COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE HEARING BUDGET HEARING
STATE CAPITOL MAJORITY CAUCUS ROOM HARRISBURG, PENNSYLVANIA
THURSDAY, FEBRUARY 22, 2007 1:00 P.M.
VOLUME III OF V
PRESENTATION BY DEPARTMENT OF AUDITOR GENERAL
BEFORE:
HONORABLE DWIGHT EVANS, CHAIRMAN HONORABLE MARIO J. CIVERA, JR., CHAIRMAN HONORABLE STEPHEN BARRAR HONORABLE SCOTT H. CONKLIN HONORABLE CRAIG A. DALLY HONORABLE GORDON DENLINGER HONORABLE DAN FRANKEL HONORABLE JOHN T. GALLOWAY HONORABLE WILLIAM F. KELLER HONORABLE THADDEUS KIRKLAND HONORABLE BRYAN R. LENTZ HONORABLE TIM MAHONEY HONORABLE KATHY MANDERINO HONORABLE MICHAEL P. McGEEHAN
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1 BEFORE: (cont'd.)
2 HONORABLE FRED McILHATTAN HONORABLE DAVID R. MILLARD 3 HONORABLE RON MILLER HONORABLE JOHN MYERS 4 HONORABLE CHERELLE L. PARKER HONORABLE SCOTT A. PETRI 5 HONORABLE SEAN M. REMALEY HONORABLE DAVE REED 6 HONORABLE DOUGLAS REICHLEY HONORABLE DANTE SANTONI, JR. 7 HONORABLE MARIO M. SCAVELLO HONORABLE JOHN J. SIPTROTH 8 HONORABLE MATTHEW SMITH HONORABLE KATIE TRUE 9 HONORABLE GREG VITALI HONORABLE DON WALKO 10 HONORABLE JAKE WHEATLEY
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12 ALSO PRESENT: 13 MIRIAM FOX EDWARD NOLAN 14
15 BRENDA S. HAMILTON, RPR 16 REPORTER - NOTARY PUBLIC
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1 INDEX NAME PAGE 2 JACK WAGNER 4 3
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1 P R O C E E D I N G S
2 REPRESENTATIVE KELLER: The hour of
3 one o'clock having arrived, I'd like to call
4 to order the meeting.
5 General, good to see you.
6 AUDITOR GENERAL WAGNER:
7 Mr. Chairman, thank you. Nice to be here.
8 REPRESENTATIVE KELLER: I guess you
9 know, as Chairman Evans and Civera have said,
10 that we're not going to do any opening
11 statements. We're going to go direct to
12 questions.
13 I'd like to call on Representative
14 Siptroth, please.
15 REPRESENTATIVE SIPTROTH: Thank you,
16 Mr. Chairman.
17 AUDITOR GENERAL WAGNER:
18 Representative.
19 REPRESENTATIVE SIPTROTH: Auditor
20 General.
21 AUDITOR GENERAL WAGNER: How are you
22 today?
23 REPRESENTATIVE SIPTROTH: Good to see
24 you today.
25 For the benefit of some of the newer
5
1 members, including myself, would you offer the
2 various departments that you do audit in the
3 state? Would you offer the various
4 departments in the state that you do audits
5 for --
6 AUDITOR GENERAL WAGNER: Yes
7 REPRESENTATIVE SIPTROTH: -- for us?
8 Thank you.
9 AUDITOR GENERAL WAGNER: Thank you,
10 Representative, for the question.
11 As Auditor General, it's important to
12 note that we audit virtually every department
13 of state government and a wide variety of
14 other entities that receive state taxpayer
15 dollars. Five hundred one school districts;
16 intermediate units; cyber chartered schools;
17 650 liquor stores; volunteer fire relief
18 associations, which is the financial arm of
19 volunteer fire departments; every state
20 department. It goes on and on. Nursing
21 homes, correctional institutions, state
22 universities, et cetera.
23 And I'm here today obviously to
24 address all of you for our 2007/2008 budget.
25 I very much appreciate the support that this
6
1 Committee and the General Assembly has given
2 the Department of Auditor General in the past,
3 and my request today is a request that is
4 slightly greater than what the Governor has
5 proposed.
6 Our budget in 2006/2007 is
7 approximately $50 million. I have to tell you
8 that $50 million goes a long way. This past
9 year we performed 4,836 audits. Many of those
10 audits were very lengthy, in-depth analysis,
11 performance audits, of state government.
12 Audits such as Megan's Law; SERS, the State
13 Employee Retirement System; PSERS, the Public
14 School Employee Retirement System. We
15 recently completed an audit of the gasoline
16 pump inspection program in the Commonwealth
17 and a variety, and I mean a wide variety, of
18 other audits.
19 Our request is slightly greater than
20 what the Governor's proposed suggestion is.
21 Our budget, as I indicated, was approximately
22 $50 million this present year. The Governor
23 proposed an additional one million one
24 thousand dollars for 51, approximately 51
25 million one thousand dollars.
7
1 We are requesting an additional $1.7
2 million and all of that additional increase is
3 a result of labor contracts.
4 We are a department that is heavily
5 dependent on personnel. We have our
6 approximately 750 auditors in the field every
7 day, all 67 counties of the Commonwealth of
8 Pennsylvania. We are a very mobile operation,
9 and the labor cost increase is that additional
10 $1.7 million.
11 In total our budget would be
12 approximately $52.7 million for fiscal year
13 2007/2008. That increase, again, is related
14 to labor costs. We feel very strongly that
15 those dollars will be well spent.
16 The Department of Auditor General is
17 two-tenths of one percent of the state
18 budget. And I would argue here today that the
19 taxpayers of Pennsylvania, the 12.5 million
20 taxpayers, get their bang for their buck for
21 us being the fiscal watchdog, making sure
22 there's no fraud, waste, and abuse in state
23 government.
24 REPRESENTATIVE SIPTROTH: Thank you,
25 Auditor General. As a treasurer of the relief
8
1 association of our local fire department, I
2 have direct contact with your auditors and
3 have been audited numerous times and have
4 served in that position for approximately 18
5 years now. So annually on a triangle basis
6 they do audit my books and I certainly hope
7 that doesn't become a conflict of interest
8 since I'm serving as a representative now.
9 But, nonetheless, I thank you very
10 much for your testimony and your budget
11 requests.
12 And, Mr. Chairman, that's all the
13 questions.
14 REPRESENTATIVE MCGEEHAN: Thank you,
15 Representative Siptroth.
16 I want to welcome you, Auditor
17 General Wagner. We're very glad to have the
18 testimony. To the rest of the state you may
19 be the Auditor General but among the House
20 members you're simply Representative Chelsa
21 Wagner's uncle.
22 AUDITOR GENERAL WAGNER: Thank you,
23 Mr. Chairman.
24 REPRESENTATIVE MCGEEHAN: For the
25 record I recognize Representative Reed.
9
1 REPRESENTATIVE REED: Thank you,
2 Mr. Chairman.
3 And thank you, Mr. Auditor General,
4 for appearing before us today. It's always
5 good to have another guy that spent a little
6 bit of time down at IUP down here in state
7 government, and we had Patrick Stapleton, Jr.
