MTA audit finds $10 million in fuel overpayments

MTA audit finds $10 million in fuel overpayments

Bus, light rail, and other transit fares will have to increase by more than the planned 10 cents this year in order for the Maryland Transit Authority (MTA) to come close to reaching its mandate of having passengers pay at least 35 percent of the cost of the system, a state audit has found.

Overpaying paratransit contractors by $10 million has not helped matters.

The 35-page audit by the legislative auditor comes on the heels of a special report about apparent fraud at the MTA. One supervisor—who has not been publicly identified—allegedly cost the state more than $6 million by hiring workers outside of the state system.  

The new audit says the MTA failed to check the pay rates of engineers and architects it hired to plan the Red and Purple Light Rail lines. Planning costs were originally capped at $280 million but had increased to more than $547 million, the auditors noted. The architect and engineering costs are paid according to a formula that includes profit for the contractor and a reimbursement of costs the contractor incurred, including a maximum allowable hourly labor rate of $80. But both the overhead and profit are linked to "the total billed direct labor costs," the audit says, making it especially important that MTA officials check to make sure those hourly labor costs are straight and true. 

The MTA did not check these costs, the audit says. It pledges to do so in the future. 

The paratransit service is federally mandated for people with disabilities who can't walk to the bus or subway. Nearly 25,000 people receive the service, the audit says, and MTA hires companies to provide the little vans and buses that transport these people. The MTA paid more than $89 million to its three vendors under the contract, according to the audit; MTA pays its vendors according to hours worked, maintenance on the vehicles, and fuel costs.

The MTA effectively paid double for the fuel, the audit found, by including fuel costs in the hourly payment and then paying again for fuel separately. The overpayments totaled about $10 million. MTA officials say they have negotiated repayments from the venders—one of which paid the agency back, and the other two will have the overpayments deducted monthly until they are repaid.

MTA also was not careful about handing out free passes to people desiring the paratransit service and also overpaid for fuel by paying state excise taxes, from which the agency is exempt, the audit found. The agency also has used "sole source" contracts without fully justifying them as required by state law.

Finally, MTA allowed contractors running the MARC trains to tack on a $24 million "change order" that was not well documented, the audit says. In its response to the audit, the agency promised to get independent cost estimate in the future to check on what the contractor requests: "The MTA Procurement Office will add this step as part of its change order checklist and will ensure completion prior to submitting change orders for Board of Public Works (BPW) approval."


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