LakeHavasuCounty.com

The Honorable Janet Napolitano
Governor of Arizona
1700 West Washington
Phoenix, Arizona 85007

RE: Investigation of alleged criminal misuse and theft of public money in the travel of elected member Dan Hargrove of the board of governors of Mohave Community College District.

Dear Governor:

Attached is a copy of a 16-page audit report to the Auditor General. A copy has also been sent to the Attorney General and members of the House and Senate committees on K-12 and higher education. With attachments, it is a 200+ page package (that we can provide upon request).

It is comparable to and follows the same format as that sent to your office by the Auditor General on the Mobile School District investigation in November 2000.

We think your office should be informed of this situation given the likelihood of abuse elsewhere in the state within the community college system in the use of private foundation funds. Pages 11 thru 14 of the report identify a number of issues that need to be addressed by the legislature.

Moreover, this situation in Mohave County is typical of a history of shady politics, corruption and plain bad government. The ethics of the manipulation of appointments and elections of members of the governing board of Mohave Community College (with a $28.8 million budget for this year) are equally appalling.

Should you have any questions concerning this audit and report, please let us know.

Respectfully,

Dr. Bill Ullery

Cc: Members and volunteers associated with Manager Review, Inc, a non-profit organization
Paul Lenkowsky and Kenneth Gregory, Attorneys at Law
Harvey Jackson, Attorney at Law

Debra K Davenport, CPA
Auditor General
State of Arizona, Office of the Auditor General
2910 North 44th Street, Suite 410
Phoenix, Arizona 85018

RE: Investigation of alleged criminal misuse and theft of public money in the travel of elected member Dan Hargrove of the board of governors of Mohave Community College District

Previously on June 10, 2005, we sent your office a report on the alleged criminal misuse and theft of public money of MCC board members Sally Eggers-Hero and Victor Wakimoto. This is the second such report with a focus on board member Dan Hargrove. A third report is under development on former board member and president Stuart Anderson.

A fourth report will deal specifically with the use of MCC credits cards for board member entertainment during travel and board member spousal travel. A fifth report will deal with the tracking of MCC Foundation, Inc. deposits of unrestricted funds placed into the accounts of MCC and how those unrestricted funds were allocated including alleged illegal expenditures. A letter to your office dated July 1, 2005 explained a part of that investigation on the use of Foundation funds. A third letter sent to your office dated July 7, 2005 related to the Foundation portion of the investigation, had to do with the difficulty we are having in getting the public records we seek and the need for assistance from your office in securing documents and cooperation from MCC in our investigations.

Your office received a copy of a report dated July 8, 2005 to Attorney General Terry Goddard on our investigation of several alleged open meeting law violations during group travel activities of board members Hero, Hargrove and Anderson with their spouses. Those trips were to San Diego and Denver and involved three of the five-member elected board.

The subject of this specific report that we have conducted is a limited investigation on board member Dan Hargrove of the alleged misuse and theft of public money during the period of 2000 through 2005 at Mohave Community College District (MCC). The purpose of our investigation was to determine the amount of money, if any, which was misappropriated during that period and whether the District's internal controls over disbursements for governing board members and top-level administrators were adequate to prevent their misappropriation.

As a result of our investigation and this complaint as filed with the Auditor General, we are recommending an investigation into alleged misuse and theft of public money by current board member Dan Hargrove. We are also recommending an investigation as alleged co-conspirators, aiding and abetting, be initiated on MCC board members Sally Eggers-Hero, Victor Wakimoto and former board member Stuart Anderson. Hargrove was president of the board in 2002. Wakimoto was president in 2003. Hero was president in 1999 and during part of 2004, and secretary during part of 2004. These were board terms during a number of the Hargrove travel events that were investigated and presented in this report.

We are also recommending an investigation as alleged co-conspirators, aiding and abetting, be initiated on MCC appointed officials President Thomas Henry and Vice President (Administration/Finance) William Lovejoy. We recommend these investigations cover innumerable alleged incidents of alleged theft and misuse of public monies (A.R.S.§13-1802 and A.R.S.§35-30l).

