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The state Department of Legislative Audit found the state Department of Education needed strong financial controls over its partner in administering a major federal grant intended to help American Indian students consider college.

The state Department of Education received the federal aid but doesn’t actually run the GEAR UP program. Instead the federal aid is passed through the state department to a sub-recipient, the Mid-Central Educational Cooperative at Platte.

Mid-Central in turn pays large amounts of money each year — the current contract with the state department is for $4.3 million — to direct employees, advisers, consultants and other vendors to deliver the program’s services in high schools, universities and colleges in South Dakota.

The state Department of Education provides $50,000 per month to Mid-Central and pays invoices submitted from Mid-Central.

The invoices were where the state Department of Legislative Audit found problems during its inspection of the GEAR UP grant’s administration for the 2014 fiscal year.

Legislative Audit didn’t look beyond 2014 so it isn’t known whether similar problems existed in prior years.

Mid-Central officials informed their board in December that $214,000 would need to be repaid to the state Department of Education.

Overpayments had been made by the state on expenses submitted by Mid-Central for the GEAR UP and College Access programs.

State Education Secretary Melody Schopp said Friday the money repaid by Mid-Central would be returned from her department to the federal government.

The audit also found two prominent advisers on GEAR UP were paid for months when they hadn’t submitted what are known as effort logs showing what they had been working on.

The two were former state Education Secretary Rick Melmer and former state Indian Education Director Keith Moore. They served in those posts during the previous administration of Gov. Mike Rounds.

Since at least the summer of 2012, Melmer received a stipend of $1,000 per month to serve on the Mid-Central’s GEAR UP committee and Moore received $4,000 per month to be the committee’s chairman.

Mid-Central submitted their stipend amounts as expenses to be reimbursed by the state Department of Education. The state department however didn’t require proof that the two worked.

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According to the state audit of the program’s operation for 2014, they didn’t submit effort logs for the first quarter of the 2014 fiscal year covering the months of July, August and September of 2013. The fiscal year runs July 1 to June 30.

The audit found their first logs were submitted Oct. 28, 2013.

Scott Westerhuis, the Mid-Central business manager, said Thursday that time cards hadn’t been prepared for Melmer and Moore prior to the Oct. 28, 2013, date.

Mid-Central charged the state Department of Education a total of $32,500 for Melmer and Moore for that period of nearly four months, according to the audit.

Melmer and Moore were part of a group authorized by the Mid-Central board to attend a national GEAR UP meeting in San Francisco in July 2013.

Melmer and Moore run other contracts paid by outside sources through Mid-Central as well.

The audit also questioned whether Mid-Central provided the required matching amount of $3.6 million for the GEAR UP contract period from Sept. 26, 2012, through Sept. 25, 2013.

Mid-Central in defense claimed $4,000 of value for each of 500 computer software products provided by Microsoft.

The auditors countered that the software was listed for public sale at $499.

The state Department of Education contended in response that each of the Microsoft products was valued at $300,000 per student.

That remained the position of Education Secretary Schopp as of Friday. She said she is awaiting a federal response on that point.

Schopp said her department has strengthened its requirements for documentation and explanations from Mid-Central in the wake of the audit.

State Auditor General Marty Guindon said the problems found are now in the hands of federal officials to determine the next steps if any.

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