[Final Special Report on Selected Aspects of the Circle of Nations Wahpeton Indian School]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 96-I-995
Title: Final Special Report on Selected Aspects of the Circle of
Nations Wahpeton Indian School
Date: June 25, 1996
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United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
MEMORANDUM
TO: The Secretary
FROM: Wilma A. Lewis
Inspector General
.
SUBJECT SUMMARY: Final Special Report for Your Information - "Selected
Aspects of the Circle of Nations Wahpeton Indian School" (No. 96-I-995)
Attached for your information is a copy of the subject final special report.
At the request of the North Dakota Congressional Delegation and the Assistant Secretary
for Indian Affairs, we reviewed the Wahpeton Indian School's expenditure of grant funds .
from the Bureau of Indian Affairs and the Bureau's compliance with funding and
oversight provisions of a September 1994 agreement that established the terms for
implementing a therapeutic school model at the School. The audit identified grant
expenditures totaling $117,650 that were not adequately supported or reasonable for the
efficient operation of the School, The audit also determined that key provisions of the
agreement where not completed timely as they related to identification of financial
resources needed to operate the School, preparation of implementation team reports,
establishment of a School support team, preparation of an annual written plan for the
therapeutic model, and completion of an agreement between the School Board and
relevant agencies regarding child protection and law enforcement. Although the report
makes no recommendations, we believe that to help ensure success of the therapeutic
model, the Bureau, the School Board, and the School should implement the agreement
expeditiously.
If you have questions concerning this matter, please contact me or Ms. Judy Harrison,
Assistant Inspector General for Audits, at (202) 208-5745.
Attachment
United States Department
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240
C-IN-BIA-O04-96
Memorandum
To: Assistant Secretary for Indian Affairs
Chairman, Wahpeton Indian school Board
Subject: Final Special Report on Selected Aspects of the Circle of Nations
Wahpeton Indian School (No. 96-I-995)
This report presents the results of our review of selected aspects of the Circle of
Nations Wahpeton Indian School. The objective of this review was to determine
whether: (1) the School spent Bureau of Indian Affairs funds in accordance with the
requirements of the grant agreements from the Bureau and (2) the Bureau complied
with the funding and oversight provisions of a September 1994 memorandum of
agreement between the Wahpeton Indian School Board, Incorporated, and the
Bureau's Office of Indian Education Programs. We initiated the review in response
to requests from the North Dakota Congressional Delegation and the Assistant
Secretary for Indian Affairs.
Regarding the expenditure of grant funds, we identified disbursements by the School
totaling about $117,650 during the 1993-1994 and the 1994-1995 school years that
were not adequately supported or reasonable for efficient administration of the
School. In addition, a separate financial statement audit, conducted by a certified
expenditures exceeded revenues by about $290,000.
Regarding the September 1994 memorandum of agreement, we found that the
Bureau and the School had made progress in implementing some of its provisions.
However, we also determined that certain key requirements of the agreement and
of the Improving America's Schools Act of 1994 had not been complied with in a
timely manner. Specifically, financial resources needed to implement the School's
therapeutic model were not identified; implementation team reports were not
prepared timely; a school support team was not established; and an annual written
plan for the therapeutic model was not prepared. Finally, the School Board and
relevant State and local agencies had not completed an agreement regarding child
protection and law enforcement because jurisdictional issues related to the School
had not been resolved.
C-IN-BIA-004-96
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240
Memorandum
To: Assistant Secretary for Indian Affairs
Chairman, Wahpeton Indian School Board
Subject: Final Special Report on Selected Aspects of the Circle of Nations
Wahpeton Indian School (No. 96-I-995)
This report presents the results of our review of selected aspects of the Circle of
Nations Wahpeton Indian School. The objective of this review was to determine
whether: (1) the School spent Bureau of Indian Affairs funds in accordance with the
requirements of the grant agreements from the Bureau and (2) the Bureau complied
with the funding and oversight provisions of a September 1994 memorandum of
agreement between the Wahpeton Indian School Board, Incorporated, and the
Bureau's Office of Indian Education Programs. We initiated the review in response
to requests from the North Dakota Congressional Delegation and the Assistant
Secretary for Indian Affairs. .
Regarding the expenditure of grant funds, we identified disbursements by the School
totaling about $117,650 during the 1993-1994 and the 1994-1995 school years that
were not adequately supported or reasonable for efficient administration of the
School. In addition, a separate financial statement audit, conducted by a certified
public accounting firm, for the school year ended June 30, 1994, reported that School
expenditures exceeded revenues by about $290,000.
Regarding the September 1994 memorandum of agreement, we found that the
Bureau and the School had made progress in implementing some of its provisions.
However, we also determined that certain key requirements of the agreement and
of the Improving America's Schools Act of 1994 had not been complied with in a
timely manner. Specifically, financial resources needed to implement the School's
therapeutic model were not identified; implementation team reports were not
prepared timely; a school support team was not established; and an annual written
plan for the therapeutic model was not prepared. Finally, the School Board and
relevant State and local agencies had not completed an agreement regarding child
protection and law enforcement because jurisdictional issues related to the School
had not been resolved.
The June 17, 1996, responses from the Superintendent, Circle of Nations Wahpeton
Indian School (Appendix 2), and the Assistant Secretary for Indian Affairs
(Appendix 3) provided additional information regarding the grant expenditures and
the actions that the School and the Bureau took to implement the therapeutic model.
