Few worry over reports critical of DOT

Then news broke that last year DOT so mismanaged some mass transit grants that the federal government froze the money. The freeze lasted a couple of weeks and was lifted this month.

From the outside, the picture may look chaotic. Not to the board, which oversees the 5,400-member department.

From the inside, all board members interviewed say, DOT management is headed in the right direction.

“I think we are on the right track. I do,” said the board’s chairman, Bill Kuhlke.

Kuhlke and other board members said they had no intention of asking for the official named in the state reports, former treasurer Earl Mahfuz, to step aside from his current duties as assistant treasurer while the attorney general reviews the findings. Mahfuz reports to Commissioner Vance Smith, who reports to the board. The attorney general’s review has no deadline.

In any case, Smith said corrective action had already been taken, and “we’re moving forward.”

A spokesman for Gov. Sonny Perdue, Bert Brantley, said while DOT is going in “a positive direction,” Perdue was “very concerned about somebody in a financial and fiduciary position to have these kinds of allegations against them.” But he said everyone deserved due process, and Perdue wouldn’t tell Smith or the board what to do.

Mahfuz is the lead staff member advising the board on its effort to choose possible toll road projects He is scheduled for two presentations at the board meeting this week.

However, at least one former DOT official thought Mahfuz should go.

“My position’s been known for a year now. I called for him to be fired,” said former DOT Commissioner Gena Evans. “He had a tremendous responsibility, and he hadn’t been doing it.”

Evans was supported by Perdue and fired by the board this year.

Cool reception

Following the new state auditor report, board members reacted coolly to Perdue’s take on it. Perdue said the report showed deception and “Enron-like accounting” at DOT. Some board members bridled. Others offered no opinion, or said maybe the governor knew something they didn’t.

Perdue said the auditor’s findings showed actions that were deceptive and “illegal at worst.” He urged the attorney general to act after reviewing the material, and encouraged the DOT board and Smith to “take the necessary steps to restore public confidence and the trust of Georgia taxpayers.”

Kuhlke and other board members pointed out that the time periods examined in all three reports are months or years past. They conceded that the state auditor found significant issues, but said the DOT accepted the findings and has been addressing all of them. Some also noted that they had already punished Mahfuz with a demotion last year. A new treasurer, Kate Pfirman, is implementing the auditor’s recommendations.

“I thought the statement by the governor was quite strong, but I don’t think it was right,” Kuhlke said, explaining that Enron officials had enriched themselves through misdeeds, but DOT officials hadn’t.

Board member Robert Brown said that the board shouldn’t pass judgment on Mahfuz before the attorney general’s review.

“I think [Mahfuz] has a wealth of knowledge and probably would be a benefit to us as we’re trying to work our way out of this issue,” Brown said.

Accounting issues

In reports last year and last month, the state auditor said that the DOT wasn’t keeping its books according to the Georgia Constitution. Legally, DOT must have all the money for a project on hand before it signs the contract, even if it’s a multi-year project, the auditor said. Although that was established practice at DOT, Mahfuz apparently stopped following it, the auditor said. Instead, it said, DOT spent down its cash and masked a $2.2 billion deficit in 2007 on spending of more than $5 billion by claiming money on the books that it didn’t really have. Over the years, spending that cash cost the department at least $111 million in interest it could have earned, the auditor added.

Mahfuz’s defenders have cited an earlier attorney general opinion as a defense. The auditor report urged DOT to ask the attorney general for specific advice on the opinion.

In addition, the state inspector general found that Mahfuz ordered employees to stop entering contracts into the accounting system in 2008, an act that “suggests a purposeful intent to hide the true state of GDOT’s finances.” Mahfuz denied the charge.

As for the mass transit grants, the federal government put the freeze in place after a report found sloppy oversight in the 18-month period that ended in December. It has lifted the freeze, as long as DOT sticks to its action plan.

While board members were concerned about all those findings, they said — though some were skeptical of the state audit — they are now on the way to being fixed. The big problem now, they said, is lack of funds.

“We’ll do the accounting in the manner in which they recommended,” said board member Rudy Bowen, who has just started chairing the finance committee. “As far as Earl is concerned, that’s what the attorney general will be dealing with if there’s anything in that area.”

Of 12 current board members, only new member Sidney Ross did not respond to phone calls. A few hotly defended Mahfuz.

“You don’t fire folks simply because of the way they interpreted a rule may be differently than the way an auditor interpreted a rule,” said board member Dana Lemon.