The second retraction demand from NCTD, and our response

NCTD_Logo

Joint_Logo

Dear Mr. Karlo,

I am writing you to once again request that KPBS correct ongoing and additional
factual errors contained in a series of news reports by investigative reporter Brad
Racino of your news partnering agency, Investigative News Source.

Specifically, NCTD requests the following corrections:

1. April 3, 2013 — “SPRINTER Funds Used for Buses — and Studies”

In this article, Mr. Racino suggests that money was wrongfully diverted to pay for
studies and accuses NCTD of “violating accounting principles.” We have provided
several factual sources of information to KPBS that proves this statement to be
incorrect, including:

  • The Federal Transit Administration (FTA 5307 funding guidelines, go to: http://www.fta.dot.gov/grants/13093_3561 .html). These guidelines allow for
    funding for preliminary design and planning for those CIP projects that
    result in a capital asset when completed. I refer you to the first section
    under eligibility that reads: “Eligible Activities- Eligible activities include
    planning, engineering, design and evaluation of transit projects and other
    technical transportation-related studies…
  • I have included as an attachment to this communication, a letter from
    NCTD’s independent auditor, Pun & McGeadey, indicating that studies
    undertaken by NCTD are properly accounted for as operating
    expenditures, not capital expenditures in FY 2012 and FY 2011.
  • During a May 1, 2013 interview Mr. Racino conducted with various NCTD
    managers, Mr.Tucker and Mr. Ryan Bailey, NCTD CFO, explained the
    difference between NCTD’s list of projects to be funded in our annual
    budget documents under the heading of CIP, and the accounting treatment
    for such projects in the Comprehensive Annual Financial Report (CAFR).
    Contrary to the allegation of wrong doing by Mr. Racinio on behalf of
    KPBS, NCTD properly accounts for FTA eligible studies and planning
    projects as operating expenses rather than capital projects. This interview
    was recorded by Mr. Racino and NCTD. We are able to provide the full
    recording where this explanation was provided, should Mr. Racino’s
    recording be unavailable.

The projects KPBS listed as being improperly treated are clearly properly accounted
for. The implication by KPBS that NCTD is not following generally accepted
accounting principles (GAAP) set by the Government Accounting Standards Board
(GASB) is false. NCTD requests a retraction of this allegation and a public
statement of the error in facts by KPBS.

2. May 2, 2013- “North County Rail and Bus Service Suffers without Contract Oversight”

This article incorrectly states:

“During his outsourcing, Tucker contracted out the maintenance of the
SPRINTER vehicles to a private company,-which then subcontracted out to
another private company.”

  • These contracts were authorized by the NCTD Board and entered into prior
    to Mr. Tucker being employed by the District in December 2008. The
    contract was entered into on May 8, 2006, and was executed by Karen King,
    Executive Director and Michael Cowett, General Counsel.

NCTD requests that this incorrect information be identified as an error to the
public and corrected.

3. May 2, 2013- “Transit Agency’s Revolving Door Costs Big, Causes Turmoil”
The chart entitled, Recruiting fees paid by is incorrect in the following
instances:

  • Johnny Dunning- As we stated in the May 1, 2013, interview with Mr.
    Racino, Mr. Dunning was an ancillary hire out of the one search for a Chief
    Operating Officer, Lane Fernandes. We did not pay any fees for hiring Mr.
    Dunning. We did not pay any additional fees for hiring the replacement for
    Mr. Fernandes.
  • Laynie Weaver- was hired by NCTD as a result of an independent response
    by Ms. Weaver to a standard recruitment conducted by our human resources
    department. She is the Transit Safety and Emergency Preparedness
    Manager. NCTD did not pay any fees, nor was KL Executive Search
    involved.

NCTD requests that this incorrect information be identified as an error to the public
and corrected.

I have attached the Society of Professional Journalists Code of Ethics (Code), the
basis for our requesting that KPBS correct the numerous reporting errors in this
series of articles. To quote the Code,

“Journalists are accountable to their readers, listeners, viewers and each other.
Journalists should…

  • Clarify and explain news coverage and invite dialogue with the public over journalistic conduct.
  • Admit mistakes and correct them
  • Expose unethical practices of journalists and the news media.
  • Abide by the same high standards to which they hold others.”

