North Georgia Mountains Authority

Special Report

April 2010
Georgia Department of Audits and Accounts State Government Division
Russell W. Hinton, State Auditor John A. Thornton, Sr., Director

Why we conducted this
Investigation
The State Government Division of the Department of Audits and Accounts was petitioned by Georgia Department of Natural Resources (DNR) Commissioner Chris Clark to conduct an independent investigation amid concerns of financial irregularities at the North Georgia Mountains Authority (NGMA) during fiscal years 2008 and 2009.
About the North Georgia Mountains Authority
The NGMA was established by the General Assembly in 1968 and is governed by nine members, selected by the Governor, from the DNR Board. NGMA has the authority to engage in business projects within its territorial boundaries and jurisdictions. Currently, NGMA operates the Brasstown Valley Resort and Spa, located in Young Harris, the Lake Blackshear Resort and Golf Club, located in Cordele, as well as other Georgia lodges and parks throughout the State.
NGMA is attached to the DNR for administrative purposes. In this capacity, DNR provides record keeping, reporting, and related administrative and clerical duties for the NGMA.

North Georgia Mountains Authority
Lack of controls, insufficient oversight and abuse of authority result in possible fraud and a lavishly furnished spa at the Brasstown Valley Resort
What we found
Our investigation of the North Georgia Mountains Authority (NGMA) for 2008 and 2009 primarily included the financial operations of the Brasstown Valley Resort and the Lake Blackshear Resort. While we did not find any problems at Lake Blackshear, it appears our investigation has uncovered financial irregularities related to the the construction of the Equani Spa at Brasstown Valley Resort. Construction of the spa was authorized by the NGMA Board, however, the end result appears to have far exceeded the Boards original plans and financial authorization.
Our investigation of the construction of the Equani Spa found the following:
Original plans to construct a moderately priced ,,interim spa at Brasstown Valley Resort at a cost of $501,000 resulted in a world-class luxury spa costing in excess of $2.6 million, a 434% increase.
Insufficient ,,checks-and-balances and a lack of Board oversight appears to have provided an opportunity for fraud, waste and abuse in the construction of the Equani Spa.
Evidence was found indicating an apparent improper business relationship may have existed between the NGMA Acting Director and the spa consultant during the construction of the Equani Spa.

Website: www.audits.state.ga.us

Phone: 404-656-2180

Fax: 404-651-8842

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The apparent improper business relationship between the NGMA Acting Director and the spa consultant, DaVinci Design Associates, Inc.(DaVinci), appears to have resulted in:
DaVinci being allowed to perform additional services without a written contract.
NGMA paying DaVinci $895,797.63 for construction materials, spa equipment, and supplies rather than buying directly from the actual vendors.
Mark-ups on certain items purchased through DaVinci totaling $67,458.85.
Payments of $627,992.17 in items we considered to be for lavish spa furnishings and fixtures.
Mismanagement during the construction and first year operations of the Equani Spa resulted in:
Allegations of non-payment from DaVinci sub-vendors.
Stress on the Brasstown Valley Resort financial position.
Excessive, high-cost inventory for resale.
Possible loss of spa suite rental income because the Acting Executive Director occupied the suite at no cost 11 (out of only 24 nights occupied) nights during the first six months of operation (estimated retail value was $3,850.00).
The Acting Executive Director and her guests receiving free food, beverage and alcohol on 118 occasions at an estimated retail value of $14,701.83.
State law may have been violated when all data on one of the NGMA Acting Directors six computers was inappropriately deleted and forensically unrecoverable.
Recommendations Due to the severity of the matters disclosed in this report, we recommend that the North Georgia Mountains Authority consult with the Attorney General of the State of Georgia to seek legal advice regarding how to address the matters set forth in the report and steps to take to avoid the occurrence of similar matters in the future.

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Table of Contents

Background

4

Scope of Investigation

6

Findings

Finding 1 Original planned cost for spa exceeded by 434 percent

7

Finding 2 Insufficient ,,checks-and balances

11

Finding 3 Evidence suggest improper business relationship

16

Finding 4 Lavish spending due to improper business relationship 20

Finding 5 Mismanagement detrimental to resort operations

31

Finding 6 Inappropriately deleted data

33

Appendix A Equani Spa Lavish Expenditures

34

Appendix B Equani Spa DaVinci over-charges

35

Appendix C Comped charges for Ms. Bonner and her Guests

36

Appendix D Changes on Spa from Original Design

38

Appendix E Construction photos recovered during investigation

39

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Background
Governance
The North Georgia Mountains Authority was established by the General Assembly in 1968 and is governed by nine members, selected by the Governor, from the DNR Board. "As prescribed by Law, the North Georgia Mountains Authority is administratively attached to the Department of Natural Resources. Title 12, Code Sections 3-290 thru 3-341 of the Official Code of Georgia Annotated describes the powers and purposes of the Authority. The laws pertaining to the NGMA are very similar to those of the other large recreation authorities (Stone Mountain Memorial Association, Jekyll Island State Park Authority, and the Lake Lanier Island Development Authority). Each of these entities have jurisdiction, and are empowered to conduct their business at specific locations. The NGMA has a distinction in that it has much more flexibility in where it engages in its business activities. The North Georgia Mountains Authority is authorized to exercise its powers and to conduct business in twenty-three Georgia Counties and such other counties as may from time to time be admitted by resolution of the Authority. This geographic flexibility has been strategically utilized by DNR to create and manage projects in many different parts of the State."1
Relationship with the Department of Natural Resources (DNR)
"The North Georgia Mountains Authority and the Georgia Department of Natural Resources collaborate in the active development and management of 14 projects. The roles and responsibilities of DNR and NGMA are clearly specified in a legal document titled "Agreement Pertaining to the Operation of Specific Facilities," executed on June 25th, 2003. The DNR and NGMA Boards have considered and authorized the execution of this agreement, which incorporated all previous agreements into one master document. Under the terms of this agreement, the NGMA is allowed to retain the revenues generated from the projects, but has the obligation to pay DNR, as necessary, the actual, reasonable costs incurred by DNR in assisting NGMA in the operation of the projects. The agreement also allows that appropriate reserves may be established for operation, start-up cost for new undertaking and other contingencies. The DNR Commissioner, Chief Financial Officer and Executive Director of the NGMA work closely together to manage the common activities for the mutual benefit of the DNR and NGMA in order to provide for the financial health of both legal entities."2
Facilities
The Lake Blackshear Resort and Golf Club located in Cordele opened in 2002. Located inside the 1,308 acre Georgia Veterans Memorial State Park, the resort offers 88 guest rooms, villas, and lakeside cabins, as well as more than 10,000 square feet of meeting space.

