Upper Des Moines agency reviews audit that questioned loans

By Russ Oechslin, Journal correspondent | Posted: Wednesday, September 17, 2008

SPENCER, Iowa -- Recommendations by State Auditor David Vaudt "either are in place or are in the process of being in place, with other things that we feel will just make us a stronger agency," Ron Ludwig, Upper Des Moines Opportunity executive director, said Tuesday at a meeting of the agency's board of directors.

Directors received the report Friday, and Osceola County board member Larry Pedley called it "the worst audit report I've ever read."

Ludwig, 52, was hired in June 2007 to fill the vacancy created by the unexpected death of former director Larry Rohert in February 2006. Between the two were four other acting or full-time directors -- for a total of six in less than 18 months.

UDMO is the community action agency that serves a 12-county area including Osceola, O'Brien, Dickinson, Clay, Buena Vista, Palo Alto, Emmet, Pocahontas, Humboldt, Webster, Wright and Hamilton counties.

Vaudt's report questioned loans made to employees, family members and businesses, because "UDMO does not administer any loan program, and two of the three loans were made to or involved parties who had a relationship to UDMO," the report states.

The report also considered that at least $19,346 of interest was earned on funding for two heating assistance programs in 2005 and 2006. That money, the report noted, was used for UDMO's general operations rather than being returned ...

Ludwig said the use of the interest was in compliance with the Department of Human Rights guidelines that all other community action agencies follow. He said the auditor's report does not recognize the DHR guidelines. He noted that if the DHR changes the guidelines, it will impact all the other community action agencies in the state as well.

A $15,000 payment to a former employee was also cited for failure to show the services provided by the contract.

And, the auditor also noted that the makeup of the board should be 36 members from the region, rather than the present 18. While the board had agreed to expand its membership to 24 in its July meeting, members unanimously agreed Tuesday night to the 36.

The questionable loans were made by Rohert, without the approval of the board, but later OK'd by UDMO attorney Michael Zenor, of Spencer, who died unexpectedly this spring. One of the problems cited in the auditor's report was the lack of documentation for the loans, which Ludwig says are now current. One, he noted, Tuesday night, should be paid in full before the end of the year.

Formal loan agreements were drawn up after the fact, and dated July 31, 2006, although the loans were made in 2004 and 2005, while Rohert was director.

Discussion of the report lasted less than 12 minutes.

Ludwig told Dickinson County Supervisor Pam Jordan that he understood the state would do no follow-up review on the report.

Lake Park board member Kellie Jones suggested that the loans be called for immediate payment. But chair Ron Graettinger said there was no provision for that in the agreement. He said the board could ask.

"You could probably try to call 'em in," he told Jones. "But I don't know if it's any more legal just to plain say they have to call 'em in. The bylaws at the time said such loan agreements didn't have to be approved by the board."

Pedley, who was attending his first meeting as a board member, suggested that the board "really visit the accusations in the report. If this had happened at the city or county level, I think heads would be flying. This is terrible," he added.

The chairman disagreed, explaining that the executive director and most of the board members were not in place when loans were made. He also noted that the board has already taken action to prevent any director from making unapproved loans in the future. "We already addressed these. There won't be any more loans out. But we can't do anything about the loans that were done by the (past) executive director."