NCTD is asking KPBS to uphold the journalistic standards the public and the
profession demands and publicly correct the record. Anything less than
accountability is to acknowledge that ethical decision making is absent from the
KPBS newsroom. I ask you to correct the record as soon as possible.

I can be reached at 760-967-2817 and dcastillo@nctd.org.

Sincerely,

Deborah Castillo
Manager of Marketing and Communications

Dear Ms. Castillo,

This letter responds to your May 2, 2013, letter. We are looking carefully at each point you
raise and the documents NCTD has produced, and we will respond further to your request
for certain statements we published to be retracted if warranted in the future.

Points You Raised:

“The Federal Transit Administration…” Point:

We shared your recent letter with our experts and they concluded that our points –
addressed to NCTD on April 16, 2013 and copied below — remain valid. As we stated,

“We agree that FTA money can be obtained for planning purposes. But that does not make
the planning a capital project, as evidenced in the FTA document you quote, at http://www.psrc.org/assets/471/2012_FTA_eligibility.pdf

The issue we addressed is whether NCTD is correct to show the “‘studies” on the capital budget, or whether it should
have instead included them in the operating budget.

The FTA cites three types of activities eligible for funding:

  1. Studies;
  2. Capital investments in buses; and
  3. Capital investments in rail.

As these three separate categories show, the FTA classifies “studies” separately from
“capital investments.”

Moreover, according to our experts, “studies” are generally operating expenses that must
be included in the operating budget, whereas only “capital investments” belong in the
capital budget.

We remain open to NCTD telling us specifically what is in error in our reporting on this point, and
providing the supporting documentation to validate your position.

The “… letter from NCTD’s independent auditor, Pun & McGeadey…” Point:

Our experts have reviewed Kenneth Pun’s letter and NCTD’s response, and they have concluded that it is
not relevant and that our point remains valid. Notably, Mr. Pun’s letter does not address the points
made in our story, and it does not look at any of the studies mentioned in our article. Mr. Pun addressed
only a Camp Pendleton project that was not even mentioned in the NCTD FY 2012 CIP budget.

Again, we remain open to NCTD telling us specifically what is in error in our reporting, and providing the
supporting documentation to validate your position.

The Point: “During a May 1, 2013 interview Mr. Racino conducted with various NCTD managers, Mr.
Tucker and Mr. Ryan Bailey, NCTD CFO, explained the difference between NCTD’s list of projects to be
funded in our annual budget documents under the heading of CIP and the accounting treatment for
such projects in the Comprehensive Annual Financial Report (CAFR)… NCTD properly accounts for FTA
eligible studies and planning projects as operating expenses rather than capital projects.”

Again, our experts have concluded that our points regarding improper inclusion of “studies” in the
capital budget remain valid for reasons set forth above. Additionally, as to NCTD’s argument, we note:

1. It directly contradicts NCTD’s own Capital improvement Budget definition, as evidenced in the FY
2013 CIP on page 69:

Introduction to the Capital Improvement Program:

The Capital Improvement Program (CIP) is a financial plan of proposed capital projects.

2. It further contradicts NCTD’s April 5 letter asserting that federal funding allowed NCTD to consider the
planning studies as capital expenditures, and it therefore did so.

3. Mr. Bailey also stated during his interview with us, “So we prepare on an annual basis, here’s a list of
all projects in that book, it’s called CIP, that listing of projects is not all capital projects. It’s operating
and capital projects.” As noted above, this assertion, too, contradicts NCTD’s CIP budget definition, and
Mr. Bailey and Mr. Tucker have further admitted that NCTD is mixing operating and capital expenditures
in its budget.

4. In NCTD’s May 2 PowerPoint presentation to its Board, slide 13 lists “FY 2013 Studies Classified as
Operating Expenses.” The slide lists 13 studies — six of which were included in the CIP and seven of which
were not. NCTD therefore is indicating it has the right to include some studies in the capital budget and
some in the operating budget.