1 NGMA /DNR Financial Relationship and Procedures, April 20, 2005 2 NGMA /DNR Financial Relationship and Procedures, April 20, 2005

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Resort amenities include boat and Jet Ski rentals on Lake Blackshear, hiking, bicycling, and nature trails, golf, a shooting range and three different restaurants on property.3
The Brasstown Valley Resort and Spa located in Young Harris completed a full renovation of its guestrooms and meeting space in 2003, as well as adding the Equani Spa in 2008. The resort offers eight cottages and a lodge, with 134 guestrooms and suites and over 14,298 square feet of meeting space. Resort amenities include golf, an indoor/outdoor pool, lighted tennis courts, hiking trails, trout fishing, horseback riding, a restaurant and lounges, as well as the 7,500 square foot Equani Spa that includes a 825 square foot guest suite.4
Other properties owned by the NGMA include Little Ocmulgee State Park and Golf Course, George T. Bagby State Park and Golf Course, Amicalola Falls State Park, Red Top Mountain State Park, Unicoi State Park, Smithgall Woods/Dukes Creek Conservation Center, and the Reynolds Mansion.
Day-to-Day Management
The North Georgia Mountains Authority is operated under the leadership of an Executive Director. "The Executive Director acts as the primary business manager for the Authority activities. Revenues from the outsourced projects are sent to his office for verification and review, and then delivered to DNR Cash Management Unit for deposit into Authority accounts. The larger expenditures of the Authority are approved by the NGMA board as a part of the annual budget review process for Brasstown Valley and Lake Blackshear Resorts. The Executive Director has the authority to enter into certain administrative contracts for the benefit of the authority. Examples include consultants for audits, risk management, procurement, etc."5
From 1996 to 2007, Mr. Bob Newsome served as the Executive Director for the North Georgia Mountains Authority. It was during Mr. Newsomes tenure that the NGMA Board began discussion as well as construction of an ,,interim spa at the Brasstown Valley Resort. Mr. Newsome resigned from this position on October 17, 2007 approximately six months after the spa renovation project began.
After the resignation of Mr. Bob Newsome in October 2007, Ms. Michele Bonner served as Acting Executive Director from October 2007 until March 20, 2009.
In March 2005, the NGMA entered into a contract with Coral Hospitality to oversee all facets of operations at the Brasstown Valley Resort and Spa and the Lake Blackshear Resort and Golf Club. Coral Hospitality is a full service hospitality management company based in Naples, Florida that specializes in hotels, clubs and residential communities. The responsibilities of the NGMA Executive Director include oversight of the Coral Hospitality contract.
3 Lake Blackshear Resort and Golf Club web site February 24, 2010 4 Brasstown Valley Resort and Spa web site February 24, 2010 5 NGMA /DNR Financial Relationship and Procedures, April 20, 2005

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Scope

On April 17, 2009 the Department of Natural Resources (DNR) requested the State Auditor conduct a "comprehensive, in-depth audit of the financial activity of the North Georgia Mountains Authority." At our entrance conference and other meetings, we requested and received clarification of the specific concerns. As a result, our investigation generally focused on the following:
Construction of the Equani Spa at the Brasstown Valley Resort Certain purchases at the Lake Blackshear Resort property and Brasstown Valley
Resort Concerns of misdirected DNR and NGMA Funds
While we did not find any serious problems at Lake Blackshear, it appears our investigation has uncovered financial irregularities related to the the construction of the Equani Spa at Brasstown Valley Resort. As a result, the majority of the time spent conducting this investigation focused on the construction of the Equani Spa at Brasstown Valley Resort.

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Findings
Finding 1
Original plans to construct a moderately priced spa at Brasstown Valley Resort at a cost of $501,000 resulted in a world-class luxury spa costing in excess of $2.6 million, a 434% increase.
December 2006 - Initial Plans for Spa Per NGMA Board minutes, on December 5, 2006, the North Georgia Mountains Authority discussed and approved the renovation of a 3,500 square foot house (The Corn House) on the resort property into a spa. Mr. Bob Newsome, former Executive Director, stated "that renovation of the house for a spa could be done and would be reasonably cost effective."6 The motion passed unanimously and the Authority directed Mr. Newsome to research the cost of retrofitting the house. The minutes further indicate that the cost for the spa would fit the capital outlay funds that would be available. Mr. Newsome was to report back to the board on a cost estimate in February.
February 2007 - Board Approves ,,Interim Spa On February 27, 2007, Mr. Bob Newsome, former Executive Director NGMA, introduced architect James Culpepper with Culpepper, McAuliffe and Meaders, Inc. (CMMI), to give a brief overview of a proposed interim spa design to the NGMA. CMMI brought twenty-two years of experience to the project with a focus on hospitality design. The estimated project cost per Mr. Culpeppers design was $501,825. Mr. Newsome stated "that NGMA could manage the spa renovations as developer and contractor in the same cost-effective way that The Stables were built by eliminating the general contractor." 7
Since the Authority did not currently have the funding to construct a resort style spa, the Board decided that a temporary 5 8 year development would be constructed until more funding became available. The ,,interim spa could then possibly be converted into an expanded pro shop for the Brasstown Valley golf operation located nearby when a larger spa could be constructed at the lodge. This was supported by the NGMA Board minutes, as well as, the project scope summary from CMMI which called for "professional design services for the Programming and Preliminary Planning for an Interim Spa facility for Brasstown Valley Resort, Young Harris, Georgia."8 The motion was passed unanimously by the Board to move forward with the plans to renovate and expand The Corn House into an ,,interim spa.
May 2007 - Renovation Begins During May 2007, renovation began to transform and expand The Corn House into an ,,interim spa according to the plans presented to the Board and approved at the February 2007 meeting.
6 December 5, 2006 NGMA Board minutes 7 February 27, 2007 NGMA Board Minutes 8 CMMI Project Scope Summary dated February 7, 2007

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At the May 22, 2007 NGMA Board meeting, it was disclosed that renovations were underway and that plans continued to evolve in constructing the short-term spa.

September 2007 DaVinci Contract Signed On September 10, 2007, at the recommendation of Coral Hospitality management personnel at Brasstown Valley, Mr. Bob Newsome signed the first contract with DaVinci Design Associates, Inc. (DaVinci) to be the spa consultant for space planning design during the renovation process at contract rate of $10,000. During our interview with Mr. Newsome, he stated that this was to be the only service DaVinci was to perform related to Brasstown Valleys spa since Mr. Newsome had experience in the construction and hospitality industry and was very capable of managing the construction project.

October 2007 - Change in NGMA Leadership/Spa to be the Best in North Georgia On October 17, 2007, based on interviews with Ms. Bonner and Mr. Newsome, we noted that Mr. Newsome, who had a background in construction and resort management, was asked to resign by DNR Senior Management. The project was turned over to Ms. Michele Bonner, then DNR CFO, to manage. During our investigation, we found no evidence that Ms. Bonner had any prior experience in commercial construction or resort management.

In the October 23, 2007 NGMA Board minutes, we found that Ms. Bonner gave a brief update on the spas construction, but there was no discussion regarding an increase in the scope of the project or the size of the budget.

During our investigation, we found evidence that the spa was no longer being viewed as an ,,interim spa. In an email dated October 29, 2007, 12 days after Mr. Newsomes departure, Ms. Bonner begins touting that the spa would be the best in North Georgia. See Exhibit 1

EXHIBIT 1

Thanks Bill. Fine with me to payout of the capital budget instead of using "my money" on this since I seem to be thinking of ways to spend "my money" at a pretty fast clip today. Since the spa project has now become "Michele's Spa" in every ones mind, that is where I am putting on "my money" right now! This is going to be the best spa in North Georgia! Enjoyed talking to you this afternoon. Michele
Source: Email dated 10/29/2007 from Michele Bonner recovered from one of her 6 State-purchased computers

November 2007 - DaVinci Role Expanded On November 26, 2007, Ms. Bonner, signed a second contract with DaVinci to utilize its services in phase two of the project which included retail purchasing analysis and training, staff guidance and recruitment, job descriptions and on-site training. A third contact was later signed on April 3, 2008 with DaVinci for phase three related to the Equani Spa preopening.

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March 2008 - First and Only Board Cost Update on Spa Per review of the NGMA Board minutes, we noted no mention of the spa again until March 25, 2008. At this Board meeting, Ms. Bonner "added that construction on the spa would cost between $1.3 to $1.5 million; and that when finished, the lodge would be valued at nearly $3.5 million."9 Even after the NGMA Board was informed that the cost of the spa had increased to three times the original budget, we did not find that the Board placed any further constraints on spa spending. Also in this meeting, then DNR Commissioner Noel Holcomb recommended to the NGMA Board that Ms. Bonner was capable of handling transactions for the Authority without naming a new Executive Director at that time.

