- Associated Press - Tuesday, December 6, 2016

HARRISBURG, Pa. (AP) - Pennsylvania’s auditor general said Tuesday the state should rein in what he called questionable spending of some of the hundreds of millions of dollars in fees from a natural gas drilling boom that have swelled local government coffers under a nearly five-year-old state law.

In a new report, Auditor General Eugene DePasquale, a Democrat, said the program needs better spending guidelines, improved reporting requirements and more rigorous state oversight. He also said money had been distributed incorrectly to municipalities.

The report said about a quarter of the money distributed to local governments and examined by DePasquale’s investigators were for what he deemed questionable expenditures.

“Right now, we essentially have 37 counties and 1,487 municipalities independently interpreting the flawed language” in the 2012 law that authorized the impact fees, DePasquale said.

Among other things, they found $20,000 spent on a community theater, purchases of fireworks and inflatable rentals for a township’s recreational programs and use of the money to cover payroll for prosecutors and probation officers.

DePasquale said the fees were intended to help local governments cope with the burden of gas drilling, including preventing water well pollution, fixing roads damaged by transporting heavy drilling machinery and making up for the loss of recreational space.

“Where we are seeing a problem with the spending is when local governments fail to connect the expenditures to direct impacts of drilling,” DePasquale said.

DePasquale suggested the program could be transferred from the Public Utility Commission to “a more appropriate entity” that can work more closely with local governments, such as the Department of Community and Economic Development or the Commonwealth Financing Authority.

The state had distributed more than $850 million from impact fees by the end of last year, including money to counties, municipalities and state programs.

The auditor general said the law does not require any state agency to monitor local government spending, and the recipients only have to report on commitments to projects rather than what they actually spend. He said they can deposit the money into a capital reserve account and then spend it in future years, avoiding reporting requirements.

Auditors also found overpayments during a four-year period in three of seven municipalities they examined.

“We reviewed only a sample of municipalities and found $863,000” in overpayments, DePasquale said. “That should raise alarms for municipalities and the General Assembly.”

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