State audit shows Island Transit’s finances in turmoil

ISLAND COUNTY — Reports by the Washington State Auditor’s Office puts blame for financial problems at Island Transit squarely at the feet of its five-member board of directors.

But the bombshell concerns Martha Rose, the former director, who took vacation without deducting it from her vacation balance. She will receive $106,000 in a severance package, including $88,000 in unused vacation.

Oak Harbor Mayor Scott Dudley, who’s on the board, said the vacation payout amounts to theft and he’s seeking an injunction to prevent Rose from being paid.

Rose could not be reached for comment.

A team from the state Auditor’s Office announced three official findings in the exit conference Friday largely attributable to lack to oversight. No misappropriation of public funds were identified, it emphasized.

The cause of the financial crisis, which led to service cuts and layoffs, was poor monitoring of finances by the board, one report stated.

The audits identified $100,000 in questionable costs associated with a federal grant — including the construction of gazebos — which could have financial consequences.

“Noncompliance with the grant requirements may require the transit authority to return all or a portion of this money to the grantor,” audit supervisor Jenny Lofton said.

The accountability audit largely focused on Rose. She received regular raises without board approval; her performance wasn’t reviewed since 1996; she took vacation without deducting it; and she claimed to go on two-week conferences when flight records show she was only gone for four or five days, according to a draft audit report.

The board approved a severance agreement with Rose following an Oct. 17 executive session. She will get two months’ salary — about $18,000 — plus $88,000 for unused vacation, per her contract, said Bob Clay, chairman of the transit board and a Coupeville councilman.

Clay said problems concerning Rose were the result of poor record keeping, but nothing nefarious.

“I don’t believe Martha stole time or anything else that didn’t belong to her,” he said, adding she had much more leave on the books than would have been allowed to be paid to her under the separation agreement.

The auditors conducted three types of audits covering the year 2013: Financial reporting, federal and accountability.

The audit found no deficiencies in financial reporting.

Auditors identified significant deficiencies and material weaknesses with the use of the $17.9-million federal State of Good Repair grant, which was used for the new transit facility and required a $4.8-million match.

The report states that Island Transit did not have adequate control to ensure that grant money was only being used for allowable purposes. The money was inappropriately spent on maintenance items, such as a tractor and tires, and two gazebos.

The questionable costs totaled $70,000, plus $37,000 in “likely questioned costs” for similar items purchased in 2013 and 2014.

The federal audit found the agency inappropriately substituted in-kind activities for the matching cash and claimed $13,000 in payroll expenses above what was actually paid. The auditors noted failures in record keeping, and the problems were resolved by the end of the audit.

The other finding in the federal audit is the agency’s financial condition, which “has impacted current service levels and puts it at risk of not being able to meet financial obligations.”

The report notes that the agency was deficit spending since 2011, drastically cutting the reserve funds.

Jessie Stensland: 360-675-6611, ext. 5056; jstensland@whidbeynewsgroup.com