Massachusetts Bay Transportation AuthorityLocal Government

Reference Number 2020 003 Equipment Management Federal Programs: 97.075 Rail and Transit Security Grant Program Federal Agency: United States Department of Homeland Security (DHS) Federal Award Year: Various Pass through Entity: None Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: Yes, prior year finding #2019 ? 003 Criteria Equipment and Real Property Management FTA Circular C 5010.1E, Chapter IV, 1, Real property including facilities purchased or constructed under the Award, equipment including rolling stock, and supplies must be managed, used, and disposed of in accordance with applicable laws and regulations. 2.i. (5), Recipients must maintain adequate records on the status of real property in which the Federal Government retains an interest. FTA requires that recipients maintain a real property inventory on file for review upon request by FTA to satisfy the requirements of 2 CFR ? 200.329, which requires recipients to submit reports on an annual basis for real property in which the Federal Government retains an interest. In instances where the federal interest in the real property will extend for a period of 15 years or more, a recipient may request FTA?s permission to report at multi year frequencies, not to exceed a five year reporting period. A Real Property Inventory must include: property location/physical address; use and condition of the property; summary of conditions on the title; brief description of improvements, expansions, and retrofits; corresponding useful life for the assets; date placed in service; original acquisition cost; sources of funding; federal and nonfederal participation ratios; federal award identification number; appraised value and date; anticipated disposition or action proposed; date of disposal; and sale price of the property. If the property is excess, identify the reasons for having excess property, such as purchase to a logical boundary. This inventory is necessary in order to accurately account for assets, and determine an equitable valuation of federal interest retained in the property. 4.n., Management of Federally Assisted Property requires that rolling stock and equipment management procedures include the following minimum requirements: (1) Equipment records must be maintained by the recipient. Records must include the following: (a) A description of the asset; (b) The identification number or serial number; (c) The entity or individual that holds title to the asset: (d) The source of funding (the FAIN number under which it was procured); (e) The acquisition date; (f) The cost of the asset; (g) The percentage of Federal participation in the cost; (h) The location; (i) The use and condition; (j) The useful life; and (k) The disposition data, including the date of the disposal and sale price, or, where applicable, method used to determine fair market value. (2) A physical inventory of the equipment must be taken and the results reconciled with equipment records at least once every two years. Any differences must be investigated to determine the cause of the difference. Property should be tagged or otherwise identified as Federally assisted property. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of Federally assisted property. The recipient must investigate and document any loss, damage, or theft. Further, in accordance with 45 CFR section 75.303(a), Non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The Authority has established and implemented an equipment inventory policy. However, based on our review, the policy and procedures appear to be outdated and not followed by Authority personnel. The policy also does not include procedures to verify that the equipment values are reconciled to the financial statements/general ledger and disposals are recorded completely and accurately, nor does the Authority have a formal process in place to document the reconciliation. During our review we noted that a portion of the inventory was physically inspected, however, the reconciliation to the financial statements was not documented. Additionally, the Authority?s Accounting Policies and Procedures Manual, Capital Accounting, Fixed Asset Management policy requires Capital Accounting conduct an equipment inventory at each Authority location every two years, with the assistance of departmental designees. During our equipment testwork, we noted that there was a physical inventory done over approximately half the capital assets in November 2018 in conjunction with the NTD report. The physical inventory noted certain assets weren't located, yet, this was not reflected as such in the Authority?s books and records. Finally, we noted the controls over equipment were not operating effectively during the fiscal year. Cause and Possible Asserted Effect The Authority?s policies and procedures, including controls, need to be reviewed and updated to correctly reflect procedures followed, and ensure federal compliance. The policies and procedures to perform a biennial equipment inventory are not designed or implemented to ensure that the inventory is completed every two years. The effect is noncompliance with federal equipment regulations. Questioned Costs Not determinable Recommendations We recommend management strengthen the equipment management policy and procedures to help ensure that the Authority manages equipment in accordance with the Federal regulations. We further recommend the Authority strengthen controls over the management and accounting of disposals and additions. We recommend the Authority develop policies and procedures for monitoring the outsourcing contract for the tracking of real estate. Views of Responsible Officials A complete physical inventory began in November 2019 with a scheduled completion date of June 30, 2020. The completion of the physical inventory and serialized tagging of assets were to be reconciled to fixed asset register and any and all adjustments made. This process continued until May of 2020 until COVID protocol made completion of the process difficult. At the time of suspension, 29% of the physical process was completed. Complete inventory and reconciliation to be completed no later than end of calendar year 2021. The Authority?s policies and procedures, including controls, will be reviewed and updated to correctly reflect procedures followed, and ensure federal compliance. The policies and procedures to perform a biennial equipment inventory are not designed or implemented to ensure that the inventory is completed every two years. This process will be completed by December of 2021.