8 down here yesterday testifying before us and
9 he grew up in Indiana so it was great having
10 the Indiana County connections.
11 Before I read over some of the
12 Governor's budget book last night, I actually
13 didn't think I'd have any questions today; and
14 then, when you go through the particular funds
15 and requests, I think they're very reasonable
16 requests and you've done a pretty good job for
17 your term in office in executing the job of
18 Auditor General
19 Then I came along to the program
20 objective of the Auditor General, and I
21 actually came to something that kind of
22 compelled me a little bit. I want to dive
23 into it for just a couple moments.
24 It actually appears in the Governor's
25 executive budget on Page E 5.5. And I'm just
10
1 going to read the paragraph. The paragraph
2 states: The fiscal code also requires the
3 Auditor General to audit public assistance
4 payments to determine the eligibility of
5 persons receiving public assistance grants.
6 Recipients are subject to continuous audit.
7 These audits serve to adjust grants to persons
8 either ineligible or receiving over or
9 underpayments.
10 And I guess my first question would
11 be could you just give us a real brief
12 description of what programs under the
13 Department of Public Welfare your office would
14 audit?
15 I would assume Cash Assistance,
16 Medicaid, food stamps, volunteer management
17 care for long-term elderly. But could you
18 correct me if I'm wrong but those are not
19 programs you're auditing and could you expand
20 on that just real quickly please?
21 AUDITOR GENERAL WAGNER: Yes,
22 Representative Reed. I'll be happy to.
23 There are a wide variety of programs
24 within the Department of Public Assistance or
25 Public Welfare that we audit. We audit
11
1 routinely mental retardation facilities across
2 the Commonwealth. We audit camps where young
3 people are -- or correctional facilities where
4 young people are housed. We audit them also
5 on a regular basis.
6 We audit the county assistance
7 offices, of which there are over 100 of those
8 county assistance offices, on a routine
9 basis.
10 We don't audit every single
11 transaction that's part of those operations,
12 but we do random samples.
13 We have a number of complaints that
14 come into our toll free number, 1.800.922.8477
15 about potential fraud that exists within
16 public assistance. Generally speaking, those
17 individual items are turned over to the Office
18 of Inspector General of the Commonwealth.
19 We also perform a single audit, which
20 is a required audit, of the Commonwealth and
21 the resources of the Commonwealth, including
22 the federal dollars that come into the
23 Commonwealth of Pennsylvania.
24 Our budget is about 26.3 million, and
25 there is almost an additional $30 million in
12
1 federal monies that come into the
2 Commonwealth. If I'm not mistaken, about 11
3 million of those dollars go towards public
4 assistance programs.
5 We perform a single audit. We have
6 audited welfare to work through the single
7 audit. We have identified some problems in
8 our audit associated with that. Some of those
9 concerns are also concerns of the federal
10 government.
11 So in a wide variety of ways we have
12 looked at the Department of Public Welfare and
13 we are always open to suggestions from the
14 General Assembly to not only do our routine
15 financial audits but any special performance
16 audits.
17 REPRESENTATIVE REED: Just to make
18 sure that I understand your response
19 correctly, I think I understand it, within
20 that paragraph that I talked about, it talks
21 about the eligibility of persons receiving
22 public assistance.
23 AUDITOR GENERAL WAGNER: Yes.
24 REPRESENTATIVE REED: Do you
25 generally audit individuals receiving public
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1 assistance or is it a general practice of the
2 Auditor General's Office to relay those
3 particular complaints, investigations,
4 whatever you want to call it, over to the
5 Office of Inspector General?
6 AUDITOR GENERAL WAGNER: If it is a
7 specific complaint, it goes to the Office of
8 Inspector General.
9 Our audits of county assistance
10 offices are audits of the employees performing
11 the daily functions and whether or not those
12 employees are requiring the appropriate
13 documentation.
14 REPRESENTATIVE REED: Okay. So
15 generally you're looking at the Department
16 side of it; you're not looking at the
17 recipient side of it. You turn that over to
18 the Office of Inspector General.
19 AUDITOR GENERAL WAGNER: That's
20 correct.
21 REPRESENTATIVE REED: Okay. That
22 concludes my questions.
23 Mr. Chairman, if I could just make a
24 request of the Chair at this time. Because
25 the Office of the Inspector General is not a
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1 row office as the Officer of Auditor General
2 and that falls under the Office of the
3 Administration, the Appropriations Committee
4 generally does not have the opportunity to
5 directly question the Office of the Inspector
6 General.
7 But on March the 8th at 1:00 p.m. the
8 Office of the Administration is scheduled to
9 be -- to appear before us, so I make the
10 request of the Chair that we could request
11 that the Inspector General come with the
12 Office of the Administration because I have a
13 number of follow-up questions about the
14 particulars of those types of investigations;
15 that as we determined the Auditor General is
16 not the appropriate person, I'd like to have
17 the Inspector General before us so we could
18 ask those questions and find out some of the
19 conclusions to those questions, sir.
20 Thank you.
21 REPRESENTATIVE MCGEEHAN: Thank you,
22 Representative, and your comments are duly
23 noted and will certainly be considered.
24 REPRESENTATIVE REED: Thank you.
25 REPRESENTATIVE MCGEEHAN: I want to
15
1 recognize Representative Sean Ramaley.
2 REPRESENTATIVE RAMALEY: Thank you,
3 Mr. Chairman.
4 Good afternoon, Auditor General.
5 It's always good to see you.
6 AUDITOR GENERAL WAGNER: Good
7 afternoon.
8 REPRESENTATIVE RAMALEY: You have had
9 a distinguished career in public service,
10 including a background in public safety, and
11 we've talked already this morning about some
12 of your duties auditing the various
13 departments of the state.
14 Can you, with all that experience,
15 offer some insights into what happened during
16 the snow emergency last week? I know in the
17 next two days, today and tomorrow, there are
18 going to be various legislative hearings on
19 that. But could you offer some insights on
20 that?
21 AUDITOR GENERAL WAGNER:
22 Representative, I have had a number of people
23 ask me questions about the Department of
24 Auditor General's analysis of the storm that
25 Pennsylvania encountered this past week and
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1 obviously the national news attention that's
2 been given to us.
3 We have not initiated any particular
4 investigation or audit of the Commonwealth's
5 actions or lack thereof.
6 It is my understanding through news
7 releases that there are three separate
8 investigations that are occurring. As a
9 matter of fact, one is beginning as we speak,
10 I believe, by the Senate of the Commonwealth
11 of Pennsylvania.
12 And it's my understanding also the
13 House of Representatives is initiating its own
14 investigation, and there is a third
15 investigation initiated by the administration
16 itself.
17 We have chosen to wait and see the
18 results of those three investigations prior to
19 us initiating any audit or investigation of
20 our own. We could very well audit the
21 agencies of state government as it relates to
22 their actions or lack thereof or we could
23 initiate an investigation through our Office
24 of Special Investigations.
