Schoenfish & Co: We Did Our Job Well, But Education Dept Maybe Didn’t

Schoenfish & Company signNobody from accounting firm Schoenfish & Company accepted the invitation to testify before the Government Operations and Audit Committee next week about its auditing of the scandal-sunk Mid-Central Educational Cooperative. But someone in the Schoenfish office (probably not accountant and legislator Kyle Schoenfish, who has distinguished himself with a defensive reticence and an inability to write coherently) did compose a series of concise and, where necessary for its purposes, evasive responses to the 31 questions GOAC sent to Kyle’s dad and firm chief Randy Schoenfish on August 4. The auditors undercut the Department of Education’s claim of diligent oversight of Mid-Central financial activities. And for good measure, the auditors also tell GOAC to jump in a creek.

Schoenfish & Company doesn’t tell us much new case-cracking information. Their response to GOAC tells us that “approximately eight different people” have worked on Mid-Central audits for the “approximately 20 years” that the firm reviewed Mid-Central’s finances. The last five audits Schoenfish & Company conducted of Mid-Central before ceding audit responsibility to the Department of Legislative Audit took from 145 hours on FY2010 to 172 hours on FY2014:

  • Fiscal Year 2010: 145 hours
  • FY2011: 149
  • FY2012: 152
  • FY2013: 147
  • FY2014: 172

Schoenfish & Company notes that Mid-Central was one of “roughly 80 schools, cities, coopes, and other governmental entities around the state” that it has audited. The firm notes with pleasure that “even more governmental entities chose to hire the firm for 2017.”

The firm reminds GOAC that it issued several adverse opinions to Mid-Central (Schoenfish & Company identified material weaknesses for eight years) and says that “more than just cash was reported as a concern.” The auditing firm says the responses from Mid-Central’s board members, director Dan Guericke, and business manager Scott Westerhuis were typical of responses from other agencies to audits. Apparently there were no “heated” meetings like the one described by Secretary of Education Melody Schopp with Mid-Central staff circa 2012 amidst discussions weaknesses in bookkeeping.

If the Department of Education had concerns that could provoke a “heated” meeting with Mid-Central, one would think they might be interested in learning more from the auditors who were finding chronic material weaknesses in Mid-Central’s books. However, in its most noteworthy response, Schoenfish & Company says DOE called them once:

The Department of Education had only one brief conversation with one member of our firm. As we recall, they only asked a couple of simple questions. They never expressed any concerns to us during the many years we performed the audits [Schoenfish & Company, response to GOAC, 2017.08.17, p. 2, Response #7].

Here Schoenfish & Company makes it sound like the Department of Education didn’t want to let anyone know that it knew that something was amiss at Mid-Central. Bookmark that.

GOAC asked Schoenfish & Company about the $900,000 gym Mid-Central business manager Scott Westerhuis built at his home with money he stole from GEAR UP and other federal grant moneys handled by Mid-Central. The firm says the gym “was discussed” and was “never acknowledged to be a GEAR UP asset by anyone we spoke to.”

Schoenfish & Company explains that it asked the Department of Legislative Audit to take over auditing Mid-Central after the spectacular Westerhuis murder-arson-suicide in September 2015 because the investigation was too big for any private firm:

[DLA] had better access to DCI, Forensics, Fraud Division and the Attorney General’s office. They looked at many of our documents and visited with us. Because of the media attention and various other expectations, the time they spent (not exactly known to us) would have been prohibitive to a private business with regular clients to serve [S&C to GOAC, 2017.08.17, p. 5, Response #23].

Schoenfish & Company’s evasions include using professional standards to justify not telling us who specifically worked on the audits:

We use a team approach, with approximately 8 auditors. Profession standards require all auditors under the firm to be competent and unbiased; therefore, an auditor’s individual involvement is immaterial to the scope of an audit as a whole. It is very rare that any one auditor in our firm would do more than twenty five percent of any audit [S&C to GOAC, 2017.08.17, p. 4, Response #19].

Schoenfish & Company cites the AICPA Code of Professional Conduct to avoid a specific response to GOAC’s question about gifts auditors may have receive from Mid-Central, the DOE, or other state or federal officials. The firm parries questions about misused funds, illegal contracts, and criminal charges by citing pending court cases.

Despite its reticence on several questions, Schoenfish & Company concludes with some unsolicited advice to GOAC on how to do its job:

As explained to us by Tim Flannery, the GOAC has several basic purposes. One is to determine if some changes need to be made with any weaknesses with any department. Another is to suggest possible legislation to be brought before the House and Senate. In the future, perhaps the GOAC would better serve the citizens of South Dakota through a combined effort involving the Department of Legislative Audit and several firms that audit government entities in South Dakota in order to address potential weaknesses, legislation or other local government matters [S&C to GOAC, 2017.08.17, p. 7].

Such advice from a citizen in the witness chair might seem audacious, but hey—isn’t telling the Legislature what to do one of our fundamental rights?

Schoenfish & Company is sending no one to testify in person next week to avoid putting any individual face on its responses to this legislative inquiry. The firm has provided a corporate response, stating it met its professional obligations in auditing Mid-Central for around twenty years and has the vote of confidence of an increasing number of government customers. And for those of us trying to keep score, Schoenfish & Company has suggested that the Department of Education was not quite as concerned about financial problems at Mid-Central as the Secretary of Education has suggested.

17 Responses to Schoenfish & Co: We Did Our Job Well, But Education Dept Maybe Didn’t

  1. Greg Deplorable

    Mid Central had a board of directors correct? Why has accountability escaped them in this disaster?

