OIG Annual Report 2021: 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.

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.²⁰

Since its establishment in 2013, the Transportation Unit has issued audit and investigative reports related to large-scale bridge construction contracts, town roadway projects, disability placard abuse and electronic tolling along the Massachusetts Turnpike, among other topics. As part of its mandate to prevent the misuse of transportation funds, the Transportation Unit has regularly provided anti-fraud trainings to MassDOT and MBTA employees and collaborated with transportation officials on contract administration and policy improvements. The Transportation Unit also manages two confidential hotlines for employees and the public to report suspected misuse of transportation funds or resources. Since creating these hotlines, staff have reviewed and responded to 1,623 complaints.

The Transportation Unit’s work since 2013 has led to civil recoveries from MassDOT vendors, improvements to MassDOT and MBTA policies and procedures, strengthened contract administration practices, increased oversight of transportation and transit companies doing work for the Commonwealth, and the identification of missed opportunities for cost savings or revenue. Following the Transportation Unit’s 2016 report on disability placard abuse, the Office filed legislation to strengthen the Commonwealth’s placard laws.²¹ In 2017, the Legislature passed a bill modeled on the Office’s proposed legislation and the new placard law went into effect in July 2018. The new law increased fines, penalties and license suspensions for individuals who misuse placards, and strengthened the RMV’s ability to obtain sufficient medical information from placard applicants. 

Since 2013, the Transportation Unit’s work has also led to $885,096 in civil recoveries from highway construction and maintenance companies, $15,300 in fines related to disability placard abuse and $30,000 in annual MassDOT cost savings for hotline operations. Further, the Transportation Unit identified $25,250,522 in potentially misused funds and missed cost savings related to a large bridge construction project and MassDOT’s fleet of non-revenue vehicles. Lastly, the Transportation Unit identified $985,000 in lost toll revenue from individuals, municipalities and companies that MassDOT allowed to drive on the Massachusetts Turnpike without paying for tolls.

The Transportation Unit’s enabling statute requires it to publish an annual report each March. Below are highlights from that report.

I. Audits, Investigations and Reviews

A. MassDOT Shared Services

1. Real Estate Leases

MassDOT owns property throughout the state and generates revenue by leasing property to private companies. The Transportation Unit reviewed leases that MassDOT has with three companies and found that all three companies may have underpaid MassDOT. The Transportation Unit determined that one company did not pay rent for several months in 2020 and 2021. The Transportation Unit learned that the company, which operates a parking garage in Boston, may be eligible for a rent abatement if it can show that the COVID-19 pandemic adversely affected its business. The Transportation Unit asked MassDOT to recover all unpaid rent, taking into consideration any rent abatement that the department awards. MassDOT’s contracts with the other two companies include audit provisions that allow MassDOT to audit the companies’ lease payments. MassDOT has engaged an outside auditor to review both companies’ payments, and the audits are currently underway.

B. Highway Division 

1. Bridge Maintenance Contractors 

The Transportation Unit, in collaboration with the Office’s Civil Recovery Unit (CRU), investigated allegations from a hotline complaint that NEL Corporation (NEL), a Massachusetts-based bridge contractor, overbilled MassDOT. Based on the investigation, the Transportation Unit and the CRU concluded that NEL overbilled MassDOT under contracts to repair and maintain bridges throughout the state. The Office alleged that NEL knowingly charged MassDOT for items that NEL was required to provide at its own expense under the contracts, including certain tools, equipment, sanitary facilities and personal protective equipment.

In March 2021, NEL agreed to a $700,000 settlement with the Office and the Attorney General’s Office. 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 under the contract. In addition, NEL agreed to hire an outside auditor to review NEL’s billing on all open MassDOT contracts annually and provide a copy of the audit to the Transportation Unit. These measures will remain in effect for five years. NEL neither admitted nor denied the allegations.

Similarly, the Transportation Unit and the CRU investigated billing by Massachusetts-based company, Kodiak Corporation (Kodiak), on MassDOT contracts to repair and maintain bridges throughout the state. Based on the investigation, the Office concluded that Kodiak had overcharged MassDOT. The Office alleged that Kodiak knowingly charged MassDOT for items that Kodiak was required to provide at its own expense under the contracts, including tools and equipment, sanitary facilities and personal protective equipment. The Office also alleged that Kodiak knowingly double-billed MassDOT by submitting the same invoices for reimbursement more than once. 

In January 2022, Kodiak agreed to pay $55,000 to settle the claims with the Office and the Attorney General’s Office. Under an assurance of discontinuance filed in Suffolk Superior Court, Kodiak was also required to implement measures to prevent future overbilling. It agreed to designate a contract manager for all new and existing MassDOT contracts who will train employees about billing and ensure that Kodiak’s billing complies with contractual requirements. Kodiak also agreed to notify MassDOT if it discovers any unallowed billing or payment. These measures will remain in effect for five years. Kodiak did not admit to wrongdoing under the settlement.