25 What I should mention is, at the
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1 present time, we are performing a mandated
2 four-year performance audit of the Turnpike
3 Commission. And in that audit we -- last week
4 our auditors communicated with the Turnpike
5 Commission themselves to ask some questions
6 about their maintenance procedures of
7 obviously the Pennsylvania turnpike.
8 Keep in mind, the three roads that
9 shut down, Route 78, Route 80, and Route 81,
10 intersect at least in a couple locations with
11 the Pennsylvania turnpike, especially the
12 Northeast Extension.
13 And what was -- the important
14 question we asked them was, did your road stay
15 open during those severe weather conditions
16 and the response was yes.
17 And so we asked additional questions
18 and found out, quite frankly, that the
19 Turnpike Commission has what is called a bare
20 pavement policy where during severe weather
21 conditions they initiate the removal of snow
22 and ice immediately when, in fact, its my
23 understanding through news reports that was
24 not the procedure of PennDOT.
25 So you have a drastic difference
18
1 between what happened on -- on one
2 Pennsylvania road versus other interstate
3 highways that are under the control of the
4 Commonwealth of Pennsylvania.
5 So -- and, as a matter of fact,
6 yesterday I initiated a letter, sent a letter
7 to the Governor stating that the Turnpike
8 Commission -- their maintenance policy appears
9 to be a superior policy and that should be
10 taken under consideration as part of the
11 investigation.
12 So I know that's a long answer to
13 your question. If we think those three
14 investigations are not sufficient enough,
15 we'll initiate our own.
16 And I would just further add, I think
17 this issue comes back to leadership and
18 management and, whatever the reports are that
19 are completed, they should also have
20 recommendations, findings related to those
21 management responsibilities.
22 REPRESENTATIVE RAMALEY: That's
23 great. Very helpful. Thank you very much.
24 Thank you, Mr. Chairman.
25 AUDITOR GENERAL WAGNER: Thank you.
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1 REPRESENTATIVE MCGEEHAN: Thank you.
2 Representative Ron Miller.
3 REPRESENTATIVE MILLER: Thank you,
4 Mr. Chairman.
5 Auditor General, last year your
6 office identified that the city of Altoona
7 borrowed more than $2 million from the city
8 employees pension fund and used it for general
9 spending.
10 Now, I know that your office has no
11 statutory authority to go after that or to
12 enforce it or to enforce your audit findings.
13 What do you do with that? Once you
14 have those findings issued, what happens?
15 AUDITOR GENERAL WAGNER:
16 Representative Miller, that's a good
17 question. We do over 2500 municipal pension
18 audits. Really a monumental task for our
19 department.
20 And, as you know, and I don't recall
21 all the specific particulars because there are
22 so many of those audits, but if I'm not
23 mistaken, the Altoona audit related to the use
24 of a local tax for pension purposes that was
25 being utilized for general operating
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1 expenses. And while we were auditing the
2 responsibility that we had for the state funds
3 going to nonuniform and uniform pension plans
4 in Altoona, we identified that issue. And we
5 thought it was our responsibility to bring
6 that to light.
7 What we do with it is ultimately up
8 to the local entity in that particular
9 situation. If I'm not mistaken, we do not
10 have direct jurisdiction in that particular
11 situation.
12 Now, if there were state funds going
13 to Altoona, we would hold new funds going to
14 that community if we found that pension funds
15 were improperly utilized or, let's say,
16 utilized, in this instance, for general
17 operating expenses.
18 And, quite frankly, we find that in
19 more situations than -- than you think
20 throughout the Commonwealth. But generally
21 where we find it we find it with the use of
22 state dollars rather than local dollars.
23 REPRESENTATIVE MILLER: So basically
24 once you identify something like this, then
25 it's up to the local government entity to take
21
1 action?
2 AUDITOR GENERAL WAGNER: To correct
3 it.
4 REPRESENTATIVE MILLER: Correct it?
5 AUDITOR GENERAL WAGNER: Yes. And
6 I'm more than happy to get back to you on the
7 particulars of that -- that individual
8 situation, but our findings, our
9 recommendations we make public as part of the
10 audit, which is a public document, and we're
11 doing that on behalf of the taxpayers of the
12 community whom were taxed for a specific
13 reason and the dollars collected should be
14 used for that specific purpose.
15 REPRESENTATIVE MILLER: I appreciate
16 that answer. I agree with your opening
17 remarks where I believe the people of
18 Pennsylvania get good bang for their buck.
19 I'm just trying to figure out the
20 follow-through then on some of these issues.
21 I thank you.
22 AUDITOR GENERAL WAGNER: Thank you.
23 REPRESENTATIVE MILLER: Thank you,
24 Mr. Chairman.
25 REPRESENTATIVE MCGEEHAN: Thank you,
22
1 Representative Miller.
2 Representative Matt Smith.
3 REPRESENTATIVE SMITH: Thank you,
4 Mr. Chairman.
5 Auditor General Wagner, it's always
6 great to see you, a fellow Allegheny County
7 resident, out here in Harrisburg.
8 You noted in your statement that one
9 of your key audit recommendations over the
10 last year or so related to recommendations to
11 improve the state's Megan's Law website.
12 I'm just wondering what those
13 regulations entail and whether you can give a
14 progress report whether we've met -- met the
15 level of recommendations that you recommended.
16 AUDITOR GENERAL WAGNER:
17 Representative Smith, the Megan's Law audit
18 that was completed by our Department in the
19 middle part of last year, I believe maybe
20 April or May of last year, was a very, very
21 important audit.
22 Obviously Megan's Law was passed by
23 the General Assembly for -- primarily for the
24 protection of children of the Commonwealth of
25 Pennsylvania against sexually violent
23
1 predators and sexual offenders.
2 That audit had a number of
3 recommendations to improve Megan's Law
4 legislatively and administratively. And, you
5 know, I'm here to commend all of you, the
6 General Assembly, because many of the
7 recommendations that were part of that audit
8 were passed in the form of legislation in
9 2006, in November of 2006, and are in the
10 process of implementation.
11 And one excellent example of that is
12 that prior to the passage of your legislation,
13 there were approximately 200 sexually violent
14 predators listed on the website for Megan's
15 Law. Today there are the sexually violent
16 predators, those 200-plus, another 8600 sexual
17 offenders, and what that information does is
18 it gives the average resident of Pennsylvania
19 the knowledge, the information they need to
20 know if a sexual offender lives next door or
21 lives a block down the street.
22 There were other enhancements in the
23 legislation also, physical identification,
24 information that is now on the website that
25 wasn't there previously.
24
1 We also recommended a number of
2 enhancements by the State Police themselves,
3 some of which have been implemented, some of
4 which have not been.
5 But we think that audit and the
6 legislation that followed it was a critical
7 piece of information for the safety of
8 Pennsylvanians.
9 REPRESENTATIVE SMITH: Thank you,
10 Mr. Chairman.
11 REPRESENTATIVE MCGEEHAN: Thank you,
12 Representative Smith.
13 Representative Dave Millard.
14 REPRESENTATIVE MILLARD: Thank you,
15 Mr. Chairman.
16 Auditor General Wagner, welcome here
17 this afternoon.