Our limited investigation consisted primarily of making inquiries and the examination of selected records and other documentation. Therefore, our investigation was substantially less in scope than an audit conducted in accordance with generally accepted auditing standards. Accordingly, we do not express an opinion on the adequacy of the financial records or the internal controls of the Mohave Community College District. We also do not ensure that all matters involving the District's internal controls that might be material weaknesses under standards established by the American Institute of Certified Public Accountants, the Uniform System of Financial Records (USFR), the principles of Government Accounting Standards Board (GASB), or other conditions that may require correction or improvement have been disclosed.

Given the voluminous documentation attached, we felt compelled to submit this report on Dan Hargrove inasmuch as the MCC board and administration are fully aware of this investigation. The involvement of the office of the Auditor General will help insure the integrity and preservation of key documents needed to complete the investigations of the travel activity of the MCC board and administration.

There is clearly adequate documentation in this initial report and complaint to move forward with the investigations as recommended.

Our findings and recommendations as a result of our limited investigation are set forth below.

Background:

The State of Arizona provides higher educational opportunities for the citizens of Arizona through a community college system organized by local districts typically at the county level. Each district has a governing board elected by the district's voters and is accountable to the district for the quality of education provided. In addition, districts are fiscally accountable to Arizona taxpayers for the appropriate expenditures of state and local monies.

As shown in the following Table 1 for the fiscal year ending June 30, 2003 from the Auditor General’s website section on community college audit reports as filed with the Arizona legislature, Mohave Community College District received state appropriations of $3,630,300 based on a student enrollment. Local property taxes provided revenues of $9,515,110. Student tuition and fees provided revenues of $2,122,844. There were government grants and contracts of $2,182,375. With other sources, the total revenues for FY 2003-2004 were $20,321,932. Thus, the bulk of funds are from local, state and federal sources as well as from the students. The projected budget for the current fiscal year will be $28.8 million.

The foundation of the District's financial accountability is effective internal control. The Uniform System of Financial Records (USFR) was developed jointly by the Arizona Office of the Auditor General and the Arizona Department of Education to provide the required policies and procedures districts need to maintain effective internal control. Moreover, MCC must conform to the Uniform System of Financial Records (USFR), the principles of Government Accounting Standards Board (GASB).

In addition to a legal obligation to comply with these policies and procedures, the District should follow them as a matter of good business practice. Moreover, with community colleges everywhere in this nation, adherence to the laws of our country and sound fiscal practices is particularly important given the roll such institutions of higher education play in the education of the citizens of our country. Education in the ethics of government, ethics of elected officials, and ethics of business leaders. Our colleges provide education on political science, American history and government, principals of management, principals of accounting, law enforcement, the justice system, election law, to mention just a few of the responsibilities of our colleges.

The trust of the public in Arizona’s system of higher education is crucial to the effective functioning of our system of democracy and our system of government. This is a mission that cannot be compromised and allowed to fail.

Overview:

Please refer to ATTACHMENT #1 for the public records requested for this and the upcoming investigative reports. The July 4, 5, and 6 letters request public documents on MCC credit card activity related to the spousal travel of board members Hero, Wakimoto, Hargrove and Anderson. Note the letter of July 19 and a response of July 22, 2005. As of the date of this report to the Auditor General, MCC has not provided the requested records. Records on the internal allocations of the MCC Foundation, Inc. unrestricted funds within the MCC accounting system have likewise not yet been provided. This is important since Foundation funds are deposited into the accounts of MCC. As such, those funds become “public monies” and subject to the conditions of the Arizona Constitution Article 9, Section 7 and the statutes of Arizona, A.R.S.§13-1802 and A.R.S.§35-301

ATTACHMENT #2 includes copies of Arizona Revised Statutes pertinent to the travel expenditures and audits of MCC. Of particular interest are A.R.S.§15-1473 and the repeated references in A.R.S.§41-1279.21 to “counties, school districts and community colleges.” Also attached is a review of Article 9, Section 7 of the Arizona Constitution relative to family travel as a prohibited gift.

ATTACHMENT #3 is the Auditor General report from the AG’s website, on the special investigation of the Mobile Elementary School District No. 86. The key issue was the criminal complaint filed against a former board member on theft and misuse of public monies (A.R.S.§13-1802 and A.R.S.§35-301).

