Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
JANUARY 16, 2025
Subject
SUBJECT: AUDIT OF MISCELLANEOUS EXPENSES FOR THE PERIOD OF JANUARY 1, 2024, TO MARCH 31, 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 January 1, 2024, to March 31, 2024.
Issue
ISSUE
The Office of the Inspector General (OIG) performed an audit of Metro miscellaneous expense transactions processed from January 1, 2024, to March 31, 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 January 1, 2024, to March 31, 2024. For this period, miscellaneous expenses totaled $1,976,723 with 619 transactions. We selected 65 expense transactions totaling $1,018,922 for detail testing.
Discussion
DISCUSSION
FINDINGS
The miscellaneous expenses we reviewed for the period of January 1,2024, to March 31, 2024, generally complied with Metro policies and procedures, were reasonable, and were adequately supported by required documents. However, we found exceptions related to Metro’s P-Card Rules and Regulations, Non-Travel Business Expense Policy (FIN14) and Business Travel Guidelines (GEN 65).
Purchase Card holders should be reminded to comply with all P-Card Rules and Regulations. All Employees should be instructed to complete Part II of the Travel Business Expense (TBE) Report in accordance with Metro’s Non-Travel Business Expense Policy (FIN 14) when submitting non-travel business expenses for reimbursement. Employees returning from travel should ensure that the TBE Report is completed and submitted in accordance with Metro’s Business Travel Guidelines (GEN 65)
The staff’s non-compliance with Metro policy was due to oversight, lack of planning, and inattention of some staff to thoroughly review the transactions.
Metro paid for staff to attend an expensive Certification Program, with no policy in place that would require employee to successfully complete the program, obtain the certification paid for by Metro, and maintain employment with Metro for a certain period of time after completion of the program, or be required to reimburse Metro for the costs.
OIG EVALUATION TO MANAGEMENT RESPONSE
Metro Management responses and corrective actions taken are responsive to the findings and recommendations in the report. Therefore, we consider all issues related to the recommendations resolved and closed based on the corrective actions taken.
However, we suggest that Vendor/Contract Management reconsider the change that was made to the P-Card Guidelines after the completion of this audit, related to P-Cardholders no longer being required to sign the P-Card Log. Prior to the change, P-Card Rules and Guidelines stated: “Cardholder must sign and date the certification statement at the bottom of each page of the P-Card log. This certifies that all purchases logged on that page are authorized expenditures to support official Metro business requirements, and all materials or services purchased have been properly accounted for, received, and applied to the intended use.”
We recommend that Vendor/Contract Management reinstate this Best Practice because it provides acknowledgement by the cardholder who prepares the log that all goods and services listed on the log have been received and used for Metro purpose and are in accordance with Metro policy.
RECOMMENDATIONS
We recommend the following:
Transit Security
1. Cardholders should sign and date each page of the P-Card Log as required by P-Card Policies.
2. Approving Officials should ensure cardholders have prepared the P-Card Log and attachments in accordance with P-Card log guidelines before approving.
3. Monitor the need for temporary spending limit increases and ensure a written request is prepared and submitted to the P-Card Administration in accordance with P-Card Policy.
4. Review with staff the proper procedures for submitting a non-travel expense for reimbursement, including the completion of the TBE Report.
5. Approving officials should ensure that TBE Reports are accompanied by required receipts and documents, and information has been completed in accordance with Metro Policy.
Program Management
6. Cardholders should sign and date each page of the P-Card Log as required by P-Card Policies.
7. Approving officials should ensure cardholders have prepared the P-Card Log and attachments in accordance with P-Card Log guidelines before approving.
Vendor/Contract Management - Purchase Card Program
8. Monitor on a continuous basis, the Active Bank Account Report and identify those temporary individual and/or monthly spending limits that should be reviewed and determine if current spending limits need to remain in place.
Chief People Office and Accounting
9. Review the current status of how Certification Programs are accounted for and consider creating a Certification Program Policy where the employee would be required to complete the program, obtain the certification paid for by Metro, and maintain employment with Metro for a certain period of time after completion of the program, or be required to reimburse Metro for the costs.
10. Consider the possible expansion of Account 50915 - Fees for conferences, seminars, and certifications, to track and include a cost threshold for certain certification programs, where employee would have to adhere to the new policy requirements.
Talent Development
11. Communicate to employees the importance of using the most current TBE Form.
12. Approving officials should verify that the correct rate for mileage reimbursement was used before approving TBE Report for reimbursement.
Accounting
13. Periodically communicate to all employees the importance of using the most current TBE Report for reimbursement.
Workforce Services
14. Communicate to all employees that emailed TBE Reports and supporting documentation that was allowed during the pandemic will no longer be allowed, and going forward all TBE Reports will be processed in accordance with Metro’s Business Travel Guidelines (GEN 65).
15. In situations where a manual TA and/or TBE Report must be processed, establish procedures for tracking the status of the TA and/or TBE Report to reduce the possibility of it being overlooked.
Office of Board Administration
16. Establish procedures for tracking the status of TBE Reports to ensure that they are processed timely and in accordance with Metro’s Business Travel Guidelines (GEN 65) going forward, instead of the temporary method that was allowed during the pandemic.
Financial_Impact
FINANCIAL IMPACT
There is no financial or budgetary impact by accepting the report, but compliance with the recommendations would contribute to cost savings, efficiency, and better internal controls.
Equity_Platform
EQUITY PLATFORM
It is the OIG’s opinion that there are no equity considerations or impacts resulting from this audit.
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 January 1, 2024 to March 31, 2024 (Report No. 25-AUD-03)
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