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Next On Q, Pennsylvania Auditor General Jack Wagner will be here.

What did he find during his latest audit?

We'll be talking to him about everything from FEEA to the Port Authority and his political aspirations.

It's all coming up, and we'll be taking your calls, too.

Next.

Welcome to On Q, I'm Tonia Caruso.

We have a special guest tonight.

He's the guy who investigates how your tax dollars are being spent by the state.

Jack Wagner is Pennsylvania's auditor general, and he'll be with us tonight for the entire half hour, I should say, and will be taking your calls to the number if you have a question or a comment.

It's (412) 325-1337.

Mr.

Wagner, thank you so much for joining us.

Good Evening.

Great to be here.

So let's begin with we want to tell folks at home we booked you a long time ago simply because your office has been in the news a lot this year with the Port Authority and FEEA and since that time you have announced you were running for reelection.

I am.

I announced, about a week ago.

Believe it or not, I've been here already three years, and this is a two term office.

You can only serve two terms for a total of eight years.

I think we've done a great job as the independent fiscal watchdog of the Commonwealth of Pennsylvania.

And obviously, I'd be honored if the, general public sends me back for a second term.

Right now, you have the Democratic endorsement, and right now you're unopposed.

But the minute your name comes up, the next thing that comes up is will he run for governor in 2010?

And so what are your thoughts on that right now?

Well, one election at a time.

You really can't put the cart before the horse.

And and I mean that sincerely.

It would be my hope that the people, reelect me as auditor general.

Judge me, for what I'm doing, and whether or not the Department of Auditor general, has done a good job.

If we haven't done a good job, we're not deserving.

I'm not deserving of a higher office, so I'm not focused on that.

I'm focused on doing a good job as auditor general and hopefully be being reelected in 2008.

Your name is also been kicked around as someone who could possibly run for Senate, maybe Arlen Specter seat.

What are your thoughts on that?

Well, again, I haven't focused on it.

I'm honored when I hear that it's that's a big job to be a United States senator.

Let's, take care of business in 2008 and see what the future looks like.

Okay, well, now let's talk about, your office.

And it has been a significant year.

And I'm just wondering in general, though, for folks at home, when you tell people about your office, what what do you describe as the role?

What does the auditor general?

The auditor general is a statewide, elected, independently elected fiscal watchdog.

And to tell you how important it is, it is the second oldest statewide elected office in Pennsylvania, second, and only to the governor.

The Auditor General has been elected position since 1850.

Even longer than lieutenant governor, even longer than treasurer, or even longer than attorney general, which is only about 30 years as a statewide elected position.

And the people of Pennsylvania have placed great priority on making sure there's someone to watch their taxpayer money.

How do you decide?

I mean, I know your office conducts more than 5000 audits a year.

Did these random who calls you?

Do you decide on your own?

Many a routine.

For instance, we do an audit of every school district in Pennsylvania that receives public money, public school districts.

And about every three years, we audit all the liquor stores.

We audit all the volunteer fire departments that have, that receive public money.

We audit over 2000 public pension plans.

We audit all the state prisons.

How many people work in your office?

700 approximately.

There in all 67 counties.

And we but we also do.

So we do a lot of routine audits.

But we which are generally called financial audits.

We also do special performance audits and special performance audit.

So the more high profile audits and what we do with special performance audits is dig deeper and determine whether or not that entity of government is performing up to the expectations that the people in the public expect.

We compare them with other states.

We compare them with other entities.

A good example is FEEA.

We're presently doing an audit of the Pennsylvania Higher Education Assistance Agency.

And in looking at that audit, we're comparing FEEA with other similar agencies across the country.

Yeah.

Let's start with FEEA then.

How did that come about?

Were they news reports that you saw that led you to investigate further, or were you already underway with that?

It was mostly news reports and the extravagant trips that board members and high executives were taking.

So is that one you decide to audit on your own or to someone call and say, hey, we need to start looking into these folks.

Well, we looked at it.

And as we do prior to every special performance audit, we determine whether or not it is a prime prospect for auditing.

In other words, is there suspicion that there is spending going on that should not be going on?

Not necessarily fraud, but excessive spending So our people internally took a look at FEEA.

And incidentally, FEEA and it's 44 year history has never had a special performance audit by the auditor general.

And we basically thought it was about time.

And so our audit at FEEA is really looking at how FEEA operates, what its culture is, and what has always concern me about FEEA is they have said they're a private agency.

But in fact, it's my belief they're not a private agency.

They were created by the General Assembly.

They receive over $400 million a year.

By the General Assembly.