Further, during the Transportation Unit’s investigation, the Highway Division standardized maintenance contracts across all six of its highway districts. Previously, the terms of the maintenance contracts varied from highway district to highway district. Standardizing the contracts will help provide uniformity to both MassDOT staff and vendors, reduce uncertainty about the interpretation of different contract terms, and allow staff to become more conversant about standard contract provisions, such as provisions regarding permissible charges and billing requirements.

2. 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.²² 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.”²³ Consequently, the company was no longer qualified to participate in the DBE program. The Transportation Unit based its conclusion on an indepth 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. MassDOT’s Unified Certification Program Board is currently reviewing this company’s DBE certification.

C. Massachusetts Bay Transportation Authority

1. MBTA Transit Police Department

Working with the Investigations Division, the MBTA Transit Police Department and the Suffolk County District Attorney’s Office, the Transportation Unit investigated allegations that three former MBTA transit police officers committed time theft. As a result of this investigation, all three were charged with larceny for allegedly collecting pay for hours they did not work. Following the charges, two of the former officers paid approximately $12,000 in restitution to the MBTA and have been placed on pre-trial probation. The case against the third former officer is still pending in the Boston Municipal Court.

2. MBTA Transit Police Retirement Plan

Working with the Investigations Division, the Transportation Unit examined supplemental and disability retirement benefits that the MBTA Police Association Retirement Plan paid to several retirees. The Office found that the Retirement Plan had overpaid 24 retirees more than $470,000 in supplemental retirement and disability retirement benefits.

The Office determined that the Retirement Plan overpaid the retirees because it had poor internal controls and no systems to track and terminate payments when retirees are no longer eligible. When the new executive director of the Retirement Plan discovered the overpayments, she put controls in place to ensure the plan pays the correct retirement benefits going forward. The Retirement Plan also entered into repayment plans with the retirees who received the overpayments by permanently reducing the monthly benefit. Because of this, the Retirement Plan considers the overpayments paid back.

3. 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 (Act). The Act had required the MBTA to follow certain procedures before hiring a vendor to perform services valued at $500,000 or more “which are substantially similar to and in lieu of,” services that regular employees of an agency provide.²⁴ 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. This Office must complete its review of each privatized contract within 90 days after the complete performance of the MBTA contract.

Between 2015 and 2018, the MBTA outsourced seven services pursuant to the temporary exemption. Although all seven contracts are still active and the services are ongoing, the Transportation Unit continued to actively monitor their statuses and extensions to meet the Office’s reporting requirements.

4. Federal Pandemic Funding 

The MBTA received approximately $2.2 billion in federal assistance in response to the COVID-19 pandemic. As part of its statutory mandate to monitor the quality and efficiency of MassDOT’s programs, in 2021, the Transportation Unit began to review the MBTA’s use of its federal pandemic assistance funds. The Transportation Unit will continue its reviews of transportation-related pandemic funds in accordance with its statutory mandate.

D. Registry of Motor Vehicles

1. The Merit Rating Board

In 2021, the Transportation Unit continued its review of the Merit Rating Board (MRB), the division of the RMV that maintains and updates driving records. 

The Transportation Unit analyzed the MRB’s spending to determine whether the MRB expends funds in accordance with its statutory mandate and pays only for costs related to its operations. Because the Legislature funds the MRB through a separate appropriation, the MRB’s budget can only be used to pay for its operating costs.

The MRB’s budget is roughly $11 million every year. The MRB’s spending can be divided into two major components: (1) direct spending, such as for staff salaries and office expenses; and (2) MassDOT information technology (IT) expenses. Historically, the MRB has retained approximately half of its budget for direct expenses, and MassDOT has used the other half towards its IT budget. The Transportation Unit reviewed both components. 

After analyzing detailed spending data and invoices for all of the MRB’s direct expenditures in Fiscal Year 2018, the Transportation Unit concluded that the MRB appropriately used its portion of the MRB budget. The Transportation Unit chose Fiscal Year 2018 for its audit because it was the last full fiscal year before the fatal accident that led to the Transportation Unit’s review.²⁵ 

Turning to the second component, the Transportation Unit evaluated the IT expenses that MassDOT paid for with MRB funds. The Transportation Unit found that the MRB pays for a significant portion of the fees that the state’s Executive Office of Technology Services and Security (EOTSS) charges MassDOT to provide IT support. In Fiscal Year 2018, for example, MassDOT used almost $3.9 million in MRB funds for the fees that EOTSS charged to support all of MassDOT. This represented 30% of EOTSS’s entire charges to MassDOT for IT services in 2018. The Transportation Unit could not verify that the $3.9 million allocation was directly related to the MRB’s actual IT needs and usage. Finally, the Transportation Unit also found that in Fiscal Year 2018 alone, MassDOT used $560,862 in MRB funds for IT expenses for RMV branches that were unrelated to the MRB’s operations.

