How to Trigger a State Audit

Part of America’s flag-waving rhetoric includes the well-churned hype that small business is the country’s backbone, the “job-creating engine” of the whole economy. Both political parties recite this applause line, then routinely promise to lighten the regulatory burden on small-business owners — especially around election time.

Back in 2004, then–Missouri Rep. Brian Baker took the usual talk a step further. He introduced HB 978, establishing the Small Business Regulatory Fairness Board “to ensure that Missouri state agency rules and regulations do not create an unfair burden for small businesses.” The bill defined a small business as one with 100 or fewer full- or part-time employees. The board, once established, would receive staff support from the Missouri Department of Economic Development.
Whether Baker, serving a largely rural district, was influenced by an organization such as the Missouri Chamber of Commerce and Industry or was simply touched by enlightenment one day in Jefferson City isn’t known. He didn’t respond to phone or e-mail queries. But he appears never to have owned a small business; his Linkedin page shows stints as a Cass County commissioner, a lobbyist, and a director at a Belton church before his current title: Senior Government Strategist at Cerner Corp. His bio on that page includes photos of Baker with New Jersey Gov. Chris Christie, former Maryland Gov. Martin O’Malley, Kansas Gov. Sam Brownback and Congressman Steny Hoyer.
In 2006, Baker was on the board of the Small Business Regulatory Fairness Board when it issued its first annual report — presumably written by DED staff. In an omen of what was to come, the report misidentified the bill number that had established the board.

In the nine years since that first report, the SBRFB has apparently deteriorated from a modest display of good intentions to an entity whose own board, in the 2015 annual report, charges that it’s “operating on a sub-par level.”
This was enough to prompt State Auditor Nicole Galloway to announce a coming audit of the board. Earlier this winter, she told the Jefferson City News Tribune: “The level of dysfunction reported by the board is unacceptable and does a disservice to small business owners across Missouri.”

After SBRFB’s first year of operation, Nancy Zurbuchen joined the board. She owns Motional Multimedia, a St. Louis–based communications company. Previously, Zurbuchen was executive director of the Kansas City Council of Women Business Owners.0x000ABoard members are volunteers, Zurbuchen says, who serve without compensation. “We’re doing a [greater] good,” she says. “I’m absolutely supportive [of the board]. We’re the only entity for small businesses having problems with the state. It’s either us or get an attorney.”0x000AZurbuchen, who was instrumental in releasing the 2015 annual report, which triggered the coming state audit, maintains that view but understands it’s optimistic — and has been for a while.

When the 2010 annual report was released, in May 2011, its unsigned cover letter stated: “SBRFB lacks adequate administrative support … so it can function in the way it was intended.” That support was, by statute, supposed to have come from the Missouri Department of Economic Development, but the DED failed to devote a full-time staff person to help the volunteer-run SBRFB.
To meet the need, funds were requested for one full-time and one part-time support staff member for the board. The DED estimated the cost for both at $75,000, or 1.5 FTE (full-time employee), per year.
By the time the 2011 annual report had settled on the desks of Gov. Nixon, the president pro tem of the Missouri Senate and the speaker of the Missouri House, in March 2012, then–SBRFB chairwoman Vicki Englund assumed that the 1.5 FTE had been authorized. So did the rest of the board. Instead, Zurbuchen says, “disarray” continued for the next few years, with no further annual reports completed until 2015. (At this writing, the 2009 report is missing from the SBRFB website, which also lacks the names of current board members. The last board meeting listed is from 2012. Call the phone number listed on the website and you hear a recording promising that someone from the DED will call you back.)
Scott George, who was chairman of the SBRFB in 2006, returned in late 2012 because of unfilled vacancies. He asked the DED about the 1.5 FTE meant to have been allocated for administrative support. Both he and Zurbuchen were told that the funding had been line-item vetoed by Nixon.
“We couldn’t figure it out,” Zurbuchen says. She recalls trying to get an answer from Englund, trying to convene a meeting with other board members; Englund, she says, had “just disappeared.”
Englund in the fall of 2012 was running for the Missouri Legislature from District 94. She says that, at the time, she was trying to get a meeting scheduled “to inform the board of the lost funding.”
George, owner of Mid-America Dental & Hearing Center in Mt. Vernon, recalls the DED saying that the person designated to offer staff support from the DED had been “reassigned.” And when the DED was asked why the money wasn’t asked for in the next budget (2013), George said he was told that, because it had been vetoed, “there was no point” in asking for the allocation again.
Englund, owner of GiftPak Express, in the St. Louis area, says she asked about the line-item veto. In the only e-mail Englund says she was able to find concerning the veto, she wrote to Dawn Overbey, the executive assistant to DED Director Mike Downing, for an “explanation of what happened during the veto session” and who would staff the board. That e-mail was dated Octoer 1, 2014.
“The board is starting to get upset that we don’t have a staff person,” Englund wrote. “Please call me at your earliest convenience to discuss.”
Englund says she doesn’t recall whether Overbey ever responded. But asking about the veto eventually revealed something unexpected: The FTE request wasn’t line-itemed vetoed out of the state budget but had been pared down to .5 FTE, or $50,000.
Scott Holste, press secretary to Nixon, says he found no evidence that the governor had vetoed the request. Instead, according to Holste, the $50,000 was “restricted” from the budget in September 2013 but “released” a few months later. Holste provided documentation showing that the release happened on December 24, 2013. (He did not respond to an e-mail asking who requested the amount be pared down from $75,000.)

