Hi Christoph and Mike thanks for both your quick response and insightful comments. I always try for a considerable amount of time to figure thing out before asking for help. I find that i may not come up with the solution for my particular problem but in using this approach i end up learning info which i suspect will be useful in the future. 
Getting back to the original questions it turn out there was a line in the config.txt file referencing GPIO pin 26 as a shutdown to the system. It is interesting to me how the syntax in these config file can vary some what but still accomplish the same results. When i checked the circuit diagram one of the legs of the encoder uses pin 26. This gave me hope that i may not have either made a mistake in the construction of the board or shorted something out accidentally during testing. I went back over the instruction and was able to compile an image which worked as expected recognizing the controller. 
So thanks again to you both. So far this has been fun and challenging at the same time. I have never worked with smd components before which resulted in me building a reflow oven using the Controleo3 reflow oven kit and brushing up on my soldering skills. In addition i am learning tons about the Linux Os. 
I Would like to ask another question. I have tried getting audio out of the 3.5mm A/V jack of the Raspberry pi with the correct cable which seems to work fine while playing content such as a video on YouTube but when i start piHPSDR i am not getting any sound. the current setting is suppose to be generating PCM audio from that A/V jack into a set of powered speakers.  Is there a setting which need to be modified for piHPSDR?
73's
Ian (WO2Z)