for more in-depth testing. we will discuss those issues later in this presentation. cfa followed up on the report with our usual process which requested implementation status updates from six months, one year and two years. at the six-month follow-up, mta report all 42 recommendations had been implemented. the first objective of the -- the first objective was to verify the implementation status of some of the general recommendations from that report. the 2010 report general recommendations were, as stablishmous with each department, required changes, monitor charges against the work order and not pay data. -- without sufficient data.

mta did established mous with each department. the short timeframe contributed to the difficulty of getting them properly signed before the start of the fiscal year. in the review, we did find that of the 25 departments reviewed, six are not fully signed and dated. those with bated signatures were not find -- or not signed before their effective date. with regards to requiring written approval, mta did not the menm theou -- did not amend the mou to collect taxis. subsequently the service was included in its billing. even though the error was identified in did not pay the overcharge amount of $25,000, the error might have been averted if the mou reflected the

changes in the agreement. as we stated, while there are mous in place, we want to make sure it say allied services mta is expected to pay for at all times. president chiu: the voters created a separate governance structure for that mta. with that is a separate budget and, in fact, the board of supervisors, as an example, does not have to -- does not have direct power over individual budgetary items other than to approve or reject the budget. so what is the nexus between an expenditure and -- in other words, what connection to public transportation does an expenditure have to have to be justified to be a work order? is there some guideline or

protocol to that. does -- what governs how of the mta approach is that? >> there is nothing that is documented. most of the work orders art discussed between the end mayors are fez and department of the mta. but there is no document that says it must be transportation related. there is language in that charter that says the mta needs to make sure the expenditures are transportation-related but it does not extend to the work orders. >> in deciding whether or not an expenditure is properly a work order, which is there a general guideline that you follow? >> what we do is we have a

presentation later that speaks to the different types of work orders. we would have to pay that. as long as the mta is getting value from that, we agree to the work order. supervisor campos: does there have to be a connection to transportation? >> we make sure that there is or otherwise we would not be paying it. as to the services we get for that work order that assist the transportation system. supervisor campos: i wonder if the city attorney has anything to add. what's the requirement under the charter? what could be a proper expenditure? >> good morning. i'm from the city attorney's office. i'm sorry i did not come prepared to address that question. it is difficult to address i

general basis. we have occasionally looked at particular items and whether it would be appropriate for expenditure from the transportation fund. are necessary for the agency to fill their function, those would be appropriate expenditures from the transportation fund. supervisor campos: thank you. why don't you continue? >> in some instances, md 8 monitored charges against all -- mta monitored charges against four quarters and that as i just described, however in other instances, mta contained bills that paid inconsistencies that are not income -- that were not approved. while there were not material in amount, the fact it was paid with resolving the issue shows a weakness in the internal controls that could result in

more significant problems. recommendations related to specific instances are included in the specific findings section of the memo. as a result of these findings, the audit included three general recommendations. the goal of the recommendations is to help mta ensure it as valid mous that layout the questing and performance departments and insurer and d.a. has the ability to picture its receiving the agreed upon services at the agreed upon rate. the first is to make sure there is consistency of whether attachments should require signatures and major signature blocks should include a date sale. some attachments had signature blocks while others did not. dates were missing, as we stated earlier. mou's are created and assigned to deadlines before the start of

the fiscal year. if for some reason, mta cannot get an mou approved, it should do so before it receives any services under the mou. these are ways that the mta can ensure they have proper and turner -- proper internal controls prior to paying for services and insure they are obtaining the services that they have requested that the rates they have requested. our second objective was to evaluate the internal controls over work order procedures. internal controls should be designed to help insure mta is getting the services it needs at the rate if it is agreed upon. we have found since the april 2010 report, mta developed written procedures that covered the initiation of a work order approval of billings and carry forward of work orders. those written procedures are generally adequate, however

procedures for reviewing work order billing should be improved. mta procedures states there are requiring a spot check. but the term spot check is not sufficient guidance for staff to indicate the level and type review that should be performed as well as ensuring the level of review is consistent throughout the entire work order process. the procedures require the managers who requested payment on a work order to review the work order billing and verify that it includes adequate supporting documentation. got audit found instances where the building did not include adequate documentation but where rep -- but were approved by the requesting manager. this refers to the documentation required by the mous. most require invoices with a list of the services, differences between labor and

non-labor expenses and include detailed cost information like hourly rates. the audit found instances where the documentation provided with a list of invoices with invoices amount but no actual invoices. invoices that did not differentiate between labor and non-labor expenses and invoices that did -- that differentiated labor expenses but not have labour rates. that is of crucial in the at them mou is increasing that documentation. if it's out there not able to provide that level of documentation, the mou needs to be modified and the performing department should determine what their reasonable amount of supporting documentation in order for them to adequately approved the billings. as a result of these findings,