The majority of members of the board are elected officials and state government.

All the employees of fair part of the state employee retirement system.

What looks and sounds like a public agency in, in my belief, is a public agency.

So my goal and our audit of FEEA is to change the culture.

So that is the it is a publicly responsive agency.

And is transparent to the public and is responsible and all the use of public money.

Lots of people began to hit the roof when details of the FEEA audit came out, and, and salaries ten times the median income of folks in Pennsylvania bonuses, Trips, that sort of thing.

So as you were going through this audit, where do you stand now about changes that have been made?

Do you think enough changes have been made already?

Well, we're still doing the audit.

And we issued an interim report, something we rarely do in an audit, but we did in this audit because we found some situations that we were very concerned about, one of which was, bonuses.

And it was widely reported that about five top executives were receiving extravagant, bonuses.

We found an additional approximately 250 management people receiving bonuses and the top 23 people, their bonuses were actually built into their pension.

And in some instances, people were retiring from FEEA with pensions higher than their salary.

Over a three year period, we uncovered 7.5 million in bonuses.

So.

And why is that so important that $7.5 billion could go to over 3000 grants to Pennsylvania students for higher education?

It could actually be the difference between, whether or not a young person, goes to college.

So, we are looking at excessive spending and FEEA.

Have they reformed yet?

We have seen indications that they're moving in the right direction.

Can I say that absolutely.

Sitting here.

No, I can't, and I want to see a culture change at FEEA to make them more, responsive publicly as a public agency should be.

Let's go to the phones.

We have bill from Cranbury.

Bill, thanks for calling in tonight.

Thank you.

Mr.

Wagner.

Hello.

Hi, Bill.

Hi.

I'd like you to investigate.

UPMC, you know, they recently promised to donate $100 million to the city of Pittsburgh.

Or to school district.

That is.

But I think it must be a violation of their charter that a nonprofit makes a donation to.

That's not part of their mission.

It has to be a violation of charter insurance rules.

If anything, if they're making that kind of excess profits, then maybe they are a for profit company.

Or at the very least, that money should be returned to the ratepayers.

Bill, I'm glad you asked the question because there is a misunderstanding with the Department of Auditor General.

Number one, we can't audit any entity unless they receive state taxpayer dollars or federal dollars that flow through state government.

Now, UPMC does receive some state money.

And that's through, probably certain specialty Medicare programs.

Medicaid programs could be through tobacco settlement dollars, but the general operating, dollars that UPMC operates under are not state taxpayer dollars.

So I really don't have auditing authority unless it's a particular amount of money coming from state government.

Okay.

We thank Bill for his call.

We want to remind folks at home if you'd like to call in, the number is (412) 325-1337.

I want to get back to the fire thing for a moment, because you lay out recommendations at the end of these audits, right?

By law, is there any responsibility there that they have to follow these, or do they then just look really bad in the public light?

We do not have the clout, to mandate, that changes be made.

Is and is the reason why we make our audits public and obviously look to the media, look to programs such as this, to release information and get public support.

Now, FEEA has had a lot of pressure on it.

On them.

And, I spoke with several members of the board Sean Logan, Senator Logan from Allegheny Counties.

One, he's trying to initiate reform within FEEA.

I think the public momentum of the findings and recommendations of our on it and other things that are happening public publicly will force FEEA to move in the right direction.

Yeah.

We want to take another call.

This is Michelle from the north side.

Thank you for calling us tonight, Michelle.

And go ahead with your question.

Hi and good evening, Mr.

Wagner.

Supporters, how are you?

Good.

The Port Authority, has been in trouble for quite some time, and I like to know why concessions or restructuring have not been made on their part.

And if I don't mind paying my share.

But it's always the taxpayers always bailing out these companies.

What is the status on that?

Well, we completed an order to the Port Authority of Allegheny County, and we are required by law to audit them at a minimum once every four years.

That was put in the law.

The Port Authority law about 20 years ago.

And our audit was very revealing about the Port Authority, in terms of excessive spending.

And the audit has been completed.

It has been turned over to the Port Authority.

It is my hope that the Port Authority Board, makes some substantive changes.

There's one very important, recommendation in that audit, and that is that the Board of Port Authority change, because the board is ultimately the entity responsible, the Port Authority, two thirds, tiny of their operating money comes from state government.

State government has no appointees on the board of the Port Authority who are points on the county executive.

County executive.

And, actually, state government contributes four times more to the operation of the Port Authority than county government does, but has no appointees to the board.

