New state board, meant to fight corruption, plans to seek an outside consultant for help

PIERRE -- In the wake of two major corruption cases, the new board assigned to create a system of internal financial controls for state government and its contractors, vendors and grant recipients decided Monday to seek an outside consultant.

PIERRE - In the wake of two major corruption cases, the new board assigned to create a system of internal financial controls for state government and its contractors, vendors and grant recipients decided Monday to seek an outside consultant.

The draft request is still in development. It would call for proposals from consultants to work with one state agency, the Bureau of Finance and Management, as the first case.

The information learned during the development of controls for BFM could be applied later to other state departments and offices.

The draft calls for "Train the Trainer" sessions as well.

The proposal calls for a one-year contract with four one-year renewal options. The timeline is in flux. The original proposal called for a contract start-up of April 1, 2017.


The consultant also could be contracted by other state agencies willing to directly pay for its services.

Prices would be negotiated as part of the contracting process.

The 100-point scoring system to evaluate the proposals is weighted heaviest - 30 percent - to past performance in developing large internal control systems for other states or large government projects.

"We're looking for an expert that's done this before," said Keith Senger, director for accounting analysis and financial reporting in BFM.

The Legislature created the state Board of Internal Control this year at the request of Gov. Dennis Daugaard and Lt. Gov. Matt Michels.

Michels suggested the board in response to the corruption discovered in the GEAR UP education program and the EB-5 development program.

Several millions of dollars appear to have been siphoned away from Gear Up during the past decade.

GEAR UP is a federal grant program intended to help lower-income students and their families understand what is needed for post-high school education.


The South Dakota Department of Education receives the federal grant. In turn the department had contracted with Mid-Central Education Cooperative at Platte to be the sub-recipient.

After the state Department of Legislative Audit began uncovering financial problems in GEAR UP's management, the state Department of Education reversed its position and severed its contract with Mid-Central in September 2015.

Less than 24 hours after Secretary Melody Schopp informed Mid-Central's director Dan Guericke of that decision to end the contract, six members of a family were shot to death in their home south of Platte.

They included Mid-Central business director Scott Westerhuis, assistant business director Nicole Westerhuis and the couple's four children.

The state's criminal investigation concluded Scott Westerhuis must have shot his wife and children, lit their house on fire and then shot himself.

Three people subsequently have been indicted. They include Guericke, GEAR UP director Stacy Phelps of Rapid City and the other assistant business director, Stephanie Hubers.

Phelps created with the Westerhuises two non-profit organizations. GEAR UP money flowed through them. Hubers assisted in their operations.

Guericke and Phelps allegedly attempted to change some contract documents in September 2015 in an attempt to block the Legislative Audit investigation.


GEAR UP's use in South Dakota began under a previous secretary of education, Rick Melmer, during the previous administration of then-Gov. Mike Rounds.

Under Rounds, now a U.S. senator, the department added an office of Indian education, to which Keith Moore was appointed. Schopp worked at the department at the time.

While secretary under Daugaard, Schopp created a paid oversight panel to supervise Indian education activities conducted for the department by Mid-Central.

Melmer and Moore left state government before the end of the Rounds administration in 2010. Schopp brought them back into the department's orbit when she asked them to serve on the oversight panel.

Missing work logs for Melmer and Moore led the Department of Legislative Audit to look farther into GEAR UP and Mid-Central, setting off the broader investigation.

The GEAR UP contract was shifted to the state Board of Regents and Black Hills State University during the past year.

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