Jonathan Starkey

The News Journal

Top state officials, including Gov. Jack Markell and Treasurer Chip Flowers, regularly ignored rules for authorizing out-of-state taxpayer-funded travel, making it difficult to track the purpose and validity of the spending, according to findings from a report issued Wednesday by state Auditor Tom Wagner.

Wagner's office reviewed two years of travel and other spending paid for using state-issued credit cards, and blamed the issues partly on the state's rules themselves, which he called so confusing that even officials at the state Office of Management and Budget, the cabinet-level department that tracks all state spending, had "various instances of non-compliance."

Among other findings, the report concluded that:

• Deputy Treasurer Erika Benner charged taxpayers for $6,399 in personal purchases, including $890 for a hotel stay in Alaska and $331 for a car rental, contradicting earlier statements by Flowers that those charges were business-related. Flowers made the trip to Alaska with Benner, who resigned her post as deputy treasurer and was denied another state job. Benner later reimbursed the state for the personal charges.

• Transportation Secretary Shailen Bhatt violated state rules prohibiting certain types of in-state travel when he hosted a two-day retreat in Rehoboth Beach for Delaware Department of Transportation employees in April 2012. Bhatt billed taxpayers for an overnight stay for 18 employees at an estimated cost of more than $2,000. The hotel stays were billed to the state despite warnings from DelDOT staff, and suggestions to move the retreat out of state to Ocean City so they qualified.

• Markell, on nine separate occasions, upgraded to "preferred" or "choice" seating while on taxpayer-funded flights, against state travel rules. Markell, like other officials reviewed, also regularly failed to authorize out-of-state travel, a requirement intended to "provide transparency" on the purpose and anticipated costs of out-of-state travel.

Wagner, a Republican who faces re-election in November, opened the audit after Benner resigned her post following revelations that she used her state-issued Visa credit card to charge personal expenses, including tickets to a New England Patriots football game. State finance officials raised questions early last year about a series of expenses that led to the discovery of Benner's personal charges.

Flowers, who has clashed with other state officials over his office's handling of travel expenses, declared on Wednesday that "travel audit clears state treasurer Flowers" on his office's website and his Facebook page.

But Wagner stopped short of clearing Flowers after he released the report, citing in an interview the remaining questions about days that Flowers stayed in Seattle and Anchorage after conferences he attended had ended. Wagner said Flowers told members of his staff that he met with law firms, treasurers from other states and NAST officials after the end of the conference in Alaska, for example.

But Wagner said he's not certain what, if anything, the staff was able to independently verify.

"Without knowing fully what we did and did not specifically verify, it's an absolution I cannot give," he said of Flowers' claim that he was cleared by the report.

Official travel

Wagner's report also breaks down travel costs charged to state-issued credit cards for four officials: Markell, Bhatt, Flowers and Benner.

Between November 2011 and November 2013, Flowers and Benner charged about $25,000 each in travel costs to their JPMorgan Visa cards. Markell charged about $21,500, with Bhatt making about $24,500.

Wagner's report says three international trips were not included in Markell's totals, because they were trade visits billed to the Delaware Department of State, not the governor's credit card.

The totals provided are not a complete look at state-funded travel, only purchases made on state-issued cards. Some of the travel also was reimbursed by third-party organizations. The National Governors Association reimbursed the state about $7,500 for portions of Markell's travel costs. The National Association of State Treasurers and another organization reimbursed the treasurer's office about $3,900 for travel costs. The Northeast Association of State Transportation Officials and other groups reimbursed the state $5,098 for Bhatt's travel.

The report spends considerable time criticizing the state's process for funding out-of-state travel on state-issued credit cards, saying the rules are confusing and a "moving target," with frequent changes by Markell administration officials that often are not shared with officials using cards to fund trips.

The travel program is also fraught with unnecessary layers of bureaucracy that create confusion, add no value and could save money if eliminated, Wagner says.

State budget officials restrict travel expenses based on federal guidelines, for example, but "insist on adding further restrictions and administrative procedures that add no value.

"Thus, the salary and administrative expenses from the additional processing cost the state more than double the original travel expense."

"In general, we found consistent noncompliance with exhaustive and bureaucratic instructions," Wagner's report says.

Wagner's office said that state officials did not file necessary paperwork to document out-of-state travel, and the report notes that problems with state-funded travel are not limited to the treasurer's office.

And all officials reviewed exceeded travel spending limits set by the federal General Services Administration, by amounts ranging from about $100 to more than $300.

Markell responds

The report found that Markell ran afoul of state travel rules by not filing appropriate forms to document the purpose and expected cost of state trips; by charging his state credit card for meals for officials outside his office, including his wife, Carla Markell, and state lawmakers; and by charging $128.50 for taffy to send to members of the Delaware National Guard serving in Afghanistan.

A spokeswoman for the Democratic governor criticized the report, calling it a political smear. "It is not hard to imagine that this review may have been motivated more by politics than by a good-faith desire to improve state travel policies," spokeswoman Kelly Bachman said.

