Broken Arrow has changed the way it manages downtown redevelopment after an audit revealed that more than $20,000 in transactions by the Broken Arrow Economic Development Corp. in 2017 were found to be excessive or personal in nature.
The audit by Oklahoma City’s Crawford & Associates was initiated by Broken Arrow City Manager Michael Spurgeon in early 2018. According to a statement from the city, Spurgeon received several complaints from former Chamber of Commerce employees and two members of the EDC board of directors regarding questionable business practices and possible inappropriate use of chamber and EDC funds by the former President and CEO Wes Smithwick.
Citing health reasons, Smithwick resigned June 1, about a month after the city requested the EDC’s financial policies, procedures and expenditures for calendar year 2017.
“There are consequences to actions,” Spurgeon said. “I’m very proud to say that as soon as this matter was brought to my attention, officially, by some concern from our employees and two concerned board members who have a fiduciary responsibility, we acted immediately.
“When things like this happen, the true test of a person’s mettle is how you deal with it. And I think this community has stepped forward. I think the chamber and Economic Development Corp. have stepped forward and dealt with it.”
Honoring an Open Records request, the city of Broken Arrow released audits Friday of the chamber and EDC.
As a result of the audit, the Broken Arrow Economic Development Authority and the EDC have negotiated a new contract, taking into consideration recommendations from the Crawford report.
This includes the city terminating the downtown redevelopment services contract and managing downtown redevelopment through a new business retention and expansion program implemented by city employees.
Additionally, late last year, the EDC reimbursed BAEDA $20,000 for expenses deemed to be excessive or had the appearance of being personal in nature.
“From the city’s perspective, we believe that we have been made whole,” Spurgeon said.
The audit of the Economic Development Corp.’s finances found that of 839 credit card transactions reviewed, 117 transactions did not have itemized receipts or appropriate documentation, and 241 transactions did not have any receipts.
A total of 48 credit card transactions totaling $20,276 had the appearance of being personal expenses, including $899 for an American Airlines Elite Status Boost, $723 for an airline ticket purchased for an employee’s spouse and $1,958 in cash advances for which no documentation was provided.
The Broken Arrow Police Department investigated the audits’ findings and determined there was no criminal liability, Spurgeon said.
“We believe very strongly in the chamber and the EDC,” he said. “I do not believe that this situation reflects the actions of the leadership of either one of those organizations. I believe it takes a public-private effort in order to maximize the effectiveness in economic development administration.”
“I’m not going to let the actions of one person affect us going forward. This community is on a trajectory to continue to have tremendous success. I believe that the appropriate measures have been put in place with the new agreement.”
At the time of the allegations, the city was reviewing the current contract language with the Economic Development Corp., which was set to expire on June 30, 2018.
Based on the nature of the complaints and the pending contract negotiations, the city asked that the documentation be provided by May 23.
Smithwick agreed to provide the documentation and financial information by that date and shortly thereafter requested an extension to June 11.
Three days after Smithwick’s resignation on June 1, the Broken Arrow Economic Development Authority — the city entity which contracted with EDC — authorized Crawford & Associates to conduct an audit, and those findings were presented Oct. 23 to members of the authority during a special meeting.
Other findings of the audit included downtown redevelopment funds that weren’t spent for those purposes and noncompliance with current contractual provisions. In addition, the audit found that EDC submitted broad monthly activity reports instead of monthly claims reports listing actual expenses.
A national search will be conducted for Smithwick’s successor.
“We do have financial audits on an annual basis,” said Ted Cundiff, past chairman of the EDC. “There’s no money missing, so nothing ever appeared in those.”
But he added that the Crawford report provided the organization a deeper look.