GEAR Up Closing Ceremony / SDSMT

November 23, 2015; KELO-TV (Sioux Falls, SD)

Nonprofit conflicts of interest are sometimes difficult to manage, and seldom more difficult than in rural communities where small populations make multiple business and family relationships all but inevitable.

NPQ has previously reported on a tragic murder-suicide involving the business manager of a nonprofit in a rural South Dakota town. The situation has propelled administration of a $24 million federal grant to national attention but the day before the tragedy the organization had been informed of the withdrawal of $4 million in grants due to concerns about accounting. Subsequent reporting has expanded the number and illuminated the extent of conflicts of interest involving federal grants, consultants, at least two nonprofit organizations, and state officials.

At present, there are concurrent federal and state investigations into how the Mid-Central Educational Cooperative handled more than $3 million a year in South Dakota’s GEAR UP college readiness program, along with 22 other programs Mid-Central administered on behalf of the state. The state’s auditor general says it will take six months to complete his work, and that his final report will be made public.

The state’s largest TV station has begun its own investigation, based on publicly available documents as well as those received in response to multiple federal Freedom of Information Act (FOIA) requests. Analysis of the grant application documented grant-paid state staff administering the program, while the practice was for the state to contract all the grant-paid staff positions to Mid-Central. This included the grant’s budget analyst, who would be responsible for monitoring Mid-Central along with other contractors and consultants hired by Mid-Central.

Not only has the probe broadened to include more programs and encompass federal and state investigators, it has also identified yet more conflicts of interest between grant-funded program staff and others. Originally centered on Mid-Central’s business manager, Scott Westerhuis, who also was involved with two nonprofit organizations receiving GEAR UP funds from Mid-Central, focus is shifting to two state Board of Education members who were receiving federal payments from Mid-Central.

As reported recently, Kelly Duncan had several conflicts of interest. She is a member of the SD Board of Education who was paid a stipend by Mid-Central Cooperative in connection with South Dakota’s federal College Access grant. She also served as lead evaluator for Mid-Central’s administration of the GEAR UP program in 2014 while serving as a professor at the University of South Dakota. While eager to talk with KELO-TV about her GEAR UP evaluation activities, when reporter Angela Kennecke asked about her payments from Mid-Central for her College Access work, she immediately stammered and literally closed a door to end the interview. Duncan has received at least $124,000 in contract payments from the SD Department of Education in the last three years in several contracts, each below the $50,000 threshold for required bid-letting.

Continued investigation will address questions of the actual accounting of funds by Mid-Central as well as the conflicts of interest. In addition, the questions of efficiency and effectiveness of the GEAR UP and other federally funded programs continue. South Dakota GEAR UP’s current budget allocates more than $1,500 per person served (direct costs plus matching funds), and there is little solid data upon which to assess outcomes.—Michael Wyland