West Bonner forensic audit delayed, nonprofit filing draws concern

PRIEST RIVER — Initial results from a forensic audit of the West Bonner County School District have been postponed.

"We have looked at pretty much the majority of the information that has been provided to us, but we are still awaiting information," said Brandon Waldren of Eide Bailly, which is conducting the audit.

The Spokane-based firm was selected due to its expertise in the area and school accounting. Waldren, a senior manager at the firm, has extensive experience handling fraud and forensic cases with school districts.

To prepare the preliminary report, Waldren said the firm needed all data for the audit period of 2018 to 2023 by Aug. 1. However, as of Aug. 25 — the date Eide Bailly planned to deliver the report — some of the data needed had yet to be given to the firm.

Waldren told the board Friday that it has only received two of the five years of bank statements, and while it has received the general ledger details for the time period needed, it only has the canceled check images for three of those years.

Credit card statements for the five-year timeframe have been sent to the firm. However, Waldren said Eide Bailly is waiting on some additional data to be able to complete that portion of the audit.

Much of the data requires board approval to get access to the district's prior bank account, resulting in a delay in compiling the information.

The firm will then need two weeks from the receipt of the documents to complete the audit. To present audit results at the board's Sept. 16 meeting, he said the firm would need the data by Sept. 1.

As part of the audit's first phase, Eide Bailly met with key WBCSD personnel to determine the scope of district concerns. Among the data sought by the firm were credit card and banking statements with attached canceled check images for the five years under review.

"Once we receive both of those, our intent is to conduct a comparison of the general ledger and the bank statements in order to verify that what is said in the general ledger actually matches what's in the bank statements, and there's no missing transactions that maybe unfortunately happened," Waldren said.

The firm also sought general ledger information, in part to compare the data with the financial statements. The scope of the review also called on the firm to identify payees, end users and signors of the district's financial activity.

The board approved a multi-phase audit of its finances in early July to address board and community concerns. The audit would move forward only if something is discovered and needs additional investigation.

The delay means that audit results will come after Tuesday's election, in which embattled board chair Keith Rutledge and vice chair Susan Brown face recall from their seats.

According to recall organizers, Rutledge and Brown don't respect the rights and opinions of their constituents and have a "hidden agenda." However, the pair contend that they are being targeted by liberals and activists attempting to halt the conservative board's efforts to revamp a troubled district.

Bad behavior, mismanagement of funds, conflicts with district administrators or teachers, a refusal to listen to constituents, and open meeting law violations are among the reasons listed on petitions seeking to recall board members, according to Ballotpedia, a nonprofit that tracks nationwide school board elections.

When first elected, Rutledge and Brown garnered 485 and 359 votes, respectively.

As of Wednesday, Aug. 23, 244 absentee ballots had been cast and 59 early voters. There are 3,411 eligible voters. Bonner County Clerk Michael Rosedale said the election could easily top 2,000 votes.

Secretary of State filing

A Secretary of State filing listing the district as a non-profit has drawn concern that some on the WBCSD board are attempting to convert at least part of the district into a charter school.

Community members have pointed to a proposed sale of the district's junior high school, halted after an outcry by Priest River area residents, saying it shows they have grounds for concern.

Members of a West Bonner support page questioned the need for the 501(c)(3) filing, saying auditing firms typically only require board minutes and a resolution from the board authorizing who its contacts are.

"They are a public/government entity; therefore, they would not need to file with the SOS, as the state would confirm business status to any financial institution," one poster said.

An initial post on the filing quickly garnered more than 115 comments, with many asking what it meant for the district — and its students.

However, West Bonner Superintendent Branden Durst said the matter was merely to aid with the completion of the forensic audit.

"This was a required action to allow for the addition and removal of signers and executives on a previously closed bank account with Wells Fargo," Durst said. "We had to do so in order to get documentation to submit to our forensic auditors. Nothing more, nothing less."

As to why WBCSD is listed as a nonprofit on the filing, district personnel saw an example from another district and simply replicated their filing, Durst said.

A search of the Idaho Secretary of State website shows an entry from the Post Falls School District filing articles of incorporation for a nonprofit in December 2021. However, that status was administratively dissolved in March 2023.

Durst said the filing was part of an effort by West Bonner to build a new profile with the district's bank. Personnel changes resulted in problems with paychecks being cashed and current officials accessing district accounts.

Current banking requirements mean naming a key executive and designated employees who can interact with the bank on behalf of the district. That happened at the board's Aug. 9 meeting, in which Durst, finance director Melissa Reilly, and payroll/accounts payable manager Kendra Salesky were named to fill those roles.

Banking requirements also meant filing with the Idaho Secretary of State's office, West Bonner officials said.

Alex J. Adams, interim director of the Charter School Commission, said per Idaho Code that "no whole school district may be converted to a charter district or any configuration that includes all schools as public charter schools."

For a public school to be converted into a charter school, the matter has to first go to the local school district's board for review and approval. A petition must then be signed by at least 60% of the teachers currently employed by the school district and by at least one parent or guardian of at least 60% of the students.