After GEAR UP Audit, Frankenfeld Says State Must Take Deeper Look at Mid-Central Finances

Pat Powers is too steeped in the propaganda demands to offer any substantive analysis of the audit Mid-Central Educational Cooperative released yesterday of its handling of the federal GEAR UP grant funds. He can only recycle in a sidelong political screech his weak charge that discussing corruption at Mid-Central and the Department of Education is equivalent to dancing on children’s graves.

So Pat, is forensic economist Don Frankenfeld dancing on children’s graves when he says Eide Bailly’s no-smoking-gun review of Mid-Central’s GEAR UP books is only a first step in what needs to be a deeper investigation?

Don Frankenfeld
Don Frankenfeld

Frankenfeld says the audit turned up some minor discrepancies showing what he calls some sloppy accounting procedures at the cooperative but no major obvious problems.  He says a second more extensive audit is needed to take a deeper look at the payments made to each vendor.

“I think enough has happened, red flags as they say, including the tragic deaths of two people who worked at the co-op and their children.  Enough questions, I think have been raised that I think a thorough analysis is appropriate, particularly  when we’re talking about more than $6-million in state and ultimately federal money was expended,” says Frankenfeld [link added; Charles Michael Ray, “Frankenfeld: Deeper GEAR UP Audit Needed,” SDPB Radio, 2015.12.03].

Ah, but Frankenfeld is promoting the Anti-Corruption Act ballot initiative with Republican Dave Volk, Independent Rick Knobe, and Democrat Rick Weiland to create an ethics commission that could investigate the kind of corruption that appears to have broken out at Mid-Central, so I’m sure Pat will dismiss all of them as political vultures. Such denial is far easier for a political hack like Pat than admitting, analyzing, and solving corruption in South Dakota government.

*     *     *

Speaking of Mid-Central, the audit they paid Eide Bailly to conduct only looked at “GEAR UP reimbursements paid to MCEC” by the South Dakota Department of Education “for the time period of July 2013 through September 2015.” It does not include the $233,925.99 in GEAR UP money disbursed to MCEC by DOE in November 2015:

SD Dept. Education payments database, screen cap 2015.12.04
SD Dept. Education payments database, screen cap 2015.12.04

Recall that Education Secretary Schopp cancelled Mid-Central’s GEAR UP contract by phone on September 16 and in writing on September 21. In the September, October, and November MCEC minutes, I find 42 checks to vendors tagged “GEAR UP”—the vast majority of them, 34, in September—totaling $121,958.81. So there must be another $111,967.18 in GEAR UP expenses that MCEC wracked up in previous months that it simply hadn’t submitted for reimbursement to DOE prior to the contract cancellation… or Eide Bailly needs to call Don Frankenfeld to take a second look at the books.

30 Responses to After GEAR UP Audit, Frankenfeld Says State Must Take Deeper Look at Mid-Central Finances

  1. It’s almost as if the South Dakota DOE, in an attempt to get it hands on as many federal dollars as possible — because it’s apparent our state government lacks the will and therefore the means to adequately fund education — had counted on Mid Central as a way to launder as much federal revenue it could find. To the tune of over $100,000 a month. A lot of money flowed through the Platte office every month, and instead of being used to help Native American youth, it appears a portion of it went toward building a huge house, a $900,000 private gym, and if the tap hadn’t been shut off by the DOE, a new indoor swimming pool. Do we really know that something similar hasn’t been going on at any other educational cooperatives in South Dakota that the SD DOE has used to try to funnel federal dollars to South Dakota?

  2. Dave, you raise an excellent point about the rest of the state’s education co-op’s. (Anybody remember how these things were created during the middle of a legislative session with nary an objection, hardly any debate about 10 years ago?)
    But if SD DOE wanted to use a co-op to launder federal grant funds, why would it turn around and pull a grant from that co-op? From afar, it looks more like some co-op officials took things way too far and DOE couldn’t look the other way any longer. Or DOE was asleep and finally woke up.

    As for the audit, from what I can see all it does is track the expenditures – $100k was submitted for payment to, say, Rick Melmer, and Melmer was paid that $100k. It doesn’t delve into whether such transactions were warranted (someone tell me if I missed something here) and it doesn’t examine transactions carried out by subcontractors. Which we all know is where the bulk of the graft went on. Forensic, you say?

    So solicitor Swier can tout this audit as vindication and a clean bill of health and frame it and hang it on his wall. The rest of us can take it to the restroom and wipe with it.

