Auditor Yost Declares East Cleveland in a State of Fiscal Caution

Thursday, January 5, 2012

Columbus – Auditor of State Dave Yost declared a state of fiscal caution for the City of East Cleveland in a meeting today with city officials.  This designation provides the city with an early warning so it may address fiscal issues before they become more serious.

“Both the mayor and city council are seeking creative solutions to the city’s fiscal challenges,” Auditor Yost said.  “New development, outsourcing and regional partnerships are all being utilized to help bring stability to this community.  I encourage them to continue to pursue these types of opportunities.”

A review of financial data at November 30, 2011 identified 15 funds with deficits totaling more than $5.8 million.  These deficits exceed two percent of the estimated revenue to those funds by more than $5.4 million.

Under the declaration and in accordance with Revised Code 118.025, the city has 60 days to submit to the Auditor of State a plan to correct the budgetary conditions that led to the declaration of fiscal caution, including eliminating deficit fund balances.

The authority to declare a state of fiscal caution for municipalities was established through the course of Ohio’s biennial budget passed last year.  Auditor Yost believes that, rather than through sudden declarations of fiscal watch and emergency, local governments should be provided with earlier notice of financial concerns.  Instead, these political subdivisions should have access to the same tool provided for school districts, allowing a declaration of fiscal caution. Under fiscal caution, the subdivision has an opportunity to make adjustments to avoid a declaration of fiscal watch or emergency.

East Cleveland was previously declared in fiscal emergency on September 9, 1988 for deficit funds and treasury deficits.  The city was released from fiscal emergency on February 6, 2006.

The fiscal years 2006, 2007 and 2008 financial audits of the City of East Cleveland were also released today.  Citations related to budgetary problems were issued.  The city did not make required payments to the Ohio Police and Fire Pension Fund during the audit years.  As of November 3, 2011, the city owes $221,021 for 2006, $279,080 for 2007 and $283,521 for 2008.  A questioned cost of $611,159 was issued in the 2007 audit due to a possible misuse of U.S. Department of Housing and Urban Development grant money.

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The Auditor of State’s office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 5,600 state and local government agencies.  Under the direction of Auditor Dave Yost, the office also provides financial services to local governments, investigates and prevents fraud in public agencies and promotes transparency in government.

Carrie Bartunek
Press Secretary