Audit flags use of funds

The findings will go to PennDOT, which has the ability to impose sanctions.
By LAURE CIOFFI
VINDICATOR NEW CASTLE BUREAU
NEW CASTLE, Pa. -- State auditors found that Lawrence County's treasurer made an improper loan to the county general fund and improper investments with state gasoline tax money.
The money -- called liquid fuels funds -- was audited by the Pennsylvania Attorney General's office after county Controller Mary Ann Reiter found some inconsistencies with the funding earlier this year.
Auditors gave their findings Tuesday in the county commissioner's meeting room to a group of about 25 people, including county and state officials.
Outlined findings
J. Terry Kostoff, deputy auditor general for audits, outlined four findings from the draft audit report that included problems with the loan and investments. He said the final report should be ready in about a month.
The final report will be sent to the Pennsylvania Department of Transportation, which has the ability to impose sanctions on the county, Kostoff said. The state auditor's office can only determine findings and make recommendations.
Kostoff said the treasurer improperly transferred $984,000 of liquid fuels money to the general fund Dec. 29, 2003. The money, derived from state gasoline taxes, can be used only for road and bridge projects.
The money was repaid to the fund Jan. 13 this year, but there was a $55,000 loss when the money was pulled from mutual funds to make the loan to the general fund.
Auditors said the general fund loan caused the liquid fuels account to be about $500,000 short Dec. 31, 2003, when the books were closed. They explained that money in the account already was earmarked for road and bridge projects.
Treasurer's response
County Treasurer Gary Felasco has said that was the only fund available to borrow money to meet the county's year-end expenses.
The previous commissioners have said they told Felasco to transfer money to meet the year-end expenses, but they did not specify from which fund the money would be taken.
Auditors also were critical of Felasco's investments of the liquid fuels money.
Kostoff said more than $1 million was in three mutual funds that don't fall under guidelines set in the county code for investments.
The county code permits taxpayer money to be invested only in short-term investments backed by the "full faith and credit of the United States," which could include U.S. Treasury Bonds.
Kostoff said the county's liquid fuels allocation was placed in mutual funds that had investments in Federal National Mortgage Corp. and the Federal Home Loan Mortgage Corp. Neither are backed by the full faith and credit of the federal government.
Not short-term
The mutual funds also had maturity dates longer than one year, beyond the definition of a short-term investment in the county code, he said.
Auditors also pointed out that about $1,200 was used for snow removal and landscaping at the county government center -- activities not permitted under the liquid fuels guidelines.
But Controller Mary Ann Reiter said after the meeting that she plans to challenge that finding. She said the money was used to remove snow and trim trees on county bridges. Reiter noted that they received permission from a PennDOT official for that work.
"I know when we pull those bills, we're going to be able to clear that up," she said.
County officials were given two weeks to send a written response to the auditor general's office.
Felasco refused to comment on the findings concerning his investments and the loan.