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Waubun district dinged for $400,000 in Impact Aid;

The Waubun-Ogema-White Earth School District was guilty of an expensive mistake in one area, but was largely exonerated in six other areas looked at by the State Auditor's Office after a petition request by residents.

The State Auditor's Office looked at the district's state-funded Alternative Learning Program, federally-funded Indian Education grants, payroll allocations for several positions, payments for goods and services, disposal of surplus property, a "First Grade Preparedness" grant, and the federally funded Impact Aid program.

The petition drive was spearheaded by former Waubun-Ogema-White Earth school board member Kelly Hall, who served from 2001 to 2004, and who teamed up with a group of concerned taxpayers from the Bad Medicine Lake area.

The biggest problem revealed by the State Auditor's investigation was an overpayment to the school district of about $400,000 from the federal Impact Aid program.

Impact Aid is designed to compensate school districts for the loss of traditional revenue from federal sources.

Parents qualify who do at least one of the following: Pay no income taxes or vehicle license fees; live on non-taxable federal property; shop in stores that do not generate taxes; or work on non-taxable federal lands.

Impact Aid dollars go directly into a school district's general fund to be used as the local school board sees fit.

"The petitioners were concerned that the number of students reported on the application for the district's Impact Aid was overstated. They believe there has been a large unexplained increase in Impact Aid received by the district," according to the State Auditor's report.

Impact Aid for Waubun-Ogema-White Earth did indeed increase dramatically from the year 2000, when the district received $379,000, to 2005, when it received $1.13 million in impact aid.

But that tracks with hikes in Impact Aid received by all Minnesota school districts, thanks to a "significant overall increase" in the aid, according to the state auditor's report.

The district messed up, however, by reporting 62 children eligible for Impact Aid because their parents were employed by the Shooting Star Casino in Mahnomen, which the district claimed on its application was a "pre-populated tax-exempt federal property."

The auditors knew that was incorrect because they have worked with Mahnomen County, and were aware that the casino paid property taxes through 2005. The casino is also included on the county tax rolls for 2006 and 2007, although the tribe has not paid taxes on the property since 2005.

The tribe has petitioned the Bureau of Indian Affairs to have the casino property placed in trust status, and the county has filed an appeal. If the tribe is successful, those 62 kids will again be able to be counted towards the Waubun district's Impact Aid revenue.

Now, however, the district must repay about $400,000 in Impact Aid overpayments it received as a result of listing the Shooting Star employees.

Because the federal government is several years behind in sending its Impact Aid checks out, the district will simply receive less than it otherwise would have.

In March of this year, for example, it received about $130,000 less on its Impact Aid check for Fiscal year 2004, and it will receive about $131,000 less than it would have again next year and $138,000 less the year after that, according to the auditor's report.

After that, the district will be square with the federal government's Impact Aid program.

Waubun-Ogema-White Earth Board Chairperson Jim Helliksen said the district failed to change a once-correct Impact Aid form relating to the Shooting Star property when the property's status changed, and that's what caused the problem.

The auditor's report said it's not known whether that is the case, or whether the form was originally submitted in error.

The district was correct in all other aspects of its Impact Aid program, and concerns from petitioners about the other six areas covered by the investigation proved largely unfounded, according to the report.

For example, petitioners were concerned about whether the Alternative Learning Program director, a full-time teacher and coach, was able to devote enough time to the ALP to justify being paid from those state funds.

The investigation showed that was not a valid concern -- the district spent its ALP funds appropriately.

The petitioners were concerned about Federal Indian Education grants, that there was no parent advisory committee as required and that signatures on the Parent Committee Approval Form had been forged.

The 2004 grant did appear to pose a problem for the district. The signatures on the parent committee approval form appeared to be written by the same person, and "upon inquiry, the superintendent disclosed that the form had been signed by a single employee of the district allegedly under verbal proxy of the Parent Committee members," the auditors reported. The district also was not able to provide minutes or other documentation to support the existence of a parent committee for 2004.

The documentation and signatures were in order for 2005 and 2006.

Hall said she believes the federal grant went to other district programs in 2004, and was not used to improve education specifically for Indian students, as intended. She said the same thing happened in earlier years also, when she was on the board, but the auditors did not look back that far.

Petitioners were also concerned about payroll allocations for the Title 7 and mid-level ALP teacher and the Title 1 director. The investigation found no problems in that area.

Petitioners also had concerns about certain payments made by the district, specifically for property purchased in 2004 for a parking lot for the Ogema school, the cost to build the parking lot, and cost of a baseball diamond in Waubun.

Investigators found that low bids were correctly accepted to build the parking lot and the ball park.

However, the district paid $50,000 for the parking lot property, which was scheduled to be valued by the county at $19,500 for taxes payable in 2005 had it not been sold. The property, which was sought-after because it adjoined school property, was not on the district's capital asset listing and not reflected in its audited financial statements.

Petitioners were also concerned about the disposal of surplus property during the construction and remodeling of two school buildings in 2003 and 2004.

According to the petitioners, the district did not sell the surplus property at a public sale. Many items were just left outside for anyone to pick up.

"Specific concerns were that employees of the district, including the superintendent, obtained surplus property," the auditors said.

But the investigation found that the district had, in fact, properly advertised for sealed bids for surplus property in the Mahnomen Pioneer on May 8. 2003 and May 15, 2003, with the bids going directly to the superintendent.

Under state statute, Superintendent Boyd Bradbury was technically not eligible to bid on items, but he bought several items, purchasing a gas convection oven for $1,000, a four-burner gas range for $100, a dishwasher booster heater for $1, and an assortment of wood doors and trim for $20. The superintendent told auditors he submitted bids for the items.

And finally, the petitioners had concerns that grant money for a First Grade Preparedness program was not being properly spent.

The investigators found no problems with how funds were spent for that program.

All in all, the special audit shows the district has handled things pretty well, said Helliksen, the school board chairperson.

"The special audit was going on for over a year," he said. "Any time somebody audits you, they are going to find discrepancies."

Although the district took its lumps in a few areas, the investigation showed many allegations were unfounded and it cleaned up a lot of rumors, Helliksen added.

"The district has to pay about $17,000 for this audit," he said. "(And) I don't see a lot of good coming out of it."

For her part, Hall was unhappy with the scope of the investigation.

Although the audit team spent 265 hours conducting the investigation (which was not an official audit) and writing a report, it did not take as comprehensive a look at the district's finances as her Alliance for Educational Reform group wanted.

The group collected signatures for a petition that asked the state to conduct an audit and examine the books, records, accounts and affairs of school district No. 435 covering a period from July 1, 2003 through June 30, 2005.

"The audit team limited the scope of the audit to less than what was requested," Hall wrote in a summary for this newspaper. "They examined seven areas of concern limiting the years ending June 20, 2004 and 2005 ... No one walked away happy with the results."