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November 02, 2015 04:15 PM

KELOLAND News Investigation: SD GEAR UP Grant Application

Sioux Falls, SD

Alice Phelps is not Stacy Phelps'wife, but rather Phelps' aunt, often referred to as his sister-in-law because his uncle was like a brother to him.

On the eve of the Attorney General's announcement about the investigation into the deaths of the Westerhuis family in Platte, we are getting new information from the state's GEAR UP grant application about how the money and programs for GEAR UP were supposed to be handled. 

Scott Westerhuis was the business manager for the educational cooperative that doled out millions in grant money, as well as the accountant of the foundation that got the money to run GEAR UP.  

The state had just cancelled its contract with Mid Central Educational Cooperative for $4.3 million on September 16, following a troubled audit.

Hours later, Westerhuis allegedly shot and killed his wife and four children, set fire to his house and turned the gun on himself.  If it weren't for that horrific tragedy, chances are the GEAR UP program would never have come under such scrutiny. 

Under the Freedom of Information Act, KELOLAND News obtained a 185-page document.  It's the 2011 application by the South Dakota Department of Education for $24.4 million in GEAR UP grant money over seven years.  Inside, the state makes a lot of promises when it comes to the program, how it will be handled and the results it expects.  But when we dug into the documents, we found some troubling issues involving conflict of interest and who was really responsible for the money. 

We asked former grant writer and reviewer Michael Wyland to look over the document with us.  Wyland currently is a consultant for non-profit organizations, but has written $60 million in successful, mostly federal grant applications.

"When I look at an application, I want to see as few questions as possible.  The more questions I have, the less confidence I have in the quality not only of the application, but in the quality of the applicant organization," Wyland said.

And Wyland found plenty of questions in South Dakota's GEAR UP Grant application.  It starts with who's actually responsible for what.  According to the application, the State Department of Education is the lead partner and fiscal agent for the program.  In the application, the Department of Ed committed to hiring 13 full-time employees to work on the grant activities and to hire the independent evaluator of the program among, other things.  But the state tells KELOLAND News all of that was contracted out with Mid Central.

Angela Kennecke: The state says, 'Well, we contracted all that out with Mid Central.'  Is that way it's supposed to work?
Wyland: Well, it could work that way. The difficulty is that the grant application itself was not written that way. The application is written so that half of the $24 million over seven years would be contracted out to various entities including Mid Central Educational coop. The other $12 million was identified as being spent by the applicant, which was the Department of Education.

Wyland also noticed another red flag in the application: 

"There are a number of conflicts of interests involved in the GEAR UP program," Wyland said.

Wyland says conflicts of interest are bound to happen, but the important thing is how they are documented and managed.  Stacy Phelps was the GEAR UP grant project coordinator.  At the same time, he was acting as the Chief Executive Officer of the American Indian Institute of Innovation, the very same group that got the money to run the GEAR UP programs in the schools.  And Phelps’s wife, Alice, was on AIII's payroll for $90,000 a year, according to the foundation's IRS returns.  One of the reasons, the state cancelled its contract with Mid Central was due to conflict of interest and failure to disclose related parties.

"We don't know what his role with AIII was, during the time he was 100 percent dedicated, according to the grant application, to being the project coordinator for GEAR UP," Wyland said.

Scott Westerhuis' name also shows up in the application; he signed the partnership form for AIII as the organization's Chief Financial Officer. 

Wyland also points out that the state's objectives for the program are vague and hard to measure.  And we discovered in the application that South Dakota applied for a waiver from having to use any of the money for college scholarships for Native American students. 

"50 to 75 percent of GEAR UP funds are designed to be spent on scholarships. South Dakota requested a waiver to spend no money on scholarships, but rather to spend 100 percent of the grant on college preparedness and college readiness.  And so that was a major departure from the original intent of the federal law," Wyland said.

And even though the state contracted out so much of the GEAR UP grant work to Mid Central, it's still the Department of Education that's on the hook to the federal government. 

"The extent to which the state does not have adequate documentation of money over and above what was identified in the grant application as going to Mid Central or other partners, it's going to be problematic for the state of South Dakota in substantiating to the federal government that that money was used appropriately," Wyland said.

KELOLAND News has requested and we are waiting for more reports on GEAR UP from the U.S. Department of Education that could indicate any changes the state made from the original application.  We also requested an interview with State Department of Education Melody Schopp and were told it would be 'inappropriate' until the investigation is complete.

Wyland also believes the evaluation of the GEAR UP program in South Dakota was underfunded.  $85,000 a year was set aside for the evaluation.  Wyland says it should have been $150,000 a year or more to do an effective evaluation.  

As KELOLAND News reported late last week, the most recent evaluation of the program found that it couldn't determine that GEAR UP was really getting more Native American students to go to college.  The USD report says one reason was due to lack of access to data.

The South Dakota Department of Education responded via email to some of our questions: 

DOE did not hire any staff for the grant. Our organization contracted with Mid-Central to run the day-to-day operations of the grant, and that organization in turn hired the people. 

As the lead agency, we are responsible for both fiscal and programmatic aspects of the grant. Our concerns have been with the fiscal management side of the grant, and those concerns were outlined in the Notice of Termination letter to MidCentral.


On 11/04/2015, KELOLAND News learned that Glenn Drapeau took over as Project Coordinator for GEAR UP in 2012, while Stacy Phelps continued to run GEAR UP out of Rapid City and was in charge of the summer program. 

  • Eye on KELOLAND
  • Sioux Falls, SD

This article has been revised to reflect the following correction:
Alice Phelps is not Stacy Phelps'wife, but rather Phelps' aunt, often referred to as his sister-in-law because his uncle was like a brother to him.


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