This information was incorporated into our report as appropriate. However, neither
the School nor the Bureau adequately addressed funding of the therapeutic model,
timely reporting of the results of implementation team visits, sufficiency of the
support team, or development of a fully integrated budget for implementation of the
therapeutic model. We believe that these issues will continue to have an adverse
impact on the School's implementation of the therapeutic model if they are not
resolved.
This report makes no recommendations, therefore, no response to the Office of
Inspector General is required. However, we believe that complete and timely
implementation of the memorandum of agreement is important to the success of the
therapeutic model. Therefore, we believe that the Bureau, the School Board, and
the School should give emphasis to resolving the issues identified in our report
especially those related to the annual written plan and to the preparation of an
integratedbudget.
The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the Congress on all audit reports issued, the monetary
impact of audit findings, actions taken to implement audit recommendations, and
identification of each significant recommendation on which corrective action has not
been taken.
We appreciate the cooperation of School Board and Bureau officials in the conduct
of our audit.
CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PRIOR AUDIT COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
APPENDICES
1. BUREAU OF INDIAN AFFAIRS FUNDING OF THE
CIRCLE OF NATIONS WAHPETON INDIAN SCHOOL
FOR THE SCHOOL YEARS 1994-1995 AND 1995-1996 . . . 14
2. CIRCLE OF NATIONS WAHPETON INDIAN SCHOOL
RESPONSE . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . ...15
3. BUREAU OF INDIAN AFFAIRS RESPONSE . . . . . . . . . . . . 19
INTRODUCTION
BACKGROUND
From February 1908 through June 1993, the Bureau of Indian Affairs operated the
Wahpeton Indian School, which is located in Wahpeton, North Dakota, as an off-
reservation elementary boarding school. In July 1993, the Bureau transferred control
of the School to the Wahpeton Indian School Board, Incorporated, as authorized by
the Indian Education Amendments of 1988 (Title V of Public Law 100-297). Since
In June 1994, the School Board changed the School's name to the Circle of Nations
Wahpeton Indian School.
On October 5, 1994, the Improving America's Schools Act of 1994 (Public Law 103-
382) was enacted. The Act authorized the Bureau to establish two demonstration
schools based on a therapeutic model "to provide services necessary to achieve
positive changes in the attitudes, behavior, and academic performance of Indian
youth attending off-reservation boarding schools." The Act states:
The purpose of the therapeutic model demonstration schools is to: (A)
clinicians, counselors, and mental health professionals with academic
program personnel in a culturally sensitive residential program tailored
to the particular needs of Indian students; (B) provide for a continued
evaluation of the planning and implementation of the therapeutic
model; and (C) determine what steps the Bureau of Indian Affairs
must take and what resources are required to transform existing off-
reservation boarding schools to meet the needs of chemically
dependent, emotionally disturbed, socially troubled, or other at-risk
Indian youth who attend such schools.
The School was selected by the Bureau to be a therapeutic model demonstration
school and has operated as such since October 1994.
In September 1994, the School Board and the Bureau's Office of Indian Education
Programs entered into a memorandum of agreement that established the terms for
implementing the therapeutic model demonstration school. The agreement specified
that the Bureau was to provide additional funding to supplement the normal
allocation under the Indian School Equalization Formula, limit enrollment to a target
population of 150 students, and provide assistance in implementing the therapeutic
model. The agreement also specified that the School was to provide professionally
qualified staff, maintain nepotism restrictions, submit monthly business reports to the
School Board, and meet academic requirements as mandated by the Indian
Education Amendments of 1988 (Public Law 100-297).
The School's enrollment during the student count week for the 1994-1995 and the
1995-1996 school years was 152 and 150, respectively. The Bureau's total funding
for the School's programs was about $4.12 million and $3.6 million for the 1994-1995
and the 1995-1996 school years, respectively (see Appendix 1).
The School has had three superintendents since July l993. The first superintendent
was employed by the School Board from July 1993 through April 1995. Prior to this
period, the individual was employed by the Bureau as the School's administrator.
From April through June 1995, the School had an acting superintendent, who was
a Bureau employee assigned to the School under an Intergovernmental Personnel
Act agreement. The present superintendent has been in the position since July 1995.
OBJECTIVE AND SCOPE
The objective of this review was to determine whether: (1) the Circle of Nations
Wahpeton Indian School spent Bureau of Indian Affairs funds according to the
requirements of the grant and (2) the Bureau complied with the funding and
oversight provisions of the September 1994 memorandum of agreement.
We reviewed expenditures related to School operations for the 1993-1994 and the
1994-1995 school years and concentrated on amounts paid to the School's
superintendent. Our analysis of compliance with the memorandum of agreement was
based on the 1994-1995 and the 1995-1996 (through January) school years. In
addition, we reviewed the single audit report of the School's financial statements for
the year ended June 30, 1994.
The review was performed during January through April 1996 and included a visit
to the School. We also obtained information from the Bureau's Office of Indian
Education Programs and the Department of Health and Human Service's Indian
Health Service.
PRIOR AUDIT COVERAGE
Neither the Office of Inspector General nor the General Accounting Office has
previously audited the Circle of Nations Wahpeton Indian School. However, as
required by the Single Audit Act of 1984, the" School Board obtained an annual
financial and compliance audit of the operations of the School for the fiscal year
ended June 30, 1994. The report concluded, among other issues, that the School
overspent available funding and reimbursed travelers for meals and incidental
expenses in excess of authorized amounts. In March 1996, the School Board
awarded a contract for the single audit for the fiscal year ended June 30, 1995.
