Trustee alleges illegal transfers from operations to cover Title I; attorney urges interfund loan policy

A board member at the School City of East Chicago meeting accused the district’s finance office of moving operations dollars to cover Title I costs and called the practice illegal, prompting public comment and a recommendation from the board attorney for clearer interfund borrowing rules.

During the board Q&A after Superintendent Dr. Steven Bornay’s grant update, a trustee asserted that the CFO, Ms. Simmons, “started taking monies for $4,471,698.73 out of operations funds, which is illegal.” The trustee further said the board had not received award letters showing final state approval and raised alarm about borrowing against anticipated federal reimbursements.

Board attorney (Attorney Harris) and Superintendent Bornay responded in separate remarks. Harris noted two concerns: the immediate fiduciary risk of borrowing against unapproved funds and the absence of explicit board policy limiting such borrowing. Harris recommended the policy committee draft a rule that defines when operations funds can be used to cover grant‑funded positions and said the board should consider approving interfund loans by resolution so such moves are discussed and authorized up front.

Bornay acknowledged that borrowing from operations in anticipation of reimbursement has been a past practice in some districts and said the district has used operations funds temporarily while awaiting federal reimbursement: “We operate knowing that in some courses, we'll say in good faith, we have traditionally continued to run schools by borrowing from the operations fund,” he said, while also stressing the uncertainty that comes when final approval is not guaranteed.

Public commenters amplified concerns. Helen Steinbeck, who spoke during public comment, urged accountability and asked whether additional grants had been applied for and what school improvement work the director had pursued. Linda Randolph said the issue was harming the district’s culture and climate, urging board members and staff to “come together to try to bring some closure.”

The trustee’s allegation that $4,471,698.73 was moved from operations appears in the meeting record; district officials at the meeting did not produce an award letter on the spot and described the IDOE status information on the document as indicating “not yet approved.” The matter of alleged improper transfers was raised publicly at the meeting and will likely prompt follow‑up in committee with a request for documentary evidence.

Next steps: Attorney Harris’s recommendation directed the policy committee to consider a borrowing policy and the board’s finance committee to examine the district’s cash‑management practices and interfund loan documentation. The board did not vote on any motion related to the allegation during the meeting.