Traverse City -- Next stop for the Bay Area Transportation Authority: The road to reform.
The publicly funded bus system that serves Grand Traverse and Leelanau counties is in line for a financial management overhaul and personnel tune-up as its longtime executive director retires.
Joseph DeKoning's impending departure from the BATA helm comes amid red-flagged audit letters and internal changes, including a new controller, as well as pledges from the agency's governing board to increase scrutiny of BATA finances.
DeKoning, 62, will retire at month's end. He directed BATA since 1996 and worked for the organization more than 16 years.
BATA employs more than 100 people and has a budget of about $5.6 million, a significant portion of which comes from a .35 mill property tax.
DeKoning, who makes $71,761 annually, hasn't returned a Record-Eagle reporter's calls for two months and wouldn't comment on his reasons for retirement at a BATA board meeting last month. Board members, though, said his retirement was at least "in part" because of health issues.
"There's a certain amount of stress with a job like that," said board member Jean Watkowski, a Leelanau County commissioner.
But members of the seven-person BATA board acknowledged weaknesses in BATA financial management and oversight, as well as deficiencies in accounting practices.
"As things roll out this spring, who knows if (DeKoning) wanted to leave for other reasons," said BATA board member Janet Wolf. "With the new financial person there and so on, things will start changing, I think."
Auditors in their October 2007 management letter -- an assessment of the fiscal year 2006 audit -- noted several problems. Among them:
-- Employee expense reports often were signed only by the employee making the request; paid expense documentation was lacking in some cases.
-- Bank reconciliations were untimely and not done with accounting software.
Auditors made repeat suggestions in management letters for fiscal years 2005 and 2006. Recommendations included:
-- A three- to five-year plan so the agency would not have to borrow money while awaiting tax collection.
-- A conflict of interest policy.
-- Improved cash handling.
New controller hired
In January, BATA hired a new controller, Eric Gray, to handle finances. Board members decided to become more involved and participated in the interview process that led to Gray's hiring.
They're now also working more closely with him to gain a better grasp of the organization's finances, details current and former employees and board members said DeKoning held close to the vest.
David Coville worked as BATA's finance director from July 2001 to January 2007, when his position was eliminated.
Coville contends DeKoning wouldn't let him share negative financial information with the BATA board, such as cash flow statements "that showed we weren't making money."
"I always had to review with Joe what I was going to show the board before I showed the board," Coville said. "There were certain things I couldn't say."
Wolf, a vice president at Munson Healthcare, said she wasn't aware of Coville's charge, but said she'd disapprove if that was the case.
Wolf said she's asked to see more detailed financial statements. Sometimes she'd ask and receive verbal answers, or data in formats that were difficult to understand.
"Probably as a board we should have been more insistent," she said.
Wolf and board member Tina Allen met Gray, the new controller, this month to discuss financial reports that he can provide to the board.
"I did want better financial reporting, and I think we're going to get it," Wolf said.
Numerous shortcomings
The audit for BATA's 2007 fiscal year should be finished this month.
"I think we're off to a pretty good start," said Bob Thompson, an auditor with Dennis, Gartland & Niergarth.
Things weren't so smooth during pervious audits. Auditors worked on and off for a year inspecting BATA's finances for fiscal year 2006.
The audit came out clean, but auditors' October 2007 letter to BATA's board uncovered numerous shortcomings with the organization's financial procedures.
And BATA had to rely on outside consultants last year to prepare records following Coville's dismissal, a move that cost taxpayers tens of thousands of dollars. Coville earned about $57,300.
"(Coville's) departure revealed many broken procedures in day-to-day operations, as well as the year-end reporting function," the auditor's letter to the BATA board stated. "This departure and the magnitude of adjustments needed heightened the overall risk assessment of BATA's audit and the timeline necessary to complete the audit."
BATA board Chairman Rob Bacigalupi also serves as deputy director of Traverse City's Downtown Development Authority. When asked about Coville's performance leading up to the fiscal year 2006 audit, he said:
"I would just say there were definitely some problems that had to be cleaned up last year, 2007."
After Coville's departure, BATA paid $27,667 from June to August 2007 to outside consultant Bott and Company for help with audit preparation, according to records obtained by the Record-Eagle through the state Freedom of Information Act.
The organization also paid roughly $125,000 in 2007 to Processing Concepts Limited, a company that provided audit preparation services as well as information technology assistance and computer equipment and software. BATA officials did not have the amount specifically spent on audit preparation.
In addition to nearly $5,000 for audit fieldwork, BATA paid auditors at least $7,375 for audit planning, consultation services and meetings to discuss areas that needed additional reconciliation for the audit of fiscal year 2006.
Gray prepared for the current audit and said he's "formed no conclusions or decisions at this point" about BATA finances.
Some board members participated in interviews for the controller position, a change of past practices.
"Obviously, we have a clean audit, which is good, but the audit identified some things they believed we needed to address, and it's not just one or two things," Bacigalupi said. "That's part of the reason we wanted to make sure we had somebody responsible, a controller responsible for making sure those things got done."
Self-examination
The Record-Eagle reported in November that BATA failed to construct 14 bus stop shelters it owned because, DeKoning said, details of a capital grant hadn't been worked out. Bad weather froze installation and left riders in the cold throughout the winter.
The story revealed a disconnect between staff and BATA board members, who said they weren't aware of the shelter hold-up.
BATA's board plans to examine its own functions, as well as the organization's management. Issues brought up in recent years' audits contributed to the need for the assessment, Wolf said.
"As a board, we just decided it's time to examine what our role is and what the accountability should be and what we expect of management," she said.
The board previously received monthly income statements, but now wants to see cash flow statements and other information on a monthly basis, Wolf said.
"In a transition you start thinking about how you want to make things better," she said in reference to the new controller, "and part of it is recommendations from the audit."
BATA board member Wayne Schmidt said he couldn't recall what concerns were raised by audits, or exactly what steps the board took in reference to it other than discussing it with DeKoning. He said he'd have to look at the audit again to refresh his memory.
"I can tell you based on the audit that my overall goals were to get a stronger person in that financial spot and have better analysis," said Schmidt, a Grand Traverse County commissioner.
Auditors made repeat suggestions in the audits for fiscal years 2005 and 2006, including recommendations for changes to cash-handling, expense reports and bookkeeping.
"On some level, you see those things and you expect them to be taken care of, and then we see them again," Bacigalupi said.
"We recognize that BATA has grown over the years, and as a board, we recognize that we probably have to catch up in terms of things like making sure we have a conflict of interest policy, making sure we have a clear purchasing policy," he said.
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