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State's new internal-control board moves ahead on financial monitors

PIERRE -- The new Board of Internal Control for state government met for its second time Tuesday as its members began putting steps in place for more transparency regarding grants and contracts.

PIERRE - The new Board of Internal Control for state government met for its second time Tuesday as its members began putting steps in place for more transparency regarding grants and contracts.

The new processes will focus first on federal grants that pass through state government and in many cases go next to grant sub-recipients or contractors.

The state law approved earlier this year at the request of Gov. Dennis Daugaard and Lt. Gov. Matt Michels creating the board includes a requirement that grant agreements be publicly posted on state websites starting July 1.

Colin Keeler, director for financial systems and operations in the state Bureau of Finance and Management, is overseeing the grant-posting portion of the transparency project.

Keeler said the mechanism is in place at state government's transparency website, open.sd.gov. He said posting many contracts started in 2010. So far there are 513 grant-services contracts and 57 grant agreements posted as part of the new requirement, he said.

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Keeler said he believes any protected information that can be redacted from public view under existing state-records law can continue to be blocked on the documents that are posted, such as identifying data numbers.

The Board of Internal Control's chairman is Jason Dilges, commissioner for the Bureau of Finance and Management. Dilges said he would rather see redacted documents be posted than for agencies to withhold documents altogether.

"I think we've got a really great start on this," Dilges said. He said they'll monitor how the work progresses.

Dilges acknowledged that posting grant agreements and grant-services contracts might seem like "a daunting task" for smaller boards and commissions but he suggested they work with their agencies and departments. He promised cooperation.

Keith Senger said the challenge now is ensuring compliance on federal grants regarding pass-through entities and sub-recipients. Senger is director for accounting analysis and financial reporting in BFM.

Senger said state government likely has "widespread noncompliance" with 2013 federal grant requirements. "The problem we have is we don't have any central guidance," he said.

"We're all going to learn together," Senger continued. In time the new approach that will be taken for federal-grant compliance within state government will migrate to state grants too, he said.

State agencies have been taking their own approaches, according to Senger. He said the internal-control project is trying to bring together best practices within state government. Different levels of government and different entities had different requirements, he said.

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That led to the uniform grant requirements distributed in December 2013 by the federal government. He said the federal document isn't thin and isn't simple to follow. There are different requirements for sub-recipients than for contractors who supply sub-recipients.

"It's very complicated, and it's not very straight-forward," Senger said.

Government on the hook

A key step so far was creation of a uniform grant guidance work group from state agency personnel. The plan is to come up with standard controls and some standard forms, he said.

Senger didn't identify the specific entity but said a sub-recipient won't return state officials' phone calls after failing to properly use a federal grant that passed through state government. Now state government is on the hook, he said.

He said the work group members suggested developing a watch list or prohibition list.

Lt. Gov. Michels supported the high-risk list's development. "I would encourage that," Michels said. He also favored development of sanctions that could be placed within grant agreements.

Senger said he takes some comfort in that many state grant agreements are pay for performance. But others are up-front arrangements that create a danger for state personnel if they don't comply, Senger said.

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"There will be a lot of research done in that case," Senger said.

Michels suggested requiring a certificate of good standing from the South Dakota secretary of state for grant recipients.

"I think it gives us a little bit of a taste for what's to come," Dilges said about Senger's presentation.

Senger said there are about three dozen people participating in the work group. He said the meetings are conducted by teleconference and are open. They are progressing through nine immediate topics of attention, he said, and will present recommendations to the board. He said those nine are a small part of the requirements.

The board's creation came in the wake of the financial wrongdoing and the deaths of a family of six people at Platte in connection with Mid-Central Educational Cooperative's pass-through grant for the federally funded GEAR UP program.

Three people currently are charged in state court in connection with an ongoing state investigation and a state financial audit is continuing.

The grant's management was awarded by the state Department of Education to Mid-Central, which in turn contracted for GEAR UP services. The program was intended to help lower-income students and their parents understand what was needed for further education after high school graduation.

Mid-Central's board has voted to disband the cooperative in the coming year and GEAR UP management was moved to the state Board of Regents. The program now runs from Black Hills State University.

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