18 AUDITOR GENERAL WAGNER: Thank you.
19 REPRESENTATIVE MILLARD: The Auditor
20 General's Office is responsible for the
21 distribution of the Firemen's Relief Fund
22 payments to volunteer fire associations; and
23 having served as secretary and president in
24 that organization for a number of years, I
25 know that these funds are derived from a two
25
1 percent tax on insurance companies out of
2 state that the premiums are paid to.
3 But my question is something I'm a
4 little unclear on here. Is it your office
5 that actually determines the distribution of
6 funds to these organizations and is that
7 distribution -- is it -- is it based on a
8 formula or is there some other methodology
9 involved in that?
10 AUDITOR GENERAL WAGNER:
11 Representative, first off, let me commend you
12 for your service to the volunteer fire
13 department, and there's other members of the
14 General Assembly that are part of that also.
15 That -- there is a formula, a formula
16 that is part of the legislation that passed
17 for the allocation of those dollars, and that
18 formula is based on, I believe, the assessed
19 value of property within the community and
20 population -- there's another factor in there
21 that I'm not recalling it right now but, yes,
22 we do distribute those dollars.
23 Now, what's important for all of you
24 to know is that, even though we distribute
25 those dollars, we also audit the VFRA's.
26
1 There -- these are distinct, separate
2 functions within the Department of Auditor
3 General.
4 There is a firewall between the two,
5 if I could use that terminology. Meaning that
6 it is our Comptroller's Office that
7 distributes those dollars to the VFRA's.
8 Actually to the local community of which the
9 dollars then go to the VFRA's.
10 It is then obviously utilized,
11 according to the permissible use of those
12 dollars, and we ultimately audit to make sure
13 the dollars are properly utilized.
14 There is one other aspect that you
15 may or may not know that I think is a great
16 service that we provide approximately eight to
17 ten evenings a year.
18 We actually have educational sessions
19 where our people in the Bureau of Fire Audits
20 have around the state in different regions of
21 the state where we ask those volunteers, who
22 are not accountants, who have not
23 traditionally done paperwork, and we have a
24 booklet by which we show them the appropriate
25 accounting procedures that are necessary to
27
1 keep the books accurately.
2 Because if we don't do that,
3 obviously those volunteer fire relief
4 associations would have to hire accounting
5 firms, et cetera, to -- to -- to keep the
6 books. So we have found actually that there
7 is a great level of rapport and communication
8 between our auditors and the volunteer fire
9 relief associations.
10 REPRESENTATIVE MILLARD: I have
11 attended many of those sessions and have the
12 certificates and they have been extremely
13 helpful.
14 Thank you.
15 AUDITOR GENERAL WAGNER: Thank you.
16 REPRESENTATIVE MCGEEHAN: Thank you,
17 Representative Millard.
18 Representative Jake Wheatley.
19 REPRESENTATIVE WHEATLEY: Thank you,
20 Mr. Chairman.
21 Good afternoon.
22 AUDITOR GENERAL WAGNER: Good
23 afternoon.
24 REPRESENTATIVE WHEATLEY: It's always
25 a pleasure. In a former life you were part of
28
1 my senator's team that represented my
2 district, as well as we share a common bond
3 that many may not know as a -- two former
4 Marines. So it was always an honor and
5 privilege to be in your presence.
6 Today I have like three tracks of
7 questions. One is around your school
8 auditing, really around performance. I know
9 you do both financial audits but you also do
10 performance audits.
11 So I want to talk a little bit about
12 how those performance audits are -- are done
13 and are they done in a way of -- of
14 measuring -- I guess the question is, do
15 you -- when you do your performance audits, do
16 you measure them against what we as the
17 Commonwealth say we are trying to produce and
18 then say we're spending dollars X, Y and Z
19 and we're moving this towards what we say our
20 goals are -- is or are and -- or we're missing
21 the boat on this and we should be changing or
22 you recommend some changes to how we are
23 spending our dollars in that area. So is that
24 the type of performance audit you do on school
25 districts?
29
1 AUDITOR GENERAL WAGNER:
2 Representative Wheatley; we do a performance
3 audit on school districts generally related to
4 issues such as teacher certification, bus
5 driver licensing, issues related to maybe
6 excess spending.
7 A good example would be that we've
8 noted in many of our school district audits
9 the multiple payment of superintendent
10 contracts.
11 We -- I think what you're getting at,
12 do we go in and measure performance as it
13 relates to education?
14 REPRESENTATIVE WHEATLEY: Right.
15 AUDITOR GENERAL WAGNER: No. We
16 don't do that.
17 REPRESENTATIVE WHEATLEY: Now, is
18 that outside of your -- your understanding
19 what your regulatory responsibilities are?
20 AUDITOR GENERAL WAGNER: We -- we
21 in -- there's a couple ways to -- to audit
22 education.
23 One is through a departmental audit
24 of the Department of Education, which should
25 be making certain that school districts are
30
1 performing at the level in which they are
2 required to, whether that's a state mandate or
3 a federal mandate.
4 REPRESENTATIVE WHEATLEY: Sure.
5 AUDITOR GENERAL WAGNER: Then the
6 individual audits of the school districts
7 themselves.
8 From a programmatic point of view,
9 that would probably be more suited for us in
10 terms of an audit, a performance audit of the
11 Department of Education for all 501 school
12 districts.
13 REPRESENTATIVE WHEATLEY: Okay. And
14 would -- you wouldn't need any direction to do
15 that; you could do that on your own if you so
16 desired? Is that -- is that my
17 understanding?
18 AUDITOR GENERAL WAGNER: Yes. But I
19 have to be frank with you. That would be --
20 that would be -- that may be a complicated
21 audit based on federal and state mandates.
22 REPRESENTATIVE WHEATLEY: And the
23 reason I -- I guess the reason I'm going down
24 this line of questioning on this particular
25 instance is because I believe -- and this is
31
1 only my personal belief, but I think the facts
2 bear this out -- I believe we are in a serious
3 downward spiral as it relates to educating our
4 children in the Commonwealth and I should say
5 that when I say -- with the caveat, I think
6 that Governor Rendell and his administration
7 has tried to focus in on this issue and
8 address it.
9 But it's even more apparent that when
10 we drill the data down and look at children of
11 color in the Commonwealth and we compare all
12 children as relates to the standards we have
13 in this Commonwealth to international
14 standards we are in a serious, serious crisis
15 in education.
16 And we -- we say our goals are one
17 thing, but I don't know of any evidence that
18 we actually measure to see if we are actually
19 spending money appropriately to get us to the
20 goals that we say and that we have a clear
21 plan of how, if we are not spending the money
22 appropriately, how we get to spending the
23 money in an appropriate manner.
24 So I'm just curious about who -- who
25 monitors that we are spending money in a wise
32
1 way to get us to where we say we want to go?
2 And at what point does it become something
3 that we as the General Assembly and the
4 administration make it an issue and at what
5 point does it become an independent agency,
6 like you, who would come in and make that an
7 issue? So that's one.