ATTACHMENT #4 includes the MCC policies on reimbursement for expenses of travel for board members and staff.

ATTACHMENT #5, includes 118 pages of Hargrove’s travel records as requested by Dr. Ullery for the period of 2000 through 2005 and provided by MCC. What were not provided by MCC were the internal MCC records on credit card expenditures for board member entertainment and spousal travel. Once those records are made available, a report will be developed. The assistance of the Office of the Auditor General is requested in securing these records.

ATTACHMENT #6, includes news articles from local media based on interviews with MCC and Foundation officials. Note the references to annual gifts to MCC of unrestricted funds from the Foundation. Our review of AZ law, interviews of three Auditor General staff from two divisions, a review by an A.G. certified auditor, and to other experts verify that such Foundation funds whether restricted to scholarships or other legal expenditures, once deposited into the accounts of MCC, become “public monies” and subject to the requirements of the Arizona Constitution and Arizona statutes.

Specific Trip Summary:

Trip to Las Vegas and Nashville, 10-16 to 10-21-2000, pages 1 thru 7: $1,071.96 is shown on the travel claim form for “LESS CREDIT CARD CHARGES.” There were MCC credit card expenditures as prepayments. There were MCC credit card expenditures during the actual travel period. This is the pattern on all MCC board member travel.

Many credit card receipts were not included in the materials provided by MCC. We have asked MCC for those records and may need help from the A.G. to secure those credit card receipts for both prepayments and expenditures during the actual trip of 10-16 to 10-21-00. We are particularly interested in credit card charges on these dates that are not resolved or shown on either the travel request form or the travel expense claim form as there may well be illegal expenditures not shown on the travel documents.

Such credit card expenditures are resolved when a monthly statement is received from the card provider. We requested copies of those statements covering the month of the prepayments, and covering the month of the expenditures during the trip on dates 10-16 to 10-21-00 for each of the MCC credit cards used. We also requested documentation on how each entry or charge on the prepayments and dates of travel on those monthly statements were handled within the accounting system. That would include the internal MCC account numbers (i.e. travel, office supplies, meals, MCC Foundation, etc.) to which each charge on the invoice was processed within the internal MCC accounting system. An example might be for the Governing Board, account # 10-0-5050-000-5520 Out-of-State Travel. To date, MCC has not provided the records.

We also requested a copy of the internal documents authorizing the processing of each check for credit card payments. In particular, we want records showing the internal accounts to which each expenditure was initially recorded. An example might be for the Governing Board, account # 10-0-5050-000-5520 Out-of-State Travel. In short, we need records to allow us to understand completely, how each specific expenditure for the prepayments and expenditures on the actual dates of travel on 10-16 to 10-21-00 on those monthly credit card invoices (for each MCC card used in this travel) within the MCC accounting system.

We need help from the Auditor General in securing those records from MCC.

Trip to Las Vegas and Chicago, 6-1 to 6-16-01, pages 8 thru 12: As with the credit card documentation requested for the Nashville trip, we have requested the same records for this trip.

Trip to San Diego, 10-9 to 10-13-01, pages 13 thru 2027: Board members Anderson and Hero with spouses along with Hargrove and his spouse Sara, attended this conference. As with the credit card documentation requested for the Nashville trip, we want the same records from MCC.

The investigation on board member Hero showed several trips where MCC checks and/or credit cards were used for prepayments of airfare for spouse Lenny. As with the requests for credit card records for the Hero trips with spousal travel, we want that documentation on Hargrove. MCC president (at that time) Tacha’s college credit was used for airfare.

Trip to Las Vegas, 6-9 to 6-12-02, pages 21 thru 27: Board member Hero and her spouse Lenny also attended this conference. As with the credit card documentation requested for the Nashville trip, we want the same records for this trip. The ACCT conference was shown as being held at the Mandalay Bay. The cab fare to the Hilton (page 27) appears to be a personal trip and must be challenged.

Trip to Dallas, 4-2 to 4-6-03, pages 28 thru 43: The Las Vegas hotel receipt (page 34) indicates two persons in the room. A beverage receipt for the “American Bar” (page 43) is included and needs to be challenged by MCC. As with the credit card documentation requested for the Nashville trip, we want the same records for this trip.

