Washington State Legislature

Mr. Troy Kelley

Washington State Auditor
PO BOX 4002 1
Olympia, W A 98504-0021
Dear Auditor Kelley,
August 1, 20 14
We are writing you as the elected delegation of the 10
111
Legislative District. We are greatly concerned
regarding on-going issues with Island Transit. On July 25, 2014, the Whidbey News Times printed an
at1icle entitled, "With reserves gone, Island Transit axing staff, routes. "This article exposes information
to the public that is very concerning and begs answers. Here are some of the quotes from that arti cle.
dipping into investments as expenses outpaced revenues for years on end"
"As a result of the shortfall, the transit board approved an $800, 000 note - basically a bank loan -
to pay bills. On top ofthat, the board OK'd issuance of a $1.5-million bond to pay the balance ofthe
agency's matching funds for the new transit facility near Coupeville."
"Every aspect of this must be investigated, by internal audit and state audit. Also, I want assurance
that there was no illegal activity. "
"Kuykendall said she was surprised that state auditors didn 't identify the problems in their yearly
audits. "It would have been nice if they had said, 'Whoa, horsey, where 's all your cash?"' she said."
It is critically impot1ant to have public transparency and accountability of public funds. In reviewing the
Washington State Auditor's Office- Financial Statements and Federal Single Audit Report on Island
County Public Transportation Benefit Area (Island Transit), with the audit period of January I, 2012 -
December 3 I, 20 12 (Report No. I 0 l 0494), I fi nd on page 12 that it states that "the overall financial
condition of Island Transit as of December 31, 2012 slightly improved in comparison to the 2010
financial." Thi s statement appears to be in confl ict with the information exposed in the Whidbey News
Times article. If reserve funds were being used to pay the operation costs of Island Transit last several
years as reflected in the news art icle, how is it that the assigned auditor would be led to believe that the
agency was on sound financial ground?
With the above information in mind we respectfully request the answers and responses to the following
questions and statements.
I . Mat1ha Rose, Island Transit Executive Director states in the news article that she has asked
the state Auditor's Office to come earlier than usual for the audit. Can you confirm that this
request has been made? And, if so can you advise when the audit will be conducted and the
findings avai lable?
Legislative Building Ol ympia, Washington 98504
~
2. The article states that Island Transit had $6.2 million in reserves in 2010 with $4 million
dedicated to the matching funds for the facility. That leaves $2.2 million in reserves. The
article continues by stating that Savary spent $1.2 million of the reserve over the next two
years. That should have left a balance of$1.0 million in reserves. Now they need loans
totaling another $2.3 million to cover the matching money and operating expenses. This
accounts for $3.3 million dollars that is in question, is there a detailed accounting of these
expenditures?
3. When did Island Transit start pulling from their reserves? How were the funds spent?
The Island Transit Executive Director and Board of Directors had oversight of the operations.
Are there local policies governing the Executive Director and Island Transit Board? Have
these policies been consistently followed?
4. It appears to us that Island Transit started drawing down their reserves in 20 I 0. Can you look
back at the previous audits and see if the auditor was given correct information to provide an
accurate audit report?
Please let us know how you plan to respond to this inquiry. When can we expect a response?
Sincerely,
Norma Smith
State Representative
I 0
11
' Legislative District
Dave Hayes
State Representative
I O'" Legislative District
Barbara Bailey
State Senator
I 0
11
' Legislative District