  3. Connect the dots to the SD Board of Education.
    Kelly Duncan—see previous articles, sweetheart consulting contracts
    Stacy Phelps—was on Board until Sept. when the Governor had the revelation that there was a conflict of interest
    Julie Mathiesen—Director of Technology and Innovation in Education (TIE), a regional professional development organization based in Rapid City. TIE is the west river equivalent to MCEC. Someone should look into their contracts.

  4. David Newquist

    It looks as if the audit was in fact a financial audit, not a forensic audit, which looks for fraud and diversions of money that do not contribute directly to the purpose of an enterprise. Audit reports of government agencies used to include observations on wasteful and superfluous expenditures. Forensic audits would specifically track money to its ultimate use. For example, for a line item such as “Grant Agreement — Gear Up,” the audit would break down exactly what that expenditure covered. The Eide Bailly report does not provide any such accounting. It merely matches expenditures to line items, which provides no accounting of on what and how the money was spent. But then, my reporting experience on audits was made in ancient times when terms such as “forensic audit” had different meanings.

  5. mike from iowa

    Why would the state want to fully fund any program if they can get a compliant US congress full of right wing varmints to hand them federal dollars with zero oversight?

  6. I’m not a mathematics major, but this doesn’t add up:
    “For my work I received 43,000 dollars a year. I have an unusual skill set, years of experience in many fields and a willingness to undertake new tasks as assigned.”
    Lerdal, Darla 116,331.32
    Audit- October 2013 through August 2015

    Something stinks or is there another Darla Lerdal?

  7. Darla’s figure’s don’t add up, Oldhag, but perhaps the audit figures include benefits plus salary? But I also wondered how Darla Drew got paid more than Stacy Phelps, who was running the whole program, right? That’s what doesn’t add up for me.

  8. larry kurtz

    Frankenfeld is a political opportunist of the highest order. Nobody is independent making the motives for a witch hunt with no possibility of resolution highly suspect.

    Get grips, people.

  9. Lanny V Stricherz

    Folks, We have watched our State government holler about smaller Federal government and not to interfere in State projects, but then watch this type of corruption and it is not limited to just once in a while. In 2004/05, I contacted both John Thune and Tim Johnson’s offices as well as that of SHS and asked that they not support a Federal grant from the highway fund to move the rail tracks in DT SF. At the same time I wrote a LTE to that local newspaper suggesting the same. In July of this year, that same local paper offered this:
    “The city of Sioux Falls is poised to announce a deal that would cap a decade-long project to remove the downtown rail yard, freeing up about 10 acres of land for potential development.

    The deal with BNSF Railway and the Ellis & Eastern Railroad would cost close to $30 million. It would include the sale of land for about $6.7 million, nearly $15 million to BNSF for the loss of the yard and another $6 million to pay for other upgrades and connectivity.

    The money would come from a $40 million earmark that Congress approved in 2005. At the time, downtown boosters and the Sioux Falls Area Chamber of Commerce declared it as a top priority, and Sens. John Thune and Tim Johnson secured funding in the 2005 highway funding bill.

    Mark Clausen, a supervisory civil engineer with the Federal Highway Administration, said it’s unclear how much money remains with the earmark. Some of it reverted back to the federal government and some of it was used to pay for project expenses.”

    If memory serves, there had been several million dollars spent within the first five years, with absolutely no further work done on the project. And oh by the way, what does moving the rail tracks in downtown Sioux Falls have to do with the Federal Highway program, which needs every dollar it can get to keep the Interstate highway system in decent repair?

  10. Eide Bailly can balance the checkbook (as in audit) so no big deal if bills match checks.
    In my checkbook, my hubby has no idea that a lot of those bills are useless stuff from Ebay.
    He never looks and I don’t tell him. However, he does notice packages arriving.

    In this case, where and for what did those monies go? And no one noticed?

    Maybe those red kids were going to be invited to shoot hoops and for a swim?
    Or invited on cruises and deluxe trips?
    Or to enjoy a state-of-the-art basement surround sound HD theater at the compound?

  11. Anyone know why the audit was only for Gear-up grant while SW as we all know was the BM at MCEC with lots of grants and why only from October 2013 through August 2015?
    August of 2015- 4 children still had a future.

  12. reminds me of the jim jones mass-suicide “compound” in guyana.

    hubby oversight! funny

  13. Roger Elgersma

    I thought the forensic audit was the deeper audit. Do they keep changing the wording to confuse people so they can make it all work ok until someone finds a problem and then they decide on another audit when they should have found the problem years ago.