8 The second is a long reply. But I
9 know that you are also planning to be very
10 active in the slots industry in monitoring
11 those, that those commitments are made.
12 What do you see as maybe future needs
13 from a -- from a legislative standpoint to
14 help you do what you need to do to ensure
15 Pennsylvanians get jobs at these sites, that
16 the minority pieces of the contract or the
17 demands on making sure contracts go through
18 minorities or whatever, to make sure all those
19 pieces are carried out and someone is held
20 accountable in making sure that's actually
21 what's happening?
22 So do you anticipate needing any
23 other resources or any other support from a
24 legislative standpoint to make sure that
25 happens?
33
1 AUDITOR GENERAL WAGNER: Well,
2 Representative Wheatley, I appreciate you
3 asking because we are about to reconnoiter on
4 a major new objective of which that will be
5 auditing gaming.
6 But as all of you know, our audit
7 function is a post audit function, which
8 really means that gaming has to be up and
9 operating before we can perform our audit
10 function. And that could be a wide range of
11 areas.
12 What I did do in December of last
13 year was send the Chairman, Chairman Decker, a
14 letter indicating upfront that we would be
15 initially looking at the hiring process of the
16 gaming entities, where the licenses are
17 awarded.
18 We did that for a reason, quite
19 frankly. I seldom ever come out and say that
20 we are doing an audit of this entity and this
21 is what we're looking at. We generally let
22 the audit speak for itself.
23 We did that because, as all of you
24 know, the gaming legislation was sold as an
25 economic generator for Pennsylvania, the
34
1 creation of jobs, 10 to 15,000 new jobs, and a
2 property tax reduction.
3 We -- we will audit property tax
4 reduction once the -- the monies begin to flow
5 and make sure those dollars are going to
6 property -- property tax reduction. But prior
7 to that there's going to be the hiring of new
8 employees.
9 If you look at the licenses that have
10 been awarded, the far majority are very close
11 to the borders of Ohio, West Virginia,
12 Delaware, New Jersey and New York.
13 It is our concern that these gaming
14 entities will be hiring people from out of
15 state. So we upfront said we are going to
16 grade you as to the percent of new hires that
17 are Pennsylvania residents and we're going to
18 look at two other areas. We're going to look
19 at diversity in hiring and making sure that
20 the diversity within that particular entity is
21 reflective of the region where the license is
22 located.
23 And the third item, of which the
24 Gaming Control Board has not done a good job
25 so far, is background checks for all new
35
1 hires. Because everyone working in a casino
2 must have a background check prior to
3 employment. So we have kind of set the bar up
4 there.
5 Now, we audit the Pennsylvania Gaming
6 Control board. We can't audit the private
7 entity. But what we've really said to them is
8 these are issues that we're going to look at
9 with all of you to make sure that they are
10 adhering to the intent of the legislation that
11 passed.
12 Will we need additional resources to
13 do that? I have not come in front of the
14 General Assembly asking for one dollar more to
15 audit gaming. Primarily because we have not
16 initiated the process yet and we will
17 gradually get into it.
18 There is the potential a year from
19 now, in next year's budget I may come back and
20 say we need some additional resources for
21 gaming.
22 REPRESENTATIVE WHEATLEY: Then one
23 final question, Mr. Chairman.
24 I've been very consistent in every
25 department that has come before that I've
36
1 asked a question to around the diversity issue
2 because, quite frankly, I'm -- I'm tired, like
3 I think many of my colleagues, of having to
4 address this year in and year out of the
5 disparities, regardless of what social or
6 economic or health related or -- issue.
7 People of color are tending to be on
8 the bottom of those things. And so as the
9 Auditor General, if you were directed, could
10 you -- do you have the resources and the
11 capabilities to do an audit of all of the --
12 of our state spending, because I believe we
13 spend a ton of money, to correct those
14 disparities, could you look at all of the
15 state spending as it relates to either the
16 health or education or even in employment and
17 contracting and come back and say to us, we're
18 spending all of this amount of money to
19 correct and we're really off the boat because
20 what we spend in education doesn't make sense
21 to what we're doing in the job training and
22 what we've been doing as it relates to
23 contracting because it doesn't seem like it
24 has systematic -- there's a systematic
25 approach and offer up recommendations and ways
37
1 by which we can spend money more appropriately
2 to address the disparities that we're seeing
3 throughout the Commonwealth?
4 Is that something the Auditor General
5 has the capacity to conduct and, if so, what
6 would be the -- what do you anticipate needing
7 to be able to do that?
8 AUDITOR GENERAL WAGNER: Well, the --
9 we have the capacity to do special performance
10 audits of identifiable programs within the
11 Commonwealth of Pennsylvania.
12 We do not have the capacity to do a
13 special performance audit of every program.
14 We have 20 to 25 people in our special
15 performance audit area that just completed
16 audits of SERS, PSERS, Megan's Law, the
17 gasoline pump inspection program, and several
18 others.
19 In a certain area we can go in -- for
20 instance, minority contracts, we could go in
21 and audit that. That was done by the previous
22 Auditor General. If -- if there seems to be a
23 need to audit that, yes, we can go in and
24 audit that program.
25 It -- it's not possible for us to do
38
1 a special performance audit of every program
2 in state government and begin to compare
3 them. We have to do it one at a time.
4 REPRESENTATIVE WHEATLEY: All right.
5 Thank you.
6 Thank you, Mr. Chairman.
7 REPRESENTATIVE MCGEEHAN: Thank you,
8 Representative Wheatley.
9 Representative Scott Petri.
10 REPRESENTATIVE PETRI: Thank you,
11 Mr. Auditor General. And thank you for your
12 testimony.
13 Can you -- just following up a little
14 bit on Representative Wheatley's questioning,
15 can you tell me what is the trend on
16 performance audits? Is it more or less the
17 same as a percentage of total audits or is it
18 going up?
19 AUDITOR GENERAL WAGNER: Actually,
20 Representative Petri, it's going up and the
21 reason why it's going up is that we have tried
22 to identify more areas of performance in each
23 and every one of our audits and a good example
24 is that right now we are surveying 501 school
25 districts, the cyber charter schools, and the
39
1 I's and vocational-technicals on the whole
2 issue of safety within the school system.
3 And we are -- and the reason why
4 we're surveying it -- as a matter of fact, the
5 School District of Altoona, I toured the
6 School District of Altoona and found that they
7 have an excellent security system for safety
8 within the school district.
9 We're trying to learn from the
10 school -- good school districts and we are
11 going to implement that as part of a
12 performance component of school district
13 audits.
14 REPRESENTATIVE PETRI: Very good.
15 And I would imagine they're more labor
16 intensive? They just take more hours and
17 personnel?
18 AUDITOR GENERAL WAGNER: They are.
19 REPRESENTATIVE PETRI: I want to
20 echo, you know, some of my colleagues. I
21 believe it's probably the most important area
22 for us because we all come up with ideas and
23 we pass them and we think they're good ideas,
24 but how those tax dollars are actually spent
25 in a performance sense is important to us so
40
1 that we can go back and adjust the programs
2 and say, well, it was a great idea but you
3 know what? It didn't really work the way we
4 thought it would. And that's really an
5 essential function.