Bachman said the governor's travel is reviewed by the state budget office and officials there have not required the governor to submit travel authorization forms seeking permission to take business trips out of state.

"The auditor's office conducted a detailed examination over several months of the governor's office's travel and PCard use," Bachman said. "After all that work, the Auditor concluded that state budget policies are too 'bureaucratic,' while simultaneously criticizing this office for not filling out more forms and second-guessing decisions like the Governor's gift of salt water taffy to Delaware National Guard troops serving in Afghanistan."

As to questions about preferred seating on flights, Bachman said the governor's office booked Markell on " 'economy plus' airline seats in a handful of cases because of limited availability of seats" at a cost of less than $200 to state taxpayers.

Wagner would not comment on claims that his audit was driven by politics, saying that all state officials are subject to travel rules, "from the governor to the maintenance man. You've got a travel policy," Wagner said. "You follow it or you change it."

DelDOT practices

Bhatt, the Transportation secretary, ignored advice that he should not fund in-state lodging for department employees gathered in Rehoboth for a retreat, the report states.

Geoff Sundstrom, a spokesman for DelDOT, defended the location of the retreat for transportation department employees, saying the secretary has hosted no overnight retreats since 2012.

"An overnight, strategic management meeting was held by DelDOT's senior leadership during Secretary Bhatt's first year in office," Sundstrom said. "Given the history of the department when he arrived, it was important for agency decision-makers to get away from their day-to-day routines to concentrate on reform and improvement, especially in the areas of customer service and transparency. While the meeting could have been held in an out-of-state location, it made more sense to convene the meeting where the travel dollars would stay in Delaware."

Bhatt's office was missing receipts or other supporting documentation for $525 worth of expenses during the two-year audit period. Bhatt said those purchases were for incidentals, such as a slice of pizza or parking fees. The documents for those transactions were misplaced and not scanned into DelDOT's virtual archiving system.

"Every time I have used my Pcard (state credit card), it has been for a legitimate purpose for the business of the state," Bhatt said.

Treasurer's office

The report says Benner made 34 personal charges totaling $6,399, including charges made during a trip to Alaska for a treasurers' conference, a trip Flowers also attended. Benner declined to comment.

In September 2013, Flowers disciplined a member of his office, restricting her access to state financial information for failing to appropriately address Benner's personal charges and alert Flowers to the issues. The employee retired from state government after being disciplined.

Wagner's report says treasury officials responsible for tracking spending acted properly, repeatedly attempting to secure reimbursements from Benner. Many charges were reimbursed late, however, including a charge for football tickets and a car service to the stadium. Benner repaid taxpayers more than three months after making the inappropriate charges.

"Despite public scrutiny and various reports to the contrary, we found that the treasury employees charged with internal control responsibility followed timely and appropriate procedures, which directly resulted in restitution to the state," the report says.

Wagner's report says that Flowers did not know about Benner's inappropriate charges until he was confronted by Finance Department officials in April 2013.

Like others, Flowers did not fill out proper forms to authorize state travel and twice charged the state for more than the allowable daily rate for lodging, at a cost of $113. Flowers also reimbursed state taxpayers $1,343 for various travel expenses, the report says, in an attempt to end speculation that he inappropriately spent taxpayer money. In one case, he reimbursed the state for a charge already covered by a reimbursement from the National Association of State Treasurers.

"The findings of the report are crystal clear. I used my state credit card for only legitimate business expenses and never used the card for any personal expense," Flowers said Wednesday. "The findings are crystal clear. Not a single penny."

Other issues

Wagner's report does not answer all questions surrounding the treasurer's travel, however. Wagner's report says that Flowers applied a $2,900 reimbursement check from the National Association of State Treasurers to expenses incurred while he was on state business in Alaska in September 2012. Left out is that the reimbursement check was dated July 2013, about 10 months after the Alaska trip and after travel expenses in his office had come under scrutiny.

The report also contradicts earlier statements by Flowers, and findings of a report issued by his office in October, that Benner's extended stay in Alaska after the end of a state treasurers' conference was business-related.

Benner reimbursed the state for the travel at Flowers' request in June 2013, including $890 for a two-night stay in a lodge two hours away from the Anchorage conference site and $331 for a car rental.

The June repayment was not detailed in Wagner's report, but Flowers offered conflicting views on the charges and Benner's reimbursement, at one point requesting the reimbursement from Benner and later saying he was considering returning some of her payment.

He has said most recently the charges were business-related. Wagner's report makes clear they were personal.

Flowers and Benner attended the conference together in Alaska, and both stayed for several days after it ended and attended sight-seeing visits together.

The Alaska conference ended on Sept. 12, 2012, and Flowers did not fly home until Sept. 17. He said he remained in Anchorage on state business related to the state's $2 billion investment portfolio, the report says, meeting with officials from the National Association of State Treasurers and law firms.

Benner, the report says, "did not attend the same business meetings," and her travel expenses were labeled as personal.

Reporter Melissa Nann Burke contributed to this story. Contact Jonathan Starkey at 983-6756, on Twitter @jwstarkey or at jstarkey@delawareonline.com.