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Auditors troubled by River Valley Transit finances

SUN-GAZETTE FILE PHOTO

A “shell game” may have taken place by prior management of River Valley Transit based in Williamsport and use of state and federal grants for non-transportation purchases may have occurred, based on findings by auditors who flagged many items in the fiscal books kept by prior bus service management.

A blistering draft audit by RKL, the firm hired by Mayor Derek Slaughter, was shared Tuesday with City Council’s finance committee. It covered July 1, 2019 to June 30, 2020 and included issuance of an “adverse opinion.”

While the audit was being done, River Valley Transit, the city and regional bus service, remained under a state investigation by Attorney General Josh Shapiro, a gubernatorial candidate, who Slaughter said had its criminal division agents looking into matters and reviewing finances and grant usage in prior years while Gabriel J. Campana was mayor and William E. Nichols Jr. was city transportation general manager and city finance director. Slaughter turned over financial irregularities in 2020 to District Attorney Ryan Gardner, who referred them to Shapiro’s office. Shapiro’s agents have not commented but recently visited a council meeting.

“In our opinion we really can’t tell if the balances on the income statement and assets owned and liabilities owed really are appropriately related to River Valley Transit,” said Mark Zettlemoyer of the auditing firm. He was joined by colleagues Tim Kraft and Brad Steinweg.

“A lot of it relates to grant activity and the flow of money between the city component of it and flow of the money with some of the grantors,” Zettlemoyer said.

For example, auditors said they tested and sampled transactions, looked at supporting documentation to make sure they were in line with activities of the organizations and done in accordance with government auditing standards and tested using sample transactions for eligibility related to grant activities.

“Our opinion was adverse,” Zettlemoyer said. “We could not get sufficient comfort from the information we had and nature of transactions we saw in order to give clean financial statements.”

“Our opinion is the financial statements don’t fairly present the financial position of River Valley Transit or the bureau,” he said.

Transit assets recorded by the respective authorities, grants receivable, capital assets and those type of things ä “those are numbers we can’t get comfortable with,” Zettlemoyer said.

“We could not get comfortable what assets were for RVT versus what assets were related to the city and that reflects or impacts on net assets in financing leases and property under capital leases,” Zettlemoyer said.

Another area auditors noted difficulties with was pension allocation as far as cost allocation of pension contributions.

The pension contributions sometimes for RVT component showed inconsistency in transactions.

Another area of concern was on the liability end.

For example, when the state Department of Transportation (PennDOT) would provide a grant of $4 million to $5 million, those funds are recorded as a liability until they are used for specific grant purposes.

“If they (PennDOT) give a $4 million grant and it is for funding public bus service, those grants are deemed earned and get recorded as revenue,” the auditors stated.

However, the auditors said, there were a number of expenses that were not River Valley Transit-related expenses.

“They were costs related to other entities paid for these funds and were not used and are unearned revenues,” the firm stated. “The state could call those funds back if they choose to.”

Moreover, occurrences in previous years were found where the funds from the state were used for things other than public transportation, the auditors asserted.

For further reporting on this issue, see Wednesday’s edition of the Williamsport Sun-Gazette or visit sungazette.com online.

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