2
DISCUSSION
Based on our review, we identified grant expenditures by the School totaling about
$117,650 during the 1993-1994 and the 1994-1995 school years that were not
adequately supported or that did not conform to applicable Federal cost principles.
In addition, the financial statement audit for the school year ended June 30, 1994,
reported that School expenditures exceeded revenues by about $290,000. Also, we
found that the Bureau did not comply with key provisions of the September 1994
memorandum of agreement with the School Board pertaining to the Bureau's
funding and oversight responsibilities. Finally, we noted that the School did not
prepare an annual written plan for the therapeutic model in a timely manner. These
matters adversely impacted the School's finances and delayed its implementation of
the therapeutic model.
Expenditures
The "Common Rule," the uniform administrative requirements for grants and
cooperative agreements to state, local, and Indian tribal governments, contains the
standards for recipient financial management systems. Included in those standards
is a requirement that the accounting records "should be supported by such source
documentation as canceled checks, paid bills, time and attendance records, contract'
and subgrant award documents, etc." Office of Management and Budget Circular
A-87, "Cost Principles for State and Local Governments,"l specifies that to be
allowable under a grant, costs should be necessary and reasonable for proper and
efficient administration of the program. We identified grant expenditures for a loan
($15,000), rent and utilities ($9,800), an automobile ($1,800), kitchen remodeling
($1,300), consulting fees and salaries ($7,800), and severance pay ($70,750) to the
former superintendent or his wife that were not adequately supported or justified.
We also identified excess travel payments to the former superintendent ($5,000) and
School Board members ($6,200). These expenditures are detailed as follows:
- The former superintendent received an unsupported $15,000 payment that
was noted in the accounting records as a "loan as per School Board approval."
However, the School could not provide written justification for granting the loan or
an agreement specifying the terms of the loan. In addition, minutes of School Board
meetings did not make reference to this loan.. Also, we found that the former
superintendent did not repay the loan and that the severance agreement and mutual
release, which was approved by the School Board, for the former superintendent
specified that this person was released from all claims related to his employment by
the School.
- The School did not charge the former superintendent for rent or utilities for
the Bureau-owned house that he lived in while he was employed by the School. In
1Circular A-87's definition of grantee includes Federally recognized Indian tribal governments.
3
comparison, when this superintendent was employed by the Bureau as the
administrator of the School, he was required to pay monthly rent of $323 and the
utilities. Based on the rental rate charged by the Bureau, the superintendent would
have paid rent totaling about $6,800 for the 21-month period in which he lived in the
house when he was employed by the School as the superintendent. He also received
about $3,000 in compensation for utilities for this house. The School could not
provide us with a copy of the superintendent's employment contract or other
justification for waiving the rent and utility payments.
- The School, with the approval of the School Board, purchased an
automobile for the former superintendent's use at a cost of $15,790, (The
automobile was owned by the School and was being used by the current
superintendent. ) However, there was no employment contract or other justification
for the School's action or the School Board's approval of this additional
compensation. We also noted, based on records of the bids received, that the School
did not select the lowest bidder for the purchase, in that a similar vehicle could have
been purchased for $13,990, or a savings of $1,800.
residence occupied by the former superintendent, purchased upgraded equipment, .
including a sandstone sink ($300), a pullout faucet ($275), and a 27-cubic-foot
refrigerator ($1,650). There was no written support for buying the upgraded fixtures.
Standard versions of the same items would have cost $78,$52, and $800, respectively,
or a savings of about $1,300.
- In August and December 1993, the School paid the former superintendent's
wife $2,800 in consultant fees for 10 days of work, but the School's financial
documents did not specify the purpose of the consultation or why the wife was
selected for the position. During this period, the wife was pursuing a bachelor's
degree in education and an educator's certificate. The compensation the wife
received equated to an annual (school year) salary of $58,800. The following school
year, the superintendent's wife was hired as the School's computer instructor, at an
annual salary of $29,106. Based on the School's salary schedule for teachers, we
determined that the wife's annual salary equated to that of a teacher with a master's
degree; however, she had only a bachelor's degree. The salary for a teacher with a
bachelor's degree was $24,000, or about $5,000 less than what the former
superintendent's wife was paid. There was no justification for the higher salary.
- The School paid the former superintendent $70,750 because the School
Board terminated his employment contract. According to the severance agreement
and mutual release, the former superintendent had an employment contract through
June 1996. However, we could not determine the appropriateness of the severance
compensation because School personnel could not provide us a copy of the
employment contract so that we could verify the terms of the former
superintendent's employment. We also noted that the Bureau provided the School
with school operations program funds totaling $70,750 "for the buy-out of
superintendent's contract."
4
- The former superintendent usually received $75 per day for meals and
incidental expenses when he traveled. Circular A-87 provides that travel expenses
are an allowable cost to Federal programs when incurred consistently in accordance
with the government's policies, regulations, and procedures. However, the School
did not have a written policy regarding the reimbursement of meals and incidental
expenses. For purposes of evaluating the reasonableness of the School's practice, we
computed meals and incidental expenses based on "Travel and Subsistence Expenses;
Federal awards. According to the Code, Government rates for meals and incidental
expenses ranged from $26 to $38 per day depending on the locations and periods of
travel. Based on the difference between the rates specified in the Code and the $75
rate, we estimated that the former superintendent received excess compensation of
about $5,000 for 117 days of travel during the 21-month period ended April 1995.