Spa Size and Scope Disputed When interviewed, Ms. Bonner stated that NGMA Board Chairman Tom Wheeler instructed her to build the "best spa in Georgia" and to use the finest materials. Chairman Wheeler stated this "was a complete fabrication". Chairman Wheeler further indicated that Ms. Bonner never came to the Board requesting an increase in the budget for the spa. Chairman Wheeler said he would have never built a spa that cost over two million dollars and was very surprised that no one brought it to the Boards attention.

Chairman Wheeler also added that Ms. Bonner never came to the Board and asked permission to build a ,,private accommodation spa guest suite (See Exhibit 2) on the second floor of the spa. He said the first time he was made aware the spa had a suite was when he was given a tour of the completed facility after it had opened.
EXHIBIT 2 Equani Spa Private Guest Suite The Equani Spa's private accommodation suite is a secluded 825 square-foot retreat that boasts a 175 square-foot private roof top deck, a Jacuzzi tub for two opening to a 46-inch flat screen TV and fireplace, a spacious ,,Experience Shower providing a full-sensory experience with doubledrench shower heads, steam, aromatherapy, LED lights and marine speakers with 12-head Swiss shower bars.
The bedroom features a vaulted pine ceiling and stacked stone gas fireplace with a door to the private deck. Just off the bedroom is the parlor living room also with vaulted pine ceilings, wet bar, a flat screen TV and enough space to position two massage tables for a private in-room massage. In addition, the suite offers a kitchenette with granite countertops, stainless steel refrigerator and microwave along with a workstation desk with wireless Internet.
The suite serves up fantastic views of North Georgias Blue Ridge Mountains, the golf course and horse pastures adding to the luxurious setting. Couples will truly feel a million miles away from civilization in this plush sanctuary.
Source: http://www.brasstownvalley.com/roomrates_accom.aspx (03/25/2010)
9 March 25, 2008 NGMA Board Minutes

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Final Cost Breakdown and Analysis The Equani Spa at Brasstown Valley cost $2,678,906 to build, equip and train staff, an increase of 434% over its original budget of $501,825.
In our investigation, we found that the original spa design was a simple plan, which seemed in keeping with the plan to build an ,,interim spa. While the size of the completed spa increased almost 2000 square feet over the original design, primarily due to the addition of a basement, the primary cause of the 434% increase in final spa cost was apparently due to substantial changes in the quality of the spa. We obtained documentation indicating that 59 itemized changes were made to the original design, including the addition of the ,,private accommodation spa guest suite on the second floor of the spa. As a result of the changes made to the original spa design, we have calculated that the cost of the spa increased by $267 per square foot.
We found the addition of the spa guest suite in the attic space of the original Corn House involved extensive structural changes. In total, we estimate the cost of adding the ,,private accommodation spa guest suite was approximately $294,000.
Other significant changes to the original spa design included extensive rockwork, a doublesided fireplace, eight special design doors, waterfalls, bamboo flooring, and much more. See Appendix D on page 38 for a complete listing of the 59 documented changes to the original design.
Exhibit 3 highlights the differences in the original spa plans versus the completed spa.

EXHIBIT 3

Before and After Comparison

Initial Plans for Spa

Completed Spa

Spa size = 5,545 Square

Spa size = 7,500 Square Feet

Type Spa Authorized = ,,Interim Spa Type Spa Constructed = World Class

Projected Cost = $501,825

Final Cost = $2.6 million

Cost per Square Foot = $90.50

Cost per Square Foot = $357.19

Note: Comparison represents project estimate originally approved by the NGMA Board in February 2007

versus what was actually constructed.

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Finding 2

Insufficient ,,checks-and-balances and a lack of Board oversight appears to have provided an opportunity for fraud, waste and abuse in the construction of the Equani Spa.

Dual roles delegated an excessive amount of authority to the DNR Chief Financial Officer On October 17, 2007, approximately six months after the Equani Spa construction began, Bob Newsome, NGMA Executive Director and Board Secretary, resigned. Upon his departure, the project was turned over to manage by the DNR Chief Financial Officer (CFO), Michele Bonner, until a new Executive Director could be appointed.
The DNR Commissioner, Chief Financial Officer, and Executive Director of the NGMA work closely together to manage the common activities for the mutual benefit of the DNR and NGMA in order to provide for the financial health of both legal entities.10

The Traditional Role of the DNR CFO in NGMA Operations
"Although not officially designated by the Authority as one of its officers, the Chief Financial Officer for DNR acts effectively as the Treasurer of the NGMA. In that capacity she oversees the accounting administrative processes, and generates the NGMA financial statements. The CFO and the Executive Director consult on a regular basis regarding these activities to ensure the financial health of the authority."
Source: NGMA/DNR Financial Relationship and Procedures, dated April 20, 2005. (Emphasis added)

Per our review, however, of the March 2008 NGMA Board minutes, we learned that then DNR Commissioner Noel Holcomb recommended to the Board that Ms. Bonner was capable of handling transactions for the NGMA without naming a new Executive Director at that time. The Board accepted Mr. Holcombs recommendation and in effect named Ms. Bonner as Acting Executive Director.
Checks-and-balances provided by DNR eliminated The Department of Natural Resources provides the NGMA with complete administrative support. The following services are a part of that relationship:
1. Accounting and Budget Administration. Included in this area are: a. Accounts Payable. b. Accounts Receivable. c. General Ledger Control. d. Procurement.
10 NGMA/DNR Financial Relationship and Procedures, April 20, 2005

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EXHIBIT 4

...It appears that only stringent oversight by the Board could compensate for the absence of internal controls in the day-to-day operations.

When the Board combined the position of NGMA Executive Director and DNR CFO (See Exhibit 4), they eliminated essential ,,checks and balances relative to NGMAs day-to-day operations. It appears that only stringent oversight by the Board could compensate for the absence of internal controls in the day-to-day operations.

Change in NGMA Leadership Resulted in Decreased Oversight by NGMA Board Construction of the Equani Spa began in May 2007, with the spa officially opening October 3, 2008. As indicated on Exhibit 5 on page 13, beginning in FY 2008, the NGMA Board departed from its normal pattern of meeting four times per year. During our investigation, we learned that the full DNR Board met 10 times during calendar year 2008, however, the NGMA Board met on only two of those occasions, March and May. From interviews conducted, we learned that the NGMA Board meetings normally occurred during 4 of the 10 full DNR Board meetings at the request of the Executive Director and the DNR Commissioner.
According to the NGMA board minutes of the March 25, 2008 meeting, Ms. Bonner told the NGMA Board that construction on the spa would cost between $1.3 and $1.5 million. This

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was the first and last documented update on spa construction since the Board approved a plan to construct an interim spa at a cost of approximately $501,000.

We learned that the NGMA Executive Director would normally set the agenda for board meetings and if there was no business to discuss, they would not meet. From May 27, 2008 until February 2009 the Board did not meet. As indicated in Exhibit 5, during this critical eight month period, spa construction costs unexpectedly increased from $1.3 million to $2.6 million.
Note: Photo recovered from one of Ms. Bonners six computers showing construction status as of March 26, 2008, the day after the NGMA Board was informed the project would cost $1.3 to $1.5 million. See Appendix E for more photos taken on same day.

