CLEARFIELD – Clearfield County has been cited for the misuse of Act 13/Marcellus Shale Impact Fee funding, according to a performance audit released this month by Pennsylvania Auditor General Eugene DePasquale.
More specifically, the audit showed that Clearfield County spent $287,500 to offset its deficit in the county court’s budget and $186,745 to cover a portion of the IT department’s expense budget.
From 2012 to 2015, the 10 counties and 20 municipalities reviewed for the audit (representing $85.6 million of the $428 million in impact fees distributed to local governments) spent 24 percent, or $20.2 million, of those fees on “questionable costs.”
In e-mail correspondence with GANT News on Wednesday afternoon, Commissioner Mark B. McCracken explained that: “The Auditor General cited Clearfield County spent $287,500 to offset a deficit in the county court’s budget.
“In the information, I sent, the Act 13 report for 2012 submitted in March of 2013, shows $187,500 under category 10 – Judicial Services, which was described as ‘$187,500 of Act 13 funds were allocated to offset a total deficit of $351,515 in the court’s budget.’
“Similarly, in the Act 13 report for 2014, $100,000 was reported in category 10 – Judicial Services – reported as ‘$100,000 allocated to offset a deficit of $333,363 in the court’s budget.’
“That is the total the Auditor General is citing. In this case, I would argue that, under the vague description of ‘Judicial Services,’ covering a portion of the court’s operating deficit would/should be allowable.”
So far as the second audit finding, McCracken offered this explanation. He stated: “The Auditor General cited Clearfield County spent 186,745 to cover a portion of the IT Department’s expense budget. In the 2013 Act 13 report, category 8 shows $154,856 ‘utilized to cover equipment and operation costs for the IT Department.’
“The remaining amount of $31,889, I can’t specifically correlate to any one IT item. Most of the other expenditures under category 8 are directly for GIS expenditures or for software in the Assessment Office/Tax Claim Bureau and the Sheriff’s Office.
“As with item one, we believed category 8 described as ‘Records Management, Geographic Information Systems and Information Technology’ allowed for Act 13 funds to be used for IT purposes including, but not limited to, hardware, software and costs for the IT Department to operate.”
McCracken also stated that: “Under the instructions included on the Act 13 report, I feel the $287,500 reported under Act 13 category 10 – Judicial Services – were valid as these funds were all appropriated to cover valid court-related costs.
“Additionally, the $186,745 also noted by the Auditor General’s report was reported under Act 13 category 8 – Records Management, Geographic Information Systems and Information Technology. All Act 13 funds spent under this category went for computer hardware, software or maintenance.
“Specifically a large portion of this expense went to replace software in the Assessment Office that was tied directly to the need to better track data on both surface property and mineral rights that is directly tied to the Marcellus Shale drilling.
“In the near future, we will make contact with the Auditor General’s office so they can provide further clarification on why these two items were included in the report.”
The recent audit of the Public Utility Commission’s (PUC) oversight of a fund to help alleviate the negative local effects of natural gas drilling demonstrates the need to “correct the authorizing law’s vague spending guidelines, poor reporting requirements and lack of state oversight,” according a press release issued by DePasquale.
“Our audit shows that improvements to Act 13 of 2012 are needed to help the PUC, or another state agency, administer the distribution of funds, provide greater direction to local governments for proper spending and ensure that the impact fees are used as intended,” he stated.
DePasquale continued, saying that: “… The lack of clarity in Act 13 resulted in 24 percent of impact fee funds distributed to the local governments we reviewed being spent on questionable costs, such as balancing budget deficits, salaries, operational expenses and entertainment.”
The impact fees are intended to be used to alleviate negative effects of drilling on local communities, such as gas and fracking fluids migrating into water wells, repairing roads and bridges damaged by trucks and heavy equipment and loss of recreational space.
Since enactment of Act 13 of 2012 through 2015, the PUC has collected approximately $856 million in the impact fees, including $160.3 million distributed to counties and $267.6 million distributed to municipalities, according to the press release.
Act 13 states that counties and municipalities receiving impact fees must use the funds for one of 13 purposes associated with natural gas production.
Act 13 does not require the PUC, or any state agency, to advise local governments on the appropriate use of impact fee funds, nor does it authorize the PUC, or any state agency, to monitor local government spending.
“Right now, we essentially have 37 counties and 1,487 municipalities independently interpreting the flawed language in Act 13,” DePasquale stated. “It is no wonder that local governments are broadly interpreting how to spend the money based on the 13 general criteria in the legislation.”
He continued, saying that: “To be appropriate under Act 13, that spending must meet the dual standard of fitting into one of the 13 broad criteria and being associated with natural gas well drilling operations in the community. Where we are seeing a problem with the spending is when local governments fail to connect the expenditures to direct impacts of drilling.
“The current law should be amended to transfer the administration to a more appropriate entity such as the Department of Community and Economic Development (DCED) or the Commonwealth Financing Authority (CFA) and allow them to take a more active role in helping local government leaders make sure their spending plans meet both standards.”
Commissioner John A. Sobel, chairman, agreed that the act is broad and unclear. “The Auditor General believes that Act 13 is written so vaguely, and the PUC is given so little direction on proper supervision that Act 13 monies are being spent incorrectly by counties, municipalities and conservation districts due to lack of information.
“Ten counties and numerous municipalities from throughout Pennsylvania were selected for review to illustrate the same. Eight of the 10 counties were found to have spent the monies incorrectly, along with many of the local municipalities because Act 13 does not give enough guidance on how the monies should be spent in the opinion of the Auditor General.
“Some of the counties spent funds on county jails, automobiles, advancements of money to human services departments, bouncy houses, fireworks displays, community theater and a musical performance by an American Idol contestant.
“Clearfield County spent Act 13 dollars on court deficits and IT services as permitted by sections 8 and 10 of the act (Judicial Services and information technology).”
Sobel noted that: “The difficulty is that the Auditor General has told us that the spending was incorrect but not why the spending was incorrect. It is not clear from his report.
“After reviewing the same, my surmise is the he wants the language of Act 13 to be more specific that the spending within the categories be directly related to the gas and oil industry and that it show that the same has caused the spending to occur.
“We believe that it has, particularly in the area of IT spending. However, that is only our guess at this point, and we hope that there will be more information coming to clear up this issue.
“We would agree that some of the above listed expenditures by other counties were inappropriate. However, we do believe that Clearfield County did follow the dictates of Act 13 as written and did spend our Act 13 dollars within the proper categories.
“If not, then the Auditor General and the Legislature need to provide us with better guidelines as to what is and is not permitted as to spending as the statute is written very broadly.”