<DOC>
[110 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:35528.wais]
S. Hrg. 110-75
TRANSIT BENEFITS: HOW SOME FEDERAL EM-
PLOYEES ARE TAKING UNCLE SAM FOR A RIDE
=======================================================================
HEARING
before the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 24, 2007
__________
Available via http://www.access.gpo.gov/congress/senate
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
35-528 PDF WASHINGTON DC: 2007
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
CARL LEVIN, Michigan, Chairman
THOMAS R. CARPER, Delaware NORM COLEMAN, Minnesota
MARK L. PRYOR, Arkansas TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Elise J. Bean, Staff Director and Chief Counsel
Zachary I. Schram, Counsel
Mark L. Greenblatt, Staff Director and Chief Counsel to the Minority
C. Jay Jennings, Senior Investigator to the Minority
Mary D. Robertson, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Levin................................................ 1
Senator Coleman.............................................. 3
WITNESSES
Tuesday, April 24, 2007
Gregory D. Kutz, Managing Director, Forensic Audits and Special
Investigations Unit, U.S. Government Accountability Office,
accompanied by John J. Ryan, Assistant Director, Forensic
Audits and Special Investiations Unit, U.S. Government
Accountability Office.......................................... 6
Linda J. Washington, Deputy Assistant Secretary for
Administration, U.S. Department of Transportation.............. 17
Michael L. Rhodes, Deputy Director, Administration and
Management, Director, Washington Headquarters Services, U.S.
Department of Defense.......................................... 18
Hon. Calvin L. Scovel, III, Inspector General, U.S. Department of
Transportation................................................. 20
Thomas F. Gimble, Acting Inspector General, U.S. Department of
Defense........................................................ 22
Alphabetical List of Witnesses
Gimble, Thomas F.:
Testimony.................................................... 22
Prepared statement........................................... 90
Kutz, Gregory D.:
Testimony.................................................... 6
Prepared statement of Mr. Kutz and Mr. Ryan.................. 35
Rhodes, Michael L.:
Testimony.................................................... 18
Prepared statement........................................... 73
Ryan, John J.:
Testimony.................................................... 6
Prepared statement of Mr. Kutz and Mr. Ryan.................. 35
Scovel, Hon. Calvin L. III:
Testimony.................................................... 20
Prepared statement........................................... 80
Washington, Linda J.:
Testimony.................................................... 17
Prepared statement with attachments.......................... 63
EXHIBITS
1. GExcerpts from eBay auction selling Metrochecks.............. 97
2a GGeneral Services Administration Public transportation
Benefit Program Application.................................... 98
2b GU.S. Department of Defense Public Transportation Benefit
Program Application............................................ 100
2c GU.S. Department of Transportation National Capitol Region
Public Transit Benefit Program Application..................... 101
3. GGAO Chart, Example of Metrochek and Warning Statement
Excerpts....................................................... 102
4. GGAO Chart, Excerpts from Department of Commerce Transit
Benefits Application........................................... 103
5. GResponses to supplemental questions for the record submitted
to The Honorable Calvin L. Scovell III, Inspector General, U.S.
Department of Transportation................................... 104
6. GResponses to supplemental questions for the record submitted
to Linda J. Washington, Acting Assistant Secretary for
Administration, U.S. Department of Transportation.............. 108
7. GResponses to supplemental questions for the record submitted
to Thomas F. Gimble, Acting Inspector General, U.S. Department
of Defense..................................................... 111
8. GResponses to supplemental questions for the record submitted
to Michael L. Rhodes, Deputy Director, Administration and
Management, Director, Washington Headquarters Services, U.S.
Department of Defense.......................................... 116
9. GResponses to supplemental questions for the record submitted
to Gregory D. Kutz, Managing Director, Forensic Audits and
Special Investigations Unit, U.S. Department Accountability
Office......................................................... 120
TRANSIT BENEFITS: HOW SOME FEDERAL
EMPLOYEES ARE TAKING UNCLE SAM
FOR A RIDE
----------
TUESDAY, APRIL 24, 2007
U.S. Senate,
Permanent Subcommittee on Investigations,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:39 p.m., in
room 342, Dirksen Senate Office Building, Hon. Carl Levin,
Chairman of the Subcommittee, presiding.
