An accountant hired by Citizens Alliance for Better Neighborhoods in 2000 to do its tax returns testified yesterday that he never discussed with defendant Ruth Arnao what constituted improper political expenditures by the tax-exempt nonprofit.

Arnao and former state Sen. Vince Fumo are on trial in federal court on corruption charges.

The government witness, Steve Kobasa, made the comment under cross-examination by Arnao's attorney, Ed Jacobs Jr.

Jacobs sought to sow doubt in jurors' minds about whether Arnao knew that political-polling expenses incurred by Citizens Alliance were improper.

Prosecutors have alleged that Citizens Alliance spent $250,000 in 2002 and 2003 on political polling, mostly to gauge the electoral strength of various candidates Fumo backed.

The feds have accused Arnao, a former Senate aide to Fumo and executive director of the nonprofit, of filing a false tax return in 2002 for both Citizens Alliance and its for-profit subsidiary, CA Holdings. Fumo is accused of assisting her in the false filings.

Kobasa testified Monday that he and a partner met with Arnao in March 2004 to get answers to questions about 2003 polling expenses that were hindering the filing of the nonprofit's 2003 tax return. He said Arnao promised to get answers to their questions, but never got back to them, and a 2003 tax return for Citizens Alliance was never filed.

But on cross-examination by Jacobs, Kobasa admitted that at a November 2004 meeting - which Arnao did not attend because she was ill - a lawyer for Citizens Alliance told him that he had results of the poll surveys but could not make the findings available.

Kobasa also testified under Jacobs' questioning that even if polling expenses hadn't been paid in 2002 and 2003 by CA Holdings, it still would have had losses for both years and not owed any federal taxes.

Jacobs also sought to persuade jurors that Kobasa, whom Arnao relied on to prepare tax returns, didn't always follow IRS instructions and made mistakes when he prepared Citizens Alliance's tax returns for 1999, 2000, and 2001.

Accounting fees were not reported on the proper line, Peco Energy contributions to Citizens Alliance in 1999 and 2000 were not accounted for on the proper schedule and a contribution was listed under "other deductions."

"There was no intent to defraud anybody here, these were just honest mistakes?" Jacobs asked.

"Correct," Kobasa replied. *