In a March 11 letter to the board, the auditors cautioned that they learned of “several Board and Committee meetings occurring in which a quorum of Directors were present.” Provisions of the bylaws were not followed, it was stated. The meetings did not have advance notice, did not meet open-meetings requirements and did not keep minutes.

“Not following the Cooperative’s Bylaws has the potential to impact the Cooperative’s tax-exempt status. In addition, from an appearance standpoint, this could create suspicion among members and counterparties,” the audit stated.

Board President Lois Lester attended several committee meetings, meaning that four directors were present. None of the meetings were advertised and no minutes were kept. In addition, the full seven-member board held four meetings that initially were advertised as “closed to the public.”

Two of those meetings were with directors of other utilities. The other two meetings were with consultants who are attempting to bring the board into “alignment” and end disputes between the five-member majority, which now controls the board, and two dissident directors. The cost of those “alignment” sessions is $17,500, plus expenses.

Lester and other members of her coalition budgeted $60,000 to cover a management audit to be performed by those same two consultants. The consultants were hired by the board without issuing a request for proposals. They turned down a suggestion to instead have the audit done by the National Rural Electric Cooperative Association, an industry organization that has performed many such audits. Their fee was estimated at about one-third of the sole-source contract that was issued.

The meetings cited by the auditing firm were not illegal, Lester asserted in a March 26 article appearing in the Alaska Star. She said no MEA business was discussed in the meetings, two of which involved joint meetings with other cooperatives. Despite her claim that these were not board meetings, she and other directors submitted expense vouchers for attending board meetings. Directors this year are paid $283 per meeting, plus travel costs.

MEA has an income of nearly $97 million in 2008, according to the auditor’s report. Its operating margin, the term used by a cooperative for what tax-paying corporations report as profits, was $6.6 million. As a nonprofit corporation, MEA is exempt from taxes. Loss of that status due to the board’s violation of the bylaws could cost hundreds of thousands of dollars, plus penalties and interest.

Although Lester’s coalition suspects a management audit will uncover wrong-doing by MEA’s manger and his staff, the Outside auditors hired by the board found several instances where the management should be lauded. They found no discrepancies. They said management cooperated with their review and MEA’s practices are standard within the industry.

“We would like to commend Management for (their) practice of monitoring and improving controls,” the report stated.

Lee Jordan is a member of Friends of MEA. Friends of MEA was formed by 10 former directors who are concerned about the direction the current board is headed. Its purpose is to educate the utility’s members.

This article published in The Alaska Star on Thursday, April 16, 2009.