Former ICAD office manager misappropriated $500,000: state auditor

Failure to 'exercise proper fiduciary oversight' cited

Sheri Jelinek
Sheri Jelinek

IOWA CITY — For more than a dozen years, an office manager steered nearly a half-million dollars intended for regional economic development to herself, buying from retailers including and the Home Shopping Network and even paying for her son’s school lunches, a state audit released Thursday found.

According to the Iowa State Auditor’s Office, a special investigation that covered Dec. 12, 2003, through March 14, 2017, identified $466,874.73 of improper disbursements made by Sheri Jelinek, then the office manager for the Iowa City Area Development Group.

The investigation also turned up an additional $46,903.26 in unsupported disbursements.

Jelinek could not be reached Thursday for comment. Phone numbers associated with her name were disconnected or not accepting calls.

ICAD, founded in 1984 and headquartered in Iowa City, is a not-for-profit economic development agency tasked with assisting businesses in locating to or expanding in the Johnson County area. It is funded through support from businesses and other sources such as government grants.

In his report, State Auditor Rob Sand said the improper disbursements included personal credit card transactions to businesses that included Allstate Insurance, Verizon, Mediacom, DirecTV and Hulu, among others. Jelinek also made personal purchases through the Home Shopping Network and Walmart, the investigation found.

According to a news release from ICAD, the purchases were made with an unauthorized credit card issued in 2002 and electronic transfers used to misdirect funds. The fraud was discovered in March 2017.

ICAD President Mark Nolte said in an email Thursday that the organization undergoes annual financial reviews and full audits every four to five years.

“Unfortunately those providers did not find this issue,” he said.


“We were incredibly saddened to discover this violation of our trust,” Nolte said in a separate statement, “but the organization is in solid financial shape and we hope our investors continue to recognize the work of the team as we engage every day to keep this area vibrant and growing.”

Shari DeMaris, chairwoman of ICAD’s board and a Hills Bank and Trust senior vice president and chief financial officer, said the response the group has received from business investors so far has been “very supportive.”

“The work of this organization is incredibly valuable to the community and local economy,” she said. “It is unfortunate for any business when an employee violates trust.”

The Gazette is among the business investors. Chuck Peters, a board member of Folience, parent company of The Gazette, was ICAD chairman from 2012 to 2014.

Internal investigation

ICAD said an internal investigation was conducted to determine the extent of Jelinek’s misuse of funds. The findings were turned over to the Iowa Division of Criminal Investigation.

Federal criminal charges are pending against Jelinek, according to ICAD.

According to the 974-page auditor’s report, Jelinek was hired as an executive assistant with ICAD in October 2002 and promoted to office manager in August 2012. In that role, she processed all of ICAD’s financial transactions, billed members for dues and fees, collected payments and deposited the proceeds in ICAD’s bank accounts. Jelinek left ICAD in January 2017.

About two months later, a vendor told ICAD a credit card used to pay for a software subscription had expired. The credit card had been issued to ICAD by the University of Iowa Community Credit Union and Jelinek was the authorized user.

However, it appeared no one at ICAD knew the credit card existed.

When electronic credit card statements were acquired from the credit union, ICAD representatives learned the account was used “almost exclusively for personal purchases,” according to the auditor’s report.

“They also determined payments on the credit card were made electronically from ICAD’s checking account,” the report adds.


Nolte told the state auditor’s office he was aware several ICAD staff members had an ICAD credit card to make necessary statements. However, he didn’t know Jelinek had such a card.

All told, Jelinek made 12,286 transactions on the credit card and 626 payments on the credit card, totaling $502,234.65.

Jelinek had 858 transactions involving Amazon and made purchases totaling $31,062.56 including clothing, electronics, toys and a shirt for a dog. She made 932 purchases from the Home Shopping Network totaling $22,703.36.

In addition to other personal purchases, Jelinek used the credit card to pay for her DirecTV service and for her son’s school lunch account through the Iowa City Community School District, the audit said.

The report makes several recommendations to ICAD, including segregating financial duties, having bank statements delivered to an employee who does not collect or disburse funds, conducting a monthly review of credit-card and bank statements and accounting records, and increasing oversight on ICAD operations and financial transactions.

“Based on our observations and the procedures performed, we determined management and the board placed trust in a former employee’s actions and failed to exercise proper fiduciary oversight,” the report states. “The lack of appropriate oversight and the failure to ensure implementation of adequate internal controls permitted the employee to exercise too much control over ICAD’s financial transactions.”

ICAD said it has implemented procedures to prevent this from happening again.

Nolte said immediately after ICAD learned of the alleged wrongdoing, the group hired a third-party service for the group’s bookkeeping and accounting, formed a financial review committee and disabled electronic fund transfers for all of its bank accounts. All payments now will be made via checks with signatures from two board members, he said.

ICAD has recouped some of the lost funding through insurance, Nolte said, though he declined to share a specific amount.

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