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Port Authority finds itself at center of controversy.

Federal officials have joined the investigation of the embattled New Hampshire Port Authority to see whether a loan fund intended to help local fishermen was misused.

An audit of the Port Authority released in December found problems ranging from employees spending state money for personal items, accounting irregularities and missing port property. The attorney general's office is investigating.

State and federal officials seized more than four years of files regarding the revolving loan fund. The investigation follows the release of a state audit that was highly critical of the port's operation and management.

The loan fund was established in 1994 with $1 million from the federal Economic Development Administration to help fishermen improve or buy new boats and equipment or to leave the fishing industry.

The audit reported that up to $430,000 may have been lent to borrowers who were not eligible, including possibly some of the members of the loan selection committee.

Acting Port Authority Director Geno Marconi, who administered the fund, said he did nothing wrong and is not concerned with the investigation.

"I would have expected it when the audit comments came out," he said. "It's a federal program, so I can see why they'd want to look at it. To the best of my knowledge, all the T's were crossed and all the I's were dotted. Every dollar is accounted for."

When the Port Authority was audited last summer, state inspectors hadn't checked its books in 15 years, partly because its budget is so small. The authority received $2.5 million this year to maintain Portsmouth Harbor and nearby rivers and to help develop the state's commercial fishing industry.

The port has been struggling with no permanent director, no terminal operator and no business. The scathing audit said the port authority's board had no control over operations at the port and had no inventory of port property.

The audit noted port equipment, including two boats, has been loaned to local authorities without appropriate approvals or documentation.

"There's absolutely no excuse for anything in that report," port authority board Chairman Robert Snover told the Legislative Fiscal Committee after the audit presentation.

Snover said the board has established greater authority over port operations and noted it was the board that asked the state to do the audit in January.

"If not for the board's actions, the past practices would continue today," he said.

Gov. Jeanne Shaheen said she was disturbed by the audit, but pleased that the port's interim director, Geno Marconi, and the board acted promptly to address many of the problems it uncovered.

"In response to the audit, the attorney general has already begun a criminal investigation," she said.

Here are some of the audit's findings:

* Port money spent on personal items, ranging from $10 for sunscreen to $11,000 for clothing during fiscal years 1998 and 1999. Other items included tires, an oil change for an employee's vehicle, a snow plow, a convertible top for a Jeep -- though the port did not own a Jeep -- watches, a wet suit, blankets and $1,330 for prepaid car wash coupons.

The authority said former Executive Director Tom Orfe bought the plow in anticipation of the private contract ending and was put on Orfe's truck to "save wear and tear on the port's truck."

The authority also said the convertible top was intended to be installed as sunscreen on a patrol boat and is at the port, the car wash coupons were for port vehicles, the blankets were intended as gifts while on trade missions and that work clothing with the port logo was paid for by employees.

* The port failed to properly keep track of spending from a $50,000 "off-state books" marketing fund. During fiscal 1998 and 1999, Orfe was paid $39,000 from the fund, ostensibly as reimbursement for travel and meals. The audit found only $5,600 in receipts. Documents included reimbursement for first-class airfare and $725 for a meal for a group at a Portsmouth restaurant, including a $100 bar tab. Other receipts raised questions of whether some travel expenses were reimbursed twice -- once from the marketing fund and once from the port's state account, the audit found.

The marketing fund has since been transferred into the state system.

* The port failed to monitor and enforce contracts. The terminal contractor has not made dockage and wharfage payments since December 1998. The port also allowed a $2.1 million federal payment to remain uncollected for about three years apparently due to not filing the necessary paperwork to close out a project.

* Orfe, three current part-time harbor masters and a prior part-time harbor master were given no-fee mooring permits. Other state agencies also were given the no-fee permits.

* Port employees were encouraged to charge gas on the port's account at a local gas station rather than file for mileage reimbursement.

* The port has no comprehensive inventory of equipment. Some equipment is known to be missing, including a $125 flashlight and a $140 tarp.

* Payroll records don't include documentation that employees worked the hours for which they're paid. Two port employees often claimed the same overtime each week without supporting documents. Nor did the port keep time sheets for part-time harbor masters who generally were paid for working 20 hours a week without regard to the hours worked.

The port authority has since started using time cards and requires overtime to be pre-approved except in emergencies. It also now requires activity reports for overtime.

* The port deliberately avoided state purchasing controls for some expenses. For example, the port entered a personal service contract in 1999 with a port employee's spouse to develop a computer database to track boat moorings. Five separate payments of $1,440 were made to pay the $7,200 contract. A port employee said the payments were split to circumvent the $2,500 limit on state contracts subject to review.

* The port issued loans out of a federal program intended to help the fishing industry to members of a loan fund board despite federal rules making them ineligible. The audit said at least $430,000 of the $1.3 million in loans issued were made to apparently ineligible borrowers.

The port said it thought it had gotten permission from the government for those receiving loans to abstain from voting and thus avoid any conflict of interest.

"They assured us it was fine," said port authority Commissioner Steven Driscoll.

The port authority audit has raised the question of whether other agencies also should be put under the microscope.

Catherine Provencher, director of the Legislative Budget Assistant's audit division, said there could be equally serious problems at other small and rarely scrutinized agencies. She said agencies probably should be audited more frequently to catch past mistakes and misdeeds.

But Rep. Neal Kurk, R-Weare, said the benefit of doing more audits must be weighed against the cost.

"Sometimes when you have scathing audits like this, people get the urge to hire more auditors, but I don't think that's necessary or indeed desirable," said Kurk, chairman of the House Finance Committee.

When the Port Authority was audited last summer, state inspectors hadn't checked its books in 15 years, partly because its budget is so small. The authority received $2.5 million this year to maintain Portsmouth Harbor and nearby rivers and to help develop the state's commercial fishing industry.

While agencies that handle large amounts of money are closely watched, small agencies such as the adjutant general's office or the human rights commission sometimes go for 10 years or more without inspection, Provencher said.

"They're very small agencies, and while we recognize there's a risk out there, our resources may dictate that we need to be at another agency," she said.

Donald Hill, commissioner of the Department of Administrative Services, said the agencies that get audited the least often also may be the least able to keep proper track of their accounts. He has asked for three auditors to help agencies follow the rules.

Hill said his department was created in 1983 to oversee state agencies' activities but never was given any auditors to go into the field and help them. His previous requests for the jobs have been refused.

"I must be somebody they feel is not that important," he said.
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Title Annotation:problems found in audit of New Hampshire Port Authority
Publication:New Hampshire Business Review
Geographic Code:1U1NH
Date:Dec 29, 2000
Previous Article:Emerging grants from United Way linked to housing.
Next Article:UNH economist sees N.H. continuing to set pace.

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