State audit questions school spending.

Byline: Anne Williams The Register-Guard

State school fund payments to HomeSource account for the largest share of dollars questioned in an audit by the Oregon Secretary of State's Audits Division.

An accounting of the funds was released this week as a follow-up to a Sept. 20 audit of 2003-04 payments made by school districts to four alternative education programs, among them HomeSource, a Bethel-area homeschooling resource center, and the Martin Luther King Jr. Education Center, a collaborative program for Lane County youth referred through the courts.

Auditors found that school districts wrongly claimed at least $318,000 in state school funds for students attending three of the four programs, and questioned whether an additional $807,000 also may have been distributed inappropriately.

Payments to HomeSource - mostly funneled through the Bethel School District - account for more than $850,200 of the $1.125 million in question. Of that, only about $43,000 was clearly claimed inappropriately, auditors found; the remainder fell into the "questionable" category.

In a statement issued last week, Superintendent of Public Instruction Susan Castillo pledged to seek reimbursement of the full $1.125 million.

"There is no question that these taxpayer dollars should be returned to the State School Fund," according to the statement.

But officials with both HomeSource and the Bethel district said Tuesday that most of the practices identified as inappropriate followed advice given by the department. The department has since rescinded much of that advice and has clarified policies governing alternative education contracts, but that didn't happen until after the period of the audit.

"The real issue for the Bethel School District is that over the 11 years of HomeSource's operation, Bethel has sought advice from (the department) on how to appropriately manage the program and contract with the program, and it appears that the items that were found in this audit are at odds with the advice that the district received from the Department of Education," said Superintendent Colt Gill, who is in his second year with the district.

At the time of the audit, most students who attended HomeSource were released to the Bethel district with permission from their home districts, allowing per-pupil school funds to flow to HomeSource through Bethel.

Consequently, Bethel would be on the hook for $767,470 of the money in question. The two other districts that had contracts with HomeSource at the time - Fern Ridge and Springfield - would be responsible for $21,711 and $45,170, respectively. Springfield would have owed $61,000, but auditors subtracted almost $16,000 that the district should have claimed but did not for students attending the Martin Luther King Jr. Education Center.

Auditors identified just $9,781 in wrongly claimed payments to the Martin Luther King center. The districts responsible for a portion of that are Bethel, Fern Ridge, Creswell, Eugene, Junction City, Oakridge and South Lane.

The audit, requested by the Department of Education, found instances in which districts claimed nonresident students without the necessary referral forms or consent from home districts; turned in inaccurate student counts because of flawed attendance tracking and faulty calculations; and inappropriately considered unlicensed assistants and interns as instructors, which inflated the per-pupil funding calculation.

Sue Mathisen, special education director for the Lane Education Service District, coordinates contracts between districts and the Martin Luther King center. She said Lane ESD takes responsibility for the errors.

"I think we were all operating on our best information that we had at the time, which we have since found was incorrect," she said, adding that the flawed practices have long since been corrected.

Susanne Smith, a spokeswoman for the Department of Education, said department officials plan to meet with the Department of Justice to review and verify the information in the audit. The department then will send letters to all the implicated school districts saying what they owe and giving them 30 days to respond.

She said Bethel and other districts that may question the reimbursements will have plenty of opportunity to make a case. "I think we definitely will look case by case at what their appeal is and go from there," she said.

The department sought the audit in 2004 after revelations about misspent funds funneled through the Union-Baker Education Service District. According to an Audits Division official, the review was to give a sampling of practices that may have occurred throughout the state rather than to penalize any particular program.

Since 2004, the department has adopted new, more accurate systems for tracking funding claims and has established clear guidelines for publicly funded private and public alternative education programs, Castillo said in her statement.