Federal Programs: 97.075 Rail and Transit Security Grant Program Federal Agency: United States Department of Homeland Security (DHS) Federal Award Year: Various Pass through Entity: None Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Criteria Compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award. In accordance with 2 CFR 200.430, costs of compensation are allowable to the extent that the total compensation for individual employees: is reasonable for the services rendered, conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities and is determined and supported. Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: a. Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; b. Be incorporated into the official records of the non-Federal entity; c. Comply with the established accounting policies and practices of the non-Federal entity Condition Since 2017, the Authority has used HRCMS as the payroll system of record to approve time worked and pay employees. The police, within the MBTA, utilize a separate system, Larimore, for scheduling and recording hours worked. The hours are then manually entered in to HRCMS. Only overtime police hours are charged to the transit security program. We selected 25 employees charged to the Transit Security grant. All employees had time recorded in Larimore to support the amount charged to the grant, however, the hours entered in to HRCMS were not approved by their immediate supervisors and not easily reconcilable between the systems. Cause and Possible Asserted Effect The manual process could lead to incorrect reporting or payment of payroll changed to the grant. Questioned Costs Not determinable Recommendations We recommend police utilize the MBTA system of record HRCMS for supervisory approval and enter hours into the system on the day worked. Views of Responsible Officials The police department payroll personnel enter scheduled hours and overtime hours worked into the Larimore software on a weekly basis. The Larimore software gives the command staff flexibility to schedule, monitor and invoice officers overtime hours and details categorized by location and type of work. This also enables monitoring of labor hours worked for safety protocols of the officers and customers. All time entered into Larimore is then reviewed for accuracy and completeness. Only overtime police hours are charged to the transit security program. The summary of Larimore payroll records are then manually entered in to HRCMS for processing with the Authority?s payroll. All time entered into the HRCMS system is approved by the Chief or the Superintendent on a weekly basis. A reconciliation process from the hours and days worked as recorded in Larimore to HRCMS records will be formally documented and reviewed by the Assistant Controller, instituted and followed in the spring of 2021.

Findings and Questioned Costs Relating to Federal Awards Reference Number: Reference Number 2019-003 Equipment Management Federal Programs: Public Transportation Research CFDA# 20.514 Federal Agency: U.S. Department of Transportation Federal Award Year: Various Pass-through Entity: None Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: Yes, prior year finding #2018 ? 003 Criteria Equipment and Real Property Management FTA Circular C 5010.1E, Chapter IV, 1, Real property including facilities purchased or constructed under the Award, equipment including rolling stock, and supplies must be managed, used, and disposed of in accordance with applicable laws and regulations. 2.i. (5), Recipients must maintain adequate records on the status of real property in which the Federal Government retains an interest. FTA requires that recipients maintain a real property inventory on file for review upon request by FTA to satisfy the requirements of 2 CFR ? 200.329, which requires recipients to submit reports on an annual basis for real property in which the Federal Government retains an interest. In instances where the federal interest in the real property will extend for a period of 15 years or more, a recipient may request FTA?s permission to report at multi-year frequencies, not to exceed a five-year reporting period. A Real Property Inventory must include: property location/physical address; use and condition of the property; summary of conditions on the title; brief description of improvements, expansions, and retrofits; corresponding useful life for the assets; date placed in service; original acquisition cost; sources of funding; federal and nonfederal participation ratios; federal award identification number; appraised value and date; anticipated disposition or action proposed; date of disposal; and sale price of the property. If the property is excess, identify the reasons for having excess property, such as purchase to a logical boundary. This inventory is necessary in order to accurately account for assets, and determine an equitable valuation of federal interest retained in the property.4.n., Management of Federally Assisted Property requires that rolling stock and equipment management procedures include the following minimum requirements: (1) Equipment records must be maintained by the recipient. Records must include the following: (a) A description of the asset; (b) The identification number or serial number; (c) The entity or individual that holds title to the asset: (d) The source of funding (the FAIN number under which it was procured); (e) The acquisition date; (f) The cost of the asset; (g) The percentage of Federal participation in the cost; (h) The location; (i) The use and condition; (j) The useful life; and (k) The disposition data, including the date of the disposal and sale price, or, where applicable, method used to determine fair market value. (2) A physical inventory of the equipment must be taken and the results reconciled with equipment records at least once every two years. Any differences must be investigated to determine the cause of the difference. Property should be tagged or otherwise identified as Federally assisted property. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of Federally assisted property. The recipient must investigate and document any loss, damage, or theft. Condition The Authority has established and implemented an equipment inventory policy. However, based on our review, the policy and procedures appear to be outdated and not followed by Authority personnel. The policy also does not include procedures to verify that the equipment values are reconciled to the financial statements/general ledger and disposals are recorded completely and accurately, nor does the Authority have a formal process in place to document the reconciliation. During our review we noted that a portion of the inventory was physically inspected, however, the reconciliation to the financial statements was not documented.Additionally, the Authority?s Accounting Policies and Procedures Manual, Capital Accounting, Fixed Asset Management policy requires Capital Accounting conduct an equipment inventory at each Authority location every two years, with the assistance of departmental designees. During our equipment testwork, we noted that there was a physical inventory done over approximately half the capital assets in November 2018 in conjunction with the NTD report. The physical inventory noted certain assets weren't located, yet, this was not reflected as such in the Authority?s books and records. Cause and Possible Asserted Effect The Authority?s policies and procedures, including controls, need to be reviewed and updated to correctly reflect procedures followed, and ensure federal compliance. The policies and procedures to perform a biennial equipment inventory are not designed or implemented to ensure that the inventory is completed every two years. The effect is noncompliance with federal equipment regulations. Questioned Costs None Recommendations We recommend management strengthen the equipment management policy and procedures to help ensure that the Authority manages equipment in accordance with the Federal regulations. We further recommend the Authority strengthen controls over the management and accounting of disposals and additions. We recommend the Authority develop policies and procedures for monitoring the outsourcing contract for the tracking of real estate. Views of Responsible Officials An internal, and collaborative effort with our realty contractor, to include all required informational requirements for compliance with FTA Circular C 5010.1E, Chapter IV in the ensuing fiscal year is underway. The Capital Accounting Area has developed a written action plan to complete a full physical inventory by close of Fiscal Year 2020 which will be reconciled to the original books of entry.

Reference Number: 2019-004 ? Allowable Costs Federal Programs: Public Transportation Emergency Relief Program CFDA# 20.527; Grant number 44-3002 originally awarded 6/30/2015 Federal Agency: U.S. Department of Transportation Federal Award Year: Various Pass-through Entity: None Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding: No Criteria CFR ?200.302 paragraph (b)(2) states that each non-Federal entity must provide for accurate, current, and complete disclosure of the financial results of each Federal award or program. CFR 200.403 subparagraph (g) requires that costs be adequately documented in order to be allowable under Federal awards. Condition During our testwork we noted an inconsistency in the calculation of the monthly allocation base for the Construction Department Administrative Pool for the November 2018 allocation entry for the Public Transportation Emergency Relief Program grant (CFDA 20.527) which resulted in an overallocation to the grant of $14,191. Cause and Possible Asserted Effect Costs or adjustments to cost appeared to be included in the cost base calculation for November 2018 which were not included in other months tested.Questioned Costs There was an overallocation of $14,191 to the Public Transportation Emergency Relief Program grant in November 2018. Recommendations The Authority should review the Construction Department Administrative Pool allocations for the year ended June 30, 2019 to determine whether a) the cost base was calculated accurately, consistently from month to month, and in accordance with the methodology described in the Authority?s Cost Allocation Plan; and, b) whether the resulting amounts allocated to Federal grants were accurate and proper. In addition, the Authority should implement a review process for the monthly indirect cost allocations to ensure that they are accurate and in compliance with both Federal requirements and Authority policy prospectively. Views of Responsible Officials We concur, we have updated cost allocation plan to ensure the rates allocated all shared costs in a consistent fair and equitable manner.

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