AG DEPARTMENT ; Audit Finds Unethical Tone of Upper Management; Evidence of Potential Fraud, Shoddy Lending under Gus Douglass

By Kabler, Phil | The Charleston Gazette (Charleston, WV), February 11, 2014 | Go to article overview

AG DEPARTMENT ; Audit Finds Unethical Tone of Upper Management; Evidence of Potential Fraud, Shoddy Lending under Gus Douglass


Kabler, Phil, The Charleston Gazette (Charleston, WV)


A legislative audit released Monday shows more evidence of financial mismanagement and potential fraud in the state Department of Agriculture under its former commissioner.

"An unethical tone of upper management" contributed to the violations, the audit states.

Last month, a preliminary audit cited mismanagement and lack of oversight with a $5 million revolving loan program administered by the department. That report found that 25 of 40 outstanding loans in the Rural Rehabilitation Loan Program are delinquent, and found that in nearly half the loans audited, there was no evidence of any effort to collect on delinquent loans.

Monday's report also found evidence of potential conflicts between either former Commissioner of Agriculture Gus Douglass or the four-member loan committee involving recipients of five of the 19 delinquent loans.

The full report indicates that Douglass' son received a $45,000 loan and an $18,500 refinancing, after the department received an Ethics Commission advisory opinion indicating the arrangement would be acceptable as long as the commissioner was not a voting member of the loan committee.

However, the audit notes that all four members of the committee were appointed by Douglass, and all were Agriculture employees.

At least two department employees received loans, the audit found, including one for $146,000 - to buy 95 acres of land valued at $120,000.

In addition to the loan program, the audit raises additional questions regarding department finances under the former commissioner, including possible evidence of fraud.

"Most of the issues identified in this report result from inadequate record keeping, poor or nonexistent internal controls, a lack of segregation of duties, appearance of an unethical tone of upper management and a lack of oversight and monitoring on the part of the West Virginia Department of Agriculture," the audit states.

Other key findings:

* Fictitious travel reimbursements. From 2008 to 2012, Douglass submitted a total of $3,987 in reimbursements for campsites at the State Fair - sites the audit determined are provided free of charge by State Fair officials to the Agriculture commissioner.

It also found that receipts turned in by Douglass were not from the State Fair receipt book, and the only receipt with a legible signature - from 2010 - was the name of a former employee of the State Fair.

"This finding and the evidence obtained has been communicated and provided to the U.S. Attorney's office," the audit states.

The audit found that in 2012, Douglass was reimbursed $106.72 a night for a campsite at the State Fair, while a department employee with an adjacent campsite was reimbursed $30 a night.

Legislative auditors found department employees were afraid to question expenses by Douglass and upper management, fearing they would lose their jobs. …

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AG DEPARTMENT ; Audit Finds Unethical Tone of Upper Management; Evidence of Potential Fraud, Shoddy Lending under Gus Douglass
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