In this regard, the School's financial statement audit also questioned the practice of
paying $75 per day for meals and incidental expenses, because payments exceeded the
Federal rates for meals and incidental expenses. We also noted that during the
1995-1996 school year, the present superintendent was properly compensated for
meals and incidental expenses based on the rates specified in the Code.
- School Board members and School administrative staff also usually received
$75 per day for meals and incidental expenses when they traveled during the 1993-.
1994 and the 1994-1995 school years. Based on the rates specified in the Code, we
estimated that School Board members received at least $6,200 in excess of
compensation for meals and incidental expenses in the 1993-1994 school year.
Nonadministrative School employees were reimbursed for meals and incidental
expenses based on the rates specified in the Code.
The financial statement audit for the school year ended June 30, 1994, reported that
the School expended about $290,000 more than it received in revenues. In April
1995, the Office of Indian Education Programs sent a financial specialist to the
School to determine its financial status. This individual projected that the School
reduced unnecessary expenditures. In an April 19, 1995, letter, the Director, Office
of Indian Education Programs, told the Chairman of the School Board of the results
of the review and made recommendations related to accounting controls and
financial management. In the letter, the Director specifically recommended that the
School curtail unnecessary expenditures.
Memorandum of Agreement
Although the Bureau and the School have made progress in implementing some of
the terms of the September 1994 agreement and the provisions of the Improving
America's Schools Act of 1994, significant requirements have not been fulfilled.
2Circular A-87 was revised on May 4, 1995, The revised Circular requires that travel under
Federal
awards be performed in accordance with 5 U.S.C. 57.
5
Specifically, the Bureau and the School did not identify the financial resources
needed to implement the School's therapeutic model; reports prepared by the
implementation team (composed of Bureau, Indian Health Semite, and State of
North Dakota and county representatives) were not always timely; a school support
team (consisting of Bureau, State, and tribal officials and other professionals) had
not been established; and the School did not prepare an annual written plan for the
therapeutic model timely. In addition, the School Board and relevant State and local
agencies had not completed an agreement regarding child protection and law
enforcement because jurisdictional issues related to the School had not been
resolved.
Funding. The September 1994 memorandum of agreement between the
pilot project. This funding will supplement the School's normal allocation under the
Indian School Equalization Formula," The agreement also states that a financial
specialist will work with the School's business manager and administrator to develop
a budget for the therapeutic model. In addition, the Improving America's Schools
Act of 1994 specifies that a determination should be made as to the resources
required to transform existing off-reservation boarding schools to meet the needs of
youth who attend therapeutic model demonstration schools.
We found that neither the Bureau nor the School adequately identified the financial
resources needed to implement the School's therapeutic model. As a result, even
though the Bureau provided funds to the School in excess of the School's allocation
of Indian School Equalization Formula funds, there was no assurance that the
amount was appropriate for operating the therapeutic model. (The Bureau's funding
of the School is detailed in Appendix 1.)
The Bureau provided the School with $4,124,403 to operate the School and the
therapeutic model for the 1994-1995 school year. This amount included $491,411
specifically designated for the operation of the therapeutic model: $466,411 from the
contingency funds of the Director, Office of Indian Education Programs, and $25,000
from the Drug Free School Program. However, at the time the funding was
provided, a budget had not been prepared by the School that identified the financial
resources needed to implement a therapeutic model. The Bureau's financial
documents did not provide justification for the additional funding for the therapeutic
model.
In the spring of 1995, the School's acting superintendent prepared various budgets
for the 1995-1996 school year, These budgets included estimated funding needed for
a therapeutic model. According to the acting superintendent, these budgets were
prepared based on a program that was envisioned after consulting with the School's
staff and with implementation team members, However, a July 1995 letter from the
Director, Office of Indian Education Programs, informed the School that "due to
budget constraints in the Office of Indian Education Programs, the Bureau is unable
to provide additional funds for planning and implementation of the therapeutic
school model." Consequently, the School prepared a budget for the 1995-1996 school
6
year of $3.8 million that was predicated on its historical funding and based on an
enrollment of 150 students. Subsequently, in September 1995, the School submitted
to the Bureau a budget that specified that the School needed $500,000 to implement
its therapeutic model during the 1995-1996 school year. This budget was based on
a therapeutic residential school' plan that was completed in October 1995. In
addition, the written plan identified $325,000 for unmet funding needs for chemical
dependency and mental health treatment. In total, School documents indicated that
$825,000 was needed to fund the therapeutic model for the 1995-1996 school year.
For the 1995-1996 school year, the Bureau provided the School $3,604,794, or
$519,609 less than the amount provided in the prior year. According to the Bureau's
financial records, the $3,604,794 included $80,000 specifically identified to fund some
therapeutic model activities: $25,000 from the Education of the Homeless Children
and Youth Program and $55,000 from the Drug Free Schools Program. The $80,000
was $745,000 less than the amount the School estimated was needed to implement
the therapeutic model.
The School has yet to incorporate the funding needs for the therapeutic model in a
comprehensive budget for all school activities. Consequently, we could not
determine the School's total unmet funding needs since existing sources of funds may
be used, with the concurrence of the cognizant Federal agency, to fund a portion of
the therapeutic model.
Implementation Team. The agreement between the Bureau and the School
Board stated that the Bureau was to establish an implementation team to assist the
School in developing a plan specific to its needs. In addition, the implementation
team was to make recommendations that would provide the basis for implementing
the therapeutic model.
