THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, October 5, 1996 TAG: 9610050382
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY KAREN DAVIS, STAFF WRITER
DATELINE: CAPE CHARLES LENGTH: 72 lines
Festering questions about the Eastern Shore Railroad broke to the surface this week after a group of citizens learned that the auditors for the railroad have resigned.
The auditors quit because the railroad's manager threatened to sue unless they gave the line a clean bill of financial health, the auditing firm said in a letter to the Accomack/Northampton Transportation District Commission. The commission owns the railroad.
The letter said auditors had questioned whether the railroad and Canonie Atlantic Co., its associated company, could ``continue as going concerns.''
About 20 citizens gathered at Tuesday's meeting of the transportation district commission wanting to know more about what's going on with the railroad's finances.
The railroad is publicly owned, but questions about how the line is run rarely get public answers because railroad officials insist it is not subject to scrutiny by individuals or the press.
An audit last year noted problems with the railroad's finances.
``I think we should make every effort to answer these people's questions,'' said commission member Donald Hart. ``If we don't, I think we'll be sorry later.''
The commission voted to collect questions and present written answers in a month. Meanwhile, the commission has hired Pasquale and Bowers of Syracuse, N.Y., a group that specializes in auditing short-line railroads, to do this year's audit.
J.T. Holland, the railroad's president, said earlier that any questions about the railroad's operations will be answered by the new audit.
As a publicly owned operation, the railroad pays no personal property or real estate taxes on extensive holdings, and receives state and federal grants. The railroad's tax-free status in two counties desperate for revenue has fueled on-going attempts by the public to see how well the railroad is managed.
The railroad's fiscal year runs from February to February. This year's audit was expected by June. Ginsberg, Nottingham and Mapp had been reviewing the railroad's books for years.
In the May 24 letter, auditor Thomas J. Mapp Jr. told the transportation commission that in applying accepted auditing standards to the railroad's financial statements, his group asked about the railroad's and a subsidiary's ``ability to continue as going concerns.''
Stephen Gedney, who manages railroad operations, responded to Mapp's questions in a letter, Mapp said.
``Mr. Gedney's response contained statements which we can only interpret as a threat of litigation against Ginsberg, Nottingham and Mapp unless we issue an unqualified opinion on the companies' financial statements,'' said Mapp's letter to the commission.
Before Tuesday's meeting, neither Holland nor Commission Vice Chair Betsy Mapp would discuss the specifics of the auditors' resignation. Thomas Mapp, no relation to Betsy, said the matter was confidential.
At the meeting, a question about Gedney's letter was included among those the commission said it would answer in a month.
Last year, the auditing firm pointed to several deficiencies in the railroad's financial operations, including the way federal grants were handled.
``We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions,'' the audit said about the railroad's handling of federal grants.
The 1995 audit also said that the railroad did not have enough money in the bank to satisfy bond requirements.
Holland said there should be no problems with the railroad meeting its bond requirements.
``The railroad has never been late or not made a bond payment,'' he said. by CNB