Audit Finds "Inappropriate" Use of Funds, Board of Directors Silent - NBC Bay Area
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Audit Finds "Inappropriate" Use of Funds, Board of Directors Silent

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    NEWSLETTERS

    A year after whistleblowers exposed a secret reserve of $2.5 million at the San Mateo County Transit District, the agency admits to a series of errors and promises to return the money to the general fund. Meanwhile, CEO Mike Scanlon announced his retirement following the DA’s audit looking into the whistleblowers’ complaint. Investigative reporter Vicky Nguyen asks who’s being held accountable in a story that first aired October 3, 2014. (Published Friday, Oct. 3, 2014)

    Who is being held accountable? That’s the question Caltrain riders are asking after an audit confirmed what an NBC Bay Area investigation first revealed: $2.5 million dollars of public funds were mishandled by finance managers at the San Mateo County Transit District.

    “I am paying to ride Caltrain everyday. Where is my money going?” asked commuter Zlata Balic.

    Balic and other riders are somewhat closer to knowing the answer after whistleblowers first stepped forward last September, alleging that for years, finance managers at SamTrans were setting aside money in a hidden reserve to be used at their discretion.

    The San Mateo County District Attorney’s office requested an audit looking into the allegations, performed by David Bullock with Macias Gini & O'Connell LLP. The DA’s audit found accrued expenses spanning from 2009 to 2013, “That were not supported by any documentation, nor followed by payments that would suggest monies were owed to vendors as of the end of the fiscal year.” According to the audit, this practice allowed “an aggregation of unliquidated balances to accumulate over the years.”

    The audit confirmed whistleblower allegations that SamTrans set aside millions, by claiming the money was spent on fake and inflated expenses. This allowed the district’s finance leaders to build up a reserve of at least $2.5 million.

    “There were mistakes that were made,” SamTrans spokesperson Jayme Ackemann told NBC Bay Area, acknowledging the audit’s findings. However, Ackemann denies the money was set aside intentionally.

    “That money was accrued and never reversed out for reasons we’re still unsure about,” Ackemann said.

    The NBC Bay Area Investigative Unit first asked SamTrans CEO Mike Scanlon about these mistakes in September 2013.

    He brushed off the concerns, citing the district’s multiple financial awards and lauding the competency of his finance staff, “Our people are outstanding. Your viewers and the public should take great comfort in knowing they work here as public servants,” Scanlon said.

    He denied any problems, saying if there were mistakes, they were likely clerical in nature.

    “There were no made up expenses, none zero,” Scanlon reiterated.

    But Ackemann later revised that stance after the DA’s investigation.

    “We have reversed that money back into our general fund and identified the process to avoid that in the future,” Ackemann said, adding that SamTrans has increased staffing levels and “improved oversight.”

    But those responses were less than reassuring to commuters who rely on Caltrain. The service carries 50,000 riders per week between San Francisco and Gilroy. Some question why nothing has happened to the managers responsible for what the DA called an “inappropriate use” of public funds.

    “You are basically saying, ‘Thank you for giving me your money, I will be keeping it, I am not going to spend it on what it is made for,’” Caltrain rider James Joyner said.

    NBC Bay Area requested interviews with board members from SamTrans and Caltrain. All declined except Ash Kalra, who said while he is concerned, he’s relieved the DA did not find evidence of embezzlement or criminal activity.

    “We have to make sure we do the best we can. It’s public money, we have to do the best we can to make sure it’s accounted for,” Kalra said.

    None of the board members mentioned the DA’s audit at SamTrans September board meetings and no one called for any actions following the audit’s findings.

    But SamTrans CEO Mike Scanlon announced he is retiring. He said it’s a decision he came to with his wife.

    “I just decided that it was finally time to pull the trigger,” Scanlon said. He hasn’t provided a date for when he will leave, but Scanlon is declining media requests for interviews about why he is stepping down.

    His retirement comes just months after taxpayers spent $51,591.95 including travel and expenses for his master’s degree from the University of Denver.

    That same week, the district board approved a motion to spend $37,500 to pay for the tuition of maintenance director David Olmeda to obtain the same degree.

    Unlike Scanlon, part of Olmeda’s deal is that he has to “commit to remaining with the district for at least two years” after he completes the master’s program.

    In the year since the allegations about fiscal impropriety at SamTrans arose, the only person who has been fired or disciplined from the finance department is Ling La, the senior accountant who first brought concerns to management. SamTrans says La was let go because of her performance and not as retaliation. She has filed a federal lawsuit against the district.

    Some riders question what’s happening with public money, and why no one has faced any discipline for the series of accounting irregularities that led the agency to hide $2.5 million in a reserve that wasn’t known to the board or the public.

    “I think something needs to change. The fact that they can get away with something like that, it may not seem like a big deal, to someone like me does seem like a big deal,” commuter James Joyner said.

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