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Auditor: Douglas County treasurer erred in distributing millions to local governments

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The Douglas County Treasurer’s Office miscalculated distributions of millions of dollars in revenue in 2021, resulting in overpayments to the Omaha Public Schools, the City of Omaha and Douglas County and underpayments to four other local school districts, the Nebraska State Auditor’s Office has concluded.

Even though his office had done the calculations the same way, apparently unchallenged, for 61 years, Douglas County Treasurer John Ewing said Monday that he agrees with the auditor’s conclusions. This year, he said, he changed how the distributions are calculated.

The issue involves an apparently recent interpretation of state statute that spells out how counties with more than one school district within a single city are supposed to distribute annual payments that the Omaha Public Power District makes in lieu of property taxes. It’s an issue that arose last year in Sarpy County and is the subject of litigation.

According to a letter from Nebraska State Auditor Charlie Janssen’s office made public Monday, the Douglas County treasurer in April 2021 overpaid the Omaha Public Schools by about $5.7 million, the City of Omaha by about $4.4 million and Douglas County by about $2.7 million. The treasurer underpaid the Elkhorn Public Schools by about $4.2 million, Ralston Public Schools by about $4 million, Westside Community Schools by about $3.7 million and Millard Public Schools by about $820,000, according to the letter. The treasurer also underpaid the City of Ralston by $945, says the letter, signed by Deputy Auditor Craig Kubicek.

The money comes from payments, known as payments in lieu of taxes, that state law requires OPPD to make. The publicly owned utility is required to pay 5% of its gross revenue from electricity sales. The Douglas County treasurer should have included the levies of all the school districts within Omaha when it calculated the distributions, the state auditor’s letter said.

“Instead, the County Treasurer started the calculation by using only the Omaha Public School District levies to determine the amount to be disbursed to the five school districts within the City of Omaha,” the letter said. “This incorrect amount was then divided among the five school districts based on the student census percentages that are also used for the distribution of city fines.”

Ewing said Douglas County treasurers had calculated the distributions of OPPD payments the same way for 61 years.

“Since 1960, there was an interpretation by the previous treasurers that the distribution method that we were using was the correct interpretation of the state statute,” Ewing said.

In 2019, he said, he sent a couple of his staff to training on the issue put on by the Nebraska Association of County Officials and the state auditor. They concluded they were doing it correctly.

“As we looked at what was happening in Sarpy County, we decided to do a more in-depth review of this process and came to the same determination that the State Auditor’s Office did,” Ewing said. “And we’re in the process of correcting the distribution for 2022, and that distribution was made on May 13. It was done according to this new corrected formula.”

He said his office “did a proactive approach to it and reviewed the state statutes and made the determination that we needed to correct the distribution process.”

The state auditor in 2021 found that the Sarpy County treasurer had similarly miscalculated distribution of OPPD payments from 2018 to 2020, resulting in overpayments to some school districts and underpayments to others. The Omaha, Gretna, Millard and Springfield Platteview school districts are suing the Sarpy County treasurer. A hearing is scheduled for May 31.

The Omaha Public Schools was underpaid by $1.4 million by the Sarpy treasurer, according to the lawsuit. The Millard Public Schools missed out on $2.3 million payment. The lawsuit alleges the Gretna Public Schools was underpaid by $721,774, while the Springfield Platteview Community Schools didn’t receive $1.9 million in funds.

The Bellevue Public Schools was also reportedly overpaid by more than $2.3 million, and the Papillion La Vista Community Schools received $946,054 more than it was supposed to receive, according to the lawsuit.

The audit of Douglas County’s distribution of OPPD payments came about because of the Sarpy County findings, Kubicek said.

“We received a concern that Douglas County was doing the same thing, similar concerns and so we just kind of looked at that piece,” he said.

In Douglas County, the change in how the distributions are calculated this year has led to shortfalls in what some government subdivisions were expecting. Douglas County was expecting $4 million from the OPPD payments this year, but instead received $2.6 million, said Joe Lorenz, the county’s finance director. The City of Omaha received about $5 million less than projected for 2022, City Finance Director Steve Curtiss said.

The finance directors and Ewing said they had not heard yet that underpaid governments are seeking to recover money. It will be up to those entities to decide whether to pursue that, Ewing said.

OPS officials “welcome the efforts of the Auditor to ensure that, going forward, all political subdivisions are paid correctly,” the district said by email Monday. “We will review the Auditor’s findings and continue to work with Douglas County to see what the next steps are.”

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Chris Burbach covers the Douglas County Board, Planning Board and other local government bodies, as well as local neighborhood issues. Follow him on Twitter @chrisburbach. Phone: 402-444-1057.

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