Feb 25, 2014 14:58 Audit: CATS failure to collect revenue may be law violation Audit: CATS failure to collect revenue may be law violation Advocate staff photo by BILL FEIG -- CATS bus making its run. Auditor says inaction may violate state law Rebekah ALlen| firstname.lastname@example.org Feb. 25, 2014 Comments The Capital Area Transit System may have violated state law in failing to adopt safeguards that could have avoided the loss of more than $150,000 in bus fares and bus pass revenue, the Louisiana Legislative Auditor’s Office says in an audit report released Monday. CATS failed to account for those funds during an 18-month period beginning in 2012, the audit says. The 25-page report shows CATS management was aware of the cash shortages, but “failed to take substantive action to prevent repeated shortages.” The agency may have violated state laws “by continually neglecting to safeguard public funds,” the report says. The Legislative Auditor’s Office initiated its investigation after CATS management notified the office about suspicious payments that indicated then-CATS board member Montrell McCaleb used $1,484 of CATS funds to pay his personal bills. CATS management notified the Legislative Auditor on July 19, the day after The Advocate first reported the story. McCaleb was investigated by the Louisiana Inspector General’s Office, which led to his arrest in September. He has yet to be formally charged. District Attorney Hillar Moore III said he’s been waiting to meet with the other investigating agencies before making decisions about an indictment. The legislative auditor’s report focused primarily on three areas: $79,496 of uncollected bus fare revenue, $78,648 of uncollected bus pass revenue, and $35,459 paid to former administrators for hours not worked and leave not earned that were improperly awarded as part of severance packages. The report attributes the missing bus fare revenue to a lack of written policies and procedures for fare box processing, broken equipment and untrained employees. Much of the leadership in place during the reporting period has since been replaced. CEO Brian Marshall resigned in April and CATS Board President Isaiah Marshall, no relation to Brian Marshall, resigned in July. Both resigned in response to public outcry and criticism of their performances. CATS Chief Financial Officer Gary Owens resigned in August. And four other board members also have since been replaced. The audit found that from Jan. 1, 2012, to July 30, 2013, cash transactions totaling $1,944,154 were conducted on fare boxes, but only $1,864,658 was deposited into the bank, leaving a deficit of $79,496. On average, the monthly bus fare collections were short 4 percent, or $4,416. Brian Marshall told the Legislative Auditor’s Office that he hired security personnel to investigate the shortages, and ultimately concluded the shortages were related to bus operator error, according to the report. In a written response to the report, Brian Marshall said he learned about the fare box shortages in 2011 and determined it was the result of faulty equipment that the agency could not afford to replace. He said the fare boxes could not read the new $5 bills. Owens wrote in his written response that he conducted an audit in July and August of last year that confirmed theft was the principal cause of the reported shortages. In his subsequent resignation letter, he said he was not involved with the theft, but took responsibility as CFO. Current CEO Bob Mirabito, who began working at CATS in June, publicly announced the missing fare box revenue in an August news conference last year to demonstrate transparency during a time of public mistrust. There is only supposed to be 1 percent of variance, or room for error, from money collected compared with trips taken. But as of April, fare boxes were off by as much as 10 percent, translating into almost $11,000 missing for the month. Mirabito said Monday that prior to the Legislative Auditor’s report, he had already implemented several changes to address the fare box problem, and the fare boxes now have variances of less than half of one percent every month. But Mirabito said his staff was surprised by the findings related to missing bus pass revenue. Bus fares are transactions that occur on the bus, whereas bus passes are purchased ahead of time at the terminal, oftentimes for bulk trips. The audit found that for the time period examined, $355,336 worth of bus passes were used, but only $276,688 of bus pass revenue was deposited with the bank, indicating that some passes were being given as gifts to certain customers. Of the passes used, CATS has no record of selling or depositing funds associated with 15,064 passes, valued at $78,648. Mirabito said CATS has tightened its policies related to bus pass sales, and is looking into computerizing its transactions. Purchases currently are recorded manually. The audit also found that after Brian Marshall and Owens resigned, they were paid for hours and leave not earned, based on written policies. However, Mirabito contested some of these findings, noting that the Legislative Auditor’s Office was sourcing outdated policies from a 2005 employee handbook. Employee leave policies were updated in 2008 and 2012. Brian Marshall, in his written statement, takes exception with the legislative auditor’s report and notes that the agency was facing serious financial setbacks unrelated to the fare box collections that affected its operations. “The Capital Area Transit System had perpetual deficits and struggled daily to survive. The deficits caused a lack of staffing to effectively operate the business,” he wrote. “To further demonstrate that point, my leadership team was the first in many years of CATS history to have clean triennial federal audits and annual audits.” Following the state audit, CATS also was subjected to a rigorous investigation by the Federal Transit Administration. CATS has not yet had a meeting to learn the findings of the FTA audit, nor have those findings been made public.