A regional scrap-tire district has gotten rid of its tire dumps, created a business plan and become more transparent with its oversight board, leaders say.
A former office manager for Clarksville-based West River Valley Regional Solid Waste Management District, also known as GreenSource Recycling, was arrested in February and accused of being responsible for about $91,000 in unaccounted revenue, unauthorized expenses and salary overpayments through mid-2016.
The district took hundreds of thousands of dollars in grant funding in recent years from the Arkansas Department of Environmental Quality while the district operated with little financial oversight by its board.
By rule at the time, fiscally distressed districts must move to the top of the list for grant funding, and the department has no discretion on disbursement, department officials have said.
The state has overhauled its tire program, implemented currently through emergency temporary rule-making but already approved by law, and some officials hope changes can prevent tire districts from getting as out of hand as West River Valley did.
Lawmakers expressed hope during a legislative joint auditing committee Friday that the district and others could have more oversight and even state audits.
A legislative audit report presented to lawmakers Friday morning came after the Pope County prosecuting attorney, who has charged the office manager, asked the agency to conduct one.
Audits of districts and other smaller governmental agencies are often done by private certified public accountants, which some lawmakers questioned.
"They know who's paying them," said Sen. Jimmy Hickey, R-Texarkana.
Legislators heard testimony earlier in the meeting about financial troubles within the Earle School District and mismanagement found by Legislative Audit, but were told private audits done in years prior showed no problems. The school district has been taken over by the state for fiscal distress.
Sen. Gary Stubblefield, R-Branch, said district boards need a change in structure or attitude to hold tire districts more accountable.
"Before you know it, millions of tax dollars are wasted and stolen by criminals who should have been accountable," he said.
West River Valley District Regional Solid Waste Management Director Justin Sparrow, who replaced the former director after the board learned of the district's financial troubles in 2016, said two board members now sign off on checks from the district. Sparrow also said he would welcome more auditing, which he said he believed would help him and the board do their jobs.
Rep. Lanny Fite, R-Benton, sponsored Act 317 of 2017, which sought to make tire districts and tire dealers more accountable and transparent in their operations to the state by requiring business plans and electronic manifest systems that track tires. After the meeting Friday, Fite said he believed the act would help prevent districts from doing what West River Valley did.
Districts must have business plans and must show the cost of disposing of tires, Fite said.
"No one knew what their actual cost per tire was," Fite said, referring to West River Valley.
The requirement of business plans and used tire management plans that must be submitted to the Department of Environmental Quality will force districts to think about what they can afford to do and will allow the department to have a better idea of what's going on, said Tammie Hynum, tire accountability program manager for the department.
"I think those are key elements of checks and balances in the program," Hynum said.
Act 317 is implemented through Regulation 36, which has been approved on a six-month emergency basis since January. The permanent regulation contains the same language and has approval from Gov. Asa Hutchinson, Hynum said. It will go before the Legislature's public health committee in July before it can be approved by the rules and regulations committee and then return to the Arkansas Pollution Control and Ecology Commission for final adoption.
Fite said he is working on legislation for the 2019 session that would require solid waste districts and planning and development districts to be audited separately so that officials could better see the cash flow between them.
West River Valley entered financial distress after being unable to process and sell tires to support the infrastructure it had invested in processing and recycling them. That led to more than 600,000 tires being improperly stored on two properties owned by the district, which was written up by the Department of Environmental Quality in several inspection reports.
Investigations by Legislative Audit and Arkansas State Police have found additional financial mismanagement.
The audit presented Friday showed salary overpayments to office manager Stephanie Sheppard, district assistant director Frank Baker and another unidentified employee. The audit also notes that former director Tim Lewellyn, who has not been charged with a crime, spent $12,252 on personal purchases using the district's credit card.
In 2016, Baker and Sheppard were fired and Lewellyn resigned after the district's board noticed financial issues. At that time, the Department of Environmental Quality had spent years inspecting the two piles of tires the district couldn't get rid of.
Because of a lack of records, Legislative Audit was unable to determine who was responsible for $4,483 in undeposited cash receipts at the district.
Lewellyn also signed three contracts in 2013 without authorization from the district's board, which is composed of 17 mayors and county judges in the nine-county western Arkansas district, according to the audit. The contracts were all with one company, referred to only as "the Company" in the audit, and lasted less than a year before the board canceled them after discovering their existence in early 2014.
Officials with the district and Legislative Audit said they couldn't remember the name of the company. County Judge Jimmy Hart of Conway County, the district's board chairman, said he believed it was an Internet-based marketing company but could not recall the name of it.
In one contract, according to the audit, the company agreed to remit 50 percent of its sales of the district's tires back to the district but never did so.
The district also opened, without board authorization, a storage facility in Knoxville in late 2013 and did not maintain operational records of it. The property was eventually one of the two sites covered in tires.
Metro on 06/11/2018