Employee and Eligible Nonemployee Free Ferry Passage Benefit
On May 26, 1987, the State Ethics Commission issued an advisory opinion under the Commonwealth’s Conflict of Interest Law, as outlined in Chapter 268A of the Massachusetts General Laws, regarding the appropriateness of the Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority’s (Steamship Authority’s) employee and eligible nonemployee free ferry passage benefit. This opinion determined that the distribution of free passes to all current permanent Steamship Authority employees and their family members did not violate the Conflict of Interest Law.
In our discussions with Steamship Authority officials on fraud risks, we identified a concern regarding employees obtaining free ferry passage for ineligible individuals.
Unauthorized Extension of Employee and Eligible Nonemployee Free Ferry Passage Benefit
The State Ethics Commission advisory opinion mentioned above was inclusive of the following parameters of the employee and eligible nonemployee free ferry passage benefit (which are also outlined in the Steamship Authority’s Employee Policies and Procedures Manual, dated March 20, 2018):
- Current and retired regular employees: These individuals and their spouses can be issued annual passes for passenger transportation (which allow for free ferry passage to and from the islands of Martha’s Vineyard and Nantucket). In addition, their dependent children (in this instance, only those who are under the age of 19) may obtain free ferry passage through the use of trip passes.
- Temporary or seasonal employees: These individuals may obtain free ferry passage through the use of trip passes.
However, since this State Ethics Commission advisory opinion, the Steamship Authority has unofficially extended (in both documented and undocumented ways) its employee and eligible nonemployee free ferry passage benefit in the following ways:
- Current and retired regular employees: These individuals’ unmarried partners and dependent children (in this instance, those who are unmarried, between the ages of 19 and 22, and are enrolled as full-time students at an educational institution) may obtain free ferry passage through the use of trip passes.
- Temporary or seasonal employees: These individuals’ spouses or unmarried partners, as well as dependent children (in this instance, those who are either unmarried and who are under the age of 19 or those who are unmarried, between the ages of 19 and 22, and are enrolled as full-time students at an educational institution) may obtain free ferry passage through the use of trip passes.
According to the Steamship Authority bylaws, either the general manager or the five-member board has the authority to approve changes to the Steamship Authority’s employee and eligible nonemployee free ferry passage benefit.
Section 4(d) of Chapter 701 of the Acts of 1960, as amended, states that the Steamship Authority is “authorized and empowered . . . to adopt bylaws for the regulation of its affairs and the conduct of its business.” Section 7 of Article I of the By-Laws of the Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority, effective January 1, 1961, as amended, states,
The General Manager shall be the chief operating officer of the Authority, and under the direction of the Members, shall have general oversight, care, and management of all its property and business in all its departments, and supervision of its officers, other than the Members, its agents and its employees in the discharge of all duties not specifically otherwise prescribed by law or by the Members.
We requested evidence of authorization from either the general manager or the five-member board regarding the extension of the employee and eligible nonemployee free ferry passage benefit. However, the Steamship Authority was unable to provide any documentation to support the approval of changes to this benefit.
|
Individuals Potentially Receiving Free Ferry Passage Benefit under the Unauthorized Policy
Current and Retired Employees’
Temporary or Seasonal Employees’
|
Employee and Eligible Nonemployee Free Ferry Passage Benefit Current Practices
Current practices do not agree with the employee and eligible nonemployee free ferry passage benefit, as written in the Steamship Authority’s Employee Policies and Procedures Manual. For example, according to this employee manual, employee annual passes are issued by the Steamship Authority for passenger transportation. However, according to Steamship Authority officials, this practice has not been used in over 20 years. Currently, it is the Human Resources Department’s practice to issue identification badges to employees and eligible nonemployees (e.g., employees’ spouses and retirees). These identification badges permit free ferry passage, and some are configured to permit access to Steamship Authority facilities. When we requested a list of active identification badges for employees and eligible nonemployees during the audit period, the Steamship Authority could not provide such a list.
Trip Pass Information Collection and Reconciliation
According to Steamship Authority employees we interviewed, employees should request trip passes at one of the seven trip pass distribution locations (these being the five ferry terminals, the Mashpee Reservation Office, and the Human Resources Department). Upon a request for a trip pass, a ticket agent (1) completes the trip pass with detailed information, including the date of issue, the number of passengers, the type of passenger (adult or child), and the ticket agent’s signature and (2) records the transaction in a travel log. Trip passes are collected by Steamship Authority employees after the passenger boards the ferry. These collected passes are sent to the Steamship Authority’s accounting department on a daily basis.
