Controller Blasts Transportation Authority

By Carol Dimmick

City Controller Ed Harrington has accused the staff of a city agency that spends millions of dollars a year on transportation-related projects of playing fast and loose with the public's money.

Harrington, who will soon release a financial audit of the San Francisco Transportation Authority (SFTA), told the members of its finance committee Feb. 24 that the agency's staff wrote checks without balancing its accounts, failed to reconcile its bank statements, kept money in unauthorized accounts and hired incompetent auditors that failed to report bad practices.

Members of the SF Board of Supervisors serve as commissioners for the agency.

Voters created the SFTA in 1989 when they passed Proposition B, which authorized a new half-cent sales tax increase to fund transportation projects. The agency is expected to spend $1 billion over 20 years on a number of capital projects and its funds are required, by law, to be held in accounts with the city Treasurer.

Harrington's remarks came in connection with a request by Jose Luis Moscovich, the executive director of the SFTA, to authorize the agency to issue $200 million in commercial notes to raise enough capital to avoid stopping construction on the Third Street Light Rail Project.

During a discussion of the finances involved in raising the $200 million, a verbal confrontation developed between Supervisor Fiona Ma and Moscovich over his refusal, and Ma's insistence, that a financial expert from the City work with him on the transaction.

Ma told Moscovich that she had serious concerns about the ability of his staff to provide competent financial advice because a recent financial audit of the agency uncovered a number of troubling irregularities. She proposed that the city provide his office with financial expertise as a requirement of approving the $200 million transaction.

Ma also described a telephone conversation in which members of the agency's staff offered to alter records to eliminate accounting inconsistencies, which she said caused her great concern.

"They were not doing due diligence. They asked me, OK, what number do you want?" Ma said.

City Treasurer Susan Leal also warned commissioners not to approve the agency's request until her office had a chance to look over the terms of the deal. She repeatedly offered to act in an advisory capacity.

The most controversial testimony came from Harrington, who aimed his criticism at a staff he said lacked the elementary skills necessary to balance a checkbook.

"They are the worst agency I have ever audited. They could not do a bank reconciliation. All the numbers we looked at were wrong - they would just write checks," Harrington said.

Throughout the session Moscovich insisted he would be making periodic reports to the board about financial transactions, that his staff had the necessary expertise to advise him and that oversight by the City was unnecessary.

He also said that a preliminary report by Harrington showed no money was missing and accused Harrington's office of making a $66 million error.

"There are two sides to these equations," Moscovich said.

In a recent interview, Moscovich clarified his position, saying he was never opposed to interim financial assistance from the City, but was raising a concern that the agency should maintain its independence.

"We are a legally independent agency. The sales tax (that voters passed to create the SFTA) is based on the fact the we are an independent organization," he said.

Moscovich called Ma's and Harrington's allegations "troubling," but said it was premature to comment until the audit was completed. He also said the agency is undergoing a reorganization process and indicated that some positions will be eliminated to make the agency "stronger."

The Transportation Authority committee ultimately voted to authorize the sale of $200 million in commercial notes, with the requirement that Monique Moyer, director of public finance for the city of San Francisco, provide interim financial record-keeping for Transportation Authority staff.

SFTA To Spend $1 Billion Over 20 Years
Since its creation in 1989, the SFTA has spent more than $713 million on projects, including $19 million for street resurfacing, $48.5 million for traffic signal upgrades and $6.3 million for new traffic signals.

The agency is currently working on many important capital projects, including the Doyle Drive Project, which calls for replacing the southern approach to the Golden Gate Bridge, the Central Freeway Replacement Project and the Third Street Light Rail Project.