6 So I think the taxpayer gets a
7 tremendous bargain for what we spend on
8 performance audits.
9 One item that I saw come up in your
10 report and, of course, it's come up in every
11 report we've had. I just haven't asked the
12 question yet. So unfortunately you get it.
13 Are personnel costs. And I see that
14 generally what has been happening department
15 after department is there was a
16 three-and-a-half percent increase issued this
17 year with something known as a signing bonus
18 of $1,250 per employee.
19 Can -- first of all, how much of an
20 input -- and I think I already know the answer
21 to this -- do you as the Auditor General have
22 in how that state contract is negotiated?
23 AUDITOR GENERAL WAGNER: Virtually
24 none.
25 REPRESENTATIVE PETRI: Yeah. Us,
41
1 too. Of course, we have the dubious
2 distinction of having to pay for it because it
3 is a legal obligation.
4 In your -- in your appropriation
5 request, is it -- do I understand that you're
6 looking for the funding for 750 positions so
7 that, in other words, the administration
8 negotiated a signing bonus that amounted to
9 750 people in your -- in your department?
10 AUDITOR GENERAL WAGNER: Yes.
11 REPRESENTATIVE PETRI: Okay. You
12 know, I know that there tends to be a tendency
13 to think that anything under 10 million is not
14 a lot of money, but that's $937,500 more or
15 less to the penny.
16 Do you have any idea -- and maybe you
17 don't know -- how many signing bonuses we're
18 going to be asked to pay for among all the
19 state employees who got signing bonuses?
20 AUDITOR GENERAL WAGNER: I don't know
21 that total number; but if I could just explain
22 very briefly, our budget request of an
23 increase is not just -- not related to the
24 signing bonus. It was also the increase that
25 was negotiated under the existing contract and
42
1 was implemented January 1st of this year which
2 will carry forward in the future years.
3 REPRESENTATIVE PETRI: I'm glad you
4 said that, Auditor General. I certainly
5 wasn't trying to change the record in any
6 way. You are correct.
7 You were -- you're given this
8 contract and you need to ask for that money
9 and you're going to need that money to pay
10 your employees because it's a legal obligation
11 for you, too. So -- so you are correct.
12 Going back to my earlier question, do
13 you know how many state employees got what is
14 known as a signing bonus?
15 AUDITOR GENERAL WAGNER: I -- I don't
16 know that precise number.
17 REPRESENTATIVE PETRI: And as I
18 understand it, that applies to anyone who is
19 already an employee. I mean normally I think
20 of a signing bonus as, gee, if I sign up with
21 the Sixers, I would only wish I could, that I
22 would get a signing bonus of a couple hundred
23 thousand dollars just for signing the
24 contract.
25 But this is different. This is just
43
1 any employee got -- in other words, in my view
2 it was a way to say, well, instead of a
3 four-point-whatever percent increase or five
4 percent increase, it was a 3.5 percent
5 increase and you've got this bonus of 1250
6 each.
7 AUDITOR GENERAL WAGNER: It's my
8 understanding the bonus is 1250 no matter what
9 the individual's salary is and it's for all
10 unionized workers.
11 REPRESENTATIVE PETRI: Thank you.
12 And thank you for your testimony and thank you
13 for really focusing on those performance
14 audits, because I've been watching the numbers
15 in your Department. Since you've been
16 involved it has done more and more and I think
17 that is an enhancement to Pennsylvania's
18 taxpayer.
19 AUDITOR GENERAL WAGNER: Thank you.
20 REPRESENTATIVE MCGEEHAN: Thank you,
21 Representative Petri.
22 Representative Dante Santoni.
23 REPRESENTATIVE SANTONI:
24 Representative Petri, I think the Sixers
25 should give you a tryout. They can use all
44
1 the help they can get at this particular
2 point.
3 REPRESENTATIVE PETRI: That's how sad
4 they are.
5 REPRESENTATIVE SANTONI: If you
6 follow the 76ers, you'll -- you'll know what
7 I'm talking about. And I do unfortunately.
8 But we'll stick by them.
9 Auditor General Wagner, welcome.
10 And my question, I see on your
11 written testimony, you, as Auditor General,
12 obviously you do a lot of -- a lot of audits.
13 You're very busy. You audit the school
14 districts and liquor stores and nursing homes,
15 et cetera.
16 One thing I noticed, and because of
17 my background in local government, was the
18 number of municipal pension plans, both for
19 uniform and nonuniform, and -- and the costs
20 and the fees associated with -- with --with
21 doing all those pension plans throughout our
22 Commonwealth. We do have a lot of -- a lot of
23 municipalities.
24 I think that the wave of the future,
25 in my opinion anyways, is consolidation of a
45
1 lot of municipal services. But we're
2 certainly not going to impose on our local
3 municipalities that requirement.
4 But I think we do need to provide
5 some incentives for them to -- to do it, not
6 just in road work and police work but maybe in
7 -- in pension funds.
8 So my question to you, and maybe your
9 expert opinion, way back about 14, 15 years
10 when I worked for local government there was
11 legislation that was introduced, and it pops
12 up every once in a while, that looks to
13 consolidate all our municipal, nonuniform
14 specifically, pension plans under the -- under
15 the -- under the purview of the state with, of
16 course, noting that it would -- millions of
17 dollars potentially could be saved that could
18 go back into that fund that could provide an
19 added benefit or benefit for our municipal
20 employees.
21 In your opinion is that -- is that
22 proposal good? Is -- I mean I'm sure there's
23 hurdles that need to be addressed. But is it
24 something that we should try to pursue to try
25 to address some of these costs associated with
46
1 these thousands of pension funds?
2 AUDITOR GENERAL WAGNER: Are you
3 talking about consolidation?
4 REPRESENTATIVE SANTONI: Yes.
5 AUDITOR GENERAL WAGNER: We -- we
6 audit 2,526 municipal pension plans. Of those
7 pension plans you have nonuniform and you have
8 police and you have fire.
9 Pennsylvania probably has more
10 pension plans than any state in the country.
11 I don't know that totally accurately, but
12 we're very high up there.
13 There have been discussions and
14 recommendations. PERC has made the suggestion
15 to consolidate municipal pension plans. When
16 you stop and think of 2,526 entities that
17 administer funds, the cost of doing that
18 administratively, the fact that you can't pool
19 investments together from those 2,526 and
20 invest as a bulk of money rather than a small
21 investment and, therefore, the return is far
22 less on investment, there's no doubt in my
23 mind that Pennsylvania is behind the times and
24 there should be a -- and I know there's been
25 legislation introduced by various members over
47
1 the years -- there should be a good, hard look
2 at how consolidation can occur and if that
3 were done, say, for instance, within police,
4 if it were done within fire, and if it were
5 done within nonuniform.
6 And the proof of the pudding truly is
7 SERS and PSERS, and we performed audits of
8 both, and I just read yesterday that the
9 return on investment for SERS in 2006 was 16.4
10 percent --
11 REPRESENTATIVE SANTONI: Wow.
12 AUDITOR GENERAL WAGNER: -- when the
13 projected investment in these funds is about
14 8.5 percent.
