OIG Annual Report 2020: Internal Special Audit Unit

Part VIII of the Office of the Inspector General's 2020 Annual Report

The Massachusetts Department of Transportation (MassDOT) is responsible for managing the Commonwealth’s roadways, public transit systems, public airports and the Registry of Motor Vehicles (RMV). The Internal Special Audit Unit (Transportation Unit) monitors the quality, efficiency and integrity of MassDOT’s operating and capital programs, including the Massachusetts Bay Transportation Authority (MBTA). As part of its statutory mandate, the Transportation Unit also seeks to prevent, detect and correct fraud, waste and abuse in the expenditure of public and private transportation funds.

OIG's Internal Special Audit Unit examines and evaluates the Massachusetts Department of Transportation and the MBTA.

Furthermore, the unit is responsible for examining and evaluating MassDOT’s operations, including its governance, risk-management practices and internal processes. The Transportation Unit has an additional legislative mandate to review certain MBTA procurements.13 The Transportation Unit’s enabling statute requires it to publish an annual report each March. Below are highlights from that report.

Table of Contents

Tobin Bridge with Boston skyline

I. Audits, Investigations and Reviews

​​​​​​A. Bridge Contractor Overbilling

The Transportation Unit concluded an investigation of NEL Corporation (NEL), a company that has several contracts with MassDOT to maintain and repair bridges throughout Massachusetts. The contracts required NEL to provide specific items – including certain tools, equipment, personal protective equipment and sanitary facilities – without an additional charge to MassDOT. However, NEL knowingly charged MassDOT for these items for several years.

In collaboration with the Office’s Civil Recovery Unit and the Massachusetts Attorney General’s Office, the Transportation Unit sought to recover the overpayments. After negotiations, NEL agreed to pay $700,000 to resolve allegations that it knowingly overbilled MassDOT under all five contracts reviewed. As part of the settlement, NEL also agreed to implement measures to prevent future overbilling, including designating a contract manager to ensure that the company only bills MassDOT for work, supplies and equipment allowed by contract. Additionally, NEL must hire an outside auditor to conduct annual reviews of NEL’s billing on all open MassDOT contracts, certify to MassDOT and the Transportation Unit that it has completed the audit and provide a copy of the report. The audit report should state whether overbilling occurred and include a plan to correct any deficiencies identified. These measures remain in effect for five years.

B. The Merit Rating Board

The Transportation Unit continued its in-depth review of the Merit Rating Board (MRB), the division within the RMV that maintains and updates driving records. The Transportation Unit initiated its review, at the Board’s request, in 2019 after a fatal traffic accident revealed the RMV had not been updating driving records in a timely manner.14

In 2020, the Transportation Unit found that the MRB would benefit from job-specific training for the RMV’s new electronic records system, ATLAS. Specifically, when the RMV transitioned from its 30-year-old electronic records system to ATLAS in 2018, MRB employees received the same customer-service-oriented training as all other RMV employees. This training did not include the steps for processing motor vehicle citations or infractions, both of which are crucial for updating driving records.

The Transportation Unit also found that during the transition to ATLAS, MRB’s former management eliminated employee goals that measured productivity and accuracy in order to reduce pressure while the staff learned the new records system. However, the lack of goals led to a decrease in productivity, accuracy and staff morale.

The Transportation Unit recommended that the MRB prioritize ATLAS training for its staff, including providing necessary retraining for current staff and creating an ATLAS training program for new hires. In response, the MRB completed training and developed individual coaching sessions to improve employees’ proficiency with ATLAS. The MRB continues to develop comprehensive standard operating procedures for all its units in order to standardize and document its processes. The Transportation Unit also recommended that the MRB reinstitute performance metrics. The MRB is in the process of implementing these recommendations.

The Transportation Unit also analyzed the MRB’s statutory duties, regulations, historical responsibilities and legal authority, as well as the statutes and regulations governing the RMV’s duty to maintain driving records. The Transportation Unit’s objective was to better understand the MRB’s role within the RMV and to evaluate whether the MRB is fulfilling its statutory obligations. The review included researching the legislative history of these statutes and regulations throughout changes to the MRB’s placement within the Executive Branch. The Transportation Unit presented its detailed findings to the MRB’s Board in December 2020.

