Nebraska Miscalculated State Aid for All 247 School Districts
Summary
Nebraska's Auditor of Public Accounts found the state's Department of Education miscalculated special-education reimbursements for all 247 of the state's school districts in fiscal 2025 -- from a $5.14 million overpayment to Omaha to a $994,863 underpayment to Lincoln -- on top of $54.8 million in financial-statement errors and a poverty-allowance formula mistake the department itself could not quantify.
A poverty-allowance error the Department couldn't even measure
One piece of the state-aid formula, the poverty allowance, depends on comparing a district's low-income students to a federally defined "identified student percentage." Auditors found the Department failed to multiply those two figures together for all 21 school districts participating in the federal community eligibility provision⧉ -- a step Nebraska statute requires -- an error that, per the audit, has likely been repeating since each of those districts joined the program, not just in the year tested. When auditors asked the Department to help quantify the damage, it could not provide complete information to redo the calculation.
Omaha Public Schools said publicly in November 2025 that the error had overpaid it $30 million for the year tested. The Auditor of Public Accounts is explicit that this figure is Omaha's own, not independently verified by its testing⧉, and says it will review the number in a future audit. The auditors also push back on how the Department has framed the episode: Omaha did not receive a sudden windfall -- the calculation has been wrong since Omaha joined the community eligibility program -- and the audit questions both the logic and the Department's specific legal authority for its stated plan to redistribute the disputed money among all districts rather than treat the original certification as final.
View data as table
| FY2021 | 6,187,991 | Significant financial-statement errors identified for fiscal year 2021 |
|---|---|---|
| FY2023 | 6,891,971 | Significant financial-statement errors identified for fiscal year 2023 (no comparable figure was listed for FY2022) |
| FY2024 | 281,351,290 | The largest year in the four-year table -- more than 40 times the FY2021 total |
| FY2025 | 55,311,855 | The year this piece covers in detail; auditors itemized $54,767,657 of this total in their Comment #3 breakdown |
A separate error, and it hit all 247 districts
A different part of the Department's job produced a cleaner, fully quantified finding. A 2025 change to state law required the Department to reimburse special-education costs on a pro-rata basis rather than the flat percentage used before. Auditors found the Department's own reimbursement software distributed the money incorrectly under the new formula for every one of the state's 247 school districts in fiscal 2025⧉ -- Omaha was overpaid $5,142,285, Lincoln was underpaid $994,863, and every other district landed somewhere between. The audit traces the cause to Department staff relying fully on the reimbursement software without understanding how it was actually distributing funds.
View data as table
| Omaha Public Schools (overpaid) | 5,142,285 | The largest overpayment among all 247 districts -- money Omaha received beyond what the pro-rata formula entitled it to |
|---|---|---|
| Lincoln Public Schools (underpaid) | 994,863 | The largest underpayment among all 247 districts -- shown as a positive magnitude; the district received this much less than it was owed |
A third, smaller formula error compounded the same year: a Medicaid-related receipt code was wrongly counted as a reduction against district operating expenditures⧉, a calculation that feeds 11 different components of the state-aid formula. That single miscoded receipt line underpaid 147 districts a combined $3,669,200, led by Lincoln ($883,692) and Millard ($487,047). Separately, auditors found the Department has no documented process to verify the mileage school districts self-report for transportation funding; for 22 of the 26 districts in the audit's sample, 2,144,931 reported miles produced a $5,747,156 transportation allowance with nothing behind it to check.
The Department's own books were off by $54.8 million
Beyond the aid-calculation errors, the Department misstated its own financial position by $54,767,657 in fiscal 2025⧉ -- adjustments the state's central accounting office had to make to keep Nebraska's books materially correct. The single largest piece was the special-education transportation payable itself, understated by $16,424,343 because the Department calculated it using only one of its two funding sources. Nine federal grant payables were also misstated, including an $18,555,571 understatement tied to the Every Student Succeeds Act grant that in turn understated the Department's associated federal receivable by $17,981,228; a separate failure to void and rebill interagency transactions overstated the books by $2,380,858.
