Nebraska State Treasurer Don Stenberg today told a legislative committee that he intends to ask State Auditor Charlie Janssen to audit the Nebraska Investment Finance Authority (NIFA).
Stenberg compared actions at NIFA to recent scandals at the Nebraska Tourism Commission, the Nebraska Brand Committee, and Goodwill Omaha.
Stenberg’s complete statement before the Legislature’s Government, Military, and Veterans Affairs Committee follows.
Mr. Chairman and members of the Committee, for the record, my name is Don Stenberg, Nebraska State Treasurer.
I strongly oppose LB 437.
In 2009, the Nebraska Legislature passed LB 16 to put the state’s checkbook on line for the purpose of giving taxpayers the transparency they needed to see where their tax dollars go. For each state agency, it requires that the amount, date, purpose and recipient of all state expenditures be made available on line.
In 2016, the Legislature passed LB 851 by a vote 48-0 to require that the same disclosure be made for entities created by state law whose board has one or more persons appointed by the Governor.
Every “independent instrumentality” except NIFA is complying with the Taxpayer Transparency Act as written.
Since Last September, the Executive Director of NIFA, Mr. Tim Kenny, has, with the assistance of his lawyers, engaged in a campaign of obstruction to conceal financial information concerning NIFA from the State Treasurer.
Excuse after excuse has been made. Volumes of correspondence has been exchanged. Several meetings have been held – all of which ended with no agreement from Mr. Kenny or his lawyers that Mr. Kenny would obey the law as written – the law which passed this Legislature 48 to nothing.
I would estimate that Mr. Kenny has spent tens of thousands of dollars of NIFA’s money on legal fees as part of his cover-up operations.
The only expenditure financial information Mr. Kenny is required to provide to the State Treasurer is the amount, date, purpose and recipient of each of NIFA’s expenditures – the same information that has been on-line on the state’s transparency web site for all state agencies since 2009.
Under Nebraska’s public records law, all of this information is new and has been a public record for several decades.
In my opinion, when a government bureaucrat fights this hard to prevent the disclosure of financial information, he is hiding something.
I see many similarities between what is going on at NIFA and what has happened with the Tourism Commission, the Brand Committee and, to a certain extent, the Omaha Goodwill scandal.
The Tourism board was made up of good people with full-time jobs elsewhere. The board met a handful of times a year, and the Executive Director took important actions without getting the prior approval of her board. She was fired for two main reasons. She asked the Legislature to increase her appropriation without getting her board’s prior authorization and she overspent her budget by over $4 million.
Like the Tourism Director, Mr. Kenny brought this bill to the Legislature without his board’s prior approval. That action got the Tourism Director fired. Why should Mr. Kenny be treated any differently? This bill is part of his ongoing cover-up operation. I will explain that a little later.
The Brand Commission scandal was similar. A part-time board of good people who met infrequently, and an Executive Director who kept his board in the dark on important issues and took inappropriate actions.
The Omaha Goodwill scandal had an Executive Director who paid himself and his cronies grossly excessive salaries and a board that let him do it.
Administratively, the situation at NIFA is just like these examples. We have a board composed of good people with full-time jobs elsewhere and they are not able to provide the oversight that is needed and we have an Executive Director who takes important actions without his Board’s prior approval.
That same Executive Director has gone to great lengths to obstruct and prevent the State Treasurer from seeing basic NIFA financial information and from putting that financial information on the state’s transparency web site, as is required by law.
LB 437 is written to facilitate Mr. Kenny’s continuing cover-up. The bill does not require that there would be a search capability for NIFA expenditure information.
This facilitates the cover-up in two ways. First, it makes it nearly impossible to find what you are looking for. Second, it makes it all but impossible to discover if some expenditures are not disclosed on that web site.
When I look at NIFA, I see red flags everywhere. I intend to take two actions to get to the bottom of this.
In the next few days I intend to write to the State Auditor and request a detailed audit of NIFA. In addition to determining whether any money is being spent inappropriately, I will ask the auditor to review the pay of the NIFA staff to see if it is excessive.
In addition, I will ask the State Auditor to determine whether internal controls at NIFA are sufficient to prevent fraud, waste and abuse.
Second, I am going to make a public records request for NIFA’s financial records in the near future. By law, Mr. Kenny will then have four business days to produce those records. Based on my past experience with him and his lawyers, I am all but certain that he will not do so.
Under Nebraska law, I may then ask the Attorney General for an opinion as to whether the information is public record. There is no doubt that it is. If Mr. Kenny still does not produce the records, I will request that the Attorney General file suit to compel disclosure of the records.
I have the following recommendation for the Committee concerning LB 437. I recommend that you delete all of the language of LB 437 and substitute a provision that the Executive Director of NIFA be appointed by the Governor with the advice and consent of the Legislature and that the Executive Director serve at the pleasure of the Governor. This is similar to the hiring of our State Investment Officer, who must be approved by both the Governor and the Legislature before he can take office.
If the Executive Director serves at the pleasure of the Governor, the Governor, through his staff, including PRO and DAS, can help provide the oversight that is needed.
The situation at NIFA is serious. In the last two years alone, NIFA has issued $475,000,000 of housing bonds. They have approximately one billion dollars in housing bonds outstanding. The amount of money sloshing around at NIFA is enormous, and is ripe for abuse.
The NIFA board is made up of good people, but they simply do not have the time to provide the level of oversight that is needed considering the amount of money involved.
My promise to this Committee is that working with our State Auditor and Attorney General, we will find out exactly what Mr. Kenny is hiding. Hopefully, it will not be the kind of scandal that we have seen recently at the Tourism Commission, the Brand Committee and Goodwill of Omaha.