Already facing a budget crisis forcing it to lay off staff, the Seattle School District now expects it will have to return about $300,000 to the federal government.

To help fund a program targeting Native Americans, the U.S. Department of Education provides a certain amount of money to the district for each child enrolled. But the district submitted inflated numbers of Native American students for two years running, according to an internal audit recently presented to the school board.

Last year the district claimed a number of Native American students roughly three times the actual population of 746. Officials reviewing this year’s figures predict a similar discrepancy. The numbers given the feds were so off-base that School Board President Michael DeBell says he wondered whether fraud was involved.

District spokesperson Patti Spencer-Watkins says the district, in many cases, simply failed to keep accurate records on students who had left Seattle schools. In a few other cases, she says, students may have been Native American, but weren’t enrolled members of federally recognized tribes.

Whatever the reason, it’s a costly mistake. And it also raises questions about what the district was doing with all the extra money it received. The district’s Web site says that its “Huchoosedah Indian Education Program” offers tutoring, mentoring, and cultural events, among other services. But the results are unimpressive.

Native American parents have complained to the board that they were unhappy with the program, notes DeBell. He calls the Native American dropout rate—40 percent in 2009, the highest among any ethnic group—”embarrassing.”