Complete 2012 forensic audit documents - Kansas Bioscience ...

KBA’s Response:
KBA management will discuss with the Board BKD’s recommendations to further strengthen the
specifics of the Conflict of Interest and Documentation Policy.
APPROPRIATENESS OF GRANTS TO ORGANIZATIONS WITH
FINANCIAL TIES TO BOD
From inception through the present, KBA has at times made grants to companies with financial
ties to BOD members. Whether or not those grants are appropriate under the statute creating
KBA, KEGA, is now being called into question by members of the Legislature.
To date, KBA has made grants to two organizations associated with BOD members, NanoScale
and KansasBio.
Director Bill Sanford is the COB and 14% owner of NanoScale, a bioscience company that has
received four grants totaling $674,996 from KBA. BKD’s review of the Investment Committee
and BOD minutes, as well as interviews with current and former KBA BOD members, indicate
that Mr. Sanford recused himself from all discussions and votes on NanoScale grants.
Former Director Angela Kreps is the President of KansasBio, the bioscience trade organization
for Kansas that has received funds from KBA. KBA pays an annual membership due of $5,000
and has provided financial support to KansasBio to partially underwrite and participate in annual
BIO conventions from 2006 through the present. Payments made for the BIO conventions
totaled $100,000 for 2006, $75,000 for 2007, $100,000 for 2008 and $100,000 for 2009.
Beginning in 2010, KBA did not contribute funds to KansasBio for the event, but paid for
specific goods and services related to BIO 2010 and BIO 2011.
Ms. Kreps did not become a BOD member until June 8, 2007, subsequent to the approval for the
BIO 2006 and BIO 2007 conventions. The payments for the BIO 2008 and BIO 2009
conventions were approved as part of the AOPs for FY2008 and FY2009 respectively. However,
BKD identified no recusal by Ms. Kreps with regard to the approval of the sponsorships of the
BIO conventions in those plans. Therefore, Ms. Kreps may have been in technical violation of
KBA’s Conflict of Interest and Documentation Policy. 102 Ms. Kreps chose not to stand for
reappointment to the KBA Board when her term expired early this year and is no longer a KBA
director.
Some members of the Legislature are questioning whether these grants/investments are
appropriate under KEGA. A portion of K.S.A. 74-99b04 states, “No part of the funds of the
authority shall inure to the benefit of, or be distributed to, its employees, officers or members of
the board, except that the authority may make reasonable payments for expenses incurred on its
behalf relating to any of its lawful purposes and the authority shall be authorized and empowered
102 Ms. Kreps’ position as President of KansasBio had been disclosed to KBA’s BOD and was well known by the
KBA BOD members. The FY2008 AOP lists a specific line item of $100,000 for BIO 2008. The FY2009 AOP
indicates that as part of its marketing and communications strategy, “KBA will continue to tell the Kansas success
story at the world’s largest biotechnology industry event, the BIO International Convention, by providing financial
support and by helping with the planning of the Kansas presentation.” No specific dollar amount was specified in
the FY2009 AOP for BIO 2009.
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