Spending of FEMA funds at Lake Delhi questioned

While Lake Delhi leaders struggle to win approval of federal funds to aid recovery from the devastating July flood, a state review has raised questions about their handling of Federal Emergency Management Agency funds received to aid recovery from a flood two years earlier.

The review by the Iowa Department of Homeland Security and Emergency Management Division took place last October and was reported in a 29-page document to Beth Freeman at the FEMA regional office in Kansas City, Kan.

Covering $3.757 million in billings for dam repairs and lake bed improvements, the review classified $1.182 million as questionable and $842,000 as disallowed but capable of being allowed with more documentation. The review also determined that $1.71 million in expenditures required no further action. Only $18,514 was categorically disallowed.

“It's a little disappointing when you see that,” said James “Buzz” Graham, chairman of the board of trustees of the Combined Lake Delhi Benefited Recreational Lake and Water Quality District.

“But we feel we have the records to dispute 99 percent of the objections when we get the time,” Graham said.

Those objections included a lack of competitive bidding and cost comparisons on many contracts, the taxing district's delegation of control and authority to the Lake Delhi Recreation Association, which owns the dam, and the structuring of some project management and engineering contracts on a percentage basis, which the reviewers asserted violates federal law.

The percentage-based contracts were awarded to Mohn Surveying Inc. of Lansing and to Dave's Complete Construction Inc. of Delhi.

The FEMA-funded 2008 flood recovery project consisted primarily of riprap placement around the dam, dam repairs and lake dredging. Of the $3.757 million, about $425,000 went to Mohn Surveying and about $412,000 to the Delhi construction company owned by Dave Fink, who also served as operations manager at the dam.

FEMA had also approved nearly $4.6 million for the dredging project, which was to have started last September. The July 2010 flood that caused a breach in the dam, however, eliminated the immediate need for dredging and undid most of the work covered in the review.

The review “was a shocker, and the whole thing is very damning until you understand the situation,” Fink said.

The review was submitted to FEMA by Patrick Hall, recovery bureau chief with Iowa Homeland Security, who said Lake Delhi officials had asked for an opportunity to clear up the discrepancies, and a meeting would be scheduled within a month.

“We got approval on everything we did and we have lots of documentation,” Fink said.

Graham said the discrepancies would be addressed as soon as the trustees file their second appeal of FEMA's declaration that Lake Delhi is ineligible for federal flood recovery assistance.

Graham said a bill pending in the Legislature will enable the taxing district's trustees to “take a more active role in Lake Delhi's day-to-day operations” and fulfill a state task force recommendation that the dam be operated by a transparent public entity.

The three-member board of trustees - which levies a property tax of $4 per $1,000 assessed valuation on about 900 Lake Delhi homes to support the dam and 450-acre lake - has allowed the Lake Delhi Recreation Association to handle many responsibilities, Graham said.

If the Legislature approves the expansion of the board from three to seven members, the board will have more management capability, he said.

The legislation would also allow the election as trustees of Lake Delhi property owners who live outside the district and allow the trustees to issue general obligation bonds.

One of the three current trustees, Ed Schmidt, is expected to resign this week because he lives outside the lake district, according to Delaware County Auditor Carla Becker. When Schmidt was elected in 2009, he claimed as his residency a cabin within the district that he later sold. He now lives outside the district, she said.

The trustees could fill the vacancy via special election or wait until the regularly scheduled July 19 election, she said.