So it's our recommendation in our audit that the governor, leaders of the General Assembly, the state in general, have, several appointees to the Port Authority so that the interest of state taxpayer dollars is always first and foremost in the decisions of the Port Authority.

We found that the Port Authority spent over $15 million to rent extravagant office space in downtown Pittsburgh.

That should have never been rented.

They owned a building on the north side.

We found, extravagant pensions.

Also, with the Port Authority, we find one, pension, give back, to the former CEO.

That was outrageous.

With something we've never seen before, a buyback.

So, we had great concerns in doing our audit, and it is our hope that changes begin from the top at the Port Authority.

And the real problem with the Port Authority is that that management has rewarded itself.

Consequently, when they go to the bargaining table with the union, there's no leverage with the union, to even, ask them to reduce their cost.

Someone new in charge now, Steven Bland's been there, I guess about a year and a half, maybe two years now.

Some of the recommendations that you laid out.

Not only should the board be made up of folks from the state, you also are strongly suggest suggesting that they do move back to Manchester.

Now, the Port Authority saying that could cost us just as much, 10 or $15 million.

So does that make sense?

That's hogwash.

They could move back to Manchester tomorrow, quite frankly.

And I think what they're trying to do is position themselves to stay in downtown Pittsburgh.

They have not adequately responded to that finding and recommendation in the audit.

I have great concern about that, but we'll be back to audit them again.

And their lease expires in 2010.

And at the very least, they should be relocating as of 2011.

Back to the building.

They, in Manchester, want to go to another caller.

This is Jan from export.

Jan, welcome to the program.

Thank you for calling in.

Yes.

Good evening.

Hi, Jan.

My question is, how did these executives get free reign over their, pension benefits and their salaries, etc., so that they can, demand these high compensation packages without any checks and balances?

It just seems as though it's contrary to the whole system of government.

As you mentioned, that FEEA was, started through the General Assembly.

How can they go outside of the General Assembly for approval on these packages?

I'd like to hear your comments.

Thank you.

Well, quite frankly, there wasn't enough, light shining into the organization.

And it wasn't enough transparency.

And when you have an entity and in this case, FEEA, which I consider to be a public Kennedy that's operating without, public scrutiny, the potential for these kinds of things is there to occur.

Now, they have made the argument that they're in a very competitive business competing with private entities, like salaries may across the country that pay very high salaries.

And, and that's a legitimate argument, but it still does not give them justification to have bonuses that are six figure bonuses and bonuses that are built into pensions.

Were you stunned at all?

Yes.

Yes, absolutely.

And we considered, what we saw it FEEA is being outrageous and and is the reason as I said earlier, we generally don't issue interim reports while we're doing an audit.

But when we uncovered what we uncovered and one good example was that FEEA came out and said they had eliminated extravagant spending, and they had an ad in the Harrisburg Patriot newspaper.

The very next day, they signed a contract at Hershey Park for an employee event.

So when our auditors uncovered that and they did a great job and they showed that to me, I said, this is outrageous, and we have to, we have to make this public and we have to make it public right now.

And we're going to and I think that was a wake up call, to FEEA and to the board, to say that maybe we, the board have to be more watchful of the daily operations and keep on top of things.

So we want to take another call, Peggy, from Bethel Park, thank you for calling in tonight.

What is your question?

Good evening, Mr.

Wagner.

My question is these outrageous bonuses and pensions, can they be revoked?

I didn't hear her complete question.

These outrageous bonuses and salaries, can they be revoked?

Can you go back and get any of that money back?

That's a great question.

It's a fantastic question.

And it's something that we've looked at internally.

And we're continuing to look at, as we sit here today.

I don't think so, but there is a slim possibility that that could happen.

The one thing for, for sure, that can happen is you can eliminate it.

From this day forward.

And so, even though you may not be able to go backwards, we can certainly correct the situation for the future.

I know that the head of FEEA resigned probably a little bit earlier than he would have.

What about should more heads roll their, possibly.

It's my understanding that they're, pursuing and are close to hiring a new CEO.

We would like to see, the bonuses eliminated.

Totally.

That's been our recommendation.

I think it's going to be part of the decision of the new CEO and the board as to whether or not that happens, and possibly other management changes.

Yeah, I want to go back to the Port Authority for a minute, because another thing in the audit that you brought up were cost overruns on major projects.

The North Shore Connector, among them the Wabash Tunnel.

Do you put in their recommendations for what they should do next, how they should cut it, or is it merely just pointing out, here are the big mistakes.

Well, we pointed it out.