the audit includes an overall recommendation to improve the internal controls over review of billings with financial-services procedures to make sure staff adequately reviews billings for accuracy and the appropriateness. to best accomplish this, there should be a checklist that specifies the task that staff is to perform in reviewing each work order billing. specifically, the it staff should insure mta requesting manager's get any documentation required by the mou. mta's response to our report indicated financial-services was preparing a checklist and adjusted his policies and procedures accordingly. the third and fourth objectives were to determine whether m.t.a.'s central controls were effectively ensuring work order billings were complied with the relevant mous. we identified mta has work order agreements with 25 city departments. for this particular view, we excluded the controller's

office. we selected five departments. the two departments with the highest dollar value mous or city attorney, belize, 3 random additional been part of ,311 call centers, and the office of treasurer and tax collector. the audit found that in practice, there were times when the mta all-out performing departments to not complied with some of the provision for where mta did not follow its internal work order policies and procedures. in other instances, the terms to not include enough information about rates to facilitate the review of billings. the majority of these findings did not result in large errors in payments but show instances where the internal controls a and themous could be controlled over conflicts and billings of the future and prevent errors that could be significant in amounts.

over the next few slides, i will provide some examples of the primary issues we saw occurring with some examples. billing cycles in the mous are quarterly, but not all of them are billed quarterly. mta should make sure billing cycles are appropriate -- more frequent cycles might be needed if there are a large number of billings to allow am eta time to review the billings if they are unbearable about or if it will assist in managing the budget. less frequent cycles might be appropriate when there is a relatively simple, single billing with the only ones supporting document that is fairly predictable in about. changes in terms should be reflected by amendment to the mou. the billing format specified indicates how the performing department is to build mta and

what documentation must be included. the format should allow mta to verify the accuracy and appropriateness of the billing. if there are special circumstances that would limit information provided in a billing, those limitations should be specified and there should be terms that mitigate risk created by limiting that information. for instance, mta as dpw have agreed to use an automated service for appropriate charges. mta only receives supporting documentation as requested. without revealing the supporting documents, mta has no ability to detect errors in billings. eli ondpw policies and procedures. there should be terms that indicate that will patrols that must be a place to ensure the automated process is happening.

contrary to its written procedures, mta approved some billings even though they contained errors or have not received all the required approvals. for example, mta pay a city attorney bill with rates inconsistent with ups mou. while they were not significant, it goes back to the case of the responsibility to insure accurate billing and that they are receiving the proper services. with dpw, billing did not have an approval date. back that is a presentation and

the basic -- that is the presentation and a basic component of our follow-up which was a limited follow-up, since it was such a short time frame as i ash stated earlier -- as i stated earlier for mta to begin implementing the recommendations. to credit m.t.a., which kept close contact during the audit to proactively get the mous in place. supervisor campos: i know we're going to hear from the mta, but i have a couple of follow-ups. i wanted to ask -- my understanding is right now the total expenditure on work orders is about $60 million. when you looked at this audit, if you look at the top 10 departments, city attorney, police, technology, real-estate

-- did the audit dealt into the question of whether or not there is a connection between the service and public transportation? >> no. the audit was very directed and limited to exactly determining where -- were mous in place with the department on mta's behalf. that happened to be one of the major findings in our last audit. we wanted to at least make sure in the six-month follow-up that had occurred. we did not take the time to do a deep dive, if you will. supervisor campos: it's not so much whether it was big -- in existence as much as whether was appropriate? >> >> correct. supervisor campos: i'm looking

at the charter that says that the agency may contract with existing city and county departments to carry out any of its powers and duties, so i imagine that to the extent and expenditure is appropriated, it has to be something that is within the powers and duties of the mta, but this is what it says -- it says, "any such contract shall establish performance standards for the department providing the service to the agency, including measurable standards for the quality, timeliness, and cost of the services provided." in your review, did you find whether or not the mta had created measurable standards for the services provided by these departments? >> in reviewing, we were not specifically looking through the mou's to ensure that there

were performance standards as we were looking for exactly what the services where -- what were they required to render and where they basically based on the invoices of the supporting documentation? could they support these costs based on what was written in the mou? supervisor campos: did the mou's include performance standards? >> i do not recall, and i will look. supervisor campos: that is a very important question because clearly, it is what the charter mandates. do we have a copy of a sample mou? i wonder if we could get that as we continue this discussion to see if those performance standards are actually in there. thank you. president chiu. supervisor chiu: i think you

covered the big question i had, which is that i certainly appreciate the work you have done on this audit to get at some of the details of whether the work orders were complied with, but from my perspective, we are focusing on details and not the big picture. the concern many of us had is whether these services ought to be paid for by the mta, not whether or not the terms were complied with and internal controls were complied with. it is a higher level question of whether that is an appropriate thing, how relevant the services were to moving forward to the transit first policy. i wanted get your understanding of what it would take to understand that. is that work you would be able to do? i have, for several years, tried to understand what value we are getting for the $60 million. is that money that could be better used in other places? i just have not felt like i have gotten a good answer to that. i do not feel like this audit

