A separate ledger that a former Williamsport finance director kept has been identified by a statewide grand jury as part of allegations that he misused city, state and federal funds for non-transit purposes.

The grand jury learned that under William “Bill” Nichols Jr., the former general manager of River Valley Transit (RVT) utilized a bookkeeping methodology involving the entry of transfers between various accounts in RVT’s general ledger, according to an affidavit by Special Agent Kevin M. Schofield of the state Attorney General’s office.

Nichols, 71, who has been charged with theft by failure to make required disposition of funds and tampering with public records or information, allegedly kept the ledger, which contained multiple budgets, each of which required separate budget approval that Nichols prepared every year and presented to Williamsport City Council for approval.

The grand jury notes that the failure to engage the accounting firm to conduct a more thorough grant compliance review as required by state Act 44 allowed RVT to further obscure its true expenditures from the state Department of Transportation (PennDOT) and potentially utilize restricted state (or federal) grant funds from the operating account of RVT for other non-transit expenses (such as the payment of long-term debt and other expenses related to the non-transit aspects of the TTC buildings, the transit museum, as well as the diversion of funds to pay for Hiawatha expenses. The Hiawatha is a riverboat paddlewheeler that is now operated by separate management.

But while he was in charge of the city finances, Nichols oversaw the “creating of an outward appearance of additional revenue being generated in the planning and Trade and Transit Centre accounts where there was no actual corresponding revenue generated, and additional expenses existing where there were no actual additional expenses incurred in the operating account,” the affidavit states.

These “artificially inflated expense and revenue amounts further obscured the true cost of running RVT from PennDOT,” the affidavit states.

These amounts were reported to PennDOT dating back to at least 2010.

Testimony was provided from the RVT chief financial officer that Nichols manipulated the numbers in order to hide expenditures from PennDOT that were not sufficiently transit-related, according to the court document.

It was confirmed that these transfers created “a false impression of RVT’s actual operating expenses and revenue through Department of Transportation grants,” according to the court document.

The grand jury identified a practice further obscuring RVT’s finances was its use of a single bank account known as the Utility Fund.

This account allegedly commingled revenue streams from multiple sources, including state and federal grant funds, bonds, revenue generated by RVT rider fees, advertising, rental income from TT buildings, and other sources.

Both transit and non-transit related expenses were paid from this account.

The CFO testified that on more than one occasion, she asked Nichols to open multiple bank accounts in addition to the Utility Fund, and that Nichols denied her request, telling her it would be too difficult “on the state level.”

PennDOT made numerous efforts to clarify the RVT expenditures.

In 2015, Nichols allegedly was very uncooperative with a consultant looking into this matter. Nichols was described as “charming at first, but then became pushy and blustery, and ultimately threatening.”

Conversely, in 2020, after Nichols was terminated, the same consultant was again asked by PennDOT to return to RVT to assist with reorganizing and to help set up the proper reporting of transit expenses and revenue to PennDOT.

This time, he had no issue with access to whatever information he needed and the staff were helpful.

Nichols, through RVT, was in control of the Hiawatha’s finances and access to its payroll, and issued checks on the organization’s behalf. The grand jury heard testimony that Nichols utilized public funds in order to pay for significant expenses incurred solely on behalf of the Hiawatha.

The grand jury heard testimony of a check requisitioning process. Nichols, at one time, directed RVT finance personnel to submit insurance invoices regarding the paddlewheel boat’s hull to the city for payment.

However, to avoid personnel from the finance department, controller, or treasurer’s office either rejecting or questioning the payments, Nichols ordered RVT employees to alter the hull insurance invoices prior to their submission to remove references to the Hiawatha, according to the court document.

The grand jury heard evidence that two other RVT employees admitted that they altered the Hiawatha invoices, and that they did so at the direction of Nichols and the CFO.

It was suggested, based on evidence reviewed, there was a historical precedent for RVT providing public funds to the Hiawatha without City Council’s knowledge or authorization and then simply forgiving any associated debt after it accrued.

Specifically, the grand jury learned that RVT utilized a ledger account called “Deposits Held in Trust,” to record amounts that were theoretically owed to RVT from the Hiawatha.

A council meeting record was reviewed in which Councilwoman Bonnie Katz asked Nichols to clarify the Hiwatha’s relationship to the RVT budget. His response was the boat was a separate operation, but they pay RVT some money for indirect costs but they have their own separate budget of employees and expenses. The grand jury has received significant evidence and testimony that indicates otherwise.

Nichols tenure as RVT’s general manager spanned eight mayors.

The grand jury learned that at one point during his tenure with the city, former Mayor Mary Wolf, who served between 2004 and 2008, also made Nichols the “Director of Administration.”

In his capacity, all city department heads were required to go through Nichols before speaking to the mayor.

Former Mayor Gabriel J. Campana, who served as mayor from 2008 through 2020, eliminated this role after his first few years in office.

Nichols’ institutional knowledge dated back to the 1980s, mayors and City Council often deferred to him and rarely questioned his budget proposals or financial management decisions.

Under transit business, the law requires all state transit authorities receiving state funds to obtain a third-party audit and submit it to PennDOT for review every year.

Also investigators found that RVT utilized the same accounting firm that was also responsible for performing independent audits for the city, parking authority and Hiawatha.

This firm’s involvement with RVT and other related entities dated back to the 1980s.

Nichols’ formal arraignment is scheduled for Nov. 8 in the Dauphin County Courthouse.