State to withhold $1.2 million from schools

Oregon State Superintendent of Public Instruction Susan Castillo says she will start in January 2007 withholding $1,208,286.13 in state school funds (SSF) that would normally be paid to the Sisters School District.

Castillo's decision to withhold the funds is based on the findings of an investigation conducted by the Oregon Secretary of State's Audits Division of a homeschool program operated by the Sisters School District and sited at Sonrise Christian School (now Sisters Christian Academy) during the 1999-2004 school years.

The investigation found that "the district's homeschool program operated at Sonrise was not a legitimate program for which the district was entitled to SSF (State School Funds). (See "State comes down hard on school district," The Nugget, September 19, 2006).

In a letter addressed to Sisters School District Superintendent Ted Thonstad dated October 11, Castillo specifically outlined the Oregon Department of Education's (ODE) procedure for withholding the funds from the Sisters School District.

Castillo stated, "The funds will be withheld in 11 reductions to be deducted from the district's regularly paid apportionments commencing January 2007."

Castillo outlined that 1/12 of the total amount will be deducted each month of 2007, except for July when 2/12 will be deducted and August when nothing will be deducted. In real dollars this means that the district will lose approximately $100,690 in state school funds (SSF) each of 10 months of 2007 and double that amount in July.

Castillo gave the district an alternative option of having funds withheld over a five year period in amounts that correspond to what the district was overpaid on a year-by-year basis.

In her letter, Castillo outlined the five-year correction schedule as follows: "$243,592.01 overpaid in the 1999-2000 year deducted from the January 2007 regularly paid apportionment; $182,016.85 overpaid in the 2000-2001 year deducted from the January 2008 regularly paid apportionment; $113,935.02 overpaid in the 2001-2002 year deducted from the January 2009 regularly paid apportionment; $249,942 overpaid in the 2002-2003 year deducted from the January 2010 regularly paid apportionment; and $418,800.67 overpaid in the 2003-2004 year deducted from the January 2011 regularly paid apportionment.

"As Superintendent of Public Instruction it is my responsibility to administer state financing of education and to correctly make payments to districts from appropriated state education funds," Castillo said. "It is also my responsibility to correct in a succeeding year any errors in apportionment by the withholding of the amount of a previously paid over apportionment."

Sisters School Board Chairman Rob Corrigan said that the district through its lawyers is in the process of sending letters to the ODE requesting facts and figures of how the state determined the district was overpaid $1,208,286.15 "so that we can either agree or disagree. If we agree, of course, then no problem. If we disagree, then, we're going to have to take steps to contest the dollar amount." (See related story, page 26).

The Nugget contacted Deputy State Superintendent of Public Instruction Ed Dennis for his input on the district's recourse.

Dennis said, "Let me be very clear about one thing first of all: the superintendent you have there (Ted Thonstad) came after this happened. We have tremendous respect for the superintendent."

Dennis noted that the state superintendent Susan Castillo has not yet received a response to her letter to the Sisters School District, although the Sisters School District's attorney and superintendent have been in contact with the state superintendent's office to ask questions.

"We sent them (the Sisters School District) a letter saying there are these two options to repay the funds, and that is the course we are going to pursue," Dennis said. "The district could approach us and could raise some issues that compelled us to want to take another look. We could choose to do that. They could also take us to court. We're sort of waiting to see what the district is going to do in the next step. I think though that there is understanding, maybe not one hundred percent understanding, that inappropriate things happened."

Corrigan foresees the matter drawing out for some time to come.

"I fully anticipate having a lot of back and forth here," he said. "But anything like this is going to take lawyers and government bureaucracy and time, not measured in hours, not measured in days but measured in weeks and months to get the information, a chance to go through it ourselves, a chance to talk to people who did it."

Sisters School District is evaluating its alternatives in responding to State Superintendent of Public Instruction Susan Castillo's decision to withhold $1,208,286.15 in state school funds from the district for overpayments it received for a homeschool program at Sonrise Christian School (now Sisters Christian Academy).

An investigation by the Oregon Secretary of State's Audits Division determined that the Sisters School District was overpaid from 1999-2004 by the state school fund for students the district inappropriately claimed in its Average Daily Membership (ADM) count. (See related stroy, page 1).

When asked about the district's response to Castillo's plan to withhold funds, Superintendent Ted Thonstad told The Nugget that the district cannot analyze anything until they see how the secretary of state's audits division calculated the amount they allege the district was overpaid. He said, "Until we have that information, I have nothing to say."

Sisters School Board Chairman Rob Corrigan said, "I tend to think of it, if you were running a business … you'd have a lawyer to do this; you'd pick an accountant to do that, a bill collecting agency to to do this, and we're just watching the mechanics unfold from their standpoint."

Corrigan said that in the meantime the district is trying to make an intelligent decision on how to proceed.

Sisters School District attorney Neil Bryant told The Nugget that he has requested on behalf of the district copies of the secretary of state's audit and the work papers. He said that he also has asked State Superintendent Susan Castillo to give the district time to review the audit and conduct its own investigation.

"We believe that it is going to take us 60 to 90 days, at least, from when we receive the audit. The request is saying, give us the time because you want to take a payment out of the district in January."

Bryant continued that the district feels that there is a possibility that the secretary of state has drawn some wrong conclusions or made some mistakes.

"We won't know that until after we have had a chance to do a careful review," Bryant said.

Bryant also mentioned that it is important that the Sisters School District do its own due diligence before agreeing to the state superintendent's plan to withhold funds. He said that the district must be able to tell its taxpayers, constituents and employees "this is what we think we do or do not owe. That's part of the process we go through, too. Until we get that information and review it, we're sitting in the dark."

When asked about the district's rights to appeal, Bryant noted that "the district should have the right to appeal the decision related to the audit."

Bryant added that the state superintendent has significant discretion under the statute and that it will be her decision whether or not to grant the district the time it has requested to review the audit.

If the state superintendent does not provide the district time to review the audit Bryant said, "Then, that will cause the district and our office to have some further discussions about what alternatives we might have, but I can't go in that direction yet until I have a response from her and also have a chance to look at the audit."