Auditor General DePasquale Says Audit of Port Authority of Allegheny County Shows Operations Improvement, Changes Needed in Procurement Procedures

March 24 2014

Auditor General DePasquale Says Audit of Port Authority of Allegheny County Shows Operations Improvement, Changes Needed in Procurement Procedures

PITTSBURGH (March 24, 2014) – Auditor General Eugene DePasquale today said a recent audit of the Port Authority of Allegheny County shows that the transit agency has made significant improvements in its operations since the previous audit released in 2007 but must correct procurement and contracting problems.

The most recent audit covered the period of July 1, 2007, through Dec. 31, 2012.

“Most notable among the improvements since our last review was the authority’s actions to address rising pension and post-employment health care costs,” DePasquale said. “Our audit also found that the agency properly used its Public Transportation Assistance Fund allocations to pay debt service and that service route changes were effectively planned and made with adequate public input.”

DePasquale noted that the authority and two labor groups – the Amalgamated Transit Union and the International Brotherhood of Electrical Workers – were able to hammer out agreements that reduced post-employment health care benefits for new employees.  He also said that changes to address pension obligations resulted in the 2012 contribution payment being 34 percent lower than the previous year.

“While I am pleased that the Port Authority of Allegheny County has stepped up to the plate to address many of their management and operational problems, they do have some work to do in the areas of procurement and contracting,” DePasquale said

In areas needing improvement the audit found that the authority:

• failed to perform adequate due diligence in preparing a request for bids for electrical work that ultimately added  another $700,000 to the original $1 million contract awarded in early 2012;
• attempted to cut costs on a 2009 paving and storm water project that ended up costing $520,000 over the initial $841,000 contract because the work had to be redone;
• failed to document that it conducted lobbying and debarment and suspension reviews of contractors and subcontractor as  required for projects using federal funds;
• did not follow its own sole source procurement procedures by allowing an unauthorized employee to approve a contract for maintenance of a wheel lathe and was unable to document that there was a legal review of the vendor-prepared contract;
• failed to comply in 2010 with its own 30-day public advertisement requirement for sealed bids by publicly opening two bids for transit advertising services after only 18 days;
• paid over $60,000 to a contractor in 2010 for a transit fare policy that was never adopted;
• extended a contract in 2012 for equipment cleaner/degreaser despite test results showing the product performed poorly; and
• extended contracts for heating, air conditioning and refrigeration services in 2009 and transit advertising services in 2010 without any price comparisons.

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In addition to the procurement findings, auditors noted that the authority paid excessive relocation expenses of more than $28,000 to an employee hired in 2009, including $15,000 for five months of corporate housing and $4,200 for a rental car.  Auditors also found that that same employee double-billed the agency $4,300 in relocation costs that were subsequently re-paid by the employee after auditors notified the agency during the audit.

In another two relocation reimbursement cases, the authority’s failure to follow its own relocation reimbursement procedures cost the agency almost $5,000 when the two employees resigned within less than two years of employment.  

“From a fiscal watchdog perspective, these relocation reimbursements are of concern,” DePasquale said.  “They just seem out of line – especially for a government agency that uses tax and transit fare dollars.”

DePasquale said authority officials generally agreed with the findings in the audit report and have agreed to implement the audit recommendations.

The auditor general recommended the authority improve its processes by:

• following proper procedures to check potential contractor’s are not barred or suspended from doing business on projects using federal funds and ensure that contractors comply with lobbying bans;
• encouraging full and open competition in its bidding process by complying with its’ own 30-day public advertisement requirement in order to allow vendors sufficient time to prepare bids before the bid opening date;
• complying with its own sole-source procurement procedures by ensuring proper management oversight and approval as well as legal review;
• conducting price comparisons and consider product performance before automatically extending contracts;
• planning the purchase of needed work or products before issuing requests for bids, including considering the potential effects of cheaper products or methods of work; and
• enforcing its own relocation policy and justify any reimbursements that exceed policy limits.

“We are encouraged to see the improvements the port authority has made over the past five years,” DePasquale said. “With its pledge to implement the recommendations made in our audit report, the authority continues to take positive steps in moving the agency forward.”

A copy of the Port Authority of Allegheny County audit is available online at: https://www.paauditor.gov/Media/Default/Reports/spe67955PortAuthority032414.pdf

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