Audit: State, U

Thousands of dollars worth of furniture sitting in the twinkling, mirrored West Bank Office Building caused a bit of a stink during the winter break.
The Minnesota Office of Technology — a state office designed to enhance business and education with technology — underwent an audit at the end of 1998. The results: The office did not ensure proper control over its grants, which led to improper use of the money by institutions including the University.
The University garnered $650,000 of those grants to develop a secure Internet link for businesses to trade financial information across the world. Called the Secure Electronic Authentication Link, or SEAL, the program was initiated by the United Nations’ Trade Point program.
SEAL made the University the North American hub for international electronic commerce, ensuring safe Internet business transactions world-wide.
But SEAL was shut down early last year, and depending on who is talking, the program either was terminated because of poor results and questions about the management — or performed and accomplished all that it was supposed to, but ended because the UN just didn’t know what to do with the technology next.
It was the poor supervision of these grants, among many other problems within the Office of Technology, that led those at the University working on the SEAL project to take advantage of the funds. According to the audit released Dec. 30, the more than $15,000 worth of office furniture in the West Bank Office Building — former home of the SEAL program — was an unreasonable purchase.
But Don Riley, former head of the SEAL program and associate vice president of the Office of Information Technology, said the audit was performed because new leadership in the Office of Technology “was trying to discredit the old leadership and kill the old problems” such as SEAL, he said.
However, that is not the end of Trade Point and the SEAL program’s problems. Earlier this year, both the Federal Bureau of Investigation and the United Nations started investigations into the program. Representatives from both organizations would not comment on the ongoing investigation.
Riley, who recently accepted a similar position at the University of Maryland, said the investigations revolve around illegal exportation of sensitive encryption software. The FBI commenced their investigation when an individual outside of the University of Minnesota, who Riley wouldn’t name, had “intent to harm and discredit the program.”
He went on to say the UN has completed their investigation and the conclusions were discussed at a conference in Geneva last fall.
“The UN concluded that there was no illegal activity and no illicit gain by the staff,” Riley said. “The UN investigation was a reaction to the FBI investigation.”
Backlash
The state Legislature appropriated $1.3 million to the Trade Point and SEAL programs in 1997 through the Office of Technology. In August of that year, the University received $350,000 to begin the program.
Another $300,000 was placed in an interest-bearing account with the World Trade Center Corporation, which developed the actual Web site for the SEAL program and printed some brochures about the program.
The University received the rest of the money in February 1998. Another $400,000 never made it to the University.
In a letter dated June 23, 1998, Gov. Arne Carlson placed a cease order on the remaining money. Now, the state’s Office of Technology wants back any money the University hasn’t spent — totaling about $200,000 — especially because the contract has been cancelled.
“It was mutual interest on the Office of Technology and the University’s part to cancel the project,” said Keith Pearson, director of communications at the technology office.
Pearson said there were some questions about the management of the SEAL program.
“There is no information that would indicate it was a poorly run program,” said Steve Cawley, the current associate vice president of the University’s Office of Information Technology. He said it was the UN who didn’t know what to do next that caused the program to shut down.
But, he said, some value came out of the project, which is why Riley questions the audit.
“We reached the expected outcomes,” Riley said. “I’m really proud of what we did.”
The SEAL program was up and ready to go in time for a UN summit in Lyon, France in 1998, according to a report from the University’s Office of Information Technology. However, they were unable to send information because a SEAL site in China was not operable.
To reach those expected outcomes, the University had to find space and furniture, Riley said.
“We had to house staff, host meetings and bring in people from the outside,” Riley said, including visiting UN dignitaries. “Nobody said you couldn’t buy furniture.”
But somebody did want better tracking of when and where the furniture was bought.
Part of the auditor’s report centered on how nobody from the state Office of Technology kept track of the grants.
“The office did not maintain sufficient control over its grants to ensure that some grant funds were being used in compliance with applicable legal provisions,” the report stated. It then pointed to the $15,000 in brand new furniture for the University’s SEAL office.
“Isn’t some of that subjective?” Riley said about the report’s wording, then strongly defended the SEAL group and Office of Technology.
“We had meetings, sometimes weekly, sometimes monthly, to discuss the project,” Riley said. “Money was not spent that the group did not agree to.”
But then he said that better documentation could have avoided the audit.
Playing politics
Discussions between the UN and the State of Minnesota initiated a cost estimate of $2 million to $3 million to get the Trade Point/SEAL program going; the Legislature granted them $1.3 million.
Right from the start, Riley said, the project was under-funded.
“The money wasn’t adequate. We needed $2 million to $2.5 million,” he said.
John Gunyou ran the state Office of Technology as its executive director from its inception until December 1997. JoAnn Hanson then took over the post.
Riley said there is a prevailing political aspect in these organizations and said that Hanson didn’t want the SEAL program anymore and ordered the audit to discredit it.
Sen. Steve Kelley, DFL-Hopkins, who helped author the bills funding SEAL, said that there was just “a fuzziness of the vision” between the old and new leadership; he said he is not in a position to attribute the motives behind the audit.
“If you’re a conspiracy theorist,” Kelley said, “you could make a case for it.”
Right now, almost $1 million of work and innovative technology the state paid for to help local businesses go global just sits idle.
While the investigations by the FBI and the UN conclude, the project is on hold.
Part of the problem was that the state Office of Technology was so young; things had to be smoothed out before they distributed money, and eagle eyes kept on the money.
“Yeah, perhaps they should have asked for the quarterly report,” Riley said. “But that didn’t happen because everybody was working so hard.”