South Dakota Corn: A decade of independent audits shows years of material weaknesses - Sioux Falls Argus Leader
Editor's note: This story is part of "100 Eyes on South Dakota," an investigative initiative driven by reader questions and news tips to help hold public officials accountable and shine light on truth within the region, culminating impactful reporting and resources between three newsrooms: the Argus Leader, the Aberdeen American News and the Watertown Public Opinion.
One of South Dakota’s most powerful agriculture groups was warned for years it lacked basic controls for financial management, an Argus Leader analysis of records has found.
Now, those warnings could be coming home to roost.
Officers of the South Dakota Corn Utilization Council have hired Pierre lawyer Brett Koenecke to find an auditor to review the organization’s financial records. Koenecke is a veteran lobbyist and fix-it man who has worked on the periphery of state government. He was on vacation this week.
“I’ll get started when I get back,” he told the Argus Leader.
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The decision to bring in what was called a “forensic” auditor during a council leadership meeting this month comes amid the abrupt departure of South Dakota Corn’s longtime executive director, Lisa Richardson. Teddi Mueller, the organization’s legislative director, is also no longer listed on the group's website. The South Dakota Corn Utilization Council is one of two groups that comprise South Dakota Corn, a promotional body for corn producers.
When called, a phone number for Richardson had a full mailbox.
Deficiencies and inconsistent account balances
The Argus Leader reviewed more than a decade’s worth of annual audits and several years of monthly financial reports for the council. The audit reports included repeated warnings, and financial statements show wide swings in the group’s checking and savings account.
The council is funded primarily by corn check-off fees, which were established by the Legislature in 1988 and collect one cent per bushel on all corn sold within the state, according to South Dakota law. The council typically collects between $4 million and $6 million each year from farmers, according to yearly independent audits.
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"Audits are routine when there is a changeover of leadership in the not-for-profit world," SDCUC President Grant Rix wrote in an email to the Argus Leader. "It's important to have strict accountability for how check-off dollars are spent, and we are reviewing all of our processes to ensure that's being done in the best way possible."
The council’s board of directors named Mike Jaspers, former state secretary of agriculture and current business development director for East River Electric, as South Dakota Corn's interim executive director while the organization seeks proposals for a forensic audit.
Jaspers did not respond for comment.
If the council ends up performing a forensic audit, it would include a detailed review of expenditures and be far more thorough than the annual independent audits conducted, which are required by state law.
But even the annual reports warned of possible troubles.
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Continued potential for financial misstatements
From 2010 to 2020, the reports showed years of material weaknesses, described in the reports as “a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.”
Accounting firm Eide Bailly, who conducted the annual audits, reported problems with the council’s preparation of financial statements in all 10 years examined by the Argus Leader. In eight of the 10 years, those deficiencies were considered material weaknesses, as opposed to significant deficiencies, which are considered less severe.
In six of the 10 years, auditors had to make corrections to the organization’s ledger.
“As auditors, we proposed material audit adjustments that would not have been identified as a result of the council’s existing internal controls, and therefore could have resulted in a material misstatement of the council’s financial statements” an Eide Bally auditor wrote in the 2011 audit.
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The Argus Leader also reviewed four years of monthly financial statements for the utilization council. From July 2017 to May 2021, the group’s assets more than doubled, from $2.9 million to $6.5 million.
While that metric was healthy, the group’s checking and savings account balances varied widely.
Some months, the group had several thousand dollars on hand, while other months the group had a negative balance.
In September 2020, the group’s checking account balance was negative $954,831.
In at least six other months during that time period, the organization had a negative balance in its checking and savings account.
SD Corn offices were also closed this week. All calls to the office are being forwarded to a former employee for the National Corn Growers Association who's located in Kentucky.
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