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Lessons in non-profit governance

March 16, 2010

Note to members of non-profit boards: if your executives don't want you to talk with the outside auditors, that's a really, really bad sign.

Yet that's what happened at the Iowa Association of School Boards, the entity that runs Skills Iowa, "a special project by Sen. Tom Harkin," according to testimony by the outside auditor yesterday, as reported in the Des Moines Register:

Ted Lodden, who is with the association's accounting firm, Brooks Lodden, also testified at Monday's hearing.

Lodden described a bizarre chain of events in which the association's top staffers, including Kilcrease, tried to prevent him from telling board members of his concerns with the agency's finances.

Lodden said employees repeatedly blocked his firm's access to the board last fall. He said he eventually bypassed the staff and contacted board members via e-mail, asking to meet with them. He then received what he called a "a very threatening letter" from an association lawyer demanding that he retract his request for a meeting.

Lodden called it "the strangest thing I've ever been through in my entire career."

Strange, indeed. Non-profit boards approve the hiring of accounting firms, and normally the audit report is reviewed with a board finance committee or audit committee. You'd almost think they were hiding something:

The organization's former chief financial officer is alleged to have used his association credit card to buy airline tickets for a vacation to Bora Bora. There are concerns that some of the association's affiliate businesses have lost millions of dollars in recent years.
Last fall, Kilcrease and then-board President Jack Hill revised her employment contract to include additional compensation for payroll taxes deducted from her check. That raised her pay from $210,000 to $367,000.

Now the FBI is poking around because of the federal money that goes to the organization:

The association calls Skills Iowa "a special project by Sen. Tom Harkin." The project is led by association employee Susie Olesen, a longtime friend of Harkin who has an extensive background in education and curriculum development.
Skills Iowa buys software from U.S. Skills, a software company run by Michael Perik of Rhode Island. Association officials say Skills Iowa has paid Perik's company at least $6.2 million since August 2007. Over the past 10 years, Perik has contributed more than $1 million to various Democratic Party campaign committees around the nation.