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American ShipperIntermodal

Senate wants Kings Point audit, citing possible misuse of funds

Senate wants Kings Point audit, citing possible misuse of funds

Congress has asked the Government Accountability Office to conduct a “thorough audit” of the U.S. Merchant Marine Academy,”   

citing possible “improper and illegal use of appropriated funds.”

      A Senate Appropriations Committee report on the 2009 appropriations bill for Transportation, Housing and related agencies, S. 3261, said, “Earlier this year, the committee was informed by the Department of Transportation and the Maritime Administration that for many years, officials at the United States Merchant Marine Academy may have been involved in the improper and illegal use of appropriated funds. The suggested level of impropriety is startling.”

      Eric Wallischeck, acting chief of staff and assistant superintendent for plans, assessment and public affairs at the academy, said that while the language in the Senate report is “very strong” and “certainly gives us pause, we need to give them confidence.”

      He said the concerns raised had more to do with the process of how money flowed through school than concern about how the money was spent.

      “In the end, the funds were used for supporting the educational and midshipman programs and nobody has been accused of impropriety,”   

Wallischeck said. “As a federal institution in the public trust, we need to make sure we are following the rules established by OMB (Office of Management and Budget) and other entities.”

      The July 14 report said, “Potential violations identified in an internal review of the academy ordered by the Department of Transportation’s deputy secretary include:

      ' “Obligating funding in excess of the amount appropriated for salaries and benefits at the academy.

      ' “Bypassing the civil service system by employing staff through the Academy’s Non-Appropriated Fund Instrumentalities (NAFIs) to conduct official academy business.

      ' “Bypassing competition requirements by entering into invalid reimbursable agreements in order to transmit revenue to one of the Academy’s NAFIs — the Global Maritime and Transportation School (GMATS).

      ' “Circumventing federal procurement regulations.

      ' “Perhaps most disturbingly, siphoning funds away from the direct appropriation for the academy’s instructional program for other Academy functions.”

      Officials from the federal academy, located at Kings Point, N.Y., were not immediately available for comment.

      GMATS is a continuing education school at the academy that has operated for about a decade and offers more than 140 professional education and training programs. These include programs for merchant mariners seeking license upgrades, programs on terminal and intermodal systems and programs for Navy and Coast Guard reservists.

      Rob Whitney, a senior policy advisor to Maritime Administrator Sean Connaughton, said GMATS is a government entity but operates without direct taxpayer support as a “fee for service” operation.

      Whitney said MarAd, which oversees the four-year service academy, is working with 'the Department of Transportation, and the Office of Management and Budget to address some of these concerns that the Senate committee has. Much of these come from information we provided to the committee” as part of an “ongoing reform of how the academy operates and handles money and making sure they are spending money according to federal law and government regulations.”

      He said no specific program is the focus, but “updating a lot of internal controls and checks and balances within their financial operations.” He said some of the concerns about finances at Kings Point were first raised by a new chief financial officer who joined MarAd last summer.

      On a visit to the academy, Wallischeck said the CFO found “there were things that we were doing that were not necessarily standard within the federal government, particularly in the use of non- appropriated funds. We had gotten some bad guidance.”

      Non-appropriated funds include midshipman fees, donations from alumni and parents, grants and gift money, as well as some money produced by GMATS, which was used for faculty development and other kinds of programs. GMATS, Wallischeck noted, is not subsidized, but instead produces revenue for the academy.

      Wallischeck said GAO has begun an audit and “we are confident that in the end that while we may get gigged on process, the product and the overall program will be supported.” He expects a preliminary report will be ready for Congress in September and will be finished by early 2009.

      “The level of disregard that academy officials appear to have shown to appropriate financial practices, government regulations and statutory limitations is intolerable,” the Senate report said. “These actions are likely to result in the reporting of several violations of the Anti-Deficiency Act. Moreover, the idea that so many questionable and potentially illegal actions took place under the supervision of MarAd leadership suggests either gross negligence in the agency’s oversight responsibility, or worse, complicity. The committee is also greatly disturbed that some of the actions by the academy’s officials appear to have taken funding away from the educational programs for the academy’s students.”

      According to the GAO, the Anti-Deficiency Act is one of the major laws through which Congress “exercises its constitutional control of the public purse.”

      The committee noted the GAO is initiating its audit at the same time the committee is considering the academy’s fiscal year 2009 budget request of $61.4 million.

      “The formal budget request for the academy, as submitted by the president, deviates from prior years in that several program activities are combined into one activity called ‘Academy Operations.’ This new unified account is expected to subsume the following funding activities for which the Committee has customarily set annual funding levels:

      ' “The midshipmen program.

      ' “The instructional program.

      ' “Program direction and administration.

      ' “Maintenance, repair and operations.

      “The committee does not feel that it is responsible to provide the academy with greater flexibility at a time when it is being accused of mismanaging its finances and ignoring congressional direction,” the report said.

      While it said it was “deeply committed to the mission of the academy,” and hopeful “GAO’s audit will provide a verifiable and accurate accounting of how the funding at the academy is aligned between budget accounts and program activities,” the committee said that absent the GAO audit, it “cannot provide funding to the academy as requested.

      “Therefore, in the interim, in order to ensure that the education of the midshipmen is not compromised, and that fiscal integrity and legality are restored, the committee has provided funding solely to the Secretary of Transportation to support the programs, operations and capital needs of the academy,” the committee said. “The committee has stipulated that 80 percent of the funding can be obligated only after the secretary, in consultation with the Maritime Administration, submits a plan detailing how funding will be spent, which is approved by the House and Senate Committees on Appropriations.”

      The report can be found here:
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' Chris Dupin

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