$2,678,906.00

EXHIBIT 5
NGMA Board Meetings and Spa's Cumulative Expenditures (Including Expenditures paid to DaVinci Design)
$3,000,000.00 $2,500,000.00 $2,000,000.00 $1,500,000.00 $1,000,000.00
$500,000.00 $0.00

$844,326.22 $1,325,121.39

Board did not meet for 8 months

$945,797.63

03-Feb-09

25-Mar-08 27-May-08

28-Mar-06 23-May-06 26-Sep-06 05-Dec-06 27-Feb-07 22-May-07 29-Aug-07 23-Oct-07

NGMA Board Meetings Per Calendar Year

CY 2006

CY 2007

CY 2008

CY 2009

Spa's Cumulative Expenditures Total is $2,678,906.00
Cumulative Expenditures to DaVinci Design is $945,797.63 or 35.31% of Total Spa Expenditures

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During the eight month period when no board meetings occurred, the Equani Spa was completed and officially opened (October 2008). During this time of extraordinary financial activity, we are also unaware that any of the NGMA Board members ever toured or inspected progress of the construction. Had they toured the Equani Spa prior to completion they would have easily been able to determine that their ,,interim spa had been transformed, without their approval, into a lavish, "world-class luxury" spa as cited in Southern Seasons magazine. 11

As pictured below, the grand-opening of the Equani Spa occurred on October 3, 2008. Not only are no board members present for the ribbon cutting ceremony, we were unable to find evidence the Board was made aware of such event. See Exhibit 6.

EXHIBIT 6

Note: Photo was obtained during a forensic examination of one of Ms. Bonners six State-purchased computers.
11 Southern Seasons (Summer-2009) magazine article by Ms. Eileen Gordon

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Other potential oversight apparently disregarded In a press release dated November 20, 2007, Governor Sonny Perdue recommended Mr. Bill Donohue as the new executive director of the Lake Lanier Islands Development Authority. In addition, the Governor announced that Mr. Donohue would provide administrative support to the NGMA. This announcement came approximately one month after Mr. Newsomes resignation on October 17, 2007. We did not find any evidence, however, that Mr. Donohue was ever contacted or performed any services for the NGMA during the time the Equani Spa was being constructed.

Had the Board utilized the services of Mr. Donohue, the issues found during our investigation may have been prevented. Mr. Donohue was officially named NGMA Executive Director in April 2009.

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Finding 3
Evidence was found to suggest an apparent improper business relationship may have existed between the NGMA Acting Executive Director and the spa consultant during the construction of the Equani Spa.
During our investigation, we found evidence suggesting a closer than normal business relationship between the NGMA Acting Executive Director, Ms. Bonner, and Mr. Dean Langdon, President of DaVinci Design Associates, Inc.
Email recovered from Michele Bonners State Computers We found numerous email messages between Ms. Note: Picture recovered from one of Ms. Bonner's computers Bonner and Mr. Langdon that suggests a professional business relationship was not being maintained. Two example emails can be found in Exhibit 7.
EXHIBIT 7
By the way, I was a little disappointed that we didn't get to go to lunch together on Friday. I was looking forward to us being able to eat and chat without feeling like we were constantly being watched (I always feeling like I am being watched at Brasstown, not just by Charles, but others there) so thought it would be a relaxing time and I wouldn't have to feel like I had to be "on" the whole time. Since you had 6 hours to kill that afternoon we should have gone and played, not sure doing what, but I wasn't really dressed for it. Not sure why I went to the office since I got nothing done, but I felt compelled to go since I will be out of office all next week except for a few hours on Monday, and I have noticed some of my key staff feel more comfortable when I am around to give a little direction for how I want things done. I am moving into the time of year when I do most of my work early in the morning and late at night at home and on the weekends and stay out of the office during the day - I usually go see things around the state, sit at the pool or just look for fun activities to do. I really do things most people do on weekends - and I used to do on the weekends - but my weekends pretty much suck these days since have new responsibilities with helping with daddy and also the jewelry store. Spring and summer is my favorite time of the year so don't won't to miss it being stuck in the office.
Source: Email from Ms. Bonner to Mr. Langdon found on one of Ms. Bonners six State-purchased computers.

Michele After thinking about it you could have I could have ridden with you. Can you believe that Ted, Chief Engineering guy that drove me, lives in the same community that I am moving into at Flowery Branch?? No reason to feel "weird"...all is good on my end. Now that I "know" I can tell you "no" I might have some fun with it :) Please let me do it in front of Bill Doyle and Charles?? Pretty please??? Anyway, spa is going to be awesome. I will place all I gave you under Da Vinci to make it easier for your bank wires... I would though tell Charles and/or Coral in general that you have alternative "funds' so they dont make the msitake of telling you "no" again, ya "know"? Have a good day...talk soon Robert Dean Langdon
Source: Email from Mr. Langdon to Ms. Bonner found on one of Ms. Bonners six State-purchased computers.

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The Spa Consultant was allowed to perform additional

services without a written contract The only identifiable internal control put into place by the NGMA Board was that verbal authorization had to be obtained from the Board Chairman before any NGMA written contract could be executed. Based on our investigation, however, it appears that Mr. Langdon/DaVinci was performing substantial additional services at the request of the

A motion was made...to delegate to the Secretary the authority to execute contracts on behalf of NGMA pursuant to the verbal authorization of the Chairman.

Acting Executive Director, Ms. Bonner. In addition to the NGMA Board meeting March 25, 2008

three written contracts totaling $50,000.00 between NGMA and DaVinci (See Exhibit 11 on

page 20), the NGMA also paid DaVinci an additional sum of $895,797.63 related to the spa

construction. While DaVinci was under contract to perform certain specific services, we did

not find any evidence that DaVinci was under contract to be the purchasing agent for the spa.

This financial arrangement appears to have been a circumvention of NGMA internal controls.

When written contracts are not utilized, the terms of their respective agreements and expected deliverables are not documented. Consequently, internal controls are weakened and the risk that fraud, waste, and abuse will occur and not be detected is dramatically increased.

The Spa Consultant was allowed to perform services that Coral Management was already under contract to perform In our investigation, we were told that Ms. Bonner had informed Coral Management that they would no longer be handling purchases for resale and repeat orders for the Equani Spa. In an email we obtained as part of our investigation, Ms. Bonner makes it clear that she and Mr. Langdon will handle all retail and repeat orders, including the spa (See Exhibit 8). Ms. Bonner also indicates in another e-mail that she has extended to Mr. Langdon/ DaVinci a "blanket 2-year" purchase order (See Exhibit 9 on page 18).

EXHIBIT 8

From: "Michele Bonner" <mbonner@dnr.state.ga.us> To: <dda_langdon@yahoo.com> CC: <Ronnie.Phillips@dnr.state.ga.us> Date: 7/23/2008 3:18 PM Subject: Fwd: Re: Ongoing PO's
Dean, Yes, you and I will be keeping a handle on all retail and all repeat orders including reorders for Equani Spa. That is exactly what I am thinking and what we have discussed. DaVinci should be listed as the main contact for all repeat orders and we (you and I) are handling all repeat orders. Charles - above is how we will be handling all orders and reorders for all retail items for the Spa. I briefly mentioned this at lunch when we had the budget meeting and I have not and will not change my mind about this process. As I mentioned at that meeting, no one currently employed at Brasstown will be ordering any retail items or re-ordering any retail items for the Equani Spa. Thanks, Michele
Note: Email shows that Ms. Bonner and Mr. Langdon were to handle all retail and repeat orders rather than Brasstown Valley Resort management who would be held accountable for the spas performance.

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EXHIBIT 9

-----Original Message----From: Michele Bonner [mailto:mbonner@dnr.state.ga.us] Sent: Saturday, August 02, 2008 9:59 AM To: Charles Burton; James Ayres; dda_langdon@yahoo.com Cc: Ronnie Phillips Subject: Re: FW: Brasstown's Room Amenity Order
Importance: High
** High Priority ** I am puzzled by this E-mail. Why are we not guaranteeing a blanket 2-year PO. That is what I agrred to do and told Dean to do. Dean proceed with a blanket 2-year PO. Charles this is what we are doing and I do not ever want to hear anymore discusssion about this. I told y'all month and months ago what we were doing on amenities and this will no EVER change. I am tired of people not doing what I tell them to do and having to have repeated conversations about things that are decided. Is that perfectly clear? If not Ronnie will clearly explain to you and James on Monday. If I sound angry and pissed off at Charles and James that would be because I am - EXTRENMELY!! End of discussion. Michele
Note: Email shows Ms. Bonner extending a blanket 2 year purchase order to DaVinci for the resort and spa amenities.