A rental car paid for by MCC (page 28, 38) is shown which is contrary to the practice for Hero. At such conferences, board member Hero and her spouse (who attended nearly every such ACCT conference over the 5-year period of this investigation) never rented a car. ACCT conferences are generally self contained…everything is in one primary hotel. We are very much aware of how such ACCT conferences are organized and conducted having attended such events in the past and checked the agendas. Such car rentals are not necessary and clearly for personal or optional use. Personal use of such a rental is a prohibited expenditure. It cannot be justified for an ACCT conference. It is an illegal expenditure and misuse of public monies.

The cab fares (page 39) to and from other Las Vegas casinos are illegal personal expenditures and misuse of public monies.

Trip to Las Vegas and Philadelphia, 9-16 to 9-21-02, pages 44 thru 55: This conference was also attended by Hero and spouse Lenny. As with the credit card documentation requested for the Nashville trip, we want the same records for this trip. Again, a rental car (page 55) was used and paid for by MCC. It cannot be justified for an ACCT conference. It is an illegal personal expenditure and misuse of public monies.

Trip to San Francisco, 6-23 to 6-28-03, pages 56 thru 64: This conference was also attended by Hero and spouse Lenny. There are numerous notations of “College Credit Card” for Hargrove expenditures. As with the credit card documentation requested for the Nashville trip, we want the same records for this trip.

The Las Vegas hotel indicates two persons in the room. Was it Hargrove’s spouse or a guest? A dinner tab of $135 (page 62) on a “college credit card” needs to be challenged, as it is an amount typical for two people. It is therefore reasonable to question whether or not Hargrove’s spouse was on this trip or if there was some other “guest.”

Again, a rental car (page 61) was used and paid for by MCC and should be rejected as a personal expenditure and illegal charge to MCC.

The use of taxicabs (page 64) from the Hyatt ACCT conference hotel to high-end restaurants such as Fisherman’s Warf and McCormicks is an illegal personal use of public monies and should be addressed as criminal theft and misuse of public monies.

Since ACCT conference registration fees typically include several banquets and evening meals, MCC needs to crosscheck those prepaid meals against the dates of the meals submitted for additional reimbursement. Given this situation, this check should be made on all of Hargrove’s trips.

Trip to Denver, 9-15 to 9-20-03, pages 65 to 72 pages 65 thru 72: Board members Anderson and Hero with spouses along with Hargrove also attended this conference. The Las Vegas hotel indicates two persons in the room. The Sunset Café receipt (page 69) shows 2 guests. Was it Hargrove’s spouse or some other special “guest”?

As with the credit card documentation requested for the Nashville trip, we want the same records for this trip. Again, a rental car was used for nearly 4 days at $337.24 and paid for by MCC and must be challenged as a misuse of public monies.

Trip to Las Vegas and Hawaii, 12-29-03 to 1-7-04, pages 73 thru 87: This conference was also attended by Hero and spouse Lenny.

Again, a rental car was used for nearly 4 days at $369.40 (page 80) may have been paid for by MCC. A second car rental of $433.33 (page 81) also may have been paid for by MCC, as that was the case in Hargrove’s previous trips. These charges do not show on the final travel expense claim and is cause for concern. Again, at such conferences, Hero and her spouse Lenny (who attended nearly every such conference with Sally over the 5-year period of this investigation) never rented a car. ACCT conferences are generally self contained…everything is in one primary hotel. The list of eight high-end restaurants attended (pages 85, 86, 87), gives some insight to how the rental car was used. Personal use of such a rental would be a prohibited expenditure. The two rentals must be challenged as a misuse of public monies.

Again, the eight evening meals submitted for reimbursement need to be crosschecked by MCC to the prepaid meals provided by the ACCT conference.

The plane fare was prepaid with comptroller Menlove’s MCC American Express card. Other prepayments for Hargrove included event tickets for two people (a luau, Polynesia dinner show, Polynesian Odyssey dinner show) that were made with “Tom’s (Henry) VISA THCC”, meaning an MCC credit card. There were charges for a trip to Aloha (page 79). There were hotel, meal and “Pina Colada” charges noted as “MCC/CC” meaning an MCC credit card. None of these expenses paid for by MCC are shown or resolved on the final travel expense claim form. This is alarming and has the appearance of a “cover-up.”

