SPSA blistered in state report

Published 10:28 pm Tuesday, October 21, 2008

A state report that blasts the Southeastern Public Service Authority for poor management of taxpayer funds and accuses the regional solid waste agency of lacking focus and direction contained a few surprises, according to at least one member of its governing body.

Suffolk City Councilman Leroy Bennett, who has served as the city’s representative on the authority for the last eight years or so, said Tuesday that he had not had a chance to fully examine the report released Friday by Virginia’s Auditor of Public Accounts.

Nonetheless, some of the revelations that he has seen or read about in media accounts have been surprising, Bennett said.

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“There were things that I don’t think any of the board members knew,” regarding the management of various SPSA accounts, he said, explaining that board members were unaware that funds transfers between approved, budgeted projects and unbudgeted, unapproved ones had taken place without the board’s knowledge.

The state auditor’s report confirms that such transfers were completed without the board being notified. It was just one ugly disclosure in an 80-page report replete with negative observations.

The state auditor took the embattled authority’s past management and directors to task for failing to provide adequate leadership, for sometimes failing to follow “operational and financial best practices,” for failing to properly assess either its current operations or its previous decisions and — most critically — for failing to develop “a detailed, thought-out plan to implement its mission and determine exactly what businesses the authority should remain in or enter.”

That final failure, the audit states, has led to “many of the actual and perceived problems with SPSA’s operations” and has left management and the directors unsure of the agency’s future once its organizing agreement expires in 2018.

The authority was formed in 1976 as an alliance of the Southside Hampton Roads cities of Suffolk, Franklin, Chesapeake, Portsmouth, Norfolk and Virginia Beach and the counties of Isle of Wight and Southampton, all of which pledged to send at least 95 percent of their solid waste to a central landfill, now located in Suffolk.

In exchange for hosting the landfill, the city of Suffolk has an agreement that allows it to dispose of municipal waste there without charge. Similarly the city of Virginia Beach negotiated a special contract covering tipping fees, as well as operational costs for its own landfill. The auditor estimates that deal cost SPSA a total of $17 million in the 2004-2008 period, alone.

“The special arrangements with Suffolk and Virginia Beach have a significant impact on SPSA,” the report states. “Not only has SPSA forgone tipping revenues from these localities, but many in the public have a negative perception of these arrangements. Other communities perceive these agreements as an inequity.”

The financial impact of those and other decisions since then have left an organization that is financially unstable and lacking a viable plan to monitor and maintain its landfills after the 2018 contract expiration, the report indicates.

A weak financial position and a questionable long-term future have done little to curb the authority’s penchant for borrowing money to make ends meet, a problem the auditor said needs to be brought under control soon to avoid “a significant problem in repaying all of the authority’s current and future outstanding debt.”

Rowland L. “Bucky” Taylor, SPSA’s new executive director, said in a recent press release that the authority “intend(s) to review each recommendation and finding with the Board of Directors and discuss how they can be addressed in a timely and responsive manner.”

Public Relations Coordinator Tom Kreidel said Tuesday that the board’s next scheduled meeting is Nov. 12 and that the auditor’s report “will be a topic.”

The report was ordered earlier this year by a joint resolution from the Virginia General Assembly, which called on the auditor of public accounts to “assess Southeastern Public Service Authority’s financial stability and performance, compare SPSA’s operations with similar public and private entities and make such recommendations as he may deem relevant to the purposes of this study.”

Acknowledging that the state’s audit had uncovered problems that had gone unmentioned in the agency’s self-sponsored annual audits, Suffolk’s Bennett said Tuesday that he could not explain the discrepancies.

“The board has tried to be very open with the financial reports,” he said. “We’ve had an audit every year.”