To send a message that there's probably a structural issue here and is, again, one of the reasons why we suggested changes in the board that it's very important to have an engineer sitting on a board if you're bidding contracts, engineering contracts, you should maybe have multiple engineers sitting there.

Maybe you should have an architect sitting there, transportation engineer sitting there, a geotechnical engineer sitting there.

If you're if you're going to drill under the river and spend hundreds of millions of dollars, you really should have someone who's very smart about those things, just not on staff and just not hiring.

Consultants, but someone sitting on the board that can be part of the decision making process.

The tunnel under the River project, of which I, is a very controversial project, is already 127 million over budget.

So, when we brought that to the attention of the public and the board as part of our on it, we want to see a new process, a better process in place for planning for projects, making sure that the projects, the planning for projects is sensitive to the needs of the public, and there are not outrageous cost overruns.

Yeah, I want to switch gears for a minute because tax time is coming up quickly and everybody starting to think about that.

You actually encourage people to call into your office and report fraud?

Yes.

One (800) 922-8477.

We have a toll free number.

We have a website.

You can email us.

auditorgen.state.pa.us, which will give folks, our address at the end of the show, and they can link to that.

And we get about 5000 calls a year, some of which are whistle blower, some of which are, quite frankly, just for information about government.

So we channel people in different directions, but we do get some good tips.

And I would encourage the public to let us know if you think state taxpayer dollars are being misspent.

If you think there's fraud, if you think there's waste, if you think there's abuse.

You said lots of people do call in.

What do you find?

Is there an area where you plan on focusing next?

We are always looking at areas to audit.

And one of my auditors said to me, when I first became auditor general, I asked that question, how do we make some of these decisions?

And, he said, and God, we trust in all others.

We audit.

That's beautiful.

Okay.

And, so we're always looking at where to do special performance audits.

And we're very open to ideas of the public.

And its tips, like certain tips can lead to something.

We have one more caller tonight.

Let's go to David from Clarion.

Thank you for calling in tonight, David.

Yes.

I have a question for the Auditor General with regard to FEEA.

It's probably not generally known that FEEAs established foundations and FEEA gives millions of dollars to that foundation.

Matter of fact, they employed a former executive director.

And my question is, does your audit include the foundations?

Your caller is very knowledgeable about FEEA.

We are presently considering that as part of our on it.

And yes, the foundation is a critical component of FEEA.

It was formed, to raise based on what we know.

To raise public money, in other words, contributions into the foundation.

But the majority of money that has actually gone to the foundation has come from FEEA itself.

And the foundation, to the best of my knowledge, has done some good things, but we're still not absolutely certain of its entire, purpose for being.

And so, yes, we're considering, looking into that and asking questions as the audit proceeds.

How long typically does an audit take, and when do you expect to be completed with FEEA.

We expect to complete the audit sometime, in the first half of 2008.

So that would make it how long of a process it would be?

A year, a little over a year.

Some audits, can be done in 2 or 3, four months.

Some other audits, if they're very complex.

And if, as we ask questions as we get information, we find out we need to look at other things, such as your caller is saying, one of the items under consideration looking at is the foundation.

It's an arm of FEEA, so to speak.

So, those when you expand an audit, you're in the process of doing an audit and you expand it.

It takes much longer.

Do you think for some time now, FEEA will be audited annually.

They won't be audited.

And actually, they they're audited quite often.

Because they receive some federal monies and there's a requirement for auditing, but they're financial audits.

And when we initiated our audit, I, I let the CEO of FEEA know that we were doing an audit.

And, he reminded me that they're audited many times.

And I reminded him that you've never had a special performance audit.

It's a whole different type of audit where you truly dig deep to determine whether the organization is functioning the way it should.

When you're doing that, or you wondering, where were those other auditors all this time?

What were they looking at?

They were they just weren't looking at the right things.

Yeah.

So as you move forward, more with FEEA.

Port Authority's done for now, but.

Yes, but we'll be audited again when.

Could, an audit could begin next month of the Port Authority if we saw the need to do it.

At this stage, though, it's in a cycle of being audited every four years.

Yeah.

Well, Auditor General Jack Wagner, we certainly thank you for coming in and talking with us tonight and answering our caller's questions.

We appreciate it.

And that's all the time we're going to have tonight.

And again, we thank Auditor General Jack Wagner for joining us and for you at home for joining us.

And for more information about the Office of Pennsylvania Auditor General, log on to our website at wqed.org/OnQ and of course, be sure to tune in tomorrow night at 7:30 for Off Q. Chris Moore will be here with the gang.

In the meantime, I'm Tonia Caruso.

Thanks for watching.

Good night.