Minnesota school district faces $700,000 budget shortfall, launches criminal investigation

OLIVIA, MINN. – A rural school district here is grappling with a projected $700,000 budget shortfall and is working with police after allegedly discovering numerous financial irregularities.

The budget deficit comes from escalating transportation costs, payroll discrepancies and a series of unpaid bills, Superintendent Jim Menton of the Bird Island-Olivia-Lake Lillian (BOLD) school district said at a board meeting last month.

The financial irregularities include a series of bills that had not been paid, Menton said, including a $90,000 charge for landscaping services completed years ago.

“We started to find out about these late last summer when concerns came to light about our former business manager’s handling of money,” Menton said.

Menton did not mention the name of the business manager while addressing the school board.

But police in Olivia are looking for details from a 48-year-old woman who worked at BOLD from May 1, 2021, to Sept. 5, 2024, and may have been using school funds to purchase personal items, according to a search warrant described as being connected to a “serious embezzlement/theft allegation.”

Some $11,528 worth of questionable purchases on the woman’s school-issued credit card included expenses at Buffalo Wild Wings, Walmart and Target, as well as auto loan payments and energy bills, the search warrant application said.

Jason Krumheuer, Olivia police chief, confirmed his department is “currently investigating financial irregularities brought to our attention by the BOLD School District,” but declined to comment on it in an email Monday. The Minnesota Star Tribune generally does not name suspects who have not been charged.

Menton said that as part of an audit on Sept. 5, staff asked their former business manager about two lap desks, used to eat breakfast in bed or while sitting on the floor. Staff believed the school’s business manager had ordered them using the school’s Amazon account and then had taken them home for personal use.

When asked about these desks, Menton said the former manager denied having seen them and then resigned later that day.

Menton said he subsequently filed a police report, initiating an investigation by the Olivia Police Department and the Minnesota Bureau of Criminal Apprehension. The state auditor’s office was also notified, and the school hired an accounting firm to perform a forensic audit of its financial records.

Other financial anomalies include uncashed checks dating back to April, numerous overdue payments to vendors and questionable credit card charges, including a charge to an auto loan company, Menton said.

“After the business manager resigned, I had her emails routed to me and started becoming bombarded by emails from companies that were waiting for payments that had been billed many months prior to September,” Menton said. “One was for over $12,000 that had been asking for payment for over 220 days. It seemed like every day for the next month, I was receiving more emails with the same story.”

A $13,000 concession deposit containing checks but no cash raised further concerns, with the cash portion unaccounted for, Menton said at the meeting.

Menton said the district is implementing stricter financial controls, including detailed receipt requirements and tighter oversight of fund handling.

“Since last September, we have been updating our procedures for handling money,” Menton told the board. “Every transaction is required to have a receipt. This has always been the expectation but has not been well enforced.”

Menton attributed the largest portion of the deficit, approximately $400,000, to a surge in special education transportation routes. Payroll overruns accounted for an additional $200,000.

The district has taken steps to eliminate some transportation routes to mitigate costs.

Menton said in an email Friday that he expects the investigation will conclude within the next two to three weeks.