Special Free Meals and Free Alcohol for Mr. Langdon (DaVinci)

In our discussions with DNR and Brasstown Valley staff, we learned that Ms. Bonner and Mr. Langdon were frequently observed visiting the bar and the main dining room at Brasstown Valley. We obtained evidence documenting that Ms. Bonner made 118 visits to the Brasstown Valley Resort dining room and bar between

Meals and Drinks Attended by Ms. Bonner and Mr. Langdon
Food $5,657.65 Alcohol $2.236.75 Other $1,997.20
Total $9,891.60

January 2008 and March 2009. Of those visits, Mr.

Langdon was in attendance 59 times. Apparently, during site visits, Ms. Bonner and Mr.

Langdon frequently requested ,,off- menu meals for dinner at Brasstowns main dining room.

According to Brasstown Valley management, Mr. Langdon allegedly enjoyed filet and lobster

tail and Ms. Bonner instructed the resort to prepare it for him. The NGMA was not

compensated for any of the charges for food, alcohol, and other charges. See Appendix C.

Free Gran Marnier for Mr. Langdon (DaVinci) and Ms. Bonner In further discussion with Brasstown Valley management, we learned that Ms. Bonner demanded that Brasstown Valley management order a bottle of 150 year old Gran Marnier to have on hand for Mr. Langdon and her when they were on site. The resort paid $168.50 for the bottle and sells the Grand Marnier for $37 per shot. To date, Brasstown Valley has sold three shots in two years to other customers. During site visits, all drinks (including the Gran Marnier and bar drinks) and food were provided at no cost to Mr. Langdon at the request of Ms. Bonner. See Appendix C.

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Two NGMA-Purchased Laptop Computers provided to Mr. Langdon During our investigation, it was reported to us that Ms. Bonner instructed the Controller at Brasstown Valley Resort to purchase two laptop computers for Mr. Langdon. We determined that the two Dell laptop computers were ordered in August 2008 and were paid for out of Brasstown Valley Resorts capital account. When the two laptops arrived, Ms. Bonner reportedly traveled to the resort to retrieve them (See Exhibit 10). We confirmed that Ms. Bonner later gave the laptops to DNRs IT department to load software that Mr. Langdon had requested. The software added on these particular computers was installed with DNR software licenses; however, these license agreements were not transferable to Mr. Dean Langdon from DNR. Mr. Langdon would have been required to purchase his own licenses in order to be compliant with each different software license agreement.

In our interview, Ms. Bonner acknowledged delivering the laptops to Mr. Langdon. Ms. Bonner also stated that Mr. Langdon was to reimburse the resort the cost of the computers. The cost of the two laptops was $2,491.50; however, we found no evidence that Mr. Langdon ever reimbursed NGMA for the computers.

EXHIBIT 10
From: "Michele Bonner" <Michele.Bonner@dnr.state.ga.us> To: "Richie Golden" <Richie.Golden@dnr.state.ga.us> Date: 8/14/2008 1:58 PM Subject: Fwd: Computers Attachments: Text.htm See note below from Dean. I have computers in my car, but know you have not installed any software since you have not seen them. What do you want me to do, since he was going to pick up from me on Friday? >>> "Robert "Dean" Langdon" <dda_langdon@yahoo.com> 8/14/2008 1:29 pm >>> M Hey I wil pick the computers up from you tomorrow as planned...Is (or did) Ritchie install all software??? This is a list as well as anything else he recommends: * ACT * All Office components (Excel, Word, etc) * Acrobat full version * Photoshop * AutoCad * Norton Anti Virus or what ever is best * etc,etc... thx D Robert "Dean" Langdon President/CEO DaVinci Design Associates, Inc.
Note: Email indicates Ms. Bonner has computers in her possession with the intent of having DNR IT load vendor requested software.

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Finding 4
The apparent improper business relationship between the NGMA Acting Director and the spa consultant appears to have resulted in:
lavish spa furnishings and fixtures, and
inflated spa invoices related to spa construction/merchandise for resale

During our investigation of the Equani Spa construction, we found payments to DaVinci totaling $945,797.63, or 36% of total spa cost (See Exhibit 11). We were able to find three (3) written contracts for services with DaVinci totaling $50,000; however, we were not able to find any written agreement with DaVinci substantiating the additional payments totaling $895,797.63.

EXHIBIT 11
Payments to DaVinci Design Associates, Inc.
Contract No. 1 September 10, 2007 Contract No. 2 November 26, 2007 Contract No. 3 April 3, 2008 Other items purchased through DaVinci
Total all payments made to DaVinci

$10,000.00 10,000.00 30,000.00 895,797.63
$945,797.63

Based on interviews we conducted during this investigation, we were told that after Ms. Bonner became Acting NGMA Executive Director, she had given a directive that all cost related to the spa and spa suite should be billed through DaVinci to simplify and streamline the business process. Also, we found that in most cases, Ms. Bonner approved invoices for payment without verifying/documenting the products were received.
Based on our investigation we were able to determine the NGMA paid DaVinci $895,797.63 for construction materials, spa equipment, and supplies rather than buying directly from the actual vendors. Based on our analysis, a majority of these items appear to be for lavish spa furnishings and fixtures, many of which DaVinci included substantial markups over open market prices.
Pages 21 through 30 provide a description of certain items we found to be lavish, especially in light of the Boards intent to build an ,,interim spa at initial cost estimates of $501,000. Also, these pages indicate instances where we noted significant markups were paid to DaVinci.

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Appendix A contains a detailed analysis of expenditures totaling $627,992.17 we considered lavish. A majority of these expenditures were paid through DaVinci. Appendix B contains an analysis of the markups on certain items paid to DaVinci totaling $67,458.85.

Undelivered Teak Bar

In our review of spa expenditures, we noted that in June 2008, a teak bar costing $1,895 was ordered and billed by DaVinci. We were told that Ms. Bonner instructed her staff to wire the proceeds for payment of the invoice to DaVinci without verifying delivery of the product. We found that

Bar was purchased for $1,895 through DaVinci from Global Surroundings of Fountain Hills, AZ and was never delivered to the spa.

the bar was never delivered to the spa. Coral Management, DNR and our investigators have

attempted to contact the vendor regarding the status of the teak bar but have not had any

email or phone calls returned. See Exhibit 12 for a rendering of the bar obtained during a

forensic review of Ms. Bonners computer.

EXHIBIT 12

Note: DaVinci was paid $1,895 for the Teak bar, but never delivered.

Cherokee Pow-Wow Drums

Based on our review of spa invoices and our visit to the spa, we noted that two sets of

Cherokee pow-wow drums were purchased for $7,435.68 and placed in the spa to be used as

retail display shelves. The amount paid for the five drums ($2,287.68) appears to be

reasonable (per a Google search of drums for sale on the web); however, the spa was charged

$5,148 for installation. It is our understanding the drums came fully assembled. Based on our

inspection, the drums were light-weight and required no

installation other than stacking them on the spa floor. The amount paid to DaVinci for the installation represented 69% of the total purchase. Documentation we obtained indicated the invoice was approved by Ms. Bonner for

Pow-wow Drum Cost $2,287.68

Installation Charges $5,148.00

Total

$7,435.68

payment. See Exhibit 13 on page 22 for a photo of the

pow-wow drums.