Finally, the Transportation Unit reviewed the MRB’s budget and spending. In fiscal year 2021, the MRB’s budget was $10,968,209. The budget analysis will help determine whether the MRB expends funds in accordance with its statutory mandate and only pays for costs related to operating the MRB. The Transportation Unit will finalize this review in 2021.

C. Disadvantaged Business Enterprise

Following a hotline tip, the Transportation Unit investigated whether a MassDOT-certified disadvantaged business enterprise (DBE) qualified for the federal DBE program.15 The company has worked on MassDOT projects as a subcontractor and supplier for decades. Since 2001, for example, the company has received $229 million on 228 MassDOT projects.

The Transportation Unit found that the company’s success as a construction subcontractor and supplier allowed its owner to “accumulate substantial wealth.”16 Consequently, the company was no longer qualified to participate in the DBE program.17 The Transportation Unit based its conclusion on an in-depth analysis of the business owner’s overall financial condition, including her ownership of other businesses, vast real estate portfolio, access to credit and lavish spending on both personal and business accounts.

Following its review, the Transportation Unit referred the matter to MassDOT to evaluate the firm’s DBE certification. As of this report, there has been no final decision on the business’s DBE certification.

D. Park and Ride Lots

The Transportation Unit conducted a high-level review to evaluate revenue-generating agreements on MassDOT-owned property, including Park and Ride lots. The Transportation Unit found that MassDOT generally does not have long-term, written lease agreements with private bus and retail vendors that require the companies to pay MassDOT for using the publicly owned parking lots. In addition, the private companies do not share the cost of snow removal or other lot maintenance. The Transportation Unit also found that private companies had scaled back their use of MassDOT’s parking lots in response to the COVID-19 pandemic.

MassDOT has already begun researching possible revenue from private bus and retail vendors. The Transportation Unit recommended that MassDOT take preliminary steps now so that it is ready to enter into appropriate revenue-generating or cost-sharing agreements when the lots enter post-pandemic operations. The Transportation Unit plans to revisit this review after commuting returns to pre-pandemic levels.

E. The MBTA’s Privatization of Services

In 2015, the legislature passed a law giving the MBTA a three-year exemption from the Act Providing for the Delivery of State Services in a Fiscally Responsible Manner.18 The 2015 law requires this Office to review all privatization contracts that the MBTA enters into pursuant to this exemption. The review includes assessing the procurement process, the quality of the privatized services provided, the expected and actual cost of the contract, and the actual cost compared to the benefits derived from the contract.

The Transportation Unit followed up on its 2019 review of the MBTA’s privatization of its warehouse operations. The Transportation Unit’s preliminary review focused on the MBTA’s contract, Mancon’s compliance with the contract and the MBTA’s oversight of Mancon’s performance. The Transportation Unit identified opportunities for the MBTA to improve its oversight of the vendor, and it also recommended that the MBTA hold the vendor accountable for failing to provide a viable inventory system according to the terms of the contract.

In 2020, the Transportation Unit found that the MBTA is continuing to improve its oversight of the vendor. However, the MBTA has not held the vendor accountable for failing to provide a complete inventory system.

F. Equipment Misuse

Keolis Commuter Services (Keolis) operates the MBTA’s commuter rail system. As part of its contract with Keolis, the MBTA provides the company with certain equipment, tools, machines and vehicles. Keolis uses the property – which ranges from snow blowers and tractors to vehicles and heavy rail equipment – to repair and maintain the commuter rail network. Keolis is responsible for storing, tracking and maintaining the property.

Following a hotline complaint, the Transportation Unit determined that a Keolis employee took an MBTA loader home to use on personal construction projects.19 The Transportation Unit also found that Keolis maintains and manages the inventory of MBTA-owned property with little agency oversight. Further, at the time of the Transportation Unit’s review, Keolis’ employee policies prohibited employees from using MBTA vehicles for personal purposes, but the policies did not explicitly address other MBTA property, such as the loader that the employee removed and used.