  2. Cory, I’m so disgusted by the GEAR UP scandal and all the people involved with the cover-ups I have trouble even reading about it anymore, makes me want to hurl.

  3. Greg, the board members, who come from the boards of the members schools, certainly are getting a pass in the press. Their schools are named in the state’s lawsuit seeking to reclaim any cash that the feds may ask for, so there is some potential accountability.

    South DaCola, all those who want to hurl need to translate that nausea into political action. The ultimate punishment would be to replace the GOP establishment in the Governor’s office that has allowed this corruption to go on since 2005.

  4. Greg Deplorable

    So I’m a board member from a local school serving on the MCE board. I know what Scott Westerhuis is being paid, he reports to the board. I see what he is building and the massive personal expenditures taking place. I’m not living in a vacuum, simple math doesn’t evade me. I direct and set independent audit policy which is reported to me as well as a board member. With the obvious discrepancies nothing is done management wise and the situation is allowed to get completely out of control.

    How in the world am I as a board member discharged of my fiduciary responsibility when I am part of the overseeing body?

  5. You are a republican playing the state game.

  6. Greg, you’re posing the question that the voters in the dozen or so former MCEC/now “Core” coop schools ought to be asking, especially if the state presses its lawsuit and takes their money.

  7. Greg Deplorable

    Whoever the members were they need to be named and held to public account along with state officials. They have put the taxpayers in each of these districts on the line for their incompetence. Its the finger pointing game now and its easy to point to the state (which has its own issues further up the chain).

    The lawsuit will probably financially impair the school districts involved, they in turn will opt out and increase taxes all due to their malfunction.
    If this was a financial board of directors they would all be personally held liable for the loss.

  8. Roger Elgersma

    if more government agencies are hiring them, what are they trying to cover up.

  9. mike from iowa

    Sooner or/and probably much later, voters in South Dakota will have to demand independent oversight of every wingnut contract let out in their state. They cannot depend on or trust wingnuts to police themselves.

    Sooner or later this stuff has to hit home in enough people to demand change AND accountability from the elected. Unfortunately, I can’t do this for you voters.

  10. An interesting question to pose to Schoenfish & Co would be whether the MCEC ever commissioned an independent review of its internal control (apart from its regular audits) and what were the recommendations as a result of the review. eg. hiring Westerhuis’s wife?

  11. When Ms. Wismer is the leading libbie with knowledge of this, all you lesser libbies should wait and see what she says. She knows more than you, and that should scare the bejeebers out of you.

  12. Well, Greg, the January 2013 MCEC minutes show the following board members in attendance: Board Members: J. Farke (Armour), B. York (Burke), P Haukaas (Colome), T Neugebauer (Ethan), C Van Der Werff (Gregory), T Reinesch (Kimball), B Mathis (Mt. Vernon), D Merrill (Plankinton), T Olson (Platte-Geddes), L Persson (Stickney), J Munson (White Lake), R Peterson (Wolsey-Wessington). Also present at that January 2013 meeting were Superintendents from Armour, Burke, Colome, Corsica, Ethan, Gregory, Kimball, Mt. Vernon, Platte-Geddes Stickney, Wessington Springs, along with Dan Guericke (Mid Central), Scott Westerhuis (Mid Central), Stephanie Hubers (Mid Central), Penny McCormick-Gilles (Mid Central), Christy Finney (Mid Central), Sandy Stukel (Mid Central). The names of board members are public record… although it appears that Mid-Central has finally wiped its entire website.

  13. Roger E., that is a cynical and frightening read of Schoenfish & Company’s uptick in business, the idea that other agencies could be thinking, Wow! If Schoenfish & Company could keep quiet about those millions of missing dollars at Mid-Central, they’ll certainly be able to keep a lid on our minor foibles!

  14. Mr. Sol, we should think about that: Schoenfish & Co. comes back for years with reports of material weaknesses, and then they see Mid-Central double down on its conflicts by hiring Mrs. Westerhuis to help watch the till? Come on—do auditors never reach the point where they shout, “Enough’s enough! We’re shutting you turkeys down!”?

  15. By the way, Greg, the July 6, 2017 minutes of the successor Core Ed Coop show the following board members and attendees:

    Board members present: Tina Westendorf (Armour), Holly Mosterd (Burke), Joel Koskan (Colome), Chad Clites (Corsica-Stickney), Dale Larsch (Mt. Vernon), Tammie Olson via phone (Platte-Geddes), and Jim Munsen (White Lake).

    Members absent: Karen Timanus (Gregory), Lisa Pazour (Kimball), Casey Schmidt (Plankinton), Tonya Aldrich (Wessington Springs), and Jim McGillvrey (Wolsey-Wessington)

    Superintendents: Andrea Powell via phone (Armour), Eric Person (Burke), Scott Muckey (Corsica-Stickney), Tim Mayclin (Kimball), Pat Mikkonen (Mt. Vernon), Joel Bailey (Platte-Geddes), Lance Witte (Wessington Springs) and Bob Schroeder (White Lake).

    Others present: Valerie Johnson (Director), Kathy Holter (Interim Business Manager), Catrina Brown (Business Manager), and Casey Bailey (Virtual School Director).

  16. Greg Deplorable

    That is a lot of people along with school administrators. It just floors me that no one raised any red flags. It appears to be just a big club where everyone goes along to get along, critical thinking and responsibility checked at the door.

    I see some of the same cast on the new board….failed critically the first time so lets put them on again. Good grief.

    Good job CH.