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EXHIBIT 13

Note: $5,148 charged to stack drums for display.

Treatment Deck Shutters

In our review of spa invoices, we noted that

NGMA paid DaVinci $25,988 (8 @ $3,036/each plus shipping) for eight (8) sets of cypress shutters. An additional charge of $750 was assessed to apply a clear coat to protect the

Shutters Purchased through DaVinci $3,036

Comparable Shutters on Open Market $1,040

Amt Overpaid Per Shutter (8 Shutters) $1,996

Total Overpaid

$15,968

finish. In our review, we noted that comparable

louvered shutters could have been purchased at a cost of approximately $1,040 per set from a

local Georgia vendor. During one of our on-site visits, we noted the finish was flaking off the

shutters after just one year of use. See Exhibit 14.

EXHIBIT 14

Note: Example of shutter finish flaking off. Spa paid $25,988 for shutters from DaVinci.

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Spa Doors

During our review of the spa invoices and discussion with Brasstown Valley management, we

noted that NGMA paid DaVinci $34,995 for 1 exterior door and 7 interior doors (including

shipping). Each door was hand carved and constructed of Nicaraguan Mahogany. In our

research, we noted the front door was a Florida hurricane grade door and the price appeared

reasonable for the door (although it appears this type of door was not necessary in Young

Harris, GA). However, the $3,800 for each interior door appeared to be unreasonable. The

vendor, Foundation Door of Sarasota Florida, has since gone out of business and we were

unable to obtain the cost of the doors to DaVinci. We were, however, able to locate

comparable carved mahogany doors at less than

Per Interior Door through DaVinci $3,800 Comparable Door on Open Market $1,359 Amt Overpaid Per Door (7 Doors) $2,441
Total Overpaid $17,087

half the amount paid to DaVinci. (See Exhibit 15 and also Exhibit 16 on page 24 for a sample of doors purchased for the Equani Spa).

EXHIBIT 15

Note: Front entry door to spa and treatment room door sample. Purchase of eight doors was arranged by DaVinci at a cost of $34,995.

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EXHIBIT 16

Note: Each door was sketched and autographed by Mr. Dean Langdon of DaVinci.

Spa Lockers

Amt Paid to DaVinci Amt Paid by DaVinci Amt Overpaid

$9,232.40 $7,135.00 $2,097.40

Brasstown Valley Resort paid DaVinci $9,232.40 for solid wood double tier cherry lockers. Upon inspection, the lockers appear to be made from

particle board rather than solid cherry. The bill of

laden also does not state the lockers were solid wood, but rather melamine lockers with

veneer panels and veneer base trim. A review of the paid invoice from the sub-vendor,

Hollman, Inc., revealed that DaVinci was billed $7,135 for the order. The amount billed to the

spa by DaVinci represented a $2,097.40 (30%) increase in the price that would not have

occurred if Brasstown Valley Resort had been billed directly. Due to the high humidity in the

locker rooms, these lockers were deemed unusable for the spa area for which they were

purchased. A local craftsman was subsequently hired to build custom solid wood lockers for

this area. Currently, the lockers purchased through DaVinci are being used to store uniforms

for the spa employees.

Spa Signs

A further review of spa related invoices indicated that several custom made signs were purchased for use totaling $32,184.26. A closer look at the

Amt Paid by DaVinci

$18,500.00

Amt Spa was Billed by DaVinci $32,184.26

Amt Overpaid

$13,684.26

invoices revealed that DaVinci appears to have

over-billed the spa by $7,868 on 12/3/2008 for signs that had already been paid for on a

previous invoice. Per review of the invoices provided by Sign Works Unlimited, we noted that

DaVinci was invoiced $18,500.00 for the custom spa signage. That represents an increase of

$13,684.26 or 74%. See Exhibit 17 of signage on page 25.

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EXHIBIT 17

Note: Although signs purchased were of very high quality, more economical signs could have been purchased.
Chinese Wellness Training
While acting as Executive Director, on December 14, 2008, Ms. Bonner insisted (see Exhibit 18 on page 26) all management and staff of the Brasstown Valley Resort and local DNR staff (several of which objected) to participate in a two day Qigong wellness event at a cost of $10,000, plus meals and lodging (totaling $1,101.36), to the resort. Qigong is a spiritual awareness, breath empowerment, healing meditative practice developed in China. Through interviews we conducted, we learned the spa consultant, Mr. Langdon, had suggested the event to Ms. Bonner as a training service. The purpose of Qigong is to develop a more meaningful connection with nature and the universe.12
12 Wikipedia.org

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EXHIBIT 18

From: "Michele Bonner" <Michele.Bonner@dnr.state.ga.us> To: BRASSTOWNVALLEY ADMINISTRATIVE GROUP Date: 12/14/2008 1:38 PM Subject: Fwd: Vito Charles, I seem to recall this is the weekend/week that Vito and his folks are at Brasstown providing training to the staff that I requested (or better yet insisted) take place. I had hoped to get up there this week to meet him, but am not going to make it.
We have not discussed this, but I assume this is what you are doing, and if not then this is what you should be doing. The rooms for Vito and his staff should be comped since he is there providing a training service for the resort and they should sign just sign the check for their meals. Let them know the percentage to put down for tip on the checks. It would be crazy to charge them for rooms and meals and then us turn around and reimburse them.
I trust you will have no problems with this directive, but I have no intention of having a discussion about this. Ronnie will be able to clearly explain to you my wishes and how this will be handled if they are not abundantly clear from this E-mail. I do not think it will be necessary for Ronnie to get involved in this, but if it is necessary, I can assure you he will be able to clearly explain on Monday in a way that there is no question as to my intent. Have a nice weekend. Thanks, Michele
Note: Email shows Ms. Bonner insisted on Qigong training at $11,101.36 cost to resort.

Lavish Items Purchased for Resale at Spa
While reviewing invoices related to the spa, we noted one particular invoice for a Jen Morgan Retail Program totaling $24,356.28. Since quantities were not given on the invoice, we were not able to make a determination of the reasonableness of the items purchased. We did note, however, the spa was charged $1,900 for "JMS Collection Merchandising Props" and $2,400 for "White Glove Service Jen will come to the property to merchandise displays".
Also, we found that Ms. Bonner and Mr. Langdon purchased $100 bracelets and scarves ranging from $110 to $220 (wholesale cost) among other high end items, to sale in retail area of the spa. See Exhibit 19 on page 27.

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EXHIBIT 19

Note: Bracelet above (wholesale cost $114) was sold at half cost and returned when stone fell out first time worn. Flip flops with Austrian crystals have not sold well at all $129/pair.

Note: The two scarves on the mannequin above were sold to the spa by DaVinci for $140 each with a suggested retail of $250. The two scarves on the shelf to the right were also sold by DaVinci at a cost of $110 each, with a suggested retail of $195.

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Winterhawk Pottery

In a further review of the spas retail area, we noted that several pieces of Indian pottery were purchased for retail, operational usage and display.

Amt Spa was Billed by DaVinci $20,663.77

Amt Paid By DaVinci

$11,869.75

Amount Overpaid

$8,794.02

Although the pottery appeared to be nice quality

(See Exhibit 20), spa management stated it has not sold well in the spas retail area. A review

of the invoices from DaVinci indicated the spa had purchased $20,663.77 of Winterhawk

pottery between March 2008 and September 2008. During our investigation, we obtained the

original invoices from Winterhawk Pottery indicating DaVinci was invoiced only $11,869.75

for the pottery purchased. Based on the evidence obtained, it appears the spa overpaid by

$8,794.02 or a 57% markup in cost. Documentation indicates that Ms. Bonner approved the

invoices for payment and instructed her staff to wire the proceeds to DaVinci.

