My goodness, Tony, where ever do you find these officials?
You are, of course, correct. All the rule sets I'm familiar with, including NFHS rules which I assume your high school teams are playing by, allow any player to enter in any position and substitute for any player provided only that they'd not previously been in the game. Once they enter the game, either as a starter or a substitute, they are locked in that position for the remainder of the game but they are not the only player who may substitute in that position - any player not previously in the game or any player previously in that position may enter in that position as a substitute.
In any case, the penalty for illegal substitution is an unnecessary delay and a charged time out to the offending team. It becomes a point/loss of rally penalty if and only if the team has already used its two allowed time outs.
I'm thinking the folks in your association need to read their rule books a bit more carefully.
-Homer-
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