The Office referred the personnel matter to Keolis. The Office also concluded that both the MBTA and Keolis would benefit from clearer policies, increased oversight and better recordkeeping for MBTA-owned equipment. The Office recommended, for example, that the MBTA require all contractors, including Keolis, to adopt and enforce an acceptable use policy for MBTA-owned resources.

G. Commuter Rail Fare Collection

The MBTA, with approval from its Fiscal and Management Control Board, sets the fare structure for traveling on the MBTA’s subways, trolleys, ferries, buses and commuter rail (collectively, the MBTA system). The MBTA allows on-duty police officers and fire department personnel to ride throughout the MBTA system free-of-charge.

In 2020, the Transportation Unit reviewed a complaint about commuter rail conductors allowing court officers to ride for free. The Transportation Unit determined that the MBTA’s fare structure did not permit court officers to ride for free. The Transportation Unit recommended that the MBTA update its fare structure to explicitly exclude court officers from that privilege. In September 2020, the MBTA adopted this recommendation and Keolis has begun collecting fares from trial court officers.

H. Town of Eastham

In 2020, the Transportation Unit reviewed the town of Eastham’s oversight of a roadway improvement project funded through the state’s Chapter 90 program. The review, initiated from a hotline tip, focused on an overpayment to All States Asphalt, Inc. (All States Asphalt) in 2017. The Transportation Unit found that weak town oversight and financial controls led Eastham to overpay the contractor $13,672. Although the overpayment was relatively small, the review highlighted the importance of contract management and vendor oversight.

Created by the Massachusetts legislature in 1973, the Chapter 90 program provides annual funding to municipalities for transportation infrastructure projects on municipal ways, including roads and bridges.20 Under Chapter 90, cities and towns receive 100% reimbursement from the state on approved projects. MassDOT oversees the program, approves projects and handles reimbursement.

In response to learning of the weak project oversight, the town administrator made staffing changes, notably hiring a new superintendent of public works, who recovered the entire overpayment from All States Asphalt. Town officials also worked with MassDOT to identify an appropriate method for returning the overpayment, concluding that MassDOT would deduct $13,672 from the reimbursement on a future Chapter 90 project.

Following its review, the Transportation Unit recommended that the town enhance its contract administration and vendor oversight to ensure that the town only pays for the materials and services that it receives. The Transportation Unit stressed that all town officials must actively oversee vendor work, including confirming that work is completed satisfactorily and according to the contract. In Chapter 90 projects, this includes measuring the quantity of material used to ensure that the town only pays for the supplies used on the project. Best practices also include only approving invoices that are detailed and provide sufficient information. Additionally, the Transportation Unit recommended that all town employees involved in procurement, project oversight or payment processes take the Office’s free, online training, Contract Administration for Public Employees.

Since issuing its report, the Transportation Unit, with MassDOT’s community grants program, developed a training called “Project Management for Municipal Construction and Chapter 90 Projects.” The Office offered this training through its MCPPO program. Training topics included an overview of Chapter 90, contract administration, common construction fraud schemes, case studies and prohibited conduct on municipal roadway projects. The Transportation Unit and MassDOT used lessons learned from the town of Eastham to develop this training.

I. Town Roadway Project

The Transportation Unit also evaluated a complaint that a town’s Select Board had improperly applied for a MassDOT grant without seeking approval from town residents. The Transportation Unit found that the town’s Select Board was authorized to apply for grant money without a Town Meeting vote, and that in any event, the town had voted in 2017, and again in 2020, to allow the town to apply for state and federal grants.

In March 2021, MassDOT’s highway division published a comprehensive guide for municipalities receiving grant funding for local roadway improvements. The guide, “Complete Streets Funding Program Guidance,” outlines the importance of community engagement at all stages of a project and provides practical examples of how to solicit community input.

J. Other Reviews and Referrals

During 2020, the Transportation Unit referred several complaints to MassDOT and the MBTA. Transportation Unit staff also worked collaboratively with MassDOT and the MBTA to resolve many issues and inquiries. The various reviews, referrals and collaborations included topics such as land development deals, equipment operation and efficiencies, faulty maintenance equipment, subcontractor overbilling, and time and attendance abuse.

