The audit found the district violated several state laws through construction and operation of an asphalt emulsion plant. Reporter Randy Ellis wrote about it in the Tuesday edition of The Oklahoman.
The multimillion-dollar asphalt emulsion plant was purchased, equipped and operated through a joint venture of Circuit Engineering District 7 (CED7) and the CED7 County Energy District Authority (Authority).
They had no legal authority to engage in such an enterprise, either individually or as a joint venture, according to the investigative audit by State Auditor & Inspector Cindy Byrd’s office.
CED7 also violated state law by paying out nearly $17,000 to the son and wife of Monte Goucher from 2010 through 2012. Goucher was the district’s executive director at the time and his family members should not have been receiving payments, auditors said.
Goucher’s son received 16 checks totaling $13,204 “for contract labor, per diem, trailer usage, pay period bonus and labor,” while Goucher’s wife was given five $750 checks totaling $3,750 for “a fifth-wheel rental,” auditors reported.
Auditors criticized county commissioners in several counties for improperly using restrictive bidding techniques to make sure that the 7 Oil emulsion product produced by the plant was selected for their county road projects.
“Counties may not restrict their bid solicitations in ways that result in restricted, noncompetitive bidding, which could result in paying higher prices for goods or services,” auditors said in their report.
(Auditor Cindy Byrd)
Circuit Engineering District 7 includes Beckham, Blaine, Custer, Dewey, Greer, Harmon, Jackson, Kiowa, Roger Mills, Tillman and Washita counties.
Auditors noted that the circuit engineering district authority touted the emulsion products as a way for counties to save money, but there were times when they submitted bids to supply emulsion products for road projects in nonmember counties that were actually cheaper than the bids submitted to member counties. For example, a bid to supply the emulsion oil to nonmember Comanche County for $1.70 a gallon was submitted at about the same time the authority was submitting bids of $2 a gallon to Beckham, Custer, Roger Mills, Washita and Tillman counties, auditors said.
“Bidding the 7 Oil product at a higher amount in the member counties, although not prohibited, appears to undermine the objective of the joint venture, which was to reduce costs for CED7 member counties,” auditors said.
Auditors noted that the CED7 authority paid $575,000 in April 2012 for the asphalt emulsion formula, even though the inventor’s patent for that formula had expired the previous year.
Goucher claimed purchase of the formula was “necessary because a number of details and nuances, along with the intellectual knowledge and notes of the inventor, were needed to properly produce the emulsion product,” auditors said.
However, auditors said engineers with the Oklahoma Department of Transportation examined roads that had been surfaced with 7 Oil and concluded “the emulsion is not a proprietary or exclusive formula.”
Auditors also criticized CED7 for open meeting violations, improper repayment of loans taken out by employees of the district’s retirement plan and improper comingling of funds.
The state auditor’s office launched its investigative audit into the circuit engineering district in 2017 after receiving an audit request from four district attorneys who serve the region.
Almost immediately, the district’s office manager, Debbie Walpole, came forward and admitted embezzling CED7 funds, auditors reported. A certified public accounting firm conducted an investigation and concluded $99,300 in restitution was owed.
Walpole was fired as District 7’s office manager in July 2017 after she reportedly confessed to the district’s executive director that she may have embezzled funds.
The district attorneys who requested the audit could not be reached for comment Monday on whether they plan to file criminal charges.
Source: The Oklahoman