Kootenai County must hand back more than $200,000 in grant dollars to the Federal Transit Administration, after the agency discovered the county was breaching FTA regulations by holding the dollars for future spending.

"We are not losing the money," assured Commissioner Todd Tondee. "It's just where it's being stored. Right now it's in an account here at the county, and the feds don't allow that."

The county has been saving $218,194 from a 2010 FTA grant in a capital reserve fund, said Christine Fueston, county FTA grant administrator.

The dollars were intended to be used as needed down the road, she said, to replace Citylink and paratransit vehicles.

"Replacements are so expensive. A larger bus like what Citylink drives can be upwards of $250,000 or more," Fueston said, adding that the FTA grant was for general transit operations.

"So what we do, each year we get a grant, we are setting aside a portion of that grant for vehicle replacement."

But during a tri-annual compliance review this August, the FTA informed the county that the dollars must be transferred back to the agency.

FTA policy dictates that grant dollars must be held onto by the agency until the county needs to spend it, Fueston said.

"The dollars are on a reimbursement basis," she said, adding that the county is eager to comply.

The county had been advised to hold the money in a reserve by the Kootenai Area Transit System, she added, which was contracted to run county transit until that recently became an in-house operation.

"The county had been doing this for several years," Fueston said. "The FTA just had never said that we couldn't do that."

FTA regulations require that counties only withdraw their grant dollars after expenses have been incurred, said spokesman Paul Griffo.

"Grants are for specific purposes, so if you take the money and put it into a capital reserve fund, that wouldn't be to pay for a particular project," Griffo said. "That's the whole issue."

After a grant has been awarded, the dollars are available for a county to use in an FTA account, he added. The dollars must be used as reimbursement after the county has paid for a project.

"When a grantee orders a bus, they won't pay until the bus is delivered, so there's no reason to draw down until they've incurred that expense," Griffo noted.

The FTA had not detected Kootenai County holding grant dollars in a capital reserve fund before this review, he said.

The county has until December to turn the money over, Fueston said.

Citylink has eight urban service vehicles, she said. The county uses up to eight vehicles for paratransit service that shuttles handicapped individuals.

Some of these vehicles rack up 600,000 miles before they are retired, she added.

Commissioner Tondee said the mix-up hasn't phased him.

"My reaction is it doesn't make much difference," he said. "The money, wherever it is, will be there when we need it."