Given the volume of information I’ve broken the complaints into sections. Below is the formal complaint regarding the EF program and the issue regarding Morrison County United Way’s audit reports.
Oct. 3, 2008
Minnesota Attorney General’s Office
Re: Morrison County United Way
Federal Emergency Funds Program Key Issues:
· After I raised issues during the 2008 audit, auditor Gary Paulson, acknowledged that a lack financial control over the EF program was a material weakness. He later admitted during the August 2008 MCUW board meeting to withholding identification of areas of material weakness from the audit 2007 to protect the public profile of his friend and previous executive director, Ted Pfohl.
· The auditor said he discussed all material weaknesses with previous director as well as “key board members” but withheld that data from written records submitted to the Attorney General and the IRS.
· MCUW approved the 2007 audit with at least some board members knowing data concerning material weakness was being withheld. According to Gary’s admission, previous director, Ted Pfohl knew that data was being omitted on the understanding that appropriate changes be made in coming year.
· MCUW director Ted Pfohl requested that the MCUW board hire Gary Paulson to conduct the organizations 2008 audit and that decision was approved by the full board.
· While I can’t say how many board members knew of the omission, Ted’s close personal relationship with Gary Paulson was substantially apparent and should have raised questions as to Paulson’s ability to conduct a truly “independent” audit.
· Auditor only noted material weaknesses after I raised questions during the 2008 audit, the only areas to appear on the audit are areas I questioned and nothing else. Additional weaknesses could very well exist and may have been left off simply because I didn’t notice them.
· Despite questions as to whether or not some of the EF program dollars were misused, Gary Paulson never audited EF 2008.
· My report of the potential misuse of funds was ignored by the executive committee so I discussed my concerns with the auditor. While the auditor did ask Ted Pfohl about a specific incident of potential misuse, Ted’s reply was summarily accepted without further investigation as to the accuracy of the information he provided.
· Board Secretary Steve Reger said that program had been running the same way for over a year and that he didn’t see its compromised state as serious enough to warrant immediate action or attention.
· Past president Curt Hanson told me that he was sure the program funds were fine because Gregg Valentine, Morrison County’s Chaplain who managed the dollars was a good guy and that I shouldn’t worry about it. While I agreed with Hanson’s character assessment, establishing appropriate procedures and financial controls isn’t a character assassination but sound administration, reigning in the program was discouraged if not summarily rejected by key executive committee members.
· Auditor admitted during the MCUW August 2008 board meeting to “softening the language” from his preliminary audit report. This statement was made after executive committee members became abruptly unaccommodating after Gary Paulson issued his preliminary audit report. There conduct struck me as odd since the purpose of the audit is to provide a blueprint to strengthening the organizations financial controls. While I viewed the audit as good information and items to work on in the coming year, I’m not sure I’ve ever before worked with a board who had such evident expectations as to the final results. With constant changes to non profit law…being affronted struck me as strange and made me wonder about terms of the audit arrangements.
· Whether Gary Paulson would now admit it or not, I believe that given the public profile of key MCUW board members that Gary Paulson felt pressured by executive committee members which also influenced to his decision to “soften the language” in the 2008 report.
Narrative Federal Emergency Funds Program
Shortly after I was hired former director Ted Pfohl told me that he used some of the Federal Emergency (EF) funds to help a friend. He said that if people I knew, who were “good people” and ended up needing help that I could cut a check from my office, even though the EF are handled through Gregg Valentine, Morrison Counties Chaplain. This statement caused me to question the income eligibility of the people Ted helped not understanding why he didn’t refer these individual through proper channels. While, at the time, I considered it unlikely that Ted would have done anything improper, I knew based on his statement that the financial controls surrounding the EF program should be carefully reviewed. This discussion and my concerns were shared with President Teresa Schmitz and past president, Curt Hanson weeks if not days after I began employment.
I later found a questionable email regarding an EF request that came from Mary Jo Morgan former administrator for Little Falls School district. I knew Ms. Morgan earned over 100,000.00 per year so I thought it unlikely that the funds were for her personally. What struck me as off was why Ms. Morgan wasn’t referred directly to Gregg Valentine and why Ted handled a request for a program he didn’t administer. The email was also oddly cryptic, saying something about one check for about $800 and another check for $200 “for H….” While I no longer recall the exact dollars and cents the fact that the request never went through proper channels was a concern and more alarming was why it said things like “for H…”
Ted’s explanation was that Little Falls school district has its own emergency funds program and those dollars were collected and held by MCUW. He said that Mary Jo Morgan was requesting a disbursement of those funds. While this was the type of answer I expected to hear I didn’t understand why Little Falls school’s emergency funds would be sent to the Morrison County Chaplain and if they were why Mary Jo Morgan didn’t go through Gregg Valentine herself to request the disbursement. Also, when I took over I was never told to forward Little Falls school district emergency funds to the Chaplain’s office so I’m not sure if the funds disbursed were actually that of schools emergency program or if they were federal emergency dollars.
MCUW board hired Gary Paulson to conduct the organizations audit in 2007 and 2008. Gary only noted EF program as material weakness on to the 2007 audit after I raised questions about financial controls over the EF program and discussed my concern about that program. All accounting issues I raised did ended up being added to Gary’s preliminary audit report but nothing else.
While it was my initial assumption that these items were simply missed last year, Paulson’s admission during the August board meeting clearly indicated that the organizations former director and one or more board member were aware of the omissions and MCUW proceeded to hire the same auditor the following year.
Despite Paulson’s awareness of the concerns surrounding the EF program and whether or not funds were misused he never audited the EF. He did ask Ted during one of our meetings about the dollars requested by Dr. Mary Jo Morgan but after Ted offered a plausible explanation the subject was considered closed and the information that was provided was never verified.
Since MCUW had fiduciary oversight responsibility over the EF program, I recommended that MCUW immediately reign in on the program either by taking direct control or by establishing policies and reporting procedures between my office and that of Morrison County Chaplin Gregg Valentine.
Steve Reger very specifically said that the circumstances didn’t constitute an “emergency” and that the program had been run the same way for a couple years. He saw no need for immediate action.
I had recommended on more than one occasion that the organization out source data entry level work rather than a program that we were required to provide oversight for. It seemed remiss to pay and an executive director to do Imagination Library data entry while completely ignoring all oversight responsibility for a federally funded program. While this seemed like glaring logic to me, I again met adamant resistance in particular from Curt Hanson who said the program was too much work and that we “didn’t want to get into that”. He said Gregg Valentine was a “good guy” and he was sure it (the program) was fine. Also, Steve Reger said during the August board meeting that he thought transferring the data EF data back to our office might constitute a breach of data privacy laws. I pointed out that it seemed more likely that a data privacy breach occurred in the outsourcing of the programs administration to a third party rather than the later as he suggested.
Despite the issues of financial control and the potential for compromise of funds MCUW’s Executive Committee discouraged me from taking any action or from establishing accounting and obtaining records.
I was asked to resign before I had the chance to meet with Gregg Valentine and obtain EF’s financial records.
2 Comments
October 8, 2008 at 6:33 pm
Complain to a state authority, like a State Attorney General 71 , or banking department or consumer protection department. Manager Relationship
October 31, 2008 at 7:13 pm
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