Hargrove and his wife Sara joined Hero and her husband Lenny on this Hawaiian trip. While the conference they were scheduled to attend didn’t start until January 2 or 3, both couples arrived on December 28 after a night in Las Vegas. Thus, they spent the New Year’s holiday in Honolulu. Our search of the Internet revealed no educational meetings and MCC has refused to comment on the need for the extra days in Las Vegas and Honolulu. Again, most of these expenses paid for by MCC are not shown or resolved on the final travel expense claim form. This also has the appearance of a “cover-up.”

If an MCC credit card was in fact used for the spouse’s airfare, that is not shown on the travel request and claim forms (possibly charged to other internal MCC accounts). An invoice was included in the travel reimbursement package from ALL POINTS TRAVEL dated 23SEPT03 for Hargrove’s spouse Sara. We want those credit card records from MCC. Someone in the MCC administration made a decision on how to handle these charges within the MCC accounting system and it was surely noted on a piece of paper. Whether or not such expenses were ultimately reimbursed by a 3rd party such as the MCC Foundation is of little interest. What we want to know is whether or not such travel was initially paid for with an MCC credit card or check. In our requests for public records, we specifically requested records on spousal travel. We want the invoice and credit card payment documentation on both Dan and Sara Hargrove. To date, MCC has not provided those documents. MCC has not properly responded under the open records laws of AZ. None of these expenses paid for by MCC are shown or resolved on the final travel expense claim form.

The burning question must be that of why all of these questionable or controversial and possibly illegal transactions of the travel of the Hargroves and the Heros are not shown on and resolved on the final travel claim forms. Which leads to the next question of who checks and audits such travel expenditure documents. Obviously, the field auditors of the Auditor General’s office perform those checks and audits.

The inescapable conclusion is that MCC is “cooking the books” and hiding illegal travel expenditures, board member entertainment, alcohol, and spousal travel from the field auditors of the Office of the Auditor General.

Trip to Tucson, Ft. Stockton, Fredricksberg, San Antonio, El Paso 6-11 to 6-20-04, pages 88 thru 99: As with the credit card documentation requested for the Nashville trip, we want the same records for this trip. This extended journey of Hargrove and spouse Sara, covered 2453.74 miles covering ten days. Mileage, meals, and lodging apparently paid for by MCC. And there were even five cab fairs (sic) for $50 (page 94), three of which were surely for trips to restaurants as was the pattern in the previous trips. All for the stated purpose of attending an ACCT conference in Raymond, Mississippi that was later changed to San Antonio. Whether or not Hargrove even attended the conference cannot be verified. It has all the characteristics of an extended vacation. Clearly prohibited under Article 9, Section 7 of the Arizona Constitution and the statutes on theft and misuse of public monies.

Trip to Las Vegas and New Orleans, 10-2 to 10-9-04, pages 100 thru 113: This conference was also attended by Hero and spouse Lenny. The hotel receipts and meal charges show a second person that may be the spouse, Sara or some other “guest.”

Again, a rental car was used for 7 days at $826.79 (page 111) and was paid for by MCC. Seven days at $826.79 is clearly person use. Interestingly, there was also $64.40 in cab fares submitted for reimbursement. Personal use of rental cars and cabs for entertainment and trips to high-end restaurants are prohibited gifts, theft and misuse of public monies.

Most of the hotel, meal and beverage purchases were marked “College” and paid for with an MCC credit card. Included were two meals with Ferdi beer, at $8.50 per bottle (page 101, 108). The bill at Anthony’s Seafood House on 10-7-04 (page 102) showed alcoholic drinks including, Copp Wht Zin 104, two J. Walker Bk Rocks, Kahula up, Bana Foster, Kahula, etc. And marked as being paid for with a “College” credit card. The 10-4-04 credit card receipt at Anthony’s showed 2 Sm Abita drafts and 2 Dasani drinks and paid for with a “College” credit card. Such details were not provided on other expensive meals paid for by college credit cards.