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Englund says she was never told of the reinstated funds, which also surprised Zurbuchen and George. Where and for what did the $50,000 go?

In a series of March 2015 e-mails to George, Zurbuchen and other board members — more than a year after the release of funds in December 2013 — Ollie M. Green, senior legal counsel for the DED, noted that DED staff member Tori Benson was “no longer working with the board.” The person taking Benson’s place would be helping “arrange meetings” along with “other administrative tasks only.”
Green blamed the loss of Benson to the phantom veto. In a March 17, 2015, e-mail, Green wrote: “Tori is no longer working with the board — the money for her position was line-item vetoed by the Governor last year. … I will introduce you to Dawn Overbey — which most of you know — she will be helping the board arrange meetings and with other administrative tasks only.”
Overbey had made her own introduction six months earlier. In a September 17, 2014, e-mail to Englund, she wrote: “I am writing to let you know that I would be happy to assist you in setting up meetings for the Small Business Regulatory Fairness Board and take notes if needed. Please advise of any next steps.”

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The SBRFB’s 2015 report — the one in which the board says it is “operating on a sub-par level” — offers a hint of what those next steps should have looked like. One part of the report, called “Duties and Descriptions of the Administrative Support Required,” outlines recommendations of how a full-time analyst and part-time clerical person would support the board’s functions. These are essentially the same duties proposed by board members in 2011 and that, in theory, Overbey had been cleared to help achieve.

But there’s still no DED help, Zurbuchen says.

“We wanted to be clean and honest,” she says of the report. “But without the support of the DED it’s impossible for this board to work at a high level.”

That high level never has been achieved — and whatever the board has managed to do is, for now, all but invisible. Eleven years of SBRFB records, including comments from scores of Missouri small business owners, can’t be found.

“Where’s the data to evaluate how the board arrived at decisions?” Zurbuchen wonders.
“There’s no institutional history — all that’s gone,” George says. “There are no files, no electronic data — all the stuff from the earlier years, the talking with state agencies … it’s all gone. There’s definitely people in state government who want us to go away.”

Zurbuchen says when she asked the DED about the missing records, she hit a “brick wall.”

When I asked the DED about money allocated through it for support of the SBRFB, the missing records and the impending audit of the board, Amy Susan, director of marketing and communications for the DED, declined to comment. She recommended that I read the annual board reports and direct any questions to board members.

On January 4, 2016, Galloway announced an independent audit of the MSBRFB, noting that the board’s 2015 report had cited “a number of serious internal problems, including failure in proper tracking of board documents and archives resulting in missing records, as well as board vacancies that undermine the board’s ability to operate.”

Gov. Nixon appointed Galloway following the resignation of John Watson, who stepped into the position after the suicide of Tom Schweich in February 2015. Usually, the state auditor is an elected position. That person supervises approximately 115 employees including an audit staff of CPAs. The office is considered the state’s “independent watchdog agency.”

In January, Galloway said that, once her office reviewed the 2015 SBRFB report, she wanted to act quickly. In an interview, she told me she’d never seen “that type of language” (i.e., a state office evaluating itself as operating at a “sub-par level”) used in an annual report from a Missouri board or agency.

George and Zurbuchen say they welcome the audit.

“We’re glad,” Zurbuchen says. “It’s a good thing. We’re happy they are going to investigate.”

Galloway’s office says the audit should be completed this spring or by summer. •

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