MTA Lacked Internal Controls Over Hundreds of Millions, Auditors Find - Southern Maryland Headline News

MTA Lacked Internal Controls Over Hundreds of Millions, Auditors Find

By Megan Poinski,

ANNAPOLIS—The Maryland Transit Administration spent hundreds of millions of dollars without verifying bills and had little control over payroll, according to a report published Friday by the Office of Legislative Audits. The agency also did not have any standards for determining when disabled people qualified for a special transit program, and paid $744,000 in taxes it was exempt from.

The MTA, part of the Transportation Department of Transportation, runs public transportation in and around Baltimore, including the Metro subway, bus, light rail and MARC service.

The audit found several flaws in the way that the transit system double-checked its finances.

“They didn’t have any controls in a lot of places,” said Legislative Auditor Bruce Myers. “They had some pretty large contracts that they paid without vetting them. Then the rest of the audit, looking at support, even mobility, there was the same issue with those. It was a general theme.”

Terry Owens, chief public information officer for MTA, said that the agency had been conducting an internal review and found many of the same issues that came up in the audit. MTA has been working alongside the auditors, Owens said, and they have been making all of the recommended changes.

“We’ve worked hard to make sure that we are following established policies and procedures, and we will improve the way we are doing things,” Owens said.

Myers said that the audit will take center stage at budget hearings for MTA in the next week. Staff from his office has been asked to testify about the findings before MTA’s budget is reviewed.

No verification

According to the audit, MTA paid the vendor it had contracted with to handle health care claims for employees and retirees,but did not review the invoices to make sure that payments were correct. Between 2009 and 2011, MTA paid the vendor $112 million — $104 million in claim reimbursements and $8.3 million in administrative fees.

Auditors examined a March 2011 weekly invoice from the contractor for $2.6 million — $1.8 million of which was for unspecified amounts. MTA paid the invoice in full.

MTA also did not check to ensure that services that were invoiced were actually provided, or that appropriate administrative fees were being collected.

There were also problems with a $10 million contract for engineering consulting services. On a $501,030 invoice auditors examined, labor costs – worth $40,586 – were more than the agreed-upon labor rates for the employees. Auditors found a potential 7% overpayment on the invoice.

The automated system MTA used to verify disbursement transactions – amounting to about $930 million from July 2009 to December 2010 – did not electronically match invoices to purchase orders. Without matched invoices, it is difficult to tell if MTA paid the correct amount.

Payroll problems

The agency did not have enough employees to adequately process and keep track of payroll of unionized employees – worth about $201 million in fiscal year 2011, auditors found. Two employees were responsible for entering payroll adjustments into the system, but they did not have a supervisor who ensured the adjustments were correct.

Auditors found that MTA also did not segregate different payroll functions, meaning the same employee might be able to change an employee’s pay, issue a check, submit payroll information to the bank, and distribute the checks.

Also, auditors found that MTA did not verify the amount it paid vehicle drivers. Many billed MTA for their entire shift, even if they returned the vehicles to the garage early.

No standards for disabled

For people who are disabled and cannot get to MTA’s normal rail and bus services, the authority operates the Mobility Paratransit Program, which helps transport them to the normal services. People who qualify for this program, which gives them door-to-door access to MTA services, get free rides on regular MTA transit. According to unaudited figures included in the report, this service cost close to $60 million in fiscal year 2011.

To qualify for the program, a person needs to submit an application from a healthcare professional documenting his or her disability and why he or she cannot use the system. But auditors checked 30 applications and found that all 30 were missing important documentation, and there were no basic standards on which to base a person’s eligibility.

Auditors found similar problems with applications for the reduced fare program, which allows disabled people 65 and older to ride the system at lower cost.

Excise taxes not refunded

The vehicles used for the paratransit program are exempted from state and federal excise taxes on fuel. However, auditors found that MTA paid those taxes and did not attempt to get them refunded. According to the audit, in fiscal year 2011, MTA overpaid $744,000 in excise tax.

Other findings include:

-- A lack of reliable mileage records for bus inspections.

-- No control over inventories of materials, supplies and equipment.

Agency response

MTA spokesman Owens said that the agency has been working hard to bring in new people, retrain old staff, and take a second look at some of its old records. “In some areas, we had staffing challenges. In others, it was a matter of procedures that were not followed as closely as they should be,” he said.

Owens said that so far, the agency has identified a total of about $217,000 in overpayments that it is trying to get back. Its review is ongoing.

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