There were two (indicating the spouse or a guest) general admission tickets to the National D-Day Museum at $22 (page 108) included with the receipts for reimbursement. It would be quite a stretch to classify that as anything other than entertainment for a board member and his spouse or guest.

The cab fares totaling $50 (page 108) must be challenged based on Hargrove’s pattern of visits to high-end restaurants.

As with the Hero and spouse trip to this same conference, we want the same documentation. We want the same documentation on spousal travel as requested for the Hawaii trip. We want the credit card documentation.

Trip to NMC 1-13 to 1-15-05, pages 114 thru 118: As with the credit card documentation requested for the Nashville trip, we want the same records for this trip.

Summary of Misuse of Public Money for Personal and Spousal Expenditures:

Contrary to the request for public records, no documents were provided showing that such spousal travel was in fact ever reimbursed to the college. If such payments were made and not revealed, MCC is in violation of Arizona statutes on public records and has impeded this investigation.

In any case, MCC checks and credit cards paid for spousal travel on several of Hargrove’s trips. Public funds were in fact expended. From the time of approval of some of the trips with prepayments for travel, lodging, registration fees, etc, to the resolution of the final travel claim form with typically, a small balance due to board members Hero and Hargrove, up to ten months had elapsed. The total travel funds of MCC public monies expended during the period covered in this investigation for board member Hargrove was approximately $18,425.00.

Because of the deliberate obfuscation of the travel documents, along with missing and hidden expenditures and without access to the credit card statements and other internal MCC accounting records, the actual amount of board member and spousal travel cannot be determined at this time. Thus, the total travel expenses could be as much as 25% over the amounts shown on the travel claim forms.

We are determined to get the records and documents. We will complete the total and thorough review of MCC board member travel.

Key Issues:

The credibility of V.P. Lovejoy’s statement is at issue, “If the college scheduled spousal travel at the same time (assuring adjacent seating), such spousal travel was reimbursed to the college.” This action and written statement in a response under A.R.S.§39-121 (which includes penalties and possible felony charges for falsified statements and falsified public documents) casts a shadow on the honesty and integrity of the MCC administration and its adherence to the laws of Arizona. It also lends credence to the allegation of co-conspirators, aiding and abetting with a potential attempt to “cover-up” the facts of payments and reimbursements. It lends credence to the recommendation of an investigation against the other MCC board members Victor Wakimoto and Sally Eggers-Hero, and former board member Stuart Anderson, as well as MCC appointed officials President Thomas Henry, and Vice President (Administration/Finance) William Lovejoy in the alleged criminal theft and misappropriation of public funds.

The board of governors must ultimately bear responsibility for the actions of their administration. Indeed, under standards established by the American Institute of Certified Public Accountants, the Uniform System of Financial Records (USFR), the principles of Government Accounting Standards Board (GASB), the president of the board (not an employee of the board) has a responsibility to review and approve travel and expenditures by the other board members. Hargrove, Hero, Wakimoto and Anderson all served terms as board president or secretary during the years 2000, 2001, 2002, 2003, 2004, and 2005 during which Hargrove undertook the travel activity as detailed in this investigation on the alleged criminal theft and misappropriation of public funds.

It is well documented, that 24-year board member Hero, 14-year member Wakimoto, and 16-year member Hargrove along with former 23-year member Anderson, were closely knit. This is a group with a total of 77 years of board membership. This group went over 18 years without a single “NO” vote on a board agenda item. During that time, this board held private dinner sessions prior to most board meetings without regard to posted public notices as required by law. This may have resulted in more AZ open meeting law violations than any other public body of elected officials in the history of the state. It is therefore inconceivable that the members of this board and the president of the board in particular, were unaware of the common travel practices of the other board members and their own administration. In any event, the board of governors must ultimately bear responsibility for the actions of their members and their administration.

Our limited investigation also revealed the active involvement of the highest-level MCC administrators, President Thomas Henry and Vice President (Administration/Finance) William Lovejoy, in the alleged criminal theft and misappropriation of public funds by Hargrove. Henry and Lovejoy personally approved Hargrove’s travel, helped with reservations and pre-payments, gave Hargrove MCC credit cards for such travel, reviewed and approved Hargrove’s MCC travel/mileage expense claim forms…all on multiple occasions.

