Gambling grants go unchecked

BY CHAD THOMAS NEWS TRIBUNE STAFF WRITER Over the past decade, Duluth has been one of the biggest and most reliable sources of money for the Minnesota Council on Compulsive Gambling. Since 1994, the city has provided the council with more than $1.3 million from its share of earnings at Fond-du-Luth Casino. For that money, the council's executive director, Betty George, says Duluth has received hundreds of presentations, numerous public service ads and thousands of videos and posters warning of the dangers of compulsive gambling. But no one at City Hall can say for sure how George's Duluth-based nonprofit has spent the money. The city has never audited the gambling council, and officials have never asked outside experts to evaluate the group's services. In addition, a check with the city, state and Internal Revenue Service shows the gambling coun- cil has missing, incomplete or improperly filed reports. One document that would help show where Duluth's money to the gambling council has gone is an annual financial statement the group is required to provide the city. But Duluth's Finance Director Les Bass said the council hasn't filed such a statement for some time now. "I would say the last four or five years, we got nothing," said Bass, whose office is responsible for keeping such information on city contracts. The gambling council is supposed to file the statement at the completion of each contract, so the city will have a detailed accounting of exactly how the money was used. Bass said he didn't realize the gambling council wasn't fulfilling its obligation to the city until the News Tribune inquired about it last week. "It's one of those things you don't think about until someone asks," he said. George did not return a call Friday seeking comment about the missing financial statements, though she spoke on other matters in an interview Thursday. Dr. Ken Winters, a University of Minnesota psychiatry professor, said cities such as Duluth should have outside experts review the effectiveness of public-health programs receiving public support. "Somebody informed about public-health initiatives --not a politician," said Winters, who has evaluated gambling programs that get state money. This year, for the first time, the Duluth City Council said no to George, turning down a request for $143,000. But some city councilors have indicated they're interested in bringing the matter back up for another vote. The City Council's original decision stemmed in part from a political controversy over George's $109,000 annual pay, an amount much higher than the average nonprofit salary. In December, when Duluth Mayor Herb Bergson invited George to discuss his concerns about her salary, she brought along a year-by-year listing of her pay. The document showed her income was much lower in the 1990s, justifying, she argued, the $109,000 she received last year, and the $127,000 she earned in both 2002 and 2003. But a review of some of the gambling council's financial statements filed with the Internal Revenue Service indicate that for at least two years in the 1990s, she reported a higher salary to the IRS than she told Bergson. On the document she gave the mayor, George wrote that she earned $42,000 in both 1997 and 1993. However, on the council's IRS statement, she reported earning $57,889 in 1997 and $48,316 in 1993. George said Thursday the sheet for Bergson was "just a simple estimate of things" that she quickly put together, and that her correct income was what she reported to the IRS. "Does that rile me up? Yeah, I guess that probably does," Bergson said when he learned about the discrepancy. "Nobody likes being lied to." Beyond the issue of the Duluth contract, George hasn't completed all the necessary paperwork to do business in Minnesota. For the past three years, the gambling council has operated an online accrediting organization, the American Academy of Health Care Providers in the Addictive Disorders, without registering it with the state. "Any entity that is doing business in the state is supposed to have filed in our office. It really doesn't matter how they are doing business," said Kent Kaiser, the Minnesota Secretary of State's spokesman. "There is nothing like that filed right now." George said the gambling council acquired the academy in a 2002 merger and didn't realize registration was required. "That's a very easy fix," she said, "and we can do that." The council also appears to be incorrectly filing its annual financial statement with the IRS. Of concern is the organization's reporting of the merchandise it sells, such as videos, booklets and brochures. While it is IRS policy not to comment on specific organizations, agency spokesman Eric Erickson said income from such sales must be broken out separately on the financial statement. George said her accounting firm lumps that income with other sources of revenue, placing it elsewhere on the filing. "They put it on whatever line they thought was most appropriate," George said. As a result, it's unclear just how much the gambling council earned from selling merchandise. Bergson said he thinks George owes the city a detailed accounting of how Duluth's money was spent over the past several years, and added that he thinks state officials should also require her to do the same for Minnesota. "I am just disturbed that so much money went unaccounted for, for so long," Bergson said. "She hasn't justified what she did for the city for several years." -------------------------------------------------------------------------------- CHAD THOMAS covers the city of Duluth. He can be reached weekdays at (21 723-5319 or by e-mail at cthomas@duluth news.com.