State auditor’s report warns of turnpike rate swaps
HARRISBURG – Pennsylvania’s elected fiscal watchdog said Tuesday that the turnpike commission lost about $109 million in interest rate swaps and that it needs greater accountability in how the five commissioners’ expenses are reported.
Auditor General Jack Wagner, whose term expires next week, said governmental entities should not be using swaps, given the risk they carry and fixed-rate borrowing being cheap.
“We recommend all Pennsylvania public entities stop using interest rate swaps,” he said at a Capitol news conference. He said the turnpike has financial expertise in them, “but that does not match up with Wall Street – it’s really that simple.”
The losses occurred over a nearly 13-year period ending in August 2011, Wagner said.
Turnpike officials said Wagner used incorrect methods to calculate the financial impact of the swaps, and acting chief executive Craig Shuey defended the agency’s spirit of cooperation with Wagner’s auditors, particularly on the use of free passes by turnpike employees and others.
“We take issue with your characterization that the turnpike was difficult to deal with regarding requests for data about contractor and employee policies for non-revenue travel,” Shuey wrote to Wagner. “We do not believe anyone at the commission intentionally attempted to delay or interfere with your review functions.”
Wagner also criticized the commissioners for expenses that included hotel stays that sometimes exceeded $300 a night and an overall “lack of transparency” in accounting for the costs.
The audit said the commissioners racked up $539,000 in expenses from the start of 2007 through August 2011, or nearly $2,000 per month for each commissioner. They are not required to submit itemized receipts.
Those costs included $406,000 for vehicles, $46,000 for lodging, $30,000 in fuel and $15,000 for meals. The turnpike provided $18,000 for catered meals for the 101 board meetings held during the study period.
“We do not believe that part-time commissioners require permanently assigned vehicles,” the audit said. “Further, we found no convincing reason to allow commissioners to use commission purchased vehicles for personal use.”
The commission said it is altering its meeting schedule and using video conferencing to cut down on some of those costs.
Wagner says the turnpike also should install fire detection systems in all its tunnels and have more rigorous procedures to follow up on tunnel inspections.
The report said the turnpike had 2,100 workers as of May 2011. The commission oversees 546 miles of interstate, 64 toll interchanges, 21 maintenance facilities, 17 service plazas and five tunnels.