Of the 12 travel events reviewed, Hargrove appears to have signed only one travel claim form. A staff member “JAS” signed four. Henry’s personal secretary, Marilyn D. Van Vliet, signed two. Four of Hargrove’s travel claim forms had no signature on the line for the claimant. The same pattern was documented for the travel request forms. Under standards established by the American Institute of Certified Public Accountants, the Uniform System of Financial Records (USFR), and the principles of Government Accounting Standards Board (GASB), such practices are not allowed.

All of the travel claim forms were approved by members of the administration with typically two such signatures including that of president Tom Henry.

The Auditor General should specifically investigate the pre- and post-lodging stays in Las Vegas on the trips to Nashville, Chicago, Dallas, Philadelphia, San Francisco, Denver, and New Orleans. The receipts show that these extra days in Las Vegas were charged to MCC. This is particularly important since Hargrove’s residence in Bullhead City, AZ is a relatively short drive to the Las Vegas airport. Such a practice has never ever in the history of MCC, been allowed for the faculty and staff. Such “convenience” lodging or entertaining evenings in Las Vegas is a violation of state statutes. It is theft and misuse of public monies.

Given the large cost of such travel for governing board members, perhaps the most significant issue yet to be addressed as a result of this investigation is the value returned to MCC for travel of the nature Hargrove, Hero and Wakimoto have taken.

The Auditor General and MCC in particular, should investigate and challenge all of the cab fares of Hargrove on all of his trips given the pattern of visits to high-end restaurants. Moreover, the dates of the restaurant charges should be crosschecked against ACCT agendas and meals provided as a part of the registration fees. Should MCC not have the agendas on file for all of those meetings for board members Hargrove, Hero, Anderson and Wakimoto, for certain, ACCT will have those records and documents in its files. Such materials may be on the ACCT website.

The public records request of April 26, 2005 by Dr. Ullery specifically asked for trip reports by board members Hargrove, Hero and Wakimoto and “In particular, we need to know what was accomplished for MCC, what information of value for MCC that was brought back to MCC, etc.” Our review of the minutes of every board meeting during the period of this investigation, revealed not a single significant mention of information of value to MCC other than one or two references to the fact that Hargrove or Hero had been to an ACCT meeting. Members of the group that conducted this investigation have attended nearly every board meeting during this period and could not recall a discussion of any kind by board members Hargrove, Hero, Wakimoto and Anderson of what was learned and what might be of value to MCC nor of what follow-up action she would take that would benefit MCC as a result of the travel and meetings she attended.

Perhaps such trips to popular vacation destinations are “rewards” for loyalty inasmuch as Hero in her 24 years on the MCC board and Hargrove in his 16 years on the board have never once voted “NO” on a board agenda item. Perhaps such trips are intended as “incentives” for elected officials who serve for no pay on such community college boards. Irrespective of the reasons and motives for such costly travel with public monies, some significant value must be demonstrated to the institution and to the public. Otherwise, such travel should be severely curtailed. And surely, as a part of a performance audit of a public body of elected officials, such issues should be intensely scrutinized.

The inescapable conclusion is that this board in the management of the board travel activities, violates their own travel rules and regulations, violates generally accepted auditing standards, and violates the laws of Arizona in the management of public monies with the alleged criminal theft and misappropriation of public funds. Accordingly, we challenge as grossly inadequate, the financial records and the internal controls of the Mohave Community College District. We also challenge as grossly inadequate, all matters involving the District's internal controls given the evidence of material weaknesses under standards established by the American Institute of Certified Public Accountants, the Uniform System of Financial Records (USFR), the principles of Government Accounting Standards Board (GASB), and other conditions that require correction or improvement given the facts disclosed in this investigation.

We are also reminded that Arizona statutes do not require annual financial disclosure statements from community college elected officials as required of most other elected officials in our state. We did recommend to the legislature a few months ago of the need to address the issue. We had no response.

We also recommended to the legislature that the Arizona Board of Regents be assigned extensive oversight and audit responsibilities over the community college districts due to some disturbing trends of governance, appointments and elections of community college board members, and issues of fiscal controls. Again, no response from members of the legislature.

