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September 22, 2019

8/24/2019 7:30:00 AM
Our View
Oneida County must demand public answers from Teichmiller
Brian Jopek and Richard Moore
Lakeland Times News Editor and Columnist

The long anticipated audit of the Oneida-Vilas Transit Commission is in, and, as expected, the company performing the audit, Wipfli, found no condemnations or misconduct that would result in blaring headlines.

To cite just one example, the auditors found no consistent method of documenting support for expenditures, but ultimately determined there was no material misstatement. Likewise, auditors found some issues with the commission's capitalization policy and bank reconciliations, but also found no evidence of any wrongdoing.

That said, the auditors did find that a significant deficiency exists in the commission's internal controls over financial reporting, and Wipfli noted several areas where the same person was involved with authorization, custody of assets, or record keeping or there was a key activity in the accounting cycle that was not reviewed by personnel independent of the preparer, resulting in a material weakness.

So the commission survived the audit, sort of, but that is hardly the end of this story. In fact, it may only be the first chapter.

For one thing, the audit, as Wipfli pointed out in the audit's first paragraph, was strictly limited to expressing opinions about whether the commission's financial statements prepared by management were "fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States."

That leaves out a lot, as Wipfli noted: "Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses."

Then, too, the audit was never designed to reach beyond internal management and finances to embrace the larger policy questions swirling around the transit operations: Just how many real one-way trips are there each month? What is the size of the population being served - in other words, how many people take those total number of trips?

Is the commission, for all that money, serving more than a few hundred people? And are those the right people? Is the vulnerable population getting the attention it needs? Does the commission need inter-city routes or should it focus on serving needs within individual communities?

Are the rates sustainable? Does the commission's rates form unfair competition to the private sector? Is the commission working cooperatively with those private entities?

This newspaper is continuing to investigate those issues and will report our findings.

All that said, there are even more important questions that now need to be answered, and they need to be answered publicly by Erv Teichmiller, the transit commission chairman.

One question involves a potential conflict of interest posed by Mr. Teichmiller's positions as chairman of the transit commission, which leases office space from Community Mental Health Services Holding Company, where Mr. Teichmiller has served as the chairman and treasurer of the non-profit.

The audit raises this conflict-of-interest issue, but appropriately refuses to come to a legal conclusion, given that they are not lawyers. We are not lawyers, either, and so we won't hazard a legal conclusion ourselves.

We will, however, make the following observations.

First, as the audit correctly points out, Mr. Teichmiller has abstained on votes regarding the leasing of the commission's office space. But that doesn't tell the whole story.

For one thing, while he may have abstained from voting, his very presence as commission chairman is likely to exert considerable influence on the other commission members who were voting.

Indeed, Mr. Teichmiller offered up the holding company's Stevens Street location early on, and offered it up again after a nearly completed lease with Headwaters did not happen. Did commission members feel any pressure at any time not to go along?

On the other side of the equation, as the holding company's chairman and treasurer, Mr. Teichmiller had a unique ability to set the lease rate, or to accept what the commission was offering.

Two questions thus stand out: By offering up the Stevens Street space after Headwaters fell through, did Mr. Teichmiller short-circuit a search for space that might have gotten the transit commission a better deal? Or, in fact, by offering the commission the same rate as it negotiated with Headwaters, might Mr. Teichmiller have shorted the nonprofit holding company by renting space for which the holding company might have gotten a higher rent?

We can't tell from the posted minutes, but here's the point: As chairman of the transit commission, Mr. Teichmiller's responsibility was to get the transit commission the best rent deal he could, while as president of the nonprofit holding company his responsibility was to get the highest rent he could.

It's hard to see how he could possibly serve both masters. It's an inherent conflict of interest.

Is that situation illegal? That's a question for lawyers and perhaps prosecutors to answer - and Oneida County should ask them - but, whether illegal or not, serving in both capacities while leasing office space from one to the other smacks of conflict, and in ethics the appearance of impropriety must be avoided as much as actual impropriety.

It's tone deaf at a minimum - just as receiving rent checks at his personal address was - and that leads to another question for Oneida County: Do you really want to be part of an organization whose chairman is Erv Teichmiller? Can you ever trust such an organization?

There's an even more serious question that needs to be answered. Here's the backdrop: The Community Mental Health Services Holding Company exists for one reason and one reason only: to hold the North Stevens Street building and property as an asset for Community Mental Health Services Inc. (CMHS), a nonprofit whose purpose is to offer mental health services and education.

Here's how the holding company's IRS Form 990 states its mission: "To hold title to property, collect rental income and turn over the net proceeds to Community Mental Health Services Inc."

It's a perfectly legal set-up. The IRS approves of such holding companies so they can protect the umbrella organization's property in case of a catastrophic lawsuit or other liability.But here's the problem, or at least here is what raises questions: Community Mental Health Services Inc. does not exist.

According to documents obtained from the Wisconsin Department of Financial Institutions, the corporation filed articles of dissolution last Oct. 30.

That means there's no reason for the holding company presided over by Mr. Teichmiller to exist, and, sure enough, the Stevens Street building has been listed for sale.

So here are the questions all this raises:

First, is the company really dissolved, as it appears, or was there simply a transference to another, differently named organization? That doesn't seem to be the case, but it's a pretty fundamental one.

Second, if CMHS was actually dissolved, what happened to the programs and services it offered? According to the group's 2017 Form 990, the corporation operated a community house, an eight-bed community residential facility in Rhinelander, and administered Kids in Need for runaway youth.

It received $418,000 in revenues. What happened to its revenue streams and programs and services?

The corporation was low on net assets, at about $29,000 in 2017 compared to $91,000 in 2016. But what happened to any remaining assets, if there were any?

According to the amended articles of incorporation, the board of directors would dispose of any assets to fulfill the purposes of the corporation or distribute them to other nonprofit groups. The question is, where did any assets go?

With respect to the holding company headed by Mr. Teichmiller, because the holding company existed to hold that asset for the CMHS, it is presumed that the sale proceeds would either pays remaining bills, or, if it is an asset, be distributed as the CMHS articles of incorporation called for.

Now all of this may be happening, and if so and if there are no liabilities, the building assets may well go to community mental health programs upon its sale.

We certainly hope that is in the works.

The problem is, we don't know that and, because community mental health programs and a hefty revenue stream is at stake, and because there are so many appearances of conflict, the public needs to know the answers.

Readers might ask, well, why not just do an open records request?

The answer is, we can't do an open records request because CMHS and its holding company are not public entities under the open records statutes.

At the transit commission meeting this week, it was mentioned that the transit rent goes into Erv's charity, which is then distributed to other charities.

Fine, but no proof has been presented, so how do we know that? Mr. Teichmiller needs to answer the above questions and produce documentation to prove it.

Vilas and especially Oneida County - because it has take a keen interest in these issues - needs to ask Mr. Teichmiller these questions. And, as the chartering counties, they need to demand and get answers, or pull the plug on this vast boondoggle.

The sooner, the better for both.

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