15 I would doubt that very few of those
16 2,526 pension plans have that kind of return
17 on investment.
18 REPRESENTATIVE SANTONI: I agree with
19 you 100 percent. I think it is something that
20 we should pursue and I'm personally going to
21 look to pursue that and hopefully I'll get
22 some help from my colleagues.
23 Thank you for your testimony.
24 AUDITOR GENERAL WAGNER: Thank you.
25 REPRESENTATIVE MCGEEHAN: Thank you,
48
1 Representative Santoni.
2 Representative Mario Scavello.
3 REPRESENTATIVE SCAVELLO: Thank you,
4 Mr. Chairman.
5 And thank you, Auditor General
6 Wagner, for your written testimony and for
7 appearing here today.
8 I'd like to go back to the
9 performance audits, especially the economic
10 development programs. Specifically what does
11 the economic development program audit
12 entail?
13 AUDITOR GENERAL WAGNER: Well, there
14 are a variety of economic development programs
15 within DCED, and we are presently doing a
16 performance audit, a special performance
17 audit, of the Opportunity Grant Program,
18 and -- and using that as an example, and that
19 audit will be released within six to eight
20 weeks -- to use that as an example, what we do
21 is go in and determine whether or not the
22 public taxpayer dollars that all of you, the
23 General Assembly, have allocated towards that
24 program is being utilized and there is a
25 return on that investment and -- and whether
49
1 or not the performance of the program is
2 meeting the expectations of the General
3 Assembly and the public in general.
4 REPRESENTATIVE SCAVELLO: Okay. Let
5 me go further. If we ask you to audit whether
6 the recipient of the Department of the
7 Community and Economic Development funding
8 actually created or filled the number of jobs
9 that they projected in their funding
10 application, would that be available?
11 AUDITOR GENERAL WAGNER: Yes. As a
12 matter of fact, Representative, that will be
13 part of the Opportunity Grant Program audit.
14 REPRESENTATIVE SCAVELLO: Great.
15 Was -- the Mountain Laurel Arts Center, was
16 there an audit performed? Is there a possible
17 way of getting a copy of that?
18 AUDITOR GENERAL WAGNER: Yes. The
19 Mount -- Mountain Laurel Arts Center audit is
20 in the final stages of completion.
21 REPRESENTATIVE SCAVELLO: Okay.
22 AUDITOR GENERAL WAGNER: As you
23 probably know, that audit is an audit of
24 dollars expended through the Department of
25 Community and Economic Development, and it
50
1 actually is an audit that spans three
2 administrations. It goes back to the Ridge
3 administration, the Schweiker administration,
4 and the Rendell administration.
5 REPRESENTATIVE SCAVELLO: Yeah.
6 AUDITOR GENERAL WAGNER: So for that
7 reason it's actually been a very complicated
8 audit. And there's been some land
9 transactions that have occurred in it.
10 REPRESENTATIVE SCAVELLO: Yeah.
11 AUDITOR GENERAL WAGNER: And our
12 auditors have done a good job, but it's been a
13 very difficult audit for completion.
14 That audit today, as we sit here, is
15 in the administration's hands for their
16 comments.
17 REPRESENTATIVE SCAVELLO: Okay.
18 AUDITOR GENERAL WAGNER: Every audit
19 that we do, the auditee, after the audit is
20 completed, and the audit is complete, we give
21 the auditee the opportunity to offer their
22 opinion to our findings and recommendations.
23 REPRESENTATIVE SCAVELLO: Okay.
24 AUDITOR GENERAL WAGNER: The
25 administration is in the process of doing that
51
1 now. Once they get that back to us, we will
2 then look at their comments, we will add our
3 final comments, and the audit will be released
4 publicly.
5 REPRESENTATIVE SCAVELLO: How long do
6 you think that will take, that whole process?
7 AUDITOR GENERAL WAGNER: Well, if --
8 if the -- if the comments are back to us from
9 the administration in two weeks, we could have
10 the audit out in another week or so.
11 REPRESENTATIVE SCAVELLO: Oh, wow.
12 AUDITOR GENERAL WAGNER: It depends
13 on when they get it back to us.
14 REPRESENTATIVE SCAVELLO: Okay. One
15 last question. You're in the process of
16 auditing the four years of the turnpike, the
17 last four years?
18 AUDITOR GENERAL WAGNER: Yes.
19 REPRESENTATIVE SCAVELLO: Within the
20 findings could there be a recommendation that
21 we don't lease that valuable asset?
22 AUDITOR GENERAL WAGNER: Are you
23 putting me on the spot?
24 Well, the main focus of our audit is
25 safety and, you know, I'll simply state this.
52
1 I recommend to everyone, when there's
2 inclimate weather, drive the turnpike.
3 REPRESENTATIVE SCAVELLO: Thank you
4 very much.
5 REPRESENTATIVE MCGEEHAN: Thank you,
6 Representative Scavello.
7 We've been joined by Republican
8 Chairman Mario Civera.
9 REPRESENTATIVE CIVERA: Yes.
10 REPRESENTATIVE MCGEEHAN: Welcome,
11 Mr. Chairman.
12 AUDITOR GENERAL WAGNER:
13 Mr. Chairman.
14 REPRESENTATIVE MCGEEHAN:
15 Representative Gordon Denlinger.
16 REPRESENTATIVE DENLINGER: Thank you,
17 Mr. Chairman.
18 And welcome, General Wagner.
19 I need to move into an area of, I
20 guess, accounting propriety and a point of
21 concern.
22 It's come to the attention of the
23 Appropriations Committee that the Rendell
24 administration has been charging current year
25 expenditures back to prior year
53
1 appropriations. The prior year appropriations
2 balances should have been lapsed, according to
3 Administrative Code, as last amended, by Act
4 1997-57 by the administration, but it's held
5 onto these balances through what we view as an
6 inappropriate use of Management Directive
7 310.3 waivers.
8 Would financial audits conducted by
9 your office be able to identify such
10 inappropriate use of funds? I'll ask that
11 question upfront.
12 AUDITOR GENERAL WAGNER: Will audits
13 of our office of a particular department
14 identify the use of those dollars if there has
15 not been appropriate authority given for that
16 to happen? Yes.
17 REPRESENTATIVE DENLINGER: Would it
18 be possible for you to provide to the members
19 of this Committee an estimate of the amount of
20 the -- or an actual number in actuality of the
21 amounts that should have been posted in the
22 current year that have been posted back
23 against prior years?
24 AUDITOR GENERAL WAGNER: Are you --
25 are you referring, Representative, to all the
54
1 departments of state government?
2 REPRESENTATIVE DENLINGER: Yes.
3 AUDITOR GENERAL WAGNER: We could do
4 it as we audit -- we absolutely can do it as
5 we do our departmental audits of each
6 department of state government. It would
7 take --
8 REPRESENTATIVE DENLINGER: Could it
9 be done in a rolling fashion or
10 progressively?
11 AUDITOR GENERAL WAGNER: It would
12 take a more comprehensive review of our
13 Department to monitor that in all departments
14 on a routine basis.
