MESSA’s Transactions With MEDNA

Of all the directions in which MESSA routes funds, the most ambiguous involves MEDNA. One year after MESSA and the MEA entered into their operating agreement, MEDNA was incorporated for the purpose of providing administrative and clerical services to the MEA and its subsidiaries.115 MEDNA is physically located between the offices of the MEA and MESSA, and is essentially subject to the MEA's control. (The President of the MEA is President of MEDNA and the Executive Director of the MEA is the Chairman of the MEDNA Board.)

Both the MEA and MESSA contract with MEDNA for data processing equipment, computer time, accounting services, billings services, financial report preparations, and so on-services that could otherwise be maintained independently. At first glance, it is not readily apparent why the MEA and MESSA must contract with a separate firm to provide their clerical services; nevertheless, they pay out millions of dollars every year to MEDNA for these services. Furthermore, MESSA's financial statements reveal that MESSA guarantees various loans for MEDNA and leases equipment to MEDNA.116 If each corporation is separately purchasing resources for MEDNA, such as computers, and then contracting with MEDNA for access to all of its resources, then the MEA and its subsidiaries are pooling resources for the whole conglomerate. The MEA is 'providing an economy of scale by centralizing a common operation and reaping the benefits of having MESSA subsidize the operations of its related corporations by giving them access through MEDNA to MESSA-purchased resources.

MESSA provides MEDNA with approximately 60 percent of its income, so without MESSA's financial support, MEDNA probably could not afford to stay in business.117 If MESSA did not provide so much operating revenue to MEDNA, it is obvious that the whole MEA conglomerate would suffer the impact of reduced access to resources through MEDNA.

According to MESSA's financial statements, its payments to MEDNA are based upon utilization of telephone services, labor relations, financial services, buildings and grounds maintenance, staff training, and development of all required data processing and computer services. The amounts paid to MEDNA for the past 10 reporting periods are shown in Table 2.

Is it necessary for MESSA to purchase certain services from MEDNA that it otherwise could not obtain, or is MESSA using the money that it collects from school districts to help enrich the computer and other resources of the whole MEA conglomerate? The answer is not simple to discern, because the MEA is very protective of information about MEDNA's operations. But if the latter is true, and evidence does suggest that it is true, then MESSA has some explaining to do.