Present: Senators Levin and Coleman.
Staff Present: Elise J. Bean, Staff Director and Chief
Counsel; Mary D. Robertson, Chief Clerk; Zackary I. Schram,
Counsel; Mark L. Greenblatt, Staff Director and Chief Counsel
to the Minority; Mark D. Nelson, Deputy Chief Counsel to the
Minority; Jay Jennings, Senior Investigator to the Minority;
Ruth Perez, Detailee, IRS; Clifford C. Stoddard, Jr., Counsel
to the Minority; Timothy R. Terry, Counsel to the Minority;
Emily T. Germain, Staff Assistant to the Minority; and Thomas
Richards (Senator Akaka).
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. The Subcommittee this afternoon looks at the
Federal Transit Benefit Program. This fairly little known
program, I would say, was established less than 10 years ago.
It was designed to encourage Federal employees to use public
transportation for the purposes of reducing road congestion,
air pollution, gasoline consumption, and our dependence on
foreign oil. Nationwide, the program encourages nearly 300,000
Federal employees to commute to work using mass transit
systems. More than half of these employees work in our Nation's
capitol.
The program is not free, however. Last year it cost about
$250 million and there is evidence that tens of millions of
those dollars in benefits are the subject of waste, fraud, or
abuse.
The program works like this. Each employee who wants
transit benefits submits an application to their agency and
certifies that they are a Federal employee, that they will use
the subsidy for their daily commute on public transportation to
and from work, that the amount of the benefit will not exceed
their commuting costs, and that they will not transfer the
benefit to anyone else. Their agency is supposed to verify the
information and then supply the transit subsidy. The maximum
benefit is $110 per month.
In the National Capital Region, for example, employees
receive vouchers called Metrocheks that can be used to purchase
farecards for local transit systems. Each Metrochek states that
it is non-transferable.
Last year Senator Coleman, who was then the Chairman of the
Subcommittee, asked the Government Accountability Office (GAO)
to investigate possible misuse of these transit benefits. The
GAO has found that some Federal employees were abusing the
program by selling their transit benefits on the Internet or
falsely claiming excess benefits, distributing benefits to
friends and family, or by receiving benefits while on extended
leave or after leaving the Federal workforce.
The GAO identified one employee at the Department of
Defense, for example, who sold his transit benefits on eBay
taking in $6,000 over several years. The GAO found another
individual who received $4,000 worth of transit benefits from
the Department of Commerce after she had left the agency. The
GAO has found other examples of Federal employees who gave
their transit benefits to friends or family, apparently unaware
that they are not allowed to transfer their benefits. The GAO
estimates overall the waste and fraud in the Federal Transit
Benefit Program amounts to tens of millions of dollars a year.
The program is marked by weak internal controls over the
distribution of transit benefits. For more than 4 years, agency
audits have been identifying this problem. A 2005 inspection of
the Transit Benefit Program by the Naval Audit Service, for
example, found ``important internal control weaknesses that
made the Department of the Navy vulnerable to increased waste,
fraud, and abuse and expenditure of dollars.''
A 2004 audit by the Inspector General of the National
Archives wrote that the agency ``lacked adequate internal
controls to validate that the employees were not abusing the
program.''
Six agency audits in 4 years have urged the establishment
of stronger controls but they have not been implemented. In
some cases, agencies are apparently confused as to their
responsibilities to prevent misuse of the benefits. Over 100
Federal agencies have entered into contracts with the
Department of Transportation to help administer the Transit
Benefit Program. In the National Capital Region, depending on
an agency's contract with the Department of Transportation, DOT
either distributes Metrocheks directly to qualified and
registered employees or provides an agency with Metrocheks for
further distribution to their employees.
