among some 200-plus paychecks over nine years — never stood out in the books as irregular, the superintendent says.

Last week, an Indiana State Board of Accounts audit revealed three former top G-C administrators — business manager Tony Zurwell; assistant superintendent Christy Hilton; and associate superintendent Ann Vail — had been overpaid for health insurance and had under-withheld insurance premiums from 2010 to 2018. The corporation has since changed payroll policies and simplified employee contracts.

Those moves point to shortcomings in G-C’s oversight and show that a misinterpretation of old contract language is at the heart of an investigation involving the three longtime administrators, all of whom have been ordered to pay back the money.

This week, the Daily Reporter sat down with Greenfield-Central Superintendent Harold Olin and Nate Day, G-C’s business manager, to discuss the audit’s findings and examine the district’s response.

How did this happen?

The inquiry began in late August 2018. Olin said near the end of each August, corporation officials tend to wrap up collective bargaining issues with teachers; he would then start communicating with the business office about administrator salaries and potential raises. Olin said that was a long-standing policy before he became superintendent in 2014.

Last year, Olin said, he noticed an “anomaly” in employee salaries.

“I just saw something I hadn’t seen before,” he said.

Olin and other school officials sat down with Zurwell, Hilton and Vail individually to ask them about the discrepancy.

“We gave people the opportunity to explain the anomaly,” Olin said. “When there wasn’t what we considered a reasonable explanation, that’s when the administrative leave was put into effect so we could have an environment here that would allow people to look at it objectively. It would be hard for someone to come in from the outside and do that audit with those three individuals here.”

All three administrators were placed on leave in September 2018. Zurwell, who had been with G-C for 13 years, abruptly retired at the conclusion of the investigation. Vail retired and Hilton resigned last school year; both had worked more than 20 years for the corporation.

Olin ordered an independent review by a third-party school business official and reported the issue to the State Board of Accounts.

The audit revealed that each administrator, from 2010 to 2018, received an additional $116,607 in pay. Zurwell, who oversaw the corporation’s finances as the business manager, also under-withheld $95,031, and Hilton and Vail each under-withheld $103,489.

So, how did that occur for so long?

“Obviously the checks and balances we had in place at that time missed it,” Olin said.

Day noted the payments leaving the district’s coffers gradually increased over those nine years. Although it adds up to more than $650,000, it’s on average about $72,000 a year or about $6,000 a month.

In ledgers that chronicle revenue and expenditures in a $30 million budget, such anomalies would be difficult to spot, Olin said.

“Those are pretty insignificant numbers. We have enough variables that it’s going to fluctuate from month to month,” Olin said. “$6,000 in a month, or $3,000 within a two-week pay period, isn’t going to stand out like a sore thumb — not with the volume we’re talking about.”

There’s also natural growth in expenditures year over year, Day said. The corporation’s health insurance costs — the source of the additional compensation, according to the audit — has been on the rise. Day said when the corporation budgets for health insurance six months or so in advance, it typically builds a “cushion” in the budget in case of any unforeseen insurance costs. If a corporation spends about $3 million on health insurance costs a year, he said, an extra $100,000 of cushion isn’t uncommon.

Olin added that none of the former administrators asked him about the additional compensation.

Health insurance, wordy contracts

According to the audit, the discrepancy in compensation was due to how health insurance had been calculated into each of the administrator’s salaries since 2010.

Greenfield-Central administrators receive an “insurance credit” added to their bi-weekly pay for health insurance, according to administrator fringe benefits documentation. Zurwell, Hilton and Vail also had separate seven-page contracts that stated they received an amount of money each year “to purchase medical insurance offered by the Corporation.” They were the only administrators in the corporation to have a contract written that way, Olin said.

But even though the benefits were listed in two different types of contracts, language in each of their position-specific contracts state that, “to the extent that benefits for other certificated employees duplicate a benefit provided pursuant to this Contract, the benefit provided by this Contract shall be the benefit provided to (the administrator).”

In other words, their position-specific contracts would supersede the insurance credit offered to all administrators, and they were not entitled to collect both benefits.

The audit states that “beginning in November 2010, Zurwell made calculations for compensation, which not only added the cost of the family health insurance… but also included the amount given to other administrators bi-weekly as an insurance credit. This, in effect, added insurance amounts as additional compensation twice (for Zurwell, Hilton and Vail).”

Administrators pay $1 a year for health insurance, Olin said. The corporation contributes the remaining amount, about $16,000 per administrator. Olin said the corporation for a few years in that nine-year time frame required administrators to pay $4,000 a year for health insurance coverage, deducted in increments from each biweekly paycheck.

Olin said the language in the position-specific administrator contract is commonly used across the state. Zurwell, Vail and Hilton, he said, first signed that type of contract in 2005. During those first five years — until 2010 — the contract was interpreted and health insurance was paid out correctly, Olin said.

The audit also states there was “no effective oversight or review of the compensation calculated … by Zurwell. … There was no documentation indicating that anyone had reviewed the calculations to ensure that the correct amounts were being paid and withheld.”

What actions are in place now?

Ever since the internal investigation, Olin said the corporation has simplified contracts down to a one- page teacher’s contract — with the addition of an administrator’s addendum. It specifies a salary, number of hours per day and number of days per year for the employee, he said.

The district also beefed up its checks and balances for payroll. Day said payroll and contract information will now be spelled out plainly for the school board to read and approve. Olin said they not only made the language and structure clearer for school officials, but for members of the public.

Day also said once the board approves financial documents, he and the corporation treasurer will each review payroll independently. If anything needs clarified, Day said he’ll show the information to Olin as well as Scott Kern, director of human resources, to double-check the numbers.

Olin said his involvement with payroll has increased following the investigation. A week ago, Olin said the business office sent him a payroll report that shows compensation and deductions for employees. He reviewed the numbers and made sure they aligned with the approved salaries.

The audit was handed over to the Hancock County prosecutor’s office and the Indiana attorney general’s Office. Brent Eaton, county prosecutor, has also been working with the Indiana State Police on the case.

Olin said corporation leaders are now waiting to see what happens next. The State Board of Accounts has ordered each former employee to pay back the corporation the $651,832 in additional compensation as well as $33,765 for special investigations costs to the state.

The prosecutor and state police could pursue criminal charges if the evidence warrants it.

Zurwell could not be reached for comment. Vail’s attorney, David Hensel, declined comment. Hilton’s attorney, David E. Deal, did not return a message seeking comment.