EXHIBIT 20

Note: Pottery above was observed in the spas retail area, as well as an operational sink in one of the treatment rooms.

Lodge Amenities

In an email we recovered (See Exhibit 21 on page 29) during our investigation, Ms. Bonner states that Brasstown Valley Resort was to give Mr. Langdon a

$.54 vs. $.20 per unit resulted in $3,660 cost increase to Resort. $2,603.96 or 31% total invoice for Freight.

two year blanket PO to purchase all soaps, shampoos,

etc for the resort and the spa. The price Mr. Langdon was quoting for the shampoo,

conditioner, shower gel, and lotion averaged out to be $.54 per bottle (See Exhibit 22 on page

30). We found that Coral Management had already negotiated a price for these products at

$.20 per bottle. Ms. Bonner however made it very clear that they would be purchasing lodge

amenities through DaVinci. This decision resulted in a $3,660 increase in cost on one order

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noted during our review. In addition to the increased cost for the amenities, the resort paid an additional $2,603.96 in shipping costs. This increase in shipping was done at the insistence of Ms. Bonner. See Exhibit 22 on page 30.

EXHIBIT 21
From: "Michele Bonner" <Michele.Bonner@dnr.state.ga.us> To: BRASSTOWNVALLEY ADMINISTRATIVE GROUP CC: <rlangdon@davincidesignassoc.com>, <Ronnie.Phillips@dnr.state.ga.us> Date: 8/2/2008 3:47 PM Subject: Fwd: RE: FW: Brasstown's Room Amenity Order Attachments: Fwd: RE: FW: Brasstown's Room Amenity Order
Charles, The attached E-mail clearly mentions a 2 Year PO and also dean lays out the way the 2 year PO should be layed out so I am VERY puzzled as to why James E-mail has different quantities and terms anbd says this is based on your direction. You are correct, but that meeting was many months ago and the attached E-mail was sent on July 17 and is very clear as to what I want done, so what was said months ago is irrelevent.
My attached E-mail was and is clear and Ronnie said there was no way y'all could misunderstand the clear directions, but apparently he was wrong. Dean knows and understand what I want done. Talk to Ronnie on Monday. I am tired of this and want the amenities there ASAP. Quite honestly you could do a 5 year PO because these will be the amenities we use from henceforth- PERIOD! End of discussion. Michele
Note: Email shows the resort will be ordering room amenities from DaVinci at the insistence of Ms. Bonner and the amenities are to be shipped ASAP.

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EXHIBIT 22

Note: Freight totaled $2,603.96 or 31% of the total bill.

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Finding 5

Mismanagement of NGMA during fiscal years 2008 and 2009 had a detrimental impact on the Brasstown Valley Resort operations.
Contacts from DaVinci Sub-Vendors During our discussion with Mr. Charles Burton, General Manager of the Brasstown Valley Resort, and Mr. Ronnie Phillips, DNR Regional Manager, we noted that although Ms. Bonner wired funds to pay DaVinci for work and materials to build the spa, DaVinci allegedly failed to pay all sub-vendors for their services and materials.
Numerous sub-vendors have contacted Brasstown Valley regarding compensation for their service and material. These vendors included but were not limited to SignWorks Unlimited, Randall Products, Ready Care Products and Hiawassee Hardware in Hiawassee, Georgia. In our discussion with SignWorks Unlimited, we discovered they were eventually paid, but it was many months after services were rendered. Randall Products did recover a portion of their loss when the Brasstown Valley resort purchased their remaining inventory at a reduced price. As of the date of this report, Hiawassee Hardware still had not received payment from DaVinci. We were unable to contact Ready Care Products regarding whether they had ever been paid by DaVinci.
Stress on Brasstown Valley Resort Financial Position Final cost of the Equani Spa was $2,678,906. A total of $1,954,483.48 came from the Brasstown Valley Resort Capital Reserve account, $20,126.85 from the Brasstown Valley Resort Operating account, and $664,795.67 from the North Georgia Mountain Authority revenues. In our discussion with Brasstown Valley management, we noted that as of December 2008, when the majority of spa invoices had been paid, the capital reserve balance at Brasstown Valley had been depleted to a critically low balance of $70,658. Depleted balances caused from the Equani Spa Construction have limited Brasstown Valley managements ability in making needed routine capital improvements as required by the contract between NGMA and Coral Management.

Inventory for Resale In our discussion with Brasstown Valley Resort management, we noted that while the spa was under the control of Ms. Bonner, it lost money. Since being taken over by Brasstown Valley/Coral Management, the spa has begun to turn a profit. One of the reasons given for losses by Brasstown Valley management was the retail shop located at the spa. As previously noted, Ms. Bonner and Mr. Langdon purchased $100 bracelets and $200 scarves (wholesale cost see Exhibit 19 on page 27), among other high end items, to sale in the retail area of the spa. Per the spa manager, in her experience, these items do not sell well in their demographic area. She indicated that several of the items had to be marked below cost in order to eventually sell. Most of the inventory has never sold.

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Low Spa Suite Occupancy As discussed in this report, the spa guest suite was constructed at an approximate cost of $294,000. Due to the high cost of the spa suite, Brasstown Valley currently rents the spa suite for an average of $350.00 per night. Based on our inquiry, we found that from October 2008 through March 2009, the spa suite was only occupied a total of 24 nights , 13.25% occupancy rate, with Ms. Bonner occupying the suite 11 of these nights. The 11 nights provided at no cost to Ms. Bonner had a total retail value of $3,850.
By comparison, for the same time period, the Brasstown Valley lodge/cabin occupancy rate was 49.5%.

Additional Acting Executive Director Compensated Charges

Total Comped Charges

Food

$8,584.00

Alcohol $3,088.75

Prior to Ms. Bonner becoming Acting Executive Director, it was reported to us that Brasstown Valley Resort infrequently provided complimentary services upon the request of previous

Services charges, taxes and management. During Ms. Bonners tenure as Acting Executive

spa charges $3,029.08

Director of the NGMA, it was noted that there was a

Total $14,701.83

significant increase in the charges that had to be absorbed by the Brasstown Valley Resort. We obtained documentation, on

118 occasions between January 2008 and March 2009, Ms.

Bonner and her guests were provided food, beverages and alcohol with a retail value of

$14,701.83 at her request. The bar tab alone totaled $3,088.75. See Appendix C for a detailed

listing of the 118 compensated charges.

Since the net profit from the resort is transmitted to the NGMA as revenue and any losses incurred by the resort are subsidized by the Authority, these compensated charges represent lost revenue to the Authority. A detailed review of the receipts indicated that none of the amounts included in our figures were related to official NGMA Board meetings.

Possible Code of Ethics Violation The Governors Executive Order, dated January 13, 2003, establishing a Code of Ethics for Executive Branch Officers and Employees states in section 6 that "An employee on whose behalf actual and reasonable expenses for food, beverages, travel, lodging and registration are paid to permit the employees participation in a meeting related to official or professional duties of the employee shall file a report no later than 30 days after such expenses are paid" to the agencies designated Ethics Officer. Per discussion with Ms. Emily Hitchcock, DNRs Ethics Officer, no reports were ever filed by Ms. Bonner. This also appears to be a violation of DNR policy #217 "Administrative Policy on Employee Conduct".

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Finding 6
State law may have been violated when all data on one of Ms. Bonners six computers was inappropriately deleted and forensically unrecoverable.