In summary, our experts and our research have concluded the following:

-NCTD has an operating budget. Operating expenses, which include all studies that do not result in the
placement of a fixed asset, go in the operating budget.

-NCTD has a capital budget. Capital projects, which result in the creation or revitalization of a fixed asset,
go in the capital budget, as stated in NCTD’s own definition of a capital budget.

-During the meeting on May 2, 2013, NCTD upper management clearly stated the studies were
operating expenses, and that operating expenses are mixed in with the CIP budget.

As we further stated in our April 16 response:

-Ken Schermann, a senior official within the Governmental Accounting Standards Board, stated that
NCTD’s studies do not belong in a capital budget.

-Paul Scott, a forensic CPA in San Diego and a former CEO and CFO, stated that the studies do not
belong in a capital budget.

In addition:

-The Metropolitan Transit System stated, through its spokesman Rob Schupp on May 6, 2013, that it
does not include any studies in its capital budget.

Again, we remain open to NCTD telling us specifically what is in error in our reporting, and providing the
supporting documentation to validate your position.

The “Contracted out maintenance of the SPRINTER…” Point:

We were wrong in reporting that Matthew Tucker “contracted out the maintenance of the SPRINTER
vehicles to a private company, which then subcontracted out to another private company.” The
outsourced operations were already in place upon Tucker’s arrival at NCTD. We regret this error and will
publicly correct it.

The “Recruiting fees paid by NCTD…” Points:

That Johnny Dunning… was an ancillary hire… we did not pay any fees for hiring Mr. Dunning.

Per our email dated May 6, 2013, we asked you the following question, to which we have received no
response:

“On our graphic, we listed $20,000 paid to KL Executive Search for Johnny Dunning. There were two
invoices totaling $20,000 (August 2012 for $10,000 and October 2012 for $10,000) for a position called
Deputy COO Service Planning that we received through our PRA request. Deputy COO appeared to be
Mr. Dunning’s title, per pg. 32 of the November 2012 Board Agenda. If Mr. Dunning is not the person NCTD
paid $20,000 for, please tell us who that person is.

That Laynie Weaver… was hired by NCTD… NCTD did not pay any fees, nor was KL Executive Search
involved.

Per our email dated May 6, 2013, we also asked you the following question, to which we have received
no response:

“On our graphic, we listed $28,800 for Laynie Weaver, System Safety Officer. There were three invoices
totaling $28,800 (February 2012 for $10,000, March 2012 for $10,000, and April 2012 for $8,800) for a
position called System Safety Officer. If Ms. Weaver is not who NCTD paid $28,800 for, please tell us let
us know who that person is.”

Per our email dated May 6, 2013, we also asked you the following question, to which we have received
no response:

“Documents we received through a PRA request show you paid $25,000 (January 2011 for $10,000, April
2011 for $10,000, and May 2011 for $5,000) for a “Program Manager Positive Train Control” position.
We did not include that in our graphic because we confirmed the information after publication. Please
supply the name of that employee so we can add it to our list.

We also didn’t know about the $31,000 total-to-be-paid for a “Civil Rights Officer” position until we
came across the invoice during our meeting Tuesday morning, May 7, 2013, in Oceanside. Please
supply the name of that individual so we can update our published graphic.

Please provide the information requested, including documentation, no later than 5:00 p.m. on Monday,
May 20, 2013, so we can address any errors that may exist.

Sincerely,

-inewsource & KPBS

Update: Oct. 30, 2013: NCTD never responded to any of our requests for clarification or more information.

About The Author

[author_image timthumb='on']http://inewsource.org/wp-content/uploads/2012/07/Brad_Racino.jpg[/author_image] [author_info color="000000"]

Brad Racino is a multimedia reporter for inewsource. To contact him with tips, suggestions or corrections, email bradracino@inewsource.org or call (619) 594-3569.

[/author_info]

We'll let you know when big things happen.

About Brad Racino

Brad Racino is a reporter, producer and editor at inewsource. To contact him with tips, suggestions or corrections, email bradracino@inewsource.org or call (619) 594-3569.

Leave a Reply