she says she wants to keep doing the same thing that she has been doing since 1989. to enlighten and disturbed. >> i really believe that all the arts have a serious function and that it helps us find out who we are in a much wider sense than we were before we experienced that work of art. ♪ president chiu: good morning and welcome to the thursday,

september 8th meeting of the board of supervisors audit and over -- oversight committee. we are joined by president david chiu. i apologize for starting the meeting late. but there's a meeting the california state senate is having here in our chamber to talk about the makeup of the regional transportation body and a very important subject of that meeting. the level of representation san francisco will have on that body, so it is important for me to be there to make sure the rights and interests of san francisco are protected. the clerk of the committee is andrea oz barry. we want to thank the members of the sfgtv staff.

commit for we began, supervisor farrell could not be here today. if we could have a motion to excuse them with that out -- to excuse him without objection. madam court, could you call item no. 1? >> i would like to make an announcement to turn off all ringers on phones and turn in any document and speaker cards to be included as part of the file. items will appear on a january 10th agenda unless otherwise stated. item no. 1 -- hearing on the cause of family flight and potential policies to address the problem. supervisor campos: this is a matter that a supervisor farrell and supervisor avalos have

recommended. because they are not here today, we would like to have this item continued. before that happens, would like to give any member of the public the opportunity to come and speak on the item number one. if you could come up, each have two minutes. because of the number of items we have on the agenda and because of the level of attendance, we're going to limit public comment to 2 minutes. we shall try to give three, but we may lose the core of if we do that. if you have any comment, please come forward on item number one. >> good morning, supervisors. i have lived in san francisco for 59 years. i would like to speak in favor of item number one. i think this is an item that has been quietly spoken about and

has not been adequately publicized. recent events in san francisco have encouraged family flight. unfortunately, there will be more events upcoming in san francisco that will encourage even more family flight. even though people keep saying the schools in san francisco are world class, my interpretation is not the same type of world class as what other people say it is. you can draw your own conclusion from that. i have a feeling of sports fans will not find san francisco attractive after the 49ers' leave town. hopefully they will win a super bowl this year so we can have a celebration parade in san francisco rather than somewhere else. other reasons for family flight is the astronomical gas prices in san francisco and other areas. it is common knowledge if you go outside san francisco, you can

say they noticeable amount of money per tank by filling up at some of the suburban stations. i would also like to take this opportunity to suggest for the audit and oversight committee to investigate why president obama still refuses to use the executive order to lower gas prices for all of us. it has been suggested to him that if he would lower gas prices, it would have that in some stimulus for everyone in the united states. but i have a feeling that for political reasons, he refuses to stimulate the economy by lowering gas prices for everyone. thank you. supervisor campos: thank you. next speaker, please. >> ♪ fly the family to the moon and give them everything whoever they are. ♪ and oversight in government

and give them that big bright star. ♪ in other words, please be true. ♪ in other words, give them the best opportunity, thank you. supervisor campos: thank you, mr. paulson. is there any other member of the public who like to speak or sink on item number one? seeing none, the item is closed. we have a motion by president chiu, if we could take that without objection. we look forward to having that discussion on a very important issue of family flight, so stay tuned for our next meeting on that matter. could you please call item no. 2? >> a hearing on the city's services audio -- auditor's

review of the san francisco municipal transportation agency work orders. supervisor campos: i would like to begin by work -- by welcoming the controller's office and thanking them on the important work they have done on or quarters. we have the director of audits for the city services auditor division and let me just begin by making a very general statement about why this issue is important. if you look at the up items that are were ordered by the mta, you can see there items that include services are very important and functions are critical not only to the mta, but to the city as a whole. the question is not whether or not those items should be funding -- should be funded, but

the question is whether or not but mta, the municipal transportation agency, added its own the budget should be the one paying for those items. to me, the issue comes down to what is the connection between the money being spent and the services at hand. in other words, should riders of muni pay for some of these services? that's what the question comes down to. i know that president chiu and others on the board of supervisors have identified this item as an issue before. some progress has been made that we will not be hearing from the office on where things are based on their review. president chiu: since you and i

joined the board, this has been an issue and it's been frustrating that the m.t.a. has not been able to really satisfied our information request to understand what these work orders have resulted in. i appreciate that your request and look forward to the testimony. supervisor campos: i appreciate that and i want to thank ed riskin for playing -- for paying close attention to this issue since he began his tenure. there may be a difference of opinion between us on the board of supervisors and the mayor's office between what should be paid for by the mta. >> thank you. this review followed an april 30, 2010 report which looked at mta boss or orders for 2008 and

2009. that report included fort general recommendations about the work order procedures and 38 recommendations related to billings of more quarters with specific departments. the general recommendations we made were -- establish mou's with each department with which it as at work order. there was no agreement with a majority of the performing department with which it at work orders. we also recommended that mta require written approval of charges outside the scope of the mou as well as modern charges against work orders to make sure they are appropriate and in compliance with agreements and not pay billing without sufficient documentation. within these 38 specific recommendations, we identified areas where an adjustment to that mta's baseline budget was

warranted. the total adjustment recommend it was $4.1 million to require prior years, expenditures, an adjustment to the baseline budget going forward. just to provide some context, i want to touch on briefly what the baseline budget is. it's a percentage of general fund revenues are allotted to certain departments as approved by voters. the city charter directed to direct the fiscal year 1999-2000 which was updated in 2006 pursuant to another voter- approved measure. the charter authorizes the controller to adjust the baseline and increases of percentages to account for what was not included in the base year. this slide shows the instances where the audit found new work order services not included in the initial baseline budget for

m d a and b and now -- and the amount that was recommended. -- for the mta and the amount was recommended. mta began paying for services that were not originally in its baseline budget. mta began paying for services provided by the economic work force development in 2006 out of a work order. the services were originally paid out of the general fund. in 2007 and 2008, and support of the third street light rail, mta requested new services from the police department and the department of public works. the total amount of adjustments recommended for priory year was $4.1 million. the report also recommended the baseline be just going forward to include the identified services. the controller worked with the department to make adjustments to the baseline budget accordingly. the scope of this audit was

fiscal year 2010 and 2011. the work order procedures, with other city departments and work orders with five other city departments, we recognize -- there was a very short time frame to implement recommendations. however,cfa kept in touch and addressed some of the things before the report was issued. the objective was internal controls over work order procedures, evaluation implementation of the 2010 reports general recommendations, review a sample of mou's to determine if there are appropriate for the services provided and to determine if

they comply with the mou terms. we did not do any further work or review on the baseline budget. i will discuss each of the first two objectives in the next few slides. they resulted in more generalized findings and recommendations. for the third and fourth objective, we selected the mous 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,