15 REPRESENTATIVE DENLINGER: In your
16 estimation would the conduct that they've
17 entered into constitute an illegality?
18 AUDITOR GENERAL WAGNER: Pardon me?
19 REPRESENTATIVE DENLINGER: Constitute
20 a-- an illegality.
21 AUDITOR GENERAL WAGNER: Well, there
22 is a procedure -- and I can't sit here and
23 quote it, but there's a procedure
24 administratively that has existed in all
25 administrations for monies to move forward
55
1 from one budget year to another, and I think
2 the real question is whether or not that
3 procedure is violated. And sitting here, I
4 can't answer that question.
5 REPRESENTATIVE DENLINGER: I think as
6 a Committee, and I'll make this statement to
7 the Chairman of the Committee, it would
8 behoove us to work with Attorney (sic) General
9 Wagner to do some investigation, to analyze
10 perhaps with lawyers on staff whether we feel
11 that, in fact, the administration is behaving
12 in an illegal fashion.
13 I personally have those concerns and
14 it would be, I think, very positive for us to
15 work in a cooperative manner to determine the
16 amounts involved, the departments involved,
17 and what corrective action should be taken.
18 Thank you.
19 AUDITOR GENERAL WAGNER: Thank you.
20 REPRESENTATIVE MCGEEHAN: Thank you,
21 Representative Denlinger.
22 Chairman Civera.
23 REPRESENTATIVE CIVERA: Thank you,
24 Mr. Chairman.
25 General Wagner, first of all, thank
56
1 you for coming before us. I know you for a
2 long time, and we've always worked together
3 well.
4 AUDITOR GENERAL WAGNER:
5 Mr. Chairman.
6 REPRESENTATIVE CIVERA: I sent you a
7 letter in order -- in regards to the audit of
8 the tobacco fund. There's been several
9 questions with -- on our side as far as that
10 fund is concerned, and I would hope that we
11 could do it in a timely fashion before we get
12 to the final day of the budget, and I'd
13 appreciate everything you can do for us.
14 AUDITOR GENERAL WAGNER:
15 Mr. Chairman, I'm well aware of your letter.
16 It is given -- being given serious
17 consideration and follow-up.
18 REPRESENTATIVE CIVERA: Thank you.
19 AUDITOR GENERAL WAGNER: Thank you.
20 REPRESENTATIVE MCGEEHAN: Thank you,
21 Mr. Chairman.
22 For a follow-up, Representative
23 Siptroth.
24 REPRESENTATIVE SIPTROTH: Thank you,
25 Mr. -- thank you, Mr. Chairman and Mr. Auditor
57
1 General again.
2 I want to thank you for your
3 concerted effort regarding the Mountain Laurel
4 Center, which resides in my district, and I'm
5 waiting anxiously for that report as well.
6 One thing that concerns me
7 regarding -- and I know that you were prudent
8 in your activities -- was the audit of the
9 gasoline stations or of the -- of the
10 Department of Agriculture actually, in the
11 fact that 20 percent of the gasoline pumps
12 statewide had not been certified as to how
13 much gallonage they are producing, dispersing,
14 and that's of great concern to me, especially
15 the -- with the very high prices that we've
16 seen.
17 And have you had any follow-up with
18 the Department as to making sure that those
19 positions are being filled at the county
20 levels and there are weights and balances and
21 that type of thing?
22 Because I've heard that our -- one of
23 my counties that I represent currently has no
24 one to go out in the field and check these
25 pumps. So I think that's a -- that's of some
58
1 concern.
2 Thank you.
3 AUDITOR GENERAL WAGNER:
4 Representative, I appreciate the question. We
5 just completed an audit within the last 45
6 days of the gasoline pump inspection program,
7 which is under the Weights and Measures Bureau
8 of the Department of Agriculture.
9 What that audit revealed was that in
10 20 percent of the gasoline stations that we
11 checked that there was at least one pump that
12 did not have a valid, timely inspection
13 sticker.
14 Keeping -- and keeping in mind we
15 initiated this audit in August when gasoline
16 prices were over three dollars and we visited
17 over 2,000 gasoline stations throughout the
18 Commonwealth and looked at over 15,000 pumps.
19 So I mean we did a very good, random
20 sample of -- yeah, of that audit. What we
21 also -- so we found out that these annual
22 inspections are not being met.
23 And, incidentally, those -- those
24 inspections are not for quality, they're for
25 quantity. In other words, someone buying a
59
1 gallon of gasoline, the real issue is whether
2 or not that gasoline pump is delivering a
3 gallon.
4 We are only one of four states in the
5 country, we also have found out as part of the
6 audit, that does not check for quality or
7 octane rating.
8 So that may be something that the
9 General Assembly may want to consider in the
10 future to have random samples of octane rating
11 as part of this inspection process.
12 What we -- the results of the audit
13 were somewhat alarming, but there's a good
14 side to this. And the good side is that, as
15 we do with all audits, we send a draft to the
16 auditee.
17 Two days after the draft of the
18 auditee that was sent there was a news release
19 out by the Governor indicating corrective
20 action was being taken on a majority of the
21 items indicated in the audit.
22 So we feel rather confident that
23 corrective actions are being taken. That
24 should be reflected in the upcoming budget,
25 because what has happened is -- and I was part
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1 of this when I was in the General Assembly as
2 all of you -- we passed a law in the 1990s
3 that permitted counties to turn over their
4 inspection to the state and 44 or 45 counties
5 have done that.
6 They only have to give the
7 Commonwealth a 30-day notice and -- and county
8 ABC can say we're not doing this inspection of
9 pumps any longer. It's your responsibility.
10 So the Department of Agriculture has
11 literally been inundated with inspections,
12 additional inspections, and has not kept up
13 with personnel and equipment to meet that
14 annual inspection requirement.
15 REPRESENTATIVE SIPTROTH: Okay.
16 Thank you very much. We'll have to see if we
17 can at the legislative level do a little
18 corrective action to that. Thank you very
19 much.
20 AUDITOR GENERAL WAGNER: Thank you.
21 REPRESENTATIVE SIPTROTH: Thank you,
22 Mr. Chairman.
23 REPRESENTATIVE MCGEEHAN: Thank you,
24 Representative Siptroth. I know I join
25 Representative Civera in thanking you for
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1 being here, and thanking you --
2 AUDITOR GENERAL WAGNER: Thank you.
3 REPRESENTATIVE MCGEEHAN: -- for the
4 professional and well-informed representation
5 today. I know that both Chairman Civera and Chairman
6 Evans and members of this Committee will take very
7 seriously your -- the request here in the
8 appropriations.
9 Thank you very much for appearing here
10 before us.
11 AUDITOR GENERAL WAGNER: Thank you all very
12 much.
13 (The proceedings were concluded.)
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2 I hereby certify that the proceedings
3 and evidence are contained fully and
4 accurately in the notes taken by me on the
5 within proceedings and that this is a correct
6 transcript of the same.
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9 ______Brenda S. Hamilton, RPR 10 Reporter - Notary Public
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