At the beginning of our investigation, DNRs Information Technology Department turned over six computers, a Blackberry device and the latest available copy of Ms. Bonners email for our review. It was reported to us that Ms. Bonner had three computers in her office, two computers at her home and one computer at her parents home. A forensic analysis of these hard drives revealed that five of the six computers were used for both work and personal purposes. The sixth hard drive had all of its information deleted with methods making recovery not possible. As a result, potential evidence related to this investigation may have been destroyed. We were unable to determine who was responsible for destroying the data from the hard drive. O.C.G.A 16-9-93(b)1 expressly prohibits unauthorized removal of computer data.

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APPENDIX A
EQUANI SPA LAVISH EXPENDITURES
LAVISH ITEM FOUNDATION DOORS/CARVED MOHOGANY DOORS TREATMENT DECK SHUTTERS TIME TREATMENT CAPSULE SPA SUITE SPA SUITE SHOWER RETAIL JEWELRY AND CLOTHING RETAIL SCARVES WINTERHAWK OPERATIONAL SINKS WINTERHAWK DISPLAY POTTERY CUSTOM SHOWER/STEAM DOORS SHEER DESCENT WATERFALL GLASS RAILING CHAISE LOUNGE CHAIRS WITH CUSHIONS FOR OUTDOORS (10) WILLOW BRANCH PLANTER BOXES (4) POW-WOW DRUMS (5) SANDBLASTED DOT SIGNS QIGONG TEAK BAR WALL MOUNTED WATER FEATURE (6) ELECTRIC MIRRORS IN MENS AND WOMENS LOCKER ROOMS RELAXATION ROOM CUSTOM LOUNGE WITH CUSHIONS (10) RELAXATION ROOM COFFEE TABLE (1) AND SIDE TABLE (7) STONEWORK - MATERIAL AND LABOR DAVINCI DESIGN ASSC. SUPERVISORY, ENGINEERING AND VISIT CHARGES INTERIOR TILE INSTALLATION STEEL SUPER STRUCTURE FOR DECK/RAILING/STAIRS TO SPA SUITE METAL LASER CUTOUTS AND OTHER STEEL MACHINING

34

AMOUNT VENDOR

$ 34,995.00 DAVINCI

$ 25,988.00 DAVINCI

$ 17,999.04 DAVINCI

$ 50,746.88 DAVINCI

$ 11,400.00 DAVINCI

$ 49,613.68 DAVINCI

$

1,605.00 DAVINCI

$

3,045.00 DAVINCI

$

4,910.40 DAVINCI

$

8,995.00 DAVINCI

$ 15,477.00 DAVINCI

$ 10,806.79 DAVINCI

$ 15,023.99 DAVINCI

$

4,760.00 DAVINCI

$

7,435.68 DAVINCI

$

3,740.39 DAVINCI

$ 11,101.36 OTHER

$

1,895.00 DAVINCI

$

7,635.60 DAVINCI

$ 13,574.40 DAVINCI

$ 22,669.60 DAVINCI

$

3,759.80 DAVINCI

$ 162,825.02 OTHER

$ 25,772.55 DAVINCI

$ 43,124.00 OTHER

$ 45,979.99 OTHER

$ 23,113.00 OTHER

TOTAL $ 627,992.17 TOTAL DAVINCI $ 341,848.80

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APPENDIX B

EQUANI SPA DAVINCI OVERCHARGES

ITEM

DAVINCI CHARGE

OPEN MARKET CHARGE

OVERAGE

CHEROKEE POW WOW DRUMS

$

TREATMENT DECK CYPRESS SHUTTERS

$

FOUNDATION DOORS

$

HOLLMAN LOCKERS

$

SPA SIGNS

$

SPA LEATHER BRACELETS

$

JEN MORGAN RETAIL PROGRAM

$

WINTERHAWK POTTERY

$

SHAMPOOS, LOTIONS, CONDITIONERS, ETC $

ECOSCENT REMOTE SINGLE (HVAC), ETC*

$

TEAK BAR FROM GLOBAL SURROUNDINGS* $

7,435.68 $ 25,988.00 $ 34,995.00 $ 9,232.40 $ 32,184.26 $ 1,368.00 $ 24,356.28 $ 20,663.77 $ 5,794.40 $ 1,887.61 $ 1,895.00 $

2,287.68 $ 8,320.00 $ 23,887.00 $ 7,135.00 $ 18,500.00 $ 1,140.00 $ 23,052.40 $ 11,869.75 $ 2,149.72 $
-$ -$

5,148.00 17,668.00 11,108.00 2,097.40 13,684.26
228.00 1,303.88 8,794.02 3,644.68 1,887.61 1,895.00

TOTAL

$ 67,458.85

* - Item purchased but never received.

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APPENDIX C Comped charges for Ms. Bonner and her guests.

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APPENDIX D

Changes on Spa from Original Design
1. Basement was added on the new addition. 2. Relax room was extended by three feet. 3. Patio was changed from wood deck to concrete and Flag stone. 4. Added double sided fireplace. 5. Added stacked stonework and waterfall and large wall at patio. 6. Added ironwood to patio deck around hot tub. 7. Added waterfalls to hot tub at patio. All electrical and plumbing components. 8. High-end glass panels and railing at patio. 9. Built labyrinth. 10. Changed pine floors in treatment to bamboo flooring. 11. Tub/deck rooms changed from pine floors and walls to all tile. 12. Shutters added to deck rooms. 13. All plumbing and fixtures upgraded. 14. Custom made sinks. 15. Vaulted ceilings. 16. All Led lighting. 17. Upgraded carpets. 18. Eight special design doors. 19. All other doors upgraded. 20. Office added. 21. Storage added. 22. Dumb waiter added. 23. Special sound system installed throughout. 24. Custom shelving and office furniture. 25. Tile upgraded in all Restrooms and additional tile added. 26. Special custom glass shower doors. 27. Front retail counters and displays and tile work. 28. Changed fireplace from brick to all stone and added gas in retail area. 29. Had to change interior walls design at least three times throughout the building. 30. Added ceiling height in pedi-medi areas. 31. Changed out ceiling height and design in retail areas. 32. Added sunroom height. 33. Added rockwork behind retail counter. 34. Added front porch and rockwork. 35. Added rock walkways. 36. Added rockwork around entire building. 37. Changed driveway twice. 38. Spa suite added, deck and stairs. 39. Added storage upstairs. 40. Addition HVAC units added for extra space. 41. Added laundry. 42. Added kitchen. 43. Added bathrooms. 44. Added storage down stairs. 45. Added sewer pumps systems in basements. 46. Building went from a 200 amp. Service project to 600-amp project. 47. Installed two 1000 gal. LP tanks. 48. Added landscaping plan. 49. Added molding and trim throughout. 50. Added AZI Hut and Fire pit. 51. Added cable TV throughout the building 52. Upgraded water heaters. 53. Side entrance added. 54. Added front entrance, which has rockwork and signage. 55. Added the fencing around the pastures at the spa. 56. Had to install sod because of opening timeframe. 57. Added wallpaper throughout. 58. Sprinkle system installed upstairs. 59. All railing and metal upgrades. Custom built.

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Appendix E
Pictures recovered in forensic review from one of Ms. Bonners six computers taken the day after NGMA Board was notified construction cost
would be between $1.3 to $1.5 million. (See page 13)

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The State Government Division (SGD) of the Department of Audits and Accounts (DOAA) is responsible for planning and performing financial and compliance audits, as well as other procedures relating to the issuance of:
State of Georgia Comprehensive Annual Financial Report (CAFR) State of Georgia Single Audit Report
State of Georgia Budgetary Compliance Report
SGD performs accounting/auditing related research to ensure successful implementation of generally accepted accounting principles (GAAP) and generally accepted government auditing standards (GAGAS) as such standards apply to the types of engagements performed by the division. The SGD also coordinates the publication of the annual compilation reports:
Salaries and Travel Supplements Per Diem and Fees Supplements

For additional information or for copies of this report call 404-656-2180.