Oops! Computer glitch leads to misallocation of millions for Iowa school projects

A computer programming error caused the Iowa Department of Revenue to misallocate more than $9 million in sales taxes to be used for school infrastructure projects.

School districts in high-retail, metro areas — including Iowa City, Cedar Rapids and Des Moines — were shorted dollars, while districts in rural areas received more money than they should have for the year that ended June 30, officials said.

'Unfortunately, the computer system used to calculate the final distribution was not programmed to handle a situation where the actual per student payment exceeded the estimated payment,' DOR Spokeswoman Victoria Daniels said Monday. 'The end result was that most school districts received the wrong amount.'

School districts were alerted to the error Jan. 2 by Matthew Gillaspie, an employee with PiperJaffray, a financial services company that advises school boards on bond issues. Gillaspie was doing some work for Northeast Community School District in Goose Lake when he discovered the error, he wrote in an email to districts.

'It looks like the DOR mistakenly capped the 'retail-rich' counties at that initial $870/student figure, and then paid out all remaining funds to the 'retail-poor' counties … which means that those schools were paid out at a rate of around $952/student,' Gillaspie wrote. 'What should have happened is that ALL SCHOOLS should have been paid out at near the same $902/student level.'

Gillaspie warned districts not to start spending their Secure an Advanced Vision for Education (SAVE) money until the DOR rectified the payments.

Daniels said the DOR was working with the Iowa Association of School Boards to alert school districts.

Craig Hansel, chief financial officer for the Iowa City Community School District, had not yet received official notification from the DOR or school board association as of Monday.

'That's a considerable amount of money,' Hansel said of the estimated $400,000 more Iowa City would gain if Gillaspie's calculations are correct. 'It's good news for us.'

The Iowa City school district is in the midst of a building boom with additions being built on several schools and new elementaries and a high school on the horizon. 'These additional dollars will flow into that master facilities plan,' Hansel said.

Other school districts will have to adjust.

'I think we're one of the districts that was overpaid,' said Jeffrey Dieleman, business manager for Washington Community Schools.

For districts that received more than their share of the SAVE money for fiscal 2014, the DOR will reduce payments in future years. Since Washington's money is going to pay down debt on a high school opened in 2012, it doesn't make much difference whether it comes in fiscal 2014 or fiscal 2015, Dieleman said. 'It will balance out in the end.'