Federal audit finds financial mismanagement at Oregon boarding school for Native Americans

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By ROB MANNING, OPB AND TONY SCHICK, OPB

July 20, 2023

The Interior Department’s inspector general blamed both school administrators and federal supervisors for poor accounting and oversight

Oregon’s only federally-run boarding school for Native American students failed to properly spend or account for millions of taxpayer dollars as well as hundreds of thousands contributed to student accounts by Indigenous families, according to an audit by the U.S. Department of Interior’s Office of Inspector General.

The audit of Chemawa Indian School was requested by U.S. Sens. Ron Wyden and Jeff Merkley after the two Oregon Democrats had pushed repeatedly for greater transparency from the school and the Bureau of Indian Education, which supervises the school. The senators’ request followed OPB’s five-part investigation into Chemawa, which raised questions about financial management and oversight at the school, as well as about the school’s approach to student health and safety, academics and its treatment of teachers and staff.

The audit, published Tuesday, calls out the school’s problems with a straightforward title: “The Chemawa Indian School Did Not Account for Its Financial Resources, and the Bureau of Indian Education Did Not Provide Financial Oversight.” The title notes the two-fold problem — that the school itself wasn’t following federal rules for spending and accounting, and the federal bureau wasn’t looking at the school’s balance sheets or holding administrators accountable.

The audit found rampant problems in how Chemawa leaders manage nearly $600,000 in its Student Enterprise Account. It’s a bank the school operates to safeguard money that belongs to individual students to spend while at the boarding school, as well as funds belonging to student organizations, donations, and money from student-run businesses, such as the on-campus student store and snack bar. The audit identified the apparent disappearance of money from student accounts — including a discrepancy of $319,000 in Chemawa’s accounting records compared to $219,000 in bank statements.

“The difference of nearly $100,000 between the accounting records and the bank account could indicate poor recordkeeping practices, misappropriation, or both,” the audit said.

The bottom line, regarding the enterprise account — including money belonging to students whose families are often low-income and live hundreds of miles from the Salem campus — was that Chemawa administrators “[m]ismanaged all student enterprise moneys averaging $597,000 at a given time.”

As part of its audit, the inspector general took a close look at a $2.2 million sample of Chemawa’s spending of government funding over a two-year period. Auditors labeled more than a quarter of that spending — $593,000 as “inappropriate and potentially wasteful.” The questionable spending practices occurred in both the “operations and maintenance” budget using Bureau of Indian Education money, and in purchases using another federal stream involving U.S. Department of Education funds.

Among the questionable expenditures was the acquisition of excavating equipment and maintenance vehicles, without demonstrating a need for the nearly $250,000 purchases. The audit says if had the school gone through such an analysis, “it would have demonstrated that it was unnecessary to purchase excavation equipment.” The school also spent more than $330,000 to build a barn “without an established program plan, curriculum, instructor, or budget” to lay out how the building would be used.

In his responses to the audit, Bureau of Indian Education Director Tony Dearman concurred with nearly all of the inspector general’s 26 recommendations. He pushed back on the audit when it came to the excavation equipment and the pole barn. Dearman said his agency wants until Oct. 31, 2023, to conduct the kind of “cost analysis” the audit said would show the purchase wasn’t necessary.

Dearman in his response to the audit, said the $330,000 construction of the “pole barn,” was justified as related to the school’s programming. He further argued the bureau’s “procurement process for the barn complied with [federal] requirements.”

However, everywhere auditors looked at spending, they seemed to find problems.

Donations to Chemawa, for instance, were not reported to anyone above the school, according to the audit. When donations were received, the audit suggests they were simply deposited into the student enterprise account.

“The responsible CIS staff, however, did not report the receipt of any donations to appropriate BIE officials, nor did they document in the mandatory annual report how donations were used,” the audit said.

Chemawa officials also violated federal guidelines for donations by accepting gifts from non-federal entities without formalizing a fundraising agreement, which is designed to ensure “that the fundraising complies with Indian Affairs policy,” and will benefit the school. Non-federal sources made up 57% of the money donated to the school during the audit period.

Parents and staff who watched Chemawa closely have long had questions about money the school had earned by leasing property on its land just east of Interstate 5.

Chemawa earned roughly $172,000 per year from six businesses that signed leases for billboards, cell towers and a Christmas tree farm.

Auditors said they couldn’t even find the actual lease agreements for most of those sales. The one they could locate was for a billboard, and the payments Chemawa staff reported for that billboard were well below what the school should have been receiving according to its contract.

According to the audit, that contract was signed in 2008 by the school’s then-principal, who didn’t have the federal authority to sign it.

Wyden, who requested the audit a year and a half ago with Merkley, responded to the audit Tuesday, saying “This new report confirms the worst fears of anybody advocating for Tribal students at the Chemawa School to be well educated and well cared for by the adults entrusted with these young lives.”

He said the audit “shines a troubling spotlight on how the deep failures of financial accounting and oversight translated into reduced opportunities and poorer outcomes for Tribal children.” Wyden said he will “keep pressing” for “the fixes long needed to help these kids succeed in the classroom and life.”

This story was originally published by Oregon Public Broadcasting and is published here by permission.