We found that the Bureau established an implementation team that consisted of
specialists from the Bureau, the Indian Health Service, and State and county
agencies. The Bureau's Branch Chief for Elementary and Secondary Programs
headed the implementation team and served as the primary liaison between the
Bureau and the School. During the 1994-1995 school year, the implementation team
met with School officials on at least six occasions, and all but two of the meetings
were at the School. In October 1994, March 1995, and October 1995, the
implementation team performed on-site evaluations of the School's implementation
of the therapeutic model. In November 1995, the implementation team members
were requested to evaluate the School's written therapeutic residential school plan
for the 1995-1996 school year. As of April 1996, the Bureau had not provided
written comments on the evaluation of the plan.
The Bureau has not always been timely in reporting to the School Board the results
of the implementation team's evaluations. For example, although the report on the
March 1995 evaluation was issued that month, when the evaluation was performed,
the report for the October 1994 evaluation was not issued until February 1995.
(Implementation team members stated that a draft report was provided to the School
7
soon after the October 1994 on-site evaluation. ) Both of these reports contained
numerous recommendations that were intended to improve the therapeutic model,
including the recommendation that the School should prepare a written plan for its
therapeutic model. As of April 1996, the Bureau had not issued a report for the
October 1995 on-site evaluation. One implementation team member stated that the
team's comments on the October 1995 on-site evaluation had been sent to the
School; however, School personnel stated that the comments had not been received
as of April 1996.
We interviewed six of the ten implementation team members and found that three
of the six implementation team members had commented on the latest on-site
evaluation and on the annual written plan and that each member had made
recommendations to enhance the quality of the School's therapeutic model.
However, the Bureau was unable to provide documentation to indicate that this
information had `been provided to the School,
School Support Team. The memorandum of agreement stated that the
Bureau was to establish a school support team in the fall of 1994 to review the
School's progress on the therapeutic model at least twice a year and provide annual
reports. These reports were to serve as the basis for determining the future needs
support team. Office of Indian Education Programs personnel stated that the
responsibility for establishing the school support team was informally delegated to
the Area Education Program Administrator for the Minneapolis Area Office.
However, the Administrator did not establish such a team before she retired in
December 1994. Personnel in the Office of Indian Education Programs stated that
they had overlooked this requirement.
Annual Written Plan. The Improving America's Schools Act requires that the
School provide a therapeutic model based on an annual written plan. In this regard,
the implementation team recommended, in February and March 1995, that the
completed for the School. A more specific therapeutic residential school plan
(annual written plan) was prepared in October 1995 for the 1995-1996 school year.
The initial delays in preparing a written plan occurred because the legislation
authorizing the therapeutic model was not enacted until October 1994, which was
after the 1994-1995 school year commenced. In addition, we were told by an
implementation team member that the former superintendent "ignored" preparing
an annual written plan. Furthermore, the implementation team member also stated
that there was confusion between the School and the implementation team regarding
the team's role in assisting the School in preparing the written plan.
Implementation team members stated that they believed their role was to provide the
School guidance for an annual written plan but not to prepare the plan. To assist
the School, the Bureau, in 1993, included the former superintendent in working
groups that developed therapeutic residential model concepts and principles for off-
reservation boarding schools. The working groups included Bureau and Indian
8
Health Service representatives, educational and psychological consultants, and
principals and school board members of off-reservation boarding schools. Some of
these participants later became members of the implementation team. The working
groups developed documents that could have been used as guidance or a foundation
for preparing an annual written plan for a therapeutic model. However, the former
superintendent left the School in April 1995. Although the present superintendent
stated that she and her staff had not been provided sufficient guidance by the
implementation team to prepare an annual written plan, she and her staff did
complete the annual written plan for the 1995-1996 school year in October 1995.
Jurisdictional Issues. The memorandum of agreement between the Bureau
and the School Board specified that the implementation team would obtain an
agreement between the Wahpeton Indian School Board and relevant State and local
agencies for child protection and law enforcement services at the School. In that
regard, in March 1994 and again in September 1995, the North Dakota
Congressional delegation requested that the Department of the Interior provide a
legal opinion regarding the jurisdiction over child protection and law enforcement
at the School. At the time of our review in April 1996, personnel of the Office of
the Solicitor stated that an opinion regarding this matter had not been issued.
However, the School entered into a memorandum of understanding with the City of
Wahpeton in September 1995 that gave the City interim authority to pursue
suspected juvenile and misdemeanor offenses committed by students on or off the
School's campus.
Circle of Nations Wahpeton Indian School and Bureau of Indian Affairs
Responses and Office of Inspector General Reply
The June 17, 1996, responses from the Assistant Secretary for Indian Affairs
(Appendix 2) and the Superintendent Circle of Nations Wahpeton Indian School
(Appendix 3), provided additional information regarding the grant expenditures and
the actions the Bureau and the School took to implement the therapeutic model.
Former Superintendent's Compensation
School Response. The School stated that the $15,000 loan was authorized by
the School Board and was "forgiven" at a rate of $5,000 per year. The School further
stated that if the amount of loan forgiveness per year ($5,000) was added to the
salary received, the total compensation package was not "unreasonable" when
compared with compensation for comparable education positions. The School also
stated that the former superintendent's contract stipulated that he be provided a
house on campus and that the utilities be paid by the School. In this regard, the
response stated, "It is common in educational circles and in any industry where a
person is required to be on call 24 hours a day for that person to be furnished with
reasonable accommodations." The School stated that the School Board did not
believe the expenditure was "at all unreasonable,"
9
Office of Inspector General Reply. Although the School Board meeting
minutes for June 22, 1994, indicated that a 3-year employment contract was approved
for the former superintendent, the terms of the contract were not specified.