Apparently some agencies thought that the Department of
Transportation was also responsible for conducting oversight of
the program to prevent abuse. The Department of Defense, for
example, which is the largest user of transit benefits and
contracts with the Department of Transportation, told the
Subcommittee that it thought the Department of Transportation
was overseeing the program as well as administering it.
DOT told the Subcommittee, however, that oversight was not
part of its contract with the DOD. Today we will hear from both
agencies and hopefully resolve that issue.
The problems identified today are ones that can and should
be promptly solved. Commonsense solutions to curb the waste,
fraud, and abuse include stronger internal controls and better
agency oversight. For instance, program administrators should
verify that beneficiaries are still on the agency payroll and
not simultaneously receiving parking permits. Another easy
improvement would be for the government to standardize across
agencies the application process and internal controls to use
to monitor the distribution of benefits.
One lead agency could also provide a website with
comprehensive information on the Federal Transit Benefit
Program. Education should be emphasized. Every employee
enrolled in the program should be clearly informed that the
transit benefits are not transferable and should not exceed the
cost--and may not exceed the cost of their daily commute.
Like many programs with a good purpose, steps need to be
taken to prevent waste and abuse in this program's operations.
If significant waste and abuse are allowed to continue then the
program itself is not sustainable.
I want to commend Senator Coleman for initiating this
investigation into the Federal Transit Benefit Program and for
working with the agencies involved to identify the problems and
possible solutions.
Senator Coleman.
OPENING STATEMENT OF SENATOR COLEMAN
Senator Coleman. Thank you, Mr. Chairman, and let me start
by thanking you for your active participation in our bipartisan
effort to combat waste, fraud, and abuse and assure that
American tax dollars are spent wisely.
As you have noted, today we turn our attention to the
Federal Transit Benefit Program. As you said, this is a program
with good purpose. It is designed to reduce air pollution and
traffic congestion by providing Federal employees with an
incentive to commute using mass transit rather than driving.
The Federal Government spends $250 million each year on the
program and the concept is simple. Eligible employees get
subsidies that can be used in their local transit systems to
offset commuting expenses. The subsidies are tax-free and do
not cost the employee a dime. In exchange the employees must
certify that they will use the cards only to commute by mass
transit and will not transfer or sell the cards to anyone else.
In addition, employees may not receive more in these tax-free
benefits than they actually spend commuting. This is, after
all, a subsidy rather than a handout.
What I have are some exhibits just to show the application
forms that employees must submit to request the benefits.\1\
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\1\ See Exhibit No. 2a, 2b, and 2c which appears in the Appendix on
page 99-101.
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It is a good thing I had my Lasik vision over here because
I think I can see that. [Laughter.]
But they do require in clear language, there is a line I
certify I am employed by the U.S. Department of Transportation.
I certify that I am eligible. I certify, etc., a series of
certifications here. That they are employees, that their
requested subsidy does not exceed their actual commuting
expenses, and that they will not give, sell, or transfer the
benefits to anyone else. Employees sign these certifications
under penalty of perjury.
Unfortunately, these explicit certifications are not enough
to prevent waste and abuse in the program. Our investigation,
along with the hard work of the Government Accountability
Office, has revealed rampant fraud, waste, and abuse in this
program, costing the American tax payer tens of millions of
dollars every year.
It is interesting, previous PSI investigations specifically
uncovered fraud amounting to the hundreds of millions, cases
where individuals owe millions back to the government. We have
done that with contractors who have not paid their Federal
taxes. We dealt with the Chairman's efforts on offshore tax
shelters, lots of dollars.
So when you look at something like this, the maximum
benefit of $110 a month, you may ask why are we looking at
this? There is an old adage that I heard once from a family in
retail, small business, that says watch the pennies and the
dollars will take care of themselves. In this case, we have not
been watching the pennies and millions of American tax dollars
are ultimately being lost.
The Chairman has already described some particularly
egregious cases of fraud and abuse, including Federal employees
who brazenly sell their transportation subsidies on the
Internet using sites like eBay. In just 3 days GAO contacted 