Demand readied for new audit of water association, election

A Carroll County woman who successfully sued her local water association on Freedom of Information Act grounds in May is demanding a new audit of the association, along with the election of additional members to the association's board of directors.

Wanda Roudebush, who lives near the Carroll-Newton county line just north of Compton, said she will present petition signatures calling for both an audit and special board election at the association's Sept. 9 meeting of the Compton Water Association. The action follows a May 12 ruling in which Circuit Judge John Putman issued a court order requiring the board to begin holding regularly scheduled meetings and to give advance notice of those meetings to the association's members.

Roudebush originally filed suit against the association, which provides water to about 300 rural residents in northern Newton County and nearby areas, in January 2014. In his ruling, Putman also ordered the board to provide the names of all association members. Roudebush's complaint also included dozens of other allegations, most of which were not addressed by Putman.

Since that ruling, the board has scheduled only two meetings, both of which have been canceled because too few board members were present to form a quorum, said board member Roger Jones.

In July, Roudebush received two copies of the association's balance statement, known as a profit and loss statement, which reflected total liabilities and earnings for the association as of Jan. 31, 2014. One of the copies was generated in February and the other in March, and they each reflect slightly different totals -- $61,374 and about $63,280.

Roudebush said the discrepancy calls for an investigation from the state Legislative Audit Division, but Veronica Oitker, the association's bookkeeper, said the final totals for any given date are subject to recalculation for a variety of reasons.

"Receipts or debits that come in 30 days late or something, and you plug that expense or income in, it's going to change that total," Oitker said. "If you ask for the January statement in February, it's going to look different than if you ask for it 90 days later."

Oitker said the association was audited in May by Little Rock-based accountant Stephen Savage, who has audited the association for several years. According to Arkansas Code Annotated 14-234-119, rural water associations with 100-500 members must be audited annually.

If Roudebush wants to call for an investigation by the Legislative Audit Division, Oitker said, she's welcome to, although it's doubtful she has the sort of evidence that would trigger such an investigation.

"I welcome anyone to look into the books in any day," Oitker said. "But when you have someone looking into the books as [Roudebush] is, it's really important that she understands what she's looking at."

Roudebush has also had a long-standing complaint that the board has been operating with only five members instead of a full complement of nine. Although board members voted to change the required number, Roudebush said she has never accepted the legitimacy of their decision. Oitker said the association's board voted to make the change in 2001 because of lack of interest in serving on the board among association members. The vote was finally ratified in 2013, she said.

Roudebush contacted Putman's office earlier in August, complaining that the board was not following the court order issued in May regarding regular meetings. In a letter dated Aug. 25, Putman replied that Roudebush would need to file an affidavit stipulating her claims before he could consider action against the board. Roudebush said Thursday that if the board agrees to hold elections and calls for a state audit, she would not file the affidavit.

Members of the board, which currently has only four members after a recent resignation, have tended to be "older," board member Jones said, and health concerns frequently supersede scheduled activities.

David Menz, a Little Rock attorney who sometimes works for the Arkansas Rural Water Association, said the Compton Water Association's situation wasn't unusual.

"In a lot of instances, you've got people in their 70s, 80s, 90s that are running these things now," Menz said. "And really, they kind of run themselves."

Meetings of the Compton Water Association have gained a reputation as quarrelsome events, both Roudebush and Jones said. While Roudebush has complained of board members shouting down or ignoring residents in attendance of meetings, Jones said he and other board members have been the targets of verbal threats of physical violence from attendees during such meetings. Jones said he had never pressed criminal charges in such instances.

"This is a small community," said Jones, who moved to Compton from Little Rock in 2010. "These are my neighbors. Along with the truth, I want peace."

Much of the apparent discord stemmed from a 2010 increase in water rates, a move Jones and Oitker said they had to make to repay debts accumulated by the previous board, which was dissolved in early 2010. The association now charges $35 for the first 1,000 gallons of water each month, and $9.50 for each additional 1,000 gallons, an increase over the previous rate of $25 for the first 1,000 gallons and $5.50 for each additional 1,000.

"Past boards had refused to up rates incrementally as costs had increased," Oitker said. "The expenses to maintain the system had gone up with time, but the board refused to raise the rates to compensate for those expenses. And as a result, much of the set-aside funds were used to run the system."

In 2009, Oitker discovered that the previous bookkeeper had not ordered an audit since 2002. Oitker requested a special investigation from the Legislative Audit Division, which determined a pattern of "salary overpayments, noncompliance with IRS regulations and Code, questioned disbursements, and significant differences in water purchased from the Supplier and sold to customers," according to the division's investigative report. The association owed more than $97,000 to the Southwest Boone County Water Association 2009; the debt has since been paid with revenue generated from the 2010 rate increase.

The investigation also found improper compensation payments in the amount of $5,550. The report was forwarded to the 14th Judicial District Prosecuting Attorney Ron Kincaid, but charges were never filed. Calls to Kincaid's office were not returned.

Over the past few years, Jones and Oitker said, Freedom of Information Act requests, filed by Roudebush and others, have overwhelmed Oitker to the point of her being nearly unable to carry out her actual responsibilities as bookkeeper.

In a December 2012 Freedom of Information Act request, Roudebush asked for copies of the association's five previous annual audit reports, among other things. Oitker said producing every document associated with even one annual audit was an enormous task.

"They want every document supplied to the auditor," Oitker said. "I don't know if you realize what that means in the accounting world. It entails every single check, every document, every receipt, everything.

"I understand the need for [the Freedom of Information Act], but when it's abused, it's perilous, and it hurts people," Oitker said. "This little group of folks are abusing it. It's antagonistic, and it's really put a burden on this water company."

Jones said: "Imagine being a small water association with three paid employees, and having to answer an unbelievable, endless flow of FOI requests. I think it's designed to wear [Oitker] out."

In addition to Oitker, the association also employs a meter reader and a maintenance worker, Jones said. Board members are not compensated for their positions with the association.

The Compton Water Association currently has no physical office. Oitker said all of the association's paperwork is kept in her home. She said board members had intended to purchase a commercial business space in 2013 but decided against it after spending approximately $3,900 in legal fees paid to Mitch Cash, an attorney retained by the board to navigate Freedom of Information Act questions.

"There were as many people saying, 'I don't want you giving my name out,'" Oitker said, referring to Roudebush's request for the names, addresses and phone numbers of association members.

As Roudebush's Freedom of Information Act suit gained momentum, board members felt the potential legal costs precluded the planned business-office purchase, Oitker said.

Menz, the Little Rock attorney, said the contrarian nature of the Compton Water Association board's relationship to its members was not unusual among rural, quasigovernmental agencies, in his experience.

"You see the same thing in small city councils: Somebody challenges them on something, and they say, 'We've been running it this way for years, and it's been OK,'" Menz said. "It's just human nature working out. What you have here may not be a legal problem -- it sounds like a personality problem."

NW News on 09/02/2014

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