Complete 2012 forensic audit documents - Kansas Bioscience ...

KBA Forensic Audit Summary Page 22 of 30
Other Issues
Audit location Issue/Question Summary
On page 44 BKD: “On October 8, 2011, the employment status
of CFO/COO Jan Katterhenry changes. Because of
this change in status, BKD evaluated two issues: 1.
Was the change in status motivated by issues
related to the forensic audit? [and] 2. Did the
change in status interfere with the auditors’
ability to perform the forensic audit?” (p. 44).
BKD: “As to the first issue, BKD did not find any evidence indicating that the change in status was
motivated by issues related to the forensic audit. As to the second issue, BKD does not believe
that the change in status interfered with the auditors’ ability to perform the forensic audit” (p.
44).
Beginning on
page 53
Beginning on
page 55
BKD reports that “to determine an appropriate
size for the [Kansas Bioscience Venture
Accelerator], the KBA reviewed and took
recommendations from a variety of market
demand studies that had been performed for
bioscience incubators” (p. 50).
BKD reviewed the budget and actual costs for the
construction of the Venture Accelerator.
BKD reports that “it appears some due diligence was performed relating to the market demand
for incubator space. … The projections of demand, however, appear to have underestimated the
supply of incubator space in the current market” (p. 55).
BKD: “A $12 million preliminary budget for a 25,000 sf building program was brought before the
[board] in October 2008. … Based on the market demand studies … KBA management and the
[board] decided that a larger building was necessary. … The actual size of the building is 38,773 sf.
… The total cost to construct the Venture Accelerator was $14,934,654 [which includes a
contingency that has not yet been spent]. … As of the date of our analysis, the total incubator
project cost paid was $13,419,000 with anticipated additional costs of [up to] $1,516,000. …
Construction cost is currently $11,045,000. … BKD reviewed the pay applications for the amounts
paid through the end of our fieldwork. We were able to find support for all expenses, and the
classification of the expenditures appeared appropriate” (p. 56).
KBA notes that the final cost of the venture accelerator was under budget and that its cost persquare‐foot
compares favorably to similar buildings, including K‐State's adjacent Olathe
Innovation Campus building. KBA notes, too, that the financing for the venture accelerator is
through the issuance of industrial revenue bonds. There is no penalty for prepayment of the debt.
Beginning on
page 62
BKD recounts the history of the establishment of
Heartland BioVentures, the KBA’s
commercialization arm.
BKD: “... KBA looked to other established organizations with a similar set of service offerings to
those KBA envisioned offering. KBA hired Bioenterprise of Cleveland, associated with KBA director
Bill Sanford through his position as [chair] of Bioenterprise, and paid $200,000 under an affiliation
agreement for start‐up operational advice, assistance with recruitment of staff and introduction
to useful contacts in the areas of technology transfer and funding. BKD identified no evidence of
purposeful partnering between the two organizations, and the affiliation agreement has
terminated” (p. 64).