Lawmaker Wants Audits Of Private Entities Receiving Government Money Public

Jun 7, 2017

Credit sdlegislature

A South Dakota lawmaker wants to make audits from organizations and businesses that receive state or federal grant money public.

That would include contractors like Mid-Central Education Cooperative, which played a role in the GEAR UP scandal in 2015.

State Senator Deb Peters says by making audits of private entities that receive public money public, the quicker something like a GEAR UP-type scandal can be caught in the future.

That’s part of a legislative response to shore up state statute that allowed the scandal to occur. She says the organization that helps draft bills, the legislative research council, is working on legislation.

“Because of where all of our statutes are with conflicts of interest and opening this stuff up, it’s very complicated,” Peters says.

In 2015, the house of Scott and Nicole Westerhuis burned to the ground. Scott set the house on fire after murdering his wife and three children. The couple was in charge of finances for Mid-Central Educational Cooperative, which doled out a federal grant to prepare low income students for college. According to a recent state audit of Mid-Central, the Westerhuis’ helped set up three non-profits, which they also used to embezzle money.

It’s those three non-profits that were set up without authorization from Mid-Central’s board of directors. Russ Olsen is the local government audit manager with the state. He says recently revised federal standards require audits of any entity receiving federal funds…

“You would have to evaluate before you gave the money to them, and then that organization would have to evaluate before they gave the money to another nonprofit or government,” Olsen says.

According to a recent state audit of Mid-Central $1.3 million dollars is still missing. State auditors say they are unsure if those are federal or matching grant dollars.