None of this is a one-year event. Auditors published their own four-year table of the Department's significant financial-statement errors⧉ specifically to rebut a state Board of Education member's public claim that the Department has had "one of the cleanest audits of any of the state agencies for many, many years": $6.2 million in errors in fiscal 2021, $6.9 million in 2023, a spike to $281.4 million in 2024, and $55.3 million in 2025. In its written responses, the Department agreed with each finding and described corrective steps already underway, including an update to its special-education reimbursement software and new internal verification procedures.
- A formula error the Department itself couldn't quantify. Auditors found the Department miscalculated the poverty allowance for all 21 school districts in a federal free-meals program -- Omaha put the cost at $30 million, but the state's own auditors say that figure is unverified.
- A second, fully quantified error hit every single district. A software miscalculation of a new pro-rata special-education reimbursement formula paid all 247 Nebraska school districts the wrong amount in FY2025 -- Omaha $5.14 million over, Lincoln $994,863 under.
- A third error, from one miscoded receipt line, underpaid 147 districts $3.67 million. The Department also has no process to verify the transportation mileage districts self-report; $5.7 million of one year's transportation allowance rests on unverified mileage claims.
- The Department's own books were off by $54.8 million entering the new fiscal year -- and auditors published a four-year error trend specifically because a Board of Education member's public defense of the Department's record didn't match what the audits actually show.
- The Department concurred with every finding and says it has already updated its reimbursement software and is formalizing new verification procedures -- corrective steps not yet tested by a future audit.
Figures are drawn from the Nebraska Auditor of Public Accounts' management letter to the Nebraska Department of Education, issued December 17, 2025 as part of the audit of the State of Nebraska's Annual Comprehensive Financial Report for the fiscal year ended June 30, 2025, read in full via direct PDF fetch from auditors.nebraska.gov. A same-day Wayback save-request returned a server error consistent with a reported archive.org outage (one probe made, not retried); an existing May 11, 2026 capture of the same URL was confirmed live and used instead. This piece omits the names of the Department's commissioner and of a Board of Education member quoted in the letter's public exchange over the audit's characterization -- every finding here is attributed to the Department as an institution, not to any individual. A blind adversarial verifier, working from the primary document alone with no access to this draft, independently checked every itemized fact; see verification.json.
The $30 million poverty-allowance figure is reported here strictly as Omaha Public Schools' own November 2025 public statement, quoted inside the auditor's letter -- the Auditor of Public Accounts states plainly that it has not verified that number and will review it in a future audit; this piece does not treat it as a confirmed fact. The FY2025 financial-statement error trend uses the audit's own year-by-year table ($55,311,855 for FY2025); the audit's separate itemized breakdown of that year's errors sums to $54,767,657, a roughly $544,000 difference the source document does not reconcile. The multiple-of-$1.1-billion and other cross-figure comparisons in analysis.json are this outlet's own arithmetic on the audit's own itemized numbers, flagged there with their scope caveats -- they do not appear in the source document itself.
Sources(1) ▾
- Nebraska Auditor of Public Accounts (State Auditor Mike Foley), Management Letter to the Nebraska Department of Education (Annual Comprehensive Financial Report, fiscal year ended June 30, 2025) (2025-12-17) — The Nebraska Auditor of Public Accounts' management letter to the Department of Education, issued alongside the State's FY2025 Annual Comprehensive Financial Report audit, is the sole source for all three of this piece's findings: the TEEOSA poverty-allowance and GFOE calculation errors (Comment #1, pp.2-8), the special-education reimbursement errors affecting all 247 school districts (Comment #2, pp.9-10), and the $54.8 million in FY2025 financial-statement errors plus the four-year error trend (Comment #3, pp.10-12). Addressed to the Department's Commissioner as the audited agency's head of record; no individual is named in this piece as responsible for any finding -- every finding is attributed to the Department itself. auditors.nebraska.gov · original document
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The Nebraska Department of Education is solely responsible for calculating, certifying, and distributing $1.1 billion a year in State Aid to the state's school districts, according to the Nebraska Auditor of Public Accounts' management letter⧉ issued alongside the state's fiscal 2025 financial-statement audit. That letter found the Department got the number wrong in three separate, compounding ways: a formula error in the main state-aid calculation that the Department itself could not quantify; a special-education reimbursement error that paid every one of the state's 247 school districts an incorrect amount; and $54.8 million in bookkeeping errors auditors had to force the state's books to correct.