II. Fraud Prevention Training

In furtherance of its mission to prevent fraud, waste and abuse of transportation funds, the Transportation Unit developed and delivered fraud prevention training at the request of MassDOT and the MBTA. In March 2020, the Transportation Unit team led two training sessions for MBTA project managers. In September 2020, the Transportation Unit trained MassDOT highway field staff who oversee maintenance and construction contracts. The MassDOT and MBTA training sessions outlined common fraud schemes, fraud prevention techniques and red flags for vendor fraud.

Also, in 2020, the Transportation Unit developed and taught a class entitled Financial Statement Fraud for the Office’s Massachusetts Certified Public Purchasing Official program. Using case studies, the class focused on the basics of fraud awareness, red flags and analytic strategies to detect fraud on financial statements.

III. Hotlines

The Transportation Unit maintains two hotlines for members of the public to confidentially report suspected fraud, waste or abuse in the expenditure of MassDOT funds; the hotlines are available on the Office’s, MassDOT’s and the MBTA’s websites. The Transportation Unit also maintains employee hotlines on MassDOT’s and the MBTA’s intranets.

The Transportation Unit evaluates each complaint received to determine whether it falls within its jurisdiction and whether it merits action. Some complaints lead to extensive investigations, some are referred to other agencies and others are closed if a preliminary inquiry fails to substantiate the allegations. Additionally, the Transportation Unit sometimes refers complaints to MassDOT or the MBTA if it determines that action would be best handled directly by the appropriate division. During 2020, the Transportation Unit received 212 complaints from private citizens and public employees. Figure 7 details the sources of the complaints and Figure 8 outlines the Transportation Unit’s action by receipt method.21

Figure 7. Intake Source by Month (2020).

Figure 7. Intake Source by Month (2020).

Figure 8. Transportation Unit Actions on Complaints Received in 2020.

Figure 8. Transportation Unit Actions on Complaints Received in 2020.

The Transportation Unit also monitors the RMV’s disability parking placard abuse hotline and receives reports of suspected placard abuse from the public. The RMV’s Medical Affairs Bureau processes this information for further investigation. In 2020, the Transportation Unit received 42 reports of alleged placard abuse.

Additional Resources

Contact   for OIG Annual Report 2020: Internal Special Audit Unit

13 See 2015 Mass. Acts c. 46.

14 Confusingly, the statute that created the Merit Rating Board provides that it is governed by a board, which is also named “Merit Rating Board.” To avoid confusion, the Office refers to the unit as the “MRB” and its governing board as the “Board.”

15 The U.S. Department of Transportation (USDOT) created the DBE program to increase the number of minority-owned and women-owned businesses that work on federally funded transportation projects. In addition to setting DBE-participation goals for federally funded projects, MassDOT must verify that firms qualify as a disadvantaged business enterprise.

16 49 C.F.R. § 26.67(b)(1)(ii)(A).

17 49 C.F.R. § 26.67(b).

18 See 2015 Mass. Acts c. 46.

19 A loader is a small construction vehicle that can be used for a variety of tasks, including moving material during construction and landscaping.

20 While commonly referred to as “Chapter 90,” since the program was originally created by Section 34 of Chapter 90 of the Massachusetts General Laws, the statutory authority for the program is now codified as Section 4 of Chapter 6C of the Massachusetts General Laws. Typically, funding for the program is authorized annually through bond bills, which are adopted as Acts of the Massachusetts legislature. Each municipality’s Chapter 90 apportionment is based on a formula that takes into account the city’s or town’s total road mileage, population and employment.

21 In Figure 8, “Referral” means the Transportation Unit reviewed the complaint, deemed the complaint legitimate and referred it to the appropriate agency, usually MassDOT or the MBTA. “Directed Complainant to the Appropriate Agency” means that the Transportation Unit determined that the matter was outside of the Transportation Unit’s jurisdiction; however, the Transportation Unit provided the complainant with the appropriate source for handling their complaint.

Date published: April 30, 2021
Image credits:  Shutterstock

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