Furthermore, the School could not provide us a copy of the former superintendent's
employment contract, which should have: (1) authorized the loan and its forgiveness;
(2) waived the rents for the Bureau-owned house; and (3) authorized reimbursement
of utilities for the house. The School's statement that the former superintendent's
total annual compensation of $69,777 (salary of $59,098, loan forgiveness of $5,000,
waiver of rent of $3,879, and waiver of utilities of $1,800) was comparable to
compensation paid to individuals in similar educational positions was not supported
by the School or addressed in our report. However, we did note that the total
compensation paid to the former superintendent ($69,777) in 1994 was 34 percent
($.17,679) greater than the annualized a-mount ($52,062) he would have received in
1993 as a Bureau employee in a similar position.
Automobile Purchase
School Response. The School stated that it initially solicited bids for a new
automobile but that the bids were too high. The School said that it subsequently
solicited bids for and purchased a used automobile. The School stated that the
$13,990 vehicle did not have "options or quality" that was "comparable" to the
$15,790 vehicle that was purchased.
Bureau Response. The Bureau objected to the characterization of the cost
of the automobile as "additional compensation" to the former superintendent on the
grounds that title to the automobile is held by the School. With respect to the
purchase of the automobile, the Bureau stated that the School was not located near
a General Services Administration motor pool and that the School was authorized
to purchase automobiles for official travel. The Bureau also stated that the report
did not address the age and condition of the automobile, mileage, service agreement,
and other factors critical in purchasing a used automobile. Such factors, the Bureau
stated, "may well outweigh" the initial savings of $1,800.
Office of Inspector General Reply. We believe that the School acted
prudently in purchasing a used versus a new automobile. However, our report notes
that additional funds could have been saved if the less expensive used automobile
had been purchased. Both automobiles were for sale by the same dealer, were the
same year and model, and were demonstrators. The purchased automobile had been
driven 4,300 miles, and the automobile that was not purchased had been driven 3,300
miles. Further, while the School and the Bureau stated that the less expensive
vehicle did not have the "options or quality" and that other factors "may well
outweigh" the initial cost differential, no support was provided for these assertions.
The School also could not substantiate that the less expensive automobile was not
sufficient to meet the School's transportation needs. In addition, we noted that the
School had obtained other vehicles from a General Services Administration motor
pool. Finally, because the automobile was used by the superintendent, we believe
that its cost can properly be considered as additional compensation to him.
10
Kitchen Remodeling
School Response. The School stated that the superintendent's house was
"nearly 70 years old" and "almost inhabitable." In addition, the School stated that it
had obtained bids for the remodeling project and had attempted to minimize the
remodeling cost. The School also stated that, while it was unable to verify the
comparable prices we used in the report, the fixtures obtained during the remodeling
were "competitively]" priced.
"structural improvements and extensive electrical work." The Bureau also noted that
the large capacity refrigerator, the most expensive upgrade, was "a practical item in
a rural area."
Office of Inspector General Reply. Based on the School's and the Bureau's
responses, we accepted the School's need to remodel the residence and modified our
report. However, upgraded items costing $1,300 were cited in our report as
examples of purchases that were not documented by the School as being needed
upgrades and of funds that could have been used more efficiently. In that regard,
the prices we used as comparable were obtained from vendors in Wahpeton.
Severance Pay
School Response. The School stated that the former superintendent was given
a 3-year contract when he was hired. The School further stated that the Bureau
"told the [School] Board that unless the former superintendent was dismissed, it
would discontinue funding of the School." The School also said that a severance
payment of half of the remaining amounts due the superintendent under his contract
was "prudent" and resulted in the School Board "saving in excess of $70,000."
Bureau Response. The Bureau stated that the report "implie[d]" that the
severance agreement may have been "improper" because the School was unable to
provide a copy of the former superintendent's employment contract. The Bureau
noted that the School Board had broad authority under the Indian Education
Amendments Act to use, at the Board's discretion, grant funds to pay education-
related administrative expenses. The Bureau also stated that at an April 1995
meeting, Office of Indian Education Program officials "expressed their concerns
about the former superintendent to the School Board" and the School Board agreed
that early termination of the former superintendent's employment contract was in the
School's "best interest."
Office of Inspector General Reply. We do not question the School Board's
authority or decision to dismiss the former superintendent or the propriety of
entering into a severance agreement. However, since the School could not provide
us with a copy of the former superintendent's employment contract, we could not
determine whether the amount of the severance compensation was appropriate.
11
Per Diem for School Board Members
School Response. The School stated that the $75 per day payment to School
Board members for attending a meeting included an "honorarium of approximately
$50." The School further stated that this was "modest compensation to those School
Board members, who receive[d] no other payment for their services to the School."
The School also noted that it had changed its accounting procedures to separate the
honorarium from the per diem payment.
Office of Inspector General Reply. There was no indication in the School
Board's charter that its members were eligible to receive honoraria for their services.
Therefore, while payment of honoraria is an allowable cost under Circular A-87
when the payment is in conformance with established policy of the government unit,
such was not the case here. Accordingly, in addition to changing its accounting
procedures to separate the honorarium from the per diem payment, the School
Board should amend its policies to allow for the payment of honoraria. Further, as
previously indicated, compensation for meals should be based on Federal
requirements in 5 U.S.C. 57.
