Montana Education Dept Faces $67M Audit Over Questionable Federal Spending

State auditors found over $67M in questionable federal pass-through spending in Montana's education department, including massage chairs.
Auditors say Office of Public Instruction may have misspent $67M of federal funding • Daily Montanan

State auditors informed Montana lawmakers of over $67 million in questionable spending of federal funds within the state’s education department, including a district purchasing massage chairs for a teachers’ lounge.

Auditors found some records so incomplete that compliance with federal law couldn’t be verified. Meanwhile, Montana Superintendent of Public Instruction Elsie Arntzen was traveling, unable to address questions, frustrating lawmakers who believed new staff shouldn’t be held accountable for Arntzen’s leadership.

“These are significant findings and as elected officials in charge of this, we require them to be here,” said Sen. Jason Ellsworth, Senate president and chairman of the Legislative Audit Committee. “We are going to reserve this opportunity for her to come here and answer these questions.”

Arntzen later apologized via video, explaining that new positions were created partly due to the negative audit findings. She will depart from her position at the end of the year.

The Montana Office of Public Instruction audit is one of many reviews by the Legislative Audit Committee, which scrutinizes state agencies’ spending of federal money. This money usually has auditing requirements to ensure it aligns with Congressional mandates.

The audit revealed $67.5 million in “known questioned costs,” either undocumented or seemingly misaligned with federal programs’ intentions. Lawmakers were frustrated, noting unresolved issues flagged two years prior. Out of five adverse opinions in the state audit, three were from the OPI.

“That’s an enormous amount of money,” remarked Sen. Kathy Kelker, D-Billings.

April Grady, OPI’s newly hired chief financial officer, highlighted positive steps, such as hiring an internal control auditor and progress on filling 13 open positions. “We were an aging agency with high turnover,” Grady noted.

The new internal control auditor reports to John McCormick, the chief accountability officer, who was also absent from the meeting. Ellsworth questioned the redundancy in roles, asking, “Then what’s the role of the accountability officer?”

Jessie Curtis, compliance audit supervisor for the Legislative Audit Division, explained that federal COVID response funds introduced new programs requiring audits. However, many issues at OPI were longstanding. “The OPI staff have responded that many of these issues were caused by the federal government,” Curtis said. “However, we found that often incorrect information was submitted or that the office didn’t track required expenditures.”

Audit staff noted high turnover at OPI led to delays. A significant portion of the $67.5 million lacked documentation, including $52 million untracked without receipts or site visits. These issues were previously flagged but not addressed by Arntzen.

Curtis highlighted federal funding for construction requiring wage certification, which OPI failed to track. Of $52 million questioned from the Education Stabilization Fund and coronavirus relief, OPI could only document $200,000.

One school district used funds to buy massage chairs for teachers, intended to retain staff during the pandemic. Other questionable expenditures included undocumented pizza purchases.

Auditors estimated $5.9 million in costs lacked sufficient documentation, potentially reaching $25 million. Two large school districts, Great Falls and Billings, missed out on hundreds of thousands for special education but later received full funding.


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