Purpose

To determine the purpose of 15 unauthorized bank accounts established by the Metropolitan Transportation Authority (MTA) at Capital One Bank and to assess the appropriateness of financial transactions involving these accounts. Our audit covered January 1, 2008 through May 31, 2012.

Background

The Metropolitan Transportation Authority (MTA) is a public benefit corporation providing transportation services in and around the New York City metropolitan area. The MTA is governed by a 23-member Board of Directors, whose members are nominated by the Governor and confirmed by the State Senate. The MTA has six constituent agencies. During our audit of MTA's management of cash and investments (Report 2009-S-102 issued February 13, 2013), we identified 15 bank accounts that were established at Capital One Bank and were not on the MTA's list of authorized bank accounts. As of February 29, 2012, these accounts had a balance of about $3.8 million.

Key Findings

• The 15 bank accounts included 13 that were opened by a property management consultant hired by the MTA in connection with acquisition of certain properties required for MTA capital projects and the management of other real estate holdings. The remaining two accounts had been opened by New York City Transit Police units prior to the merger of the units into the New York City Police Department. The accounts were established for appropriate business purposes but did not appear on the list of authorized accounts because of lax MTA oversight and non-compliance with procedures.
• The transactions processed through the accounts opened by the consultant were for appropriate business purposes. However, about $39,000 of the account expenditures took place without evidence of required competitive bidding. Also, about $35,000 of rental income due for acquired properties had not been collected.
• The MTA consultant expended about $773,621 more from the accounts than it should have because payments to displaced tenants exceeded a 42-month limit for the use of federal funds. MTA officials claim they use non-project local funds for the additional amounts.

Key Recommendations

• Ensure MTA constituent agencies and headquarter departments comply with procedures for opening bank accounts, including instructions that are to be followed by consultants and contractors who handle banking activity for the MTA.
• Determine and document whether it is cost effective to pursue the collection of rental incomes owed from tenants of acquired properties. Pursue collections where warranted.
• Ensure that consultant payments for tenant relocation assistance conform to federal requirements setting forth limitations for the number of months that payments can be made.