Complete 2012 forensic audit documents - Kansas Bioscience ...

With respect to reporting on future Outcomes, the BOD should hire an independent third party to
verify such Outcomes. This verification should include a definition of all metrics used and
should define what is considered to be acceptable supporting documentation. The BOD should
seek input from various stakeholders in evaluating this process and the verification options that
are available. BKD can assist in identifying some of the verification techniques and
methodologies that are available.
Independent verification of both past and future Outcomes can take a number of different forms
ranging from simple independent math check to 100% coverage of the entities reporting
Outcome results to KBA.
KBA’s Response:
KBA management will discuss with the Board the possibility of engaging a qualified third party
to review the Outcomes methodology and make recommendations for any revision of metrics,
definitions, documentation, and audit procedures. Management is determined that the data
collected and procedures for reporting Outcomes be completely accurate and reliable.
INVESTMENT MONITORING AND TRACKING
During the course of the Forensic Audit, it was noted that newly received information from or
regarding a client company may be loaded into Biztrakker without the HBV staff responsible for
that client company being made aware of the new information. The concern is the timely review
of information to allow KBA to appropriately take any necessary action.
Recommendation:
Management should consider instituting a practice whereby HBV staff are notified when new
information is added to Biztrakker regarding any client company for which they are responsible.
Management may investigate if the functionality of Biztrakker can be amended to cause it to
automatically send an email to the appropriate HBV staff alerting them of the presence of new
information.
KBA’s Response:
KBA management will consider possible software or process revisions to address the concern
identified by BKD.
KBA HEARTLAND BIOVENTURES DEAL FLOW MEETINGS
HBV staff attend weekly deal flow meetings. The purpose of these meetings is to internally vet
the investment opportunities and to access the collective experience of the HBV staff in
connection with the opportunities. Reportedly Tom Thornton did not often participate in the
weekly deal flow meetings. However, allegations have been made that it is at this stage that
some investments are inappropriately denied appropriate consideration. No minutes of these
meetings are maintained to document how often they are held, who is in attendance and what is
discussed.
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