Implementation Team .
Bureau Response. The Bureau stated that assistance in addition to that
identified in the report had been provided to the School regarding development of
a therapeutic model.
Office of Inspector General Reply. Based on the response, we have revised .
our report to recognize the assistance provided by the Bureau.
Annual Written Plan
School Response. The School stated that the therapeutic plan was prepared
in September 1994, before passage of the Act, and that we were provided a copy of
the plan during our review. The School further stated that after the first year of the
therapeutic model, a consultant evaluated the therapeutic plan and its
implementation at the School, and that based on this evaluation, the therapeutic plan
was modified and put in place during the 19.95-1996 school year. The School
concluded that these actions "more than meet the requirements of the agreements
[the School] had" with the Bureau and the Congressional delegation.
Office of Inspector General Reply. At our June 10, 1996, exit conference, the
School provided us a copy of a therapeutic plan that was dated April 1995. (This is
the earliest therapeutic plan that we were made aware of by the School or the
Bureau.) As stated in the report, the implementation team recommended in
February and March 1995 that the School prepare an annual written plan for the
therapeutic model. Also, in a September 26, 1995, letter to the Office of Indian
Education Programs, the North Dakota Congressional delegation stated that a
written plan would be developed within 30 days. We believe these actions may
12
indicate that these parties either were unaware that a written plan had been
prepared or believed the existing plan needed to be revised.
General Comments
Bureau Comments. The Bureau stated:
Since the report contains no recommendations for action by the
Bureau of Indian Affairs or the Circle of Nations School, we conclude
that the concerns that initially prompted [the] request for an
independent audit have since been adequately addressed by the
School's current superintendent and the School Board.
Office of Inspector General Reply. The absence of recommendations is not
an indication that all concerns in the Bureau's November 8, 1995, audit request have
been adequately addressed. The Bureau requested an evaluation of financial and
program operations. However, we did not evaluate program operations because we
did not have the technical expertise to measure the effectiveness of mental health
and academic programs designed for the particular needs of Indian children.
Accordingly, our report contains no information or recommendations on program
operations. During our review, however, we noted that the School had had several
evaluations performed by experts in mental health and education and that these
evaluations included recommendations to improve the School's program.
Furthermore, as indicated in our report (page 2), the scope of our review was to
determine whether grant funds were spent in accordance with grant agreements and
whether the Bureau complied with the September 1994 agreement. Since the
purpose of our review was to present information on the Bureau's compliance, we
did not make recommendations on issues of noncompliance. However, our report
identifies several matters that adversely impacted the School's implementation of the
therapeutic model, and we believe that the Bureau should focus its efforts on
completing implementation of the agreement. Specifically, the Bureau did not
comment on: (1) adequate funding for the therapeutic model and an integrated
budget for all school activities; (2) the untimely reporting of on-site evaluation results
and recommendations to the School Board and whether a report was issued for the
October 1995 on-site evaluation; (3) the sufficiency of the School's October 1995
written therapeutic residential school plan; and (4) the status of a school support
team.
13
APPENDIX 1
BUREAU OF INDIAN AFFAIRS FUNDING OF THE
CIRCLE OF NATIONS WAHPETON INDIAN SCHOOL
FOR SCHOOL YEARS 1994-1995 AND 1995-1996
PROGRAM
School Operational1
Transportation
Administrative Cost Grant
Handicapped (Ideas)
Handicapped (Ideas - Arts)
Drug Free Schools
Drug Free Schools (Ropes)
Title I, Part A
Title II, Part B
Facilities Operations and Maintenance
Homeless Assistance
Goals 2000
Substance - Alcohol
Facilities - Emergency
Human Services
SCHOOL YEAR
1994-1995
$2,353,4112
131,200
455,050
162,217
70,6003
158,100
634,473
13,200
134,152
12,000
SCHOOL YEAR
1995-1996
$2,053,000
110,500
509,600
136,286
100
110,750
55,0004
138,500
4,100
433,300
25,0004
28,658
Total
1Included funds of $1,806,100 and $1,961,000 that were received through the Indian School
Equalization Program for the 1994-1995 and the 1995-1996 school years, respectively.
2Included $466,411 that was designated for the therapeutic model.
3Included $25,000 that was designated for the therapeutic model.
4Total amount was designated for the therapeutic model.
14
15
16
APPENDIX 2
Page 3 of 4
APPENDIX 2
Page 4 of 4
Douglas W. Coster
June 17, 1996
Page 4
We respectfully submit that several of the conclusions reached in the
Inspector General's Report are inaccurate and erroneous and should be modified or
disregarded.
Attachments
[NOTE: ATTACHMENTS NOT INCLUDED BY OFFICE OF INSPECTOR GENERAL. ]
18
United States Department of the Interior
OFFICE OF THE SECRETARY
Washington, D.C. 20240
Memorandum
To: Assistant Inspector General for Audits
From: Ada E. Deer
Assistant Secretary - Indian Affairs
Subject: Preliminary Draft Report on Selected Aspects of the Circle of Nations Wahpeton
Indian School, Report No. C-IN-BIA-004-96
We have reviewed the preliminary draft report of the Circle of Nations School which was
conducted
in response to my request and requests from members of Congress from the State of North
Dakota.
