Press Release  Audit: Regional Transit Agencies Incur Debts Due to Slow Process

Boston — State Auditor Suzanne M. Bump today released an audit examining the Commonwealth’s funding structure for regional transit authorities (RTAs) concluded that the current process results in delays in local reimbursements to RTAs which requires them to incur unnecessary interest costs.

Throughout the Commonwealth, 15 RTAs, not including the MBTA, function as independent transit operators in 262 communities with a combined operating cost of more than $150 million annually. RTAs are overseen by the Massachusetts Department of Transportation’s (MassDOT’s) Rail and Transit Division. Auditor Bump initiated this statewide examination, which reviewed fiscal years 2012 and 2013, following an audit of the Martha’s Vineyard Transit Authority which identified systematic budget challenges.

RTAs are funded by a mixture of state, federal, and local money. The contribution paid by local communities is assessed based on the cost of individual transit routes and the share of each municipality’s activity. The assessment, after being independently audited, is deducted from the communities’ local aid payments.

Auditors found delays in local assessment payments to RTAs for more than $60 million for fiscal years 2012 and 2013 combined. Delayed local assessments, which may cover as much as half an RTA’s costs of service, force RTAs to borrow money and incur interest expenses. Auditors calculated that as much as $700,000 in interest costs were incurred during the audit period due to delayed local assessment payments.

“Regional Transit Authorities play a critical role in enhancing the economy and quality of life in communities, and local assessment dollars are a significant source of funding for these authorities. Unfortunately, the current local assessment process impedes the authorities’ abilities to operate effectively and serve the needs of their communities,” said Auditor Bump. “I urge the MassDOT and regional transit authorities to work with the Legislature to develop a more efficient way of distributing these funds.”

MassDOT has responded positively to the audit findings and has made progress in implementing the practice of forward funding state aid to RTAs. This practice has significantly decreased the amount of Revenue Anticipation Notes needed to fund RTA operations and has eliminated some debt service payments.  Additionally, MassDOT plans to reach out to stakeholders to develop a legislative remedy to improve the efficiency of the local assessment process.

The Office of the State Auditor conducts technical assessments and performance audits of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.

The Examination of the Commonwealth's Funding Structure for Regional Transit Authorities audit is available here.

###