Our review of travel logs indicated that only two of the seven trip pass distribution locations maintained travel logs during the audit period. Our review of trip passes revealed that ticket agents did not always include all of the required information on the trip passes. Further, we found that the detailed information on trip passes was not reconciled to travel logs during the audit period.
Conclusion
We conclude that, although some employee passage and ticket agent policies exist, Steamship Authority employees do not always follow these established policies to issue trip passes to current, retired, temporary, or seasonal employees and eligible nonemployees. We further conclude that control weaknesses exist in the areas of badges permitting access to facilities and free rides, the absence of travel logs in five of the seven facilities, and the capture of inconsistent information when granting trip passes.
The United States Government Accountability Office’s Standards for Internal Control in the Federal Government, issued in September 2014, state,
12.01 Management should implement control activities through policies. . . .
12.02 Management documents in policies the internal control responsibilities of the organization.
12.03 Management documents in policies for each unit its responsibility for an operational process’s objectives and related risks, and control activity design, implementation, and operating effectiveness. Each unit, with guidance from management, determines the policies necessary to operate the process based on the objectives and related risks for the operational process. Each unit also documents policies in the appropriate level of detail to allow management to effectively monitor the control activity.
12.04 Those in key roles for the unit may further define policies through day-to-day procedures, depending on the rate of change in the operating environment and complexity of the operational process. Procedures may include the timing of when a control activity occurs and any follow-up corrective actions to be performed by competent personnel if deficiencies are identified. Management communicates to personnel the policies and procedures so that personnel can implement the control activities for their assigned responsibilities.
Without accurately documented policies and procedures that are consistently implemented and monitored, Steamship Authority employees may be unaware of their responsibilities and therefore may not consistently apply Steamship Authority practices related to the employee and eligible nonemployee free ferry passage benefit, including reconciling travel logs to used trip passes and issuing identification badges.
Steamship Authority officials explained that the Steamship Authority did not develop or revise policies and procedures because of time restrictions and other priorities.
To ensure that only authorized individuals receive free ferry passage, the Steamship Authority should work to strengthen its internal controls. We recommend the following:
- The Steamship Authority should review and update its Employee Policies and Procedures Manual to define clearly the benefits to which employees are entitled. This employee manual should be reviewed periodically to ensure accuracy.
- The Steamship Authority’s general manager or its five-member board should approve all revisions to the Steamship Authority’s employee manual.
- The Steamship Authority should fully document the procedure that ticket agents use when distributing travel passes to ensure that each passenger is eligible for free ferry passage and that ticket agents record required information in travel logs.
- The Steamship Authority should develop monitoring controls to ensure that Steamship Authority employees responsible for the issuance of trip passes, the maintenance of travel logs, and the reconciliation of trip passes to travel logs are completing these responsibilities in accordance with current policies and procedures.
- The Steamship Authority should collaborate with its Human Resources Department to establish policies and procedures that ensure the regulated distribution and cancellation of identification badges. The Steamship Authority should be able to account for all active and deactivated identification badges at any given time.
Auditee’s Response
We agree with the importance of strengthening internal controls. In addition to reviewing and updating the Employee Policies and Procedures Manual to more clearly define the benefits to which employees are entitled, a periodic review of these policies will be conducted.
Additional corrective actions will include:
- All employee [identification (ID)] badges will be replaced with new badges.
- All old badges will be deactivated.
- New employee ID Badges will now include credentials that will be readable by the access control readers at all of the terminal slips.
- Employees who present their ID badge for travel must scan at the reader to allow access to the vessels.
The Human Resources department will be responsible for maintaining the Employee ID badges, including responsibility for the activation and deactivation of all the employee ID badges. The Human Resources Department will be responsible for the distribution and reconciliation of all employee passes. Human Resources will maintain a log of badges and submit it to the accounting department on a monthly basis. As part of the accounting department’s monthly reconciliation, employee travel records will be reviewed.
Steamship Authority management will review and update, where appropriate, the Employee Policies and Procedures Manual and clearly define the employee benefits. Upon completion of that review, the General Manager will propose the “updated” policy to the Board for adoption. The updated Employee Policies and Procedures Manual will be distributed to all employees.
Auditor’s Reply
Based on its response, the Steamship Authority is taking measures to address our concerns on this matter.
| Date published: | February 5, 2024 |
|---|