Another recommendation made to the legislature with no response, focused on the non-profit corporations, typically called “foundation.” All of the community college districts and universities have such foundations. Frequently, the management structure of such foundations are housed in the parent institution, supported administratively by the institution, use the same phones and mailing addresses, etc. The tax-exempt funds collected by such foundations are often used to finance activities, travel, parties, and the like which taxpayers would not otherwise allow. In some states, such foundations are required to adhere to the open meeting laws and the public records laws of the host state. Such openness has no significant effect on normal operations other than to make the officials of the parent institution and the foundation more sensitive to public reaction to inappropriate expenditures. Such changes in Arizona statutes are long overdue.

The Foundation offices are in the MCC administrative office area of the Kingman MCC campus. The Foundation statutory agent is the MCC president Dr. Thomas Henry and the executive director is a college employee, Dan Messersmith. Thus, the MCC administration has considerable influence and control over the activities and funds of the Foundation. There is therefore considerable potential for conflict of interest in the financial inter-relationships and dealings of the two organizations. It is an unusual and incestuous relationship for a public institution and an arm of government.

A June 14, 2005 news article of the TODAY’S News-Herald helps explain the process. Periodically, the Foundation gives MCC a check with no restrictions as to how the monies are to be expended. According to Foundation board president Gibelyou, (as reported in the 6-14-05 news article), “W trust ‘em to use it responsibly. There’s a lot of little things the college needs money for.” Obviously, we don’t trust ‘em to use it responsibly.

We understand clearly, MCC’s position that MCC has received unrestricted funds from the MCC Foundation, Inc. to cover such travel expenditures on the part of board members and spouses. Our position however, (and confirmed with three auditors in two divisions of the Auditor General’s office) is that such Foundation funds once deposited in MCC accounts, are “public monies” and subject to the constitution and laws of AZ on governmental gifts and family travel. Also, subject to the accounting standards of AICPA, USFR and GASB.

Recommendations:

1. The Auditor General should verify all of the documents in this report and take action accordingly.

2. Submit appropriate materials to the Attorney General for legal action.

3. Consider convening a Grand Jury to review the allegations and evidence provided herein and to conduct a thorough review of the travel of all MCC governing board members and administrators over the past ten years. A review of credit card expenditures is vital to the proper completion of this investigation.

4. Work with the legislature to insure that community college elected board members are required to submit annual financial disclosures much the same as required by most other elected official in the state of Arizona.

5. Work with the legislature to give the Arizona Board of Regents, extensive oversight and audit responsibilities over the community college districts. Included must be critical areas of governance, appointments and elections of community college board members, and issues of fiscal controls

6. Work with the legislature to address key issues of accountability of the non-profit corporations, typically called “foundation,” that all of the community college districts and universities have. Such foundations that are so closely tied to the colleges and universities should be required to adhere to the open meeting laws and the public records laws of Arizona.

7. To help ensure proper control over public monies and compliance with the USFR, the District should establish written policies and procedures addressing the personal use of District assets. In particular, these policies should state that District resources are only to be used for District business and not for unallowable personal or spousal expenditures. In addition, the policies should specify purposes for which District credit cards and pre-paid MCC checks for travel may be used, dollar limits for credit card charges, and require an effective accounting system to account for and control the cards.

9. Require for the foreseeable future to re-establish the public trust, an independent third-party auditor be retained each year to audit the travel activity of the elected board members and the administration.

8. Missing and incomplete travel documents and records, particularly the credit card documentation as requested in the letters processed and shown in ATTACHMENT #1 should be provided to the Auditor General and to Dr. Ullery.

Conclusion:

This letter is intended for the information of the Auditor General. However, this letter is a matter of public record and its distribution is not limited. The non-profit nature of our organization and our obligations to our members require the immediate release of this entire report.

Should you have any questions concerning this letter, please let us know.

Respectfully,

Dr. Bill Ullery

Cc: Members and volunteers associated with Manager Review, Inc, a non-profit organization
Mohave County legislators Gould, Groe, and McClain
Legislative chairs of House and Senate committees for education and higher education
Attorney General of Arizona
Mohave County Attorney
Paul Lenkowsky, Attorney at Law
Harvey Jackson, Attorney at Law
Mohave Community College Board of Governors
MCC Foundation, Inc.