-
Since the report contains no recommendations for action by the Bureau of Indian Affairs or the
Circle
of Nations School, we conclude that the concerns that initially prompted my request for an
independent audit have since been adequately addressed by the School's current superintendent
and
the School Board. However, we would like to comment on (1) the factual accuracy of some of
the
specific findings in regard to possible misuse of federal grant finds and (2) the omission of
special
efforts made by the Bureau's Office of Indian Programs (OIEP), as well as the Indian Health
Service
(IHS) of the Department of Health and Human Services, to assist the School in developing a new
therapeutic model for off-reservation boarding schools.
Prior Audit Coverage
On page 5, the report states, "In March 1996, the School Board awarded a contract for the single
audit for the" fiscal year ended June 30, 1995." It is important to note that in order to be in
compliance with the Single Audit Act, the School must submit a report to the Department of the
Interior within 13 months of the end of the fiscal year. The School's audit is not due into the
Department until July 31, 1996. We have spoken with the CPA firm that performed the audit for
fiscal year 1995, and they have informed us that the draft report will be issued to the school for
comment the week of June 17. Because the firm has been communicating on an ongoing basis
with
the School, the firm expects to be able to incorporate the School's response into the final report
and
submit it to the Department within the required timeframe.
Expenditures
The report's tidings with respect to certain expenditures should be modified based on the
following
information:
19
APPENDIX 3
Page 2 of 3
Purchase of an Automobile
On page 7 the report states that, "The School, with the approval of the School Board. purchased
an
automobile for the former superintendent at a cost of $15,790, which, in effect, was additional
compensation." The report continues that, "We also noted, based on the records of the bids
received.
that the School did not select the lowest bidder for the purchase, in that a similar vehicle could
have
been purchased for $13,990, or a savings of $1,800,"
The report failed to note three important facts:
(1)
(2)
(3)
The title to the automobile is held by the School, not the superintendent. Since the
superintendent is no longer at the School, and the car is still at the School, the
statements regarding additional compensation should be deleted.
Similar to many BIA schools, the Circle of Nations School is not located near any
GSA car pools or car rental agencies and is authorized to purchase automobiles for
official travel.
The School actually obtained two sets of bids - the first set was for a new car, and the
second set was for a used car. The School decided that a new car was too expensive
and purchased a used vehicle. The report does not address the age and condition of
the car, mileage, service agreement and other factors critical in purchasing a used car.
Such factors may well outweigh an initial savings of $1,800.
Kitchen Remodeling
On page 8 the report states that the School". spent $16,000
superintendent's house..." In fact, the School holds
to remodel the kitchen of the former
title to the house, not the former
superintendent. As an off-reservation boarding school, the Circle of Nations School provides
quarters for its superintendent who must be on call at all times. The house is more than 60 years
old
and needed structural improvements and extensive electrical work such as new wiring, outlets
and
circuit box. The report does not question the need for the remodeling, but only $1,295 in
upgrades
for three kitchen appliances. The most expensive upgrade was a large capacity refrigerator which
is a practical item in a rural area,
Buyout of Superintendent's Contract
On page 9, the report implies that the severence agreement with the former superintendent may
have
been improper since the auditors were unable to review the original employment contract. The
School Board had broad authority under Section 5204(a) (3) (A) of the Indian Education
Amendments Act (Public Law 100-297), which states: ", grants provided under this part shall be
used to defray, at the discretion of the school board, any expenditures for education-related
activities. including but not limited to. .(1) school operations, academic, education, residential
guidance and counseling and administrative purposes...." [Emphasis added.]
20
Page 3 of 3
During a meeting in April 1995, OIEP officials expressed their concerns about the former
superintendent to the School Board. The Board agreed that it was in the School's best interest to
terminate early the three-year contract with the superintendent, After discussions with the
superintendent, the Board determined that the quickest, most cost effective method to end the
contract was through the agreed-upon buyout.
Memorandum of Agreement
We believe that important information is missing from this section with respect to the efforts
made
by both OIEP and the IHS. The OIEP provided an Education Specialist for the first two weeks of
the project to assist in the development of a therapeutic plan and provided continued assistance
on
a hi-weekly basis. Also, although the report indicates that there were only three implementation
visits
during the 1994-1995 School Year, there were at least six visits between the School and all but
two
were onsite. Additionally, under separate agreements, Drs. David Beaulieu, Minnesota
Commissioner
University of Wisconsin Professor of Education, were commissioned to conduct reviews of the
School. Recommendations from these studies were provided to the School on January 3, 1994
and
April 11, 1994 and were separate from the Implementation Team reports.
Staff of the IHS Mental Health/Social Services Programs were available on a fairly frequent
basis
to
participate in the Implementation Team meetings and other activities involved in assisting the
School.
The Substance Abuse Branch also participated in the Implementation Team meetings and
provided
additional assistance. In December of 1995, the IHS Headquarters Mental Health Program
provided
staff training. Training consultants included a residential treatment/juvenile justice specialist and
the
Chief of the Children's Section from the Mental Health/Social Semite Programs Branch.
Because your office requested comments within only two weeks, the School has not had
sufficient
time to complete its assessment of the preliminary draft report and provide additional clarifying
information. The School Board members should also have the opportunity to review the School's
formal response before it is submitted to the Bureau. We believe the courtesy of providing the
usual
3 O-day response period should have been considered in your schedule. Since you subsequently
notified us that this would be' the only opportunity to respond, we will, therefore, forward any
expanded comments received from the School Board to you and the North Dakota Congressional
Delegation.
21
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