A state-mandated five-year forensic audit of the Connecticut Municipal Electric Energy Cooperative’s books showed that so-called “board retreats and expenses” totaled nearly $1.2 million from 2013 through 2016, and the cooperative paid $66,000 to its former chairman for lobbying expenses with no supporting documentation.

The audit appears to confirm findings released by federal authorities in two indictments of five CMEEC officials on corruption charges in connection with their leadership roles in CMEEC’s hosting of lavish trips to the Kentucky Derby from 2013 through 2016, a 2015 trip to a West Virginia golf resort and luxury gifts for participants.

Cooperative CEO Drew Rankin, Chief Financial Officer Edward Pryor, Norwich Public Utilities General Manager John Bilda, former CMEEC board Chairman James Sullivan and former board member Edward DeMuzzio face one count each of conspiracy and three counts of theft from a program receiving federal funding.

Sullivan and Rankin face the same four charges in a second indictment claiming Sullivan received reimbursement for nearly $100,000 for personal expenses and travel from CMEEC funds, much of which was called lobbying expenses in CMEEC books.

Rankin and Pryor were placed on unpaid leave by the CMEEC board, and Bilda is on paid leave pending internal investigations by both the CMEEC board and the Norwich utilities commission. CMEEC named finance and accounting director Mike Lane as interim CEO.

“Based on our procedures performed, we noted $66,061 paid to James Sullivan for lobbying and other expenditures,” the forensic audit by CohnReznick said in one of its findings. “Given that we (a) have not requested or reviewed any supporting documents or (b) have not been provided with the business purpose of certain of these expenses, we are unable to determine whether the James Sullivan related expenditures are in compliance with Chapter 101a and CMEEC’s By-Laws.”

In its responses to the audit, CMEEC officials told the auditors that the Sullivan expenses have been “previously identified, both formally and informally, for review.” The response said CMEEC accounting staff are reviewing expenses and reimbursements for compliance with CMEEC ethics and conflict of interest policies.

CohnReznick was hired by CMEEC last spring to conduct the five-year forensic audit called for in a 2017 state law mandating stricter controls on the cooperative, owned by six municipally owned utilities in the state: Norwich Public Utilities, Groton Utilities, Bozrah Light & Power, Jewett City Department of Public Utilities, South Norwalk Electric and Water and the Third Taxing District in Norwalk.

“Based on our procedures performed and the sample we tested, we noted several expense categories, during the period 2013 through 2017, that appeared inconsistent with CMEEC’s purpose,” the auditors wrote.

The auditors found that board retreat and expenses totaled $1,179,300 over the four-year period, with a refund back to CMEEC of $90,129 received in 2017. Another $10,000 was noted as for a “questionable business purpose.” The federal indictments included information that CMEEC made deposits for a planned 2017 Kentucky Derby trip that was canceled when publicity about the trips caused public outcry and prompted state legislative action.

The auditors also checked samples of expenses paid by check, by wire transfer and by purchase cards. In its sample test of purchase cards, for example, the auditors reviewed $187,475 in board retreat and expense spending, and of that, $73,499 was noted as “questionable business purposes,” and another $12,080 had no supporting documentation.

In a news release issued Friday upon release of the forensic audit, CMEEC officials said a number of changes have been implemented already in response to some of the findings and the recommendations in the audit report. A restriction placed in the new state law, changes to CMEEC bylaws and a new ethics policy now prohibit CMEEC retreats from being held out of state and stipulate that they must include actual business meetings and must be pre-approved by the board.

“Under the supervision of the Controller, Finance and Accounting staff are reviewing documentation submitted with expense authorization and reimbursement requests and monitoring compliance with the Travel and the Ethics and Conflict of Interest policies,” the release stated, “and at the direction of CMEEC’s Interim-CEO, commencing in early January 2019, CMEEC will be conducting training for all employees to reinforce the requirements for support and documentation for expense authorization and reimbursement.”

“The completion of this examination by CohnReznick marks an important step forward for CMEEC,” interim CEO Lane said in a statement in the release. “The findings and recommendations relate in large measure to the Board retreat and event expenditures that have previously been identified. CMEEC has and continues to put in place new rules and policies to strengthen our internal controls and ensure we are always acting in a way that is consistent with our mission to provide reliable, low cost energy solutions to our members and customers.”

c.bessette@theday.com