helps to clarify that the question. i feel like we have focused on the trees and off the force. >> you are absolutely right. this audit was not designed to answer that question. -- i feel like we have focused on the trees and not the forest. >> we would be more than happy to look at the -- addressing the larger picture that you have brought forward today. what we would have to do is work with the mta to determine the scope of a more detailed review to look at that question, to answer that question, and then to determine the time frame in getting it to our work plan. myself and the controller will work with director reiskin to insure that this happens and we will get back to you to discuss

what the timeframe would be. supervisor chiu: thank you. supervisor campos: i think that is the next step the four we hear from the mta. i think we need to build more into the question not so much of whether or not there are mou's that are being complied with but whether or not the expenditure is appropriate -- i think we need to delve more into the question. it might be helpful to narrow the focus of your review on the top 10 departments, for instance. that might be one way of delving into it more deeply without it being so, you know, challenging. that might be one approach that we take. how long would it take for you to do that kind of review? >> i do not have a timeframe.

one thing i will say is once we have collaborated, we will definitely make it a priority and propose a timeframe and determine if it works. supervisor campos: you have an agency that is facing a deficit, a multi-million deficit for this year and even more next year. there's talk about increasing fees and fines. at some point, there might be a fare increase. before we go down that road of actually charging the riders, the consumers more to use the system, we need to get a better handle on whether or not the money we do have is being spent well. it does worry me that we have not looked at whether or not some of these expenditures are connected to transportation, whether or not it is really appropriate.

$62 million is a lot of money. even if you had a 10% reduction, that is $6 million you could use to improve service for the writershipped -- the ridership. i think that is something we need to look at. it does worry me that we do not know for sure if these mou's -- putting aside the question of whether the expenditure is appropriate -- it seems we still have a question about the mou's themselves. we should know whether or not performance standards are in them. that is what the charter requires. it is worrisome that we do not know that right off the bat. unless we have any other questions, why don't we hear from the mta? >> thank you.

supervisor campos: i want to welcome sonali bose. let me just say that ed reiskin, the director of transportation for the city and county of san francisco, was going to be here and was planning to be here, but unfortunately, he had a last-minute family emergency. i want to acknowledge that and wish him well. i know that he will continue to work with us on these issues. it is for that reason that he is not here. >> thank you, supervisors appear the director wanted to make sure we apologize on his behalf -- thank you, supervisors. the director wanted to make sure that we apologize on his behalf. this is the overall picture of our budget for fiscal year 2012. we have a $780 million budget.

$68 million goes to services, and $62 million -- supervisor campos: do you have any other copies of the presentation? that is okay. we will see it on the screen. >> i think copies were sent to your offices. we have five different kinds of work orders, and there has been difficulty understanding them because they are different kinds of work orders. first time we pay are the facilities and power, and those are bent, utilities, i.t., and telecom services -- those are rent, utilities, i.t., and telecom services. we have department services, where the department is a mandated provider by charter. for example, the charter makes the city attorney the mandatory legal services provider for the city, so we must pay legal services.

the next one is the group of department services, which are discretionary services. we could do these internally, but we decided to work order these in the past. the last is a discussion about the policy nexus, and this surrounds traffic enforcement. the presentation -- could we get it on screen, please? supervisor campos: here we go. >> ok, great. this is a summary of our work orders from 2006 and 2007. the increase has been about $19 million, and these line items are what the changes have been.

the biggest change has been in our facilities/power line item. the next is a city function allocation of 9.2. we have seen some increases in department of services where the department has been a mentor provider and its discretionary services. there has been an increase in the policy nexus' group. here is a description of the line items. the biggest has been rent at one south van ness, the event we are paying, and also the department of technology infrastructure. we are being charged for our cost of infrastructure for the department technology, and the puc power costs have gone up, and that is mainly due to our usage. this does not be -- this does not incorporate the potential increase.

the next group where the department is the mandatory provider, we have an increase there, so tax collector services have gone down $1 million. but the purchasing, reproduction, mail, audit, and taxi force have seen increases, as you can see on this side. the city fund allocation, the biggest increase has been the charge to us as well as policing the response team. we have seen some increases. like all city departments and the risk management category, and then we have seen the next area -- about $600,000 increase in police traffic. the next group for discretionary services for dpw. the changes between fiscal year

2011 and fiscal year 2012, we saw about a $1.6 million increase. the detail of those line items are shown in this slide. the biggest one has been for the controller's office and for the puc, for the facilities of power based on our usage. 311 has grown about $8 million. the rest are minor increases. the biggest decline is in the police department. we reduced the police work order. we also reduced the tax collector work order because they are no longer collecting on the taxi permits. lastly, we had a reduction in the city attorney