  14. Jackie Jessop Rising

    “Dave, you raise an excellent point about the rest of the state’s education co-op’s. (Anybody remember how these things were created during the middle of a legislative session with nary an objection, hardly any debate about 10 years ago?)”

    The Co-Ops have been around for quite some time. They were created when school districts joined together (possible under South Dakota Law) to be able to provide more services within their own schools. I think what you are referring to is the ESA (Education Service Agencies).

  15. Jackie Jessop Rising

    **I should add that most, if not all of the ESAs are housed within the cooperatives.

  16. Oldhag, Whither is right: the tally includes benefits and salary for all individuals concerned, plus over $5,000 in reimbursements for travel, phone, etc. In the audit report, I see DDL’s monthly salary listed as $3,605, which would be $43,260 annually. In Nov 2014, that monthly salary rises to $3,749.20—just about $45K/yr. Benefits range from $1,154.03 to $1,192.60 per month.

  17. Jackie, tell me if I’m saying this right: the ESAs are entities created by Secretary of Education Rick Melmer and grafted over the existing co-ops.

  18. David Newquist, has that definitions of “forensic audit” changed over time? I’m not an expert, and I invite others to contribute their definitions, but one definition I find online says, “A forensic audit is the process of reviewing a person’s or company’s financial statements to determine if they are accurate and lawful.” That limited definition would seem to apply to the limited audit Eide Bailly performed on MCEC’s dime.

  19. Jack Klugman was forensic. His work could be used in a court of law.
    Forensic reporters would be newspaper reporter that only report the facts and not their opinions.

  20. Bob Newland

    It’s not a witch hunt. It’s a “which” hunt.

  21. Did anyone even have a remote thought this would result in anything else? N are we surprised by Dons statement? NOT

    Show me the checkbook the hubby said n show me what the hell this “gizmo” is you bought….from your sister….

    I like the audit game….that’s what it is a game. Necessary but sometimes the rule book leaves out the real rule? Step up people, pee in the cup, whos on steriods?

    N I personally don’t care if it’s Edie Bailly (anybody remember Arthur Anderson? Lol) , joe bookkeeper, or who. They don’t get into the dirt for their own client. They work to have a good audit..throw in a couple of “defiencies” to make it look good n call it a day.

    Cory et al on this blog have gleaned more issues from minutes, interviews, articles etc than the auditor has. If it’s OK that Staceys daughter was on payroll, if Moore was greased, are not Edies problem. That is another type of investigation. . It’s called right or wrong.

    Attach the itemized detailed amounts, who owns those business entities paid, the relationships of the individuals paid, the service or product delivered, the co-op authorization, the various legal authority to those dollars audited by “Edie” n now we are getting started. N don’t forget what Fed Dept of Ed requires. Those pesky matching in kinds..

    Where’s the feds? Gotta be around..with or without Seiler I hope.

    The chair of the board just recently stated “trust us” we are here for the kids. Too bad about 20-30 percent was legally stolen (is that an oxy?)

    Oops…nothing to see here.

    Have a great weekend all.

  22. Also…Professional standards. (SAS 99) requires that inquiries be made by financial statement auditors of risk management and others as to their knowledge of fraud, possible fraud and fraud risk factors as they relate to material fraudulent financial reporting and misappropriation of assets.. based on the results from these inquiries and other audit procedures, risks of material misstatements resulting in fraud are assessed and appropriate audit response are developed to limit audit risks.

    These confidential inquiries can be all kinds of questions. . submitted to staff and BOARD members. From mundane questions about procurement to …do you know anybody involved with organization that is excessively gambling, change in lifestyle , martial issues, finance problems. ..etc.

    There’s more.. such as…any disgruntled employees that feel they are no being adequately compensated so may rationalize fraud.

    N more… like anybody building a freaking mansion?

    Board members and staff at mid central in previous years should have received such confidential questionnaire from their auditors if the auditor was any good. Hope they all sleep well at night.

  23. Francis Schaffer

    Here is what I found on GEAR UP website, this was the award in 2011 so it has relevance; I wonder about the data that has been obtained with the evaluation that the final line indicates is/was/will be done.

