In response to GEAR UP scandal, House tightens financial standards

PIERRE -- The state House of Representatives agreed Monday financial reporting requirements must be tightened in South Dakota after the Mid-Central Educational Cooperative corruption.


PIERRE - The state House of Representatives agreed Monday financial reporting requirements must be tightened in South Dakota after the Mid-Central Educational Cooperative corruption.

House members voted 64-0 for final approval of SB 100. The Senate approved it 33-2 Feb. 22. The legislation now goes to the governor for review.

Sen. Deb Peters, R-Hartford, was prime sponsor. Lead House sponsor was Rep. Kyle Schoenfish, R-Scotland.

Schoenfish summarized the bill's eight sections Monday They deal with government grants and contracts.

He said the accounting firm where he works had routinely sent audit copies for every school board member.


A key point in the legislation would require that becomes standard practice in South Dakota.

Rep. Susan Wismer, D-Britton, reminded House members the bill resulted from "a lot of the work" done by the Legislature's Government Operations and Audit Committee on what she described as "the GEAR UP debacle."

Peters, Schoenfish and Wismer are certified public accountants.

Legislative auditors said last year they couldn't determine what happened to nearly $1.4 million of federal grant funding Mid Central received.

The Platte cooperative was supposed to help students from lower-income households know more about educational opportunities after high school graduation.

Several non-profit sub-recipients had access to Mid-Central's bank account. Several people at Mid-Central managed the non-profits.

They included business manager Scott Westerhuis and assistant business manager Nicole Westerhuis, who were shot to death in 2015.

GEAR UP manager Stacy Phelps, Mid Central executive director Dan Guericke and assistant business manager Stephanie Hubers face state criminal trials later this year.


Mid-Central's board disbanded the cooperative last year and formed a new one.

Wismer said it's impossible to say with certainty that something might have happened differently if stronger financial standards had been in place. But, she continued, "I do believe some of these provisions would have helped discover it sooner."

At a glance

Here are highlights of SB 100. The state House of Representatives gave final legislative approval Monday.

Section 1: Requires a copy of the report of the audit be delivered and the person must furnish a copy to each member of the school board.

Section 2: Requires any county, city, or school district receiving an independent audit to display the report on the government's website.

Section 3: Requires any sub-recipient evaluation report or program evaluation report to be posted on the state website when the state agency serves as a pass-through for a grant from the federal government to a non-state agency.

Section 3: Also requires any conflict of interest, as outlined in the organization's state-required conflict of interest policy, to be disclosed to the state agency and displayed on the state website with the grant agreement.


Section 4: Prohibits any person involved in the determination of the recipient of a grant or contract from a state agency from receiving the grant or contract.

Section 4: Also prohibits any recipient or sub-recipient of a grant or contract from a state agency from conducting any external evaluation of performance of the grant or contract.

Section 5: Requires persons holding a statewide office, and any head of an agency in the executive branch, to annually sign a state form saying the person has reviewed the state conflict of interest policy and disclosed any conflicts that weren't previously disclosed.

Section 5: Also requires the state Bureau of Human Resources to compile the forms and present them annually for review by the Legislature's Government Operations and Audit Committee.

Section 6: Lengthens the period for displaying public contracts.

Section 7: Lengthens the period for displaying grants and awards.

Section 8: Requires original invoices and vouchers be retained at least seven years.

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