The Transportation Unit presented its findings to the MRB in 2021, and met regularly with individuals at the MRB, RMV and MassDOT. The Transportation Unit recommended that MassDOT develop a method for calculating the amount to charge the MRB based on the MRB’s actual technology and system usage. The Transportation Unit also advised MassDOT to use MRB funds only for expenses directly related to the MRB’s statutory obligations and duties.

II. Other Reviews and Referrals

During 2021, 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 train idling, rail grants, employees using highway equipment for personal purposes, station access and airport planning.

III. 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 February 2021, the Transportation Unit provided fraud prevention training to the MBTA’s Procurement and Logistics Department. This training outlined common fraud schemes, fraud prevention techniques and red flags for vendor fraud. In April 2021, the Transportation Unit provided specialized training to individuals from MassDOT’s Highway Division and Office of General Counsel regarding the oversight of bridge maintenance contracts, with a focus on internal controls for evaluating contract terms, reviewing vendor invoices and making payments.

Also, in 2021, the Transportation Unit developed and taught a class on project management for municipal construction projects. Using case studies from the Transportation Unit’s review of town roadway projects, the class focused on contract administration, common construction fraud schemes and the process for false claims recoveries. The Transportation Unit presented this training in collaboration with MassDOT’s Community Grants Program.

IV. RMV Disability Placard Abuse Task Force

In 2021, the Transportation Unit continued to participate in the RMV’s Disability Placard Abuse Task Force, which is dedicated to addressing and resolving issues surrounding placard abuse, increasing enforcement of the current placard laws and tightening administrative controls to prevent and detect abuse more easily. In 2021, the task force met to discuss ongoing education and outreach, local enforcement trends, and recommendations and goals for the task force moving forward.

V. Hotlines

The Transportation Unit maintains two hotlines for members of the public to confidentially report suspected fraud, waste or abuse in the expenditure of public transportation 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 some 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 2021, the Transportation Unit received 257 complaints from private citizens and public employees. Figure 8 details the sources of the complaints and Figure 9 outlines the Transportation Unit’s action by receipt method.²⁶

Figure 8. Intake Source by Month (2021)

In Figure 9, “Referral” means the Transportation Unit preliminarily reviewed the complaint, deemed the complaint warranted further review and referred it to the appropriate agency, usually MassDOT or the MBTA. “Referral” also includes placard abuse complaints that the Transportation Unit referred to the RMV’s Medical Affairs Bureau for handling. “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.

“No Action” means that the Transportation Unit was unable to pursue an investigation, refer the matter to the appropriate agency or provide the complainant with an appropriate contact for their complaint. Most often, the complainant did not provide contact information or return a voicemail when the Transportation Unit needed more information. “No Action” also includes instances in which the complainant had already contacted the appropriate agency. Finally, complaints about out-of-state placards fall under “No Action.”

Figure 9. Actions on Complaints Received (2021).

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 2021, the Transportation Unit received 81 reports of alleged placard abuse and 38 general inquiries regarding the rules for using disability placards.

²⁰ See 2015 Mass. Acts c. 46.

²¹ Disability placard abuse refers to the intentional misuse of an RMV disability parking placard or license plate. For example, it is unlawful to use someone else’s disability parking placard, and individuals must meet specific medical criteria to lawfully obtain a parking placard or license plate. In its 2016 investigation, the ISAU found several types of placard abuse, including individuals who commuted into Boston and used another person’s disability parking placard to park at a metered parking space all day. By law, placard holders may park at parking metered spaces for free across the state. The improper use of placards in Boston may cost the city millions of dollars each year. If just 10% of drivers who regularly park at meters in Boston are misusing placards, for example, this translates into approximately $1.8 million in annual lost revenue for the city.

²² Disadvantaged Business Enterprise Program, U.S. Department of Transportation website (last viewed April 27, 2022).

²³ 49 C.F.R. § 26.67(b)(1)(ii)(A).

²⁴ M.G.L. c. 7, §§ 52-55.

²⁵ On June 21, 2019, a Massachusetts resident with an RMV-issued commercial driver’s license struck and killed seven motorcyclists while driving in the New Hampshire. A month prior, the driver was arrested in Connecticut for allegedly driving under the influence of alcohol or drugs. Following the fatal accident, it came to light that for years, neither the MRB nor any unit at the RMV had processed notifications from other states concerning driving offenses committed by Massachusetts drivers. The Transportation Unit’s review did not encompass the causes of the failure to process out-of-state notifications; the RMV retained a private forensic auditing firm to undertake that analysis.

²⁶ The Transportation Unit’s annual report included a chart similar to Figure 8, but which did not include 38 general inquiries regarding the rules for using disability placard.

Date published:	April 29, 2022