    PR Award Number: P334S110022
    Grantee: South Dakota Department of Higher Education
    Director’s Name: Roger Campbell
    State: South Dakota
    Year One Funding: $3,483,736
    Telephone Number: (605) 773-3783
    E-mail Address:
    This grant application proposes a promising program, called the GEAR UP South Dakota program
    (GUSD), which aims to significantly increase the number of low-income students who are prepared
    to enter and succeed in postsecondary education. This is an important mission for the State of South
    Dakota, as significant educational disparities continue to exist between Native American and nonNative
    students in the State.
    To achieve this goal, the program has identified the following three objectives: (1) increase the
    academic performance and preparation for postsecondary education of GEAR UP students; (2)
    increase the rate of high school graduation and participation in postsecondary education for GEAR
    UP students; and (3) increase the educational expectations of GEAR UP students, and increase
    student and family knowledge of postsecondary education options, preparation, and financing. The
    program will serve a priority cohort of 6,600 students each year over a seven-year period. Students
    will begin participating in the sixth grade, and will be followed through their first year at an
    institution of higher education. GUSD will offer:
    1) Foundational services to all grade levels;
    2) Middle school enhancements;
    3) Middle school to high school transition services;
    4) High school enhancements;
    5) High school to postsecondary transition services; and
    6) Other support services such as professional development and parent services.
    In terms of outcomes, the program expects to increase participating students‘ attendance and course
    completion rates, grade point averages, state assessment scores, SAT/ ACT completion rates, and
    high school graduation and postsecondary enrollment rates. Participating students and their parents
    will also demonstrate an increase in knowledge regarding postsecondary benefits, academic
    preparation, costs, and financial aid opportunities.
    GUSD will be implemented by a diverse, experienced, and committed group of partners, led by the
    South Dakota State Department of Education and its Office of Indian Education. Partners include the
    Mid-Central Educational Cooperative, American Indian Institute for Innovation, Oceti Sakowin
    Education Consortium, South Dakota Board of Regents, Lakota Funds, Wells Fargo, Microsoft, and
    the DIAL Virtual School. The program will be evaluated through a rigorous, well-designed, and
    independent evaluation.

  24. mike from iowa

    Klugman was a Medical Examiner/Forensic Pathologist on telly. Solved all mysteries in an hour minus commercial breaks. And his honesty was above reproach.

  25. Lanny V Stricherz

    After reading Francis Schaffer’s post at 05:29 this AM, what have I been missing in all of this. According to that post, these monies were to be dedicated toward improving Native American children’s chances toward getting post secondary education. Wasn’t a lot of this money spent in other places than on reservations or in places where those children would have been living or being educated?

  26. Francis, you just got me reading:

    Roger Campbell is cited in the GEAR UP grant award as the GEAR UP director. He was Daugaard’s first head of the Office of Indian Education, 2011–2012. Roger Campbell is married to Corrie Ann Campbell. Corrie Ann Campbell worked as a facilitator for Mid-Central Educational Cooperative. In July 2011, Mid-Central sent Corrie Ann Campbell to the national GEAR UP conference in San Francisco.

  27. Bill Dithmer

    Done with a blues riff in open D tunning with a wide open neck. With a tunning like that you cant get it wrong so grab some steel and let er rip.

    From deep inside the studio that is Carson House, its “THE EB5 BLUES”

    Now Joop kept gettin richer
    Him and Cardboard Mike were pals
    But I think they had a falling out
    Cause they sure aint friends now
    They both know a lawyer
    I think his name is Sveen
    In the middle of that mess up there
    He sure aint Mr Clean

    They have problems in Dakota
    And they have everything to loose
    Just when things were gettin all GEARED UP
    They caught the EB5 blues

    Well Bendas mind was broken
    Thats the story we were told
    They found a shotgun by his side
    In an old tree grove
    They say he double billed his friends
    That sure was bad to do
    But he didnt die from craziness
    He died from what he knew

    They have problems in Dakota
    And they have everything to loose
    Just when things were gettin all GEARED UP
    They caught the EB5 blues

    They say Scott was a monster
    He killed his wife and kids
    Hey did that really happen
    Or was it someone else that did
    The family lived beyond their means
    But no one seemed to care
    Things sure aint what they should be
    Or the safe would still be there

    They have problems in Dakota
    And they have everything to loose
    Just when things were gettin all GEARED UP
    They caught the EB5 blues

    Just when things were gettin all GEARED UP
    They caught the EB5 blues

    The Blindman, someone had to do it! Feel free to add verses as need be.

  28. Lanny V Stricherz

    Does South Dakota have a new poet laureate to take David Evans’ place? Great job, Blindman.

  29. Jackie Jessop Rising

    “Jackie, tell me if I’m saying this right: the ESAs are entities created by Secretary of Education Rick Melmer and grafted over the existing co-ops.”

    Yes, you are correct.

  30. Bill Dithmer..
    You’ve GOT talent!
    Crazy good.