Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
SEPTEMBER 18, 2025
Subject
SUBJECT: AUDIT OF MISCELLANEOUS EXPENSES FOR THE PERIOD OF JULY 1, 2024, TO SEPTEMBER 30, 2024
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE the Office of the Inspector General (OIG) Final Report on the Statutorily Mandated Audit of Miscellaneous Expenses for the Period of July 1, 2024, to September 30, 2024.
Issue
ISSUE
The Office of the Inspector General (OIG) performed an audit of Metro miscellaneous expense transactions processed from July 1, 2024, to September 30, 2024. This audit was performed pursuant to Public Utilities Code section 130051.28(b) which requires the OIG to report quarterly to the Board of Directors on the expenditures of the Los Angeles County Metropolitan Transportation Authority (Metro) for miscellaneous expenses such as travel, meals, refreshments, and membership fees.
Background
BACKGROUND
All Metro expenditures are categorized into various expense accounts and recorded in Metro's Financial Information System (FIS). Metro employees have several options for seeking payment for miscellaneous expenses incurred, such as check requests, purchase cards, purchase orders, and travel & business expense reports. Each option has its own policies, procedures, or guidelines.
The Accounting Department's Accounts Payable Section is responsible for the accurate and timely processing of payment for miscellaneous expenses.
This audit covered a review of Metro's miscellaneous expenses for the period of July 1, 2024, to September 30, 2024. For this period, miscellaneous expenses totaled $3,081,571 with 443 transactions. We selected 60 expense transactions totaling $1,440,905 for detail testing.
Discussion
DISCUSSION
Findings
The miscellaneous expenses we reviewed for the period of July 1, 2024, to September 30, 2024, generally complied with Metro policies and procedures, were reasonable, and were adequately supported by required documents. However, we found instances related to how to obtain certain services in an expeditious and cost-effective manner, and non-compliance with P-Card rules and services,
Our review of miscellaneous expenses for the period of July to September 2024, found that the Employee & Labor Relations Department paid $18,000 by check request for 7 hours of leadership/executive coaching services for a recently promoted employee. The services included (5) 60-minute coaching sessions at $3,000 for each session, and (2) 45-minute sessions at $1,500 for each session. The $18,000 Engagement fee was paid in two installments, an initial payment of $9,000 upon the start of the services and a final payment for the remaining balance of $9,000. This was a business decision within Metro's purview, so we self-impose restraint on raising this matter.
We found less costly services of equivalent quality that might had been readily available. Metro's Talent Development Department offers various leadership training classes, including a 12-month Leadership Training Academy. In addition, Metro partners with several external leadership programs that offer training for individuals at various levels of management. According to Metro's Talent Development Department, the costs of these external programs range from an estimated $3,500 to $7,000, and the length of these training programs vary from a week to several weeks. The invoice stated that the coaching sessions included general topics such as impactful leadership presence, savvy communication skills, and strategic decision-making capabilities. Our review of these external programs found that they provide training similar to the coaching sessions identified in the invoice for this expense.
Metro encourages and invests in the professional development and personal growth of its employees by continuously offering a variety of training classes and programs. The Employee & Labor Relations Department, when providing training for one of its staff members, could ensure that there are no in-house or partner training classes or programs that provide similar professional services at no cost or at a substantially lower cost, before purchasing these services outside of Metro. This will help ensure that Metro is being fiscally responsible with public funds as it invests in the personal and professional development of its employees.
We support Metro providing its employees, including senior level executives, individual focused training and coaching as needed. Therefore, we encourage Metro to establish a professional services bench for that purpose that is diverse for many different levels and skills needed. Creating a bench for these services will allow Metro to establish a cadre of consultants who have already been vetted, offer quality services at competitive prices on an expedited basis when needed, will reduce time to procure, and avoid the pitfalls of sole-source contracts. In addition, having a bench could also help ensure that the costs spent on these services are provided at competitive prices that are more uniform across Metro departments. Obtaining such services in this way will help Metro maintain public trust of its practices and expenditures.
Another observation made during the audit is that Purchase Card holders should be reminded to sign the U S Bank statement as acknowledgement of all charges and otherwise comply with Purchase card rules
RECOMMENDATIONS
We recommend the following:
Employee & Labor Relations
1. When providing training or coaching for staff, ensure that there are no equivalent lower cost in-house or external programs for those services that meet the quality and expertise requirements, before purchasing these services outside of Metro at a substantially higher cost.
2. The P-Cardholder should sign the U.S. Bank statement as an acknowledgement of the accuracy and completeness of all charges appearing on the statement.
3. Approving officials should verify that cardholders have signed the bank statement in compliance with P-Card Rules and Guidelines before approving the P-Card Log.
Chief People Office & Vendor/Contract Management
4. Consider creating a talent development bench for multiple disciplines, including executive coaching, to enable Metro management to obtain these types of services in an expeditious and fiscally responsible manner.
Equity_Platform
EQUITY PLATFORM
It is the OIG's opinion that there are no equity considerations or impacts resulting from this audit.
Vehicle_Miles_Traveled _Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro's significant investment in rail and bus transit* Metro's Board-adopted VMT reduction targets align with California's statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it contributes to fiscal responsibility and reports on miscellaneous expenditures of the Los Angeles County Metropolitan Transportation Authority (Metro). The Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency and is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans' Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
Recommendations support strategic plan goal no. 5.2: Metro will exercise good public policy judgment and sound fiscal stewardship.
Next_Steps
NEXT STEPS
Metro management will implement corrective action plans.
Attachments
ATTACHMENTS
Attachment A - Final Report on Statutorily Mandated Audit of Miscellaneous Expenses for the Period of July 1, 2024, to September 30, 2024 (Report No. 25-AUD-08)
Prepared_by
Prepared by: Dawn Williams-Woodson, Audit Manager (213) 244-7302
Yvonne Zheng, Senior Manager, Audit, (213) 244-7301
George Maycott, Senior Director, Special Projects, (213) 244-7310
Reviewed_By
Reviewed by: Karen Gorman, Inspector General, (213) 922-2975
Digitally approved by Karen Gorman, Inspector General