State releases Hayfield school district audit

Published 12:00 am Tuesday, June 12, 2001

HAYFIELD – A search for a new superintendent, recent commencement exercises and a report from the state auditor’s office have given the Hayfield Board of Education a full plate.

Tuesday, June 12, 2001

HAYFIELD – A search for a new superintendent, recent commencement exercises and a report from the state auditor’s office have given the Hayfield Board of Education a full plate.

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The state auditor’s report was unveiled May 21 at a special meeting of the school board. Tom Karlson, Richard Urbain and Wilfredo Roman-Catala revealed the findings to school board members, Superintendent Larry Shay and a dozen residents in the audience.

The audit was requested by petition after residents unearthed possible financial irregularities, stemming in part of the district’s massive school facilities’ upgrading project at both the Hayfield and Brownsdale attendance centers.

According to Karlson, the state auditor’s office responded to the petition by examining the district’s financial records through June 30, 1999.

Specifically, the state investigators looked at the building project, a possible conflict of interest, payroll items, transportation costs and sales taxes paid. Architect fees dominated most of the meeting’s discussion period May 21.

The state investigators examined the building project and found architect Paul R. Johnson of Austin may have been overpaid.

When bids for the first phase of the project were opened in April 1998, they came in at the $6.2 million mark and were rejected by the school board.

The scope of the building project was modified and the project was rebid in June 1998. When bids came in at the $5.3 million mark, they were accepted and contracts let for the project to begin.

According to the state auditor’s report, the architect continued to collect fees at 7.4 percent of the original bids, which were rejected by the school board. That allowed Johnson to collect either $41,565 more on the first phase of the project or $8,753 more on the second phase, according to the state auditor’s findings.

Johnson’s fees were more than $581,000 as the project’s architect.

The school board raised concerns about the irregularities in August 1998. The state investigation sought out Johnson for his comments during their audit of the district finances.

According to Johnson, he was able to satisfactorily answer their questions. He maintains a new agreement for the original (rejected bid amount) fee payment schedule was approved by the school board. He maintains the new revised agreement apparently was not recorded by school officials.

Karlson observed: "We did have concerns about fees based upon a rejected bid."

The report recommended any modification of a contract be documented in writing and duly recorded in the official minutes of school board meetings.

Among the other state auditor’s office findings:

The school district’s attorney, Steven Rizzi of Austin, also

is Johnson’s attorney. Any question about that relationship would

be covered by the Minnesota Bar Association’s ethical standards.

Board member Randy Demmer, owner of Computer Edge, was exonerated

for his firm contracting with the school district for the purchase

of computer equipment.

While the state auditor’s office noted "sloppy"

bookkeeping was evident in payroll accounting, it said the amounts

paid were small and otherwise insignificant and could be verified

by other means.

The situation of Walter Nelson, working as a part-time custodian

while he also was driving a school bus and then hiring his own

replacements when he could not perform the custodial duties,

was not found to be wrong. Again, the state auditor’s office

chastised the school district for another bookkeeping lapse in

documenting paid time off to school employees.

Sales tax payment irregularities were called "insignificant"

and resulted from negative account balances mainly incurred by

various senior graduating classes.

Throughout the course of its investigation, the state auditor’s office called upon school district officials to supply information and the district’s comments were duly noted in the preliminary audit report.

Karlson said the state’s investigation was to "conduct procedures to resolve some of the issues raised by citizens in their petition." It was not, Karlson, said to render any opinions.

Several comments were raised about the alleged overpayment of architect fees and how the district could recoup the overpayments and the costs of the audit; estimated at $5,000.

"I don’t know that there is anything that can be done," Karlson admitted, but more than one resident said the district should try to get funds back from the architect to pay for the expenses of the audit.

Among the most outspoken critics of the audit for failing to go far enough was Jim Hartson, who also initiated the petition drive for an audit.

"Over 330 people signed that petition," Hartson said. "I really think we are short-changing those people if we stop here and don’t do anything else."

School board President Steve Boysen said school board members were seeing the audit report at the same time residents were. He did not say what course of action the school board will pursue with the findings.

Alluding to the relatively "tame" state auditor findings, Karlson had this to say: "You may not always get the answer you want to hear."

Call Lee Bonorden at 434-2232 or e-mail him at