2014-10-24 Washington State Auditor’s Office Exit Conference With Island Transit
Island Transit yesterday had an exit conference with the Washington State Auditor’s Office (hereafter SAO) with video taken and the release of the severance agreement with former Exec Director Martha Rose. Most exit conferences are staid affairs, such as the one with the City of Oak Harbor where SAO employees explain any issues with collaboration between auditor & auditee. In the case of Island Transit; there were audible groans, arrogant grilling and even attempted gifts in what for most state & local governments is a quiet act (1) of meeting with SAO employees to ensure fiscal responsibility.
Midday through 24 October, members of the Island Transit Press Gallery (e.g. IslandPolitics.org, Whidbey News-Times) scooped us (2) with the galling news that former Exec Director Martha Rose thanks to the personal feelings of Island Transit Board Chair Bob Clay towards her Island Transit will now pay over $100,000 to this individual. Last night, a Seattle Transit Blog Page Two writer interviewed Island Transit Board Member & Oak Harbor Mayor Scott Dudley who said for the record he had sought Martha Rose’s resignation letter (3) since her resignation and that the Island Transit Board never approved former Island Transit Exec Director Martha Rose’s “separation agreement” signed back on 20 October 2014. The document was not supposed to be released until she signed it and as such, was not released to the public until 24 October 2014.
That same 24 October 2014, the SAO Exit Conference with Island Transit unfolded. For the first time the general public also learned that former Exec Director Martha Rose was getting special, improper and possibly unconstitutional at a state level treatment from the Island Transit Board. In SAO documentation publicly released at that meeting, the SAO notes with my emphasis:
The Transit’s personnel policy requires the salary schedule for all Transit employees be approved by the Board of Directors. We found no evidence of the Board approving the salary schedule. The only evidence of salary approval is in the budgeting process in departmental lump sum amounts.
The contract between the Transit and the former Executive Director requires the Board to review annually the Executive Director’s performance, contract and salary. However, this annual review did not occur. The last documented review was conducted in 1996. The former Executive Director received salary increases approximately every two years without specific Board approval.
We identified a lack of oversight of the former Executive Director’s leave usage. The Executive Director was self-approving and self-reporting any leave used to the Payroll Specialist. The former Executive Director’s calendar identified the following:
o Attendance at a conference for 16 days in April 2013 when flight records indicate the Director was only in the same city as the conference for four days.
o Vacation for four weeks that spanned July and August of 2013
o Attendance at a conference for 19 days in September 2013 when flight records indicate the Director was only in the same city as the conference for five days.
o Vacation for three weeks that spanned June and July of 2014
Despite the above items noted on the former Executive Director’s calendar, we identified only six days of leave were deducted from the former Executive Director’s leave balances from August 2012 to September 2014.
That same document also notes on page 1 of their Exit Conference agenda:
Preliminary audit results and recommendations were shared in detail with Transit management and personnel as they were developed during the audit
So there was quite a bit of shock and groaning when Island Transit Emergency Executive Director Bob Clay – with no board approval – entered into a “separation agreement” signed back on 20 October 2014 with former Island Transit Executive Director Martha Rose. Within that document is this stipulation:
“Payment of Vacation Time. The Parties acknowledge and agree that Rose has accrued unused paid time off with Island Transit, the value of which totals eighty-eight thousand one hundred ninety dollars and forty cents ($88,190.40), subject to lawful deductions. Rose acknowledges and agrees that this unused paid time off that Rose has accrued with Island Transit will be paid in monthly installments to Rose of the lesser of either eleven thousand dollars ($11,000) per month or the remaining amount due to Rose for payment in full of her accrued unused paid time off. Such monthly installments will begin on February 15, 2015 and will continue until her accrued unused paid time off is paid in full, and such payments will include lawful deductions.”
As Island Transit Board Member Scott Dudley noted in an interview, “If we were following up the vacation and leave status, we ended up paying for almost nine months of vacation.” As such, there are cogent, logical calls for a criminal investigation into who knew what when in regards to former Island Transit Exec Director Martha Rose’s “separation agreement”. Especially as Martha Rose told the Whidbey News-Times when she left she was only staying on after Island Transit’s new facility was complete due to the Island Transit fiscal crisis. But perhaps these developments should be no surprise – more after the jump.
The State Auditor’s Office (SAO) sent six employees into the exit conference – including three employees from Olympia such as the immediate former Director of the SAO Bellingham Audit Team in Sadie Armijo and a communications professional – for several reasons. One of which was because this was no ordinary exit conference. Another of which because the State Auditor’s Office made a finding in part stating, “The Board and management did not effectively monitor the financial activity of the Transit to ensure revenues were adequate to cover increased operational and capital expenditures. The Board relied on the financial information the Executive Director presented to them.” Why did the State Auditor’s Office write that? Because the State Auditor’s Office found, “The Transit’s financial condition has impacted current service levels and puts it at risk of not being able to meet financial obligations.“
As if this was bad enough, some in the audience groaned when Island Transit Board Chair and Emergency Director Bob Clay – yes, the same Island Transit Board Member who lobbed an attack on the Island Transit Press Gallery a week before – predictably decided to impugn shift some blame to the Washington State Auditor’s Office and said they “should have said something… previous to this year’s audit”. The SAO Deputy Director for Local Audit and immediate former SAO Team Bellingham Director Sadie Armijo said in her own and her team’s defense, “We did take a look at financial condition and one of the things the Transit still had going for it was there was still some reserves. There was some money there. … Those red flags weren’t going up. The minute those red flags go up, just in this case they went up really fast because of what was going on and the expenditures… at the Transit.” SAO Director of Local Audit Kelly Collins jumped in and said the Island Transit Headquarters construction was one reason why the State Auditor’s Office wasn’t surprised about reserves being drawn down due to the match requirement with federal grants.
The new Island Transit Board Member Scott Dudley said, “he did not share the same sentiment putting the onus on the State Auditors for pointing out we had a spending problem. When we look at 2012 we did end the year at $2.2 million dollars in reserves”. Yet in 2013 the $2.2 million in reserves plus $1.5 million dollars in loans were used for a “spending spree”. Later on in an interview he noted the finding “shows piss-poor management, poor oversight from a board. Unbelievable to me Bob Clay would point fingers at the state auditors” and made reference to the fact six SAO employees attended to underline this was not an ordinary SAO audit.
Island Transit Board Member Jim Sundberg then attempted to blame a decline in state support for transit. Sundberg said he wasn’t getting accurate financial reports warning Island Transit was providing more services “in excess” of Island Transit revenues. SAO Director of Kelly Collins stressed “that’s the importance of getting meaningful financial reports to the board on a regular basis”. Island Transit Board Chair Bob Clay then butted in with the excuse the Island Transit Board got only 12 reports and now those reports ‘ formatis now corrected & updated.
Finally, Island Transit’s new Headquarters construction process was issued a SAO Finding for being in noncompliance with the State of Good Repair Grants Program. For instance, the SAO found noncompliance with wage & matching fund requirements. The SAO even wrote, ” The Transit spent federal funds on preventative maintenance items and grounds maintenance equipment, such as a tractor, tires and other maintenance supplies, which are unallowable, and two gazebos, which the Transit could not demonstrate were part of the building and should have been included in the project. These items resulted in known questioned costs of $69,692 and likely questioned costs of $36,704 based on similar vendor purchases in 20l3 and 2014.” This will be addressed in a future STB post.
Somehow the State Auditor’s Office cannot accept gifts of gratitude from a civilian who was the only person able to use transit to attend a standing-room only Exit Conference where Island County Commissioner Candidate Rick Hannold (who I’ve endorsed) personally attended and his opponent Karla Jacks sent a representative; but a majority of the Island Transit Board seems to still have a serious entitlement complex. As Island Transit’s brand new Board Member Scott Dudley put it, it was sad, eye opening, and “what we can expect from this board”. Dudley has even promised he will go to great lengths to remove from the Island Transit Board Bob Clay, Jim Sundberg and Helen Price-Johnson as “this board failed to act, failed to do their duty”. It seems the Washington State Auditor’s Office agrees.
(1) Yes, I used that phrase. On purpose to this audience. Raising taxes is not a quiet act as all taxation is confiscation whether in the form of property taxes, sales taxes or transit fares. Civil discussion between professionals on the financial compliance of a governmental agency should be a quiet act. But when Island Transit broke the public trust…
(2) In my defense, Island Transit cutbacks mean the quickest way to my home office is now through Clinton & Mukilteo. Regular North by Northwest readers know what’s in Mukilteo that makes waiting for reconnecting to Skagit Transit enjoyable and will read all about it sometime during the week of October 26-November 1.
(3) A Seattle Transit Blog Page Two writer (yours truly) has also sought Martha Rose’s resignation letter.