A special report presented at a meeting of the Legislative Joint Audit
committee Friday raised questions about nonprofits associated with the Arkansas Department of Community Correction
, the state agency that oversees parolees and probationers.
Among the issues identified by the auditors: Between January 2014 and August 2017, DCC Chief Deputy Kevin Murphy
received a total of $204,000 in salary and another $49,000 in reimbursements and insurance benefits from serving as the executive director of the Arkansas Association of Correctional Employees Trust
, or AACET. During that same period, he earned an average of $97,804 annually in his administrator position at DCC.
"The nature of these dual positions creates a conflict of interest," the report states. Here's the special report
audit. Here's a document in response
from the community corrections department.
AACET is a private nonprofit that provides benefits to its members, who include employees and retirees of DCC, the Department of Correction (state prisons), the Parole Board and two educational agencies associated with the corrections system. Members pay annual dues ranging from $52 to $195 per year. In return — and depending on their level of membership — they are eligible for scholarships, assistance during family emergencies, dental and vision insurance, death benefits, event discounts and more. There were 4,404 members as of August 2017, the report says.
Dina Tyler, a spokesperson for DCC, described AACET to a reporter on Friday as "a benevolent organization. Its primary purpose is to provide assistance in times of need." Similar mutual aid nonprofits for correctional workers exist in other states, she said. Tyler also said AACET will help non-members struggling with emergencies, though likely not to the same extent as it assists its members.
The special report was a detailed follow-up requested by lawmakers after a legislative audit assessment of DCC last summer resulted in three findings.
On Friday, auditors told members of the committee that Kevin Murphy's dual employment with DCC and AACET was a problem in part because the two roles appear to have overlapped. Murphy sent or received thousands of emails related to AACET during normal state business hours over the past few years, which they said was a violation of the "public purpose doctrine" that a public entity cannot use public funds for private purposes.
The report notes Murphy's salary at AACET was "adjusted annually based on a percentage of revenues." Therefore, "Mr. Murphy's salary as AACET Executive Director is dependent on membership revenues and insurance premiums, and his position with DCC could be used to influence DCC employees decisions regarding membership and insurance coverage with AACET."
Auditors also highlighted two annual golf tournament fundraisers sponsored by AACET each year, during which vendors were solicited for contributions. "Only those vendors with sponsorships of $3,000 or more are eligible to participate in the Sunday Director's tournament," the report states. Auditor Jon Moore
told legislators such a practice gives vendors "preferential access to DCC management."
Murphy told the committee Friday that his work with AACET was "just like any other part-time employment" and did not overlap with his duties at AACET. "I’ve always viewed that as my ministry and I’ve always been able to keep the two separate," he said. Murphy acknowledged that he's "occasionally" replied to AACET emails during DCC working hours, but said he regularly works more than 50 hours per week for his day job. (DCC Director Sheila Sharp defended her deputy's performance to the committee.)
He outlined good work that he said the nonprofit has performed. "We've been able to pay for 179 funerals … provide over 500 scholarships to correctional employees … and assisted 500 of our correctional employees' kids when they couldn’t afford Christmas."
"We’re just trying to help the corrections employees. It’s a very, very tough business to be in," he said.
Sen. Stephanie Flowers
(D-Pine Bluff) was one of several legislators — mostly Democrats — who seemed skeptical of legislative audit's findings. "AACET is a private nonprofit corporation. So, I’m having a hard time trying to follow this thread as to how DCC is cited with findings that benefit the state agency’s employees," she said. Flowers asked how that violated the public purpose doctrine.
Moore, the auditor, told Flowers that an attorney general's opinion has said that the primary benefit of public funds or resources has to be to the state. "AACET’s benefits, as Mr. Murphy just explained, don’t go back to the state. They go back to DCC employees — and even then, not all DCC employees, but only those who have signed up to be members of AACET. So there’s not a clear and direct benefit back to the state of Arkansas. There’s a clear and direct benefit to private individuals. … The other part of the problem is that the state appropriates public funds to a private entity with public employees on public time in their public offices using public resources, like their computers or their phones ... [to] conduct business for that private entity."
"I don’t see how we can not say that this was a public purpose — benefiting these employees, who are public employees," Sen. Flowers responded. She said DCC employees are chronically under-compensated. "To me, what I’m hearing is you’re citing this agency for doing things that would benefit a public agency and its employees. ... If anything, the legislature has neglected and fallen short … by not paying overtime benefits promptly."
Later, Rep. Vivian Flowers
(D-Pine Bluff) asked the auditors about their criticism of the DCC golf tournament sponsorships. "We all just heard in this room that the primary funding of AACET is through employee fees … is there a specific rule or law that says a nonprofit that is funded by [members] cannot seek sponsorships?" she asked.
Moore cited a state statute that says public employees must discharge their duties impartially. "The point is that these DCC employees, acting on behalf of AACET, are soliciting these vendors to contribute to these golf tournaments and what have you. The vendors get the access to management or to the employees. We think that creates a problem with … impartiality or the appearance of impartiality. And it’s not strictly the private entity’s folks that are going out and making those solicitations; it’s people that are also state employees.
"Which hat are they wearing when they’re doing this? It looks sometimes like they’re wearing their state employee hat," he said.