Auditors: ‘Possible financial statement fraud’ at GDOT
July 28, 2009 at 1:16 pm by Thomas Wheatley in NewsState auditors have discovered what they call evidence of “possible financial statement fraud” and questionable accounting practices at the Georgia Department of Transportation during two years of former Treasurer Earl Mahfuz’s tenure.
According to a 54-page report released Monday, Mahfuz, who was demoted last year to assistant treasurer, “was responsible for the decision to implement business process changes at GDOT [between 2005 and 2007] that he knew would violate the Georgia Constitution.”
Those changes involved GDOT letting road projects even if it lacked the money to do so. The audit notes that the state Constitution has strict requirements when it comes to the state incurring debt.
The audit says the accounting practices might have helped mask GDOT’s budget deficit. It also says GDOT’s upper management and top boardmembers often butted heads with each other and that a general mistrust existed between the agency and the governor’s office. These factors helped create an operating environment that auditors say was “dysfunctional to the extent that GDOT was ripe for fraud, waste, abuse and mismanagement.”
Also reported in the audit is the allegation that Mahfuz instructed staffers to not record executed contracts, a move that allowed GDOT to avoid the appearance of a severe budget shortfall when the fiscal year ended. Mahfuz “emphatically denied” those allegations.
Gov. Sonny Perdue, who’s long been at odds with GDOT, isn’t pleased.
“This type of Enron-like accounting cannot and will not be tolerated anywhere within state government,” the governor said in a statement. “Each one of us who deals with the public’s money has a responsibility of fiduciary honesty and integrity that must be beyond reproach. To think that officials charged with supplying these numbers would intentionally direct those under their command to withhold information is unconscionable at best and illegal at worst.”
Perdue’s encouraged state Attorney General Thurbert Baker to examine the reports and “take appropriate action.”
In a lengthy statement, new GDOT Commissioner Vance Smith said the department has already followed through on many recommendations outlined in a November 2008 audit of the agency. Mahfuz’s successor, Kate Pfirman, has led those fixes. Smith also said GDOT will work with the attorney general.
“We believe that our timely response to the initial report last fall and our continuing efforts underscore our commitment to retain the public’s trust and confidence,” Smith said. “We have learned important lessons about how to manage our business practices. It is now equally important that we turn the page on this matter and move forward with this Department’s important mission to provide a safe, seamless and sustainable transportation system for Georgia in the 21st Century and beyond.”
Earlier this year, Perdue tried to curtail the state agency’s powers with a bill that overhauled Georgia’s transportation-planning structure. That bill, Senate Bill 200, was drastically rewritten in the closing days of the 2009 legislative session yet ultimately signed by Perdue. The newly created GDOT Planning Director will decide long-term transportation decisions for Georgia.
July 28th, 2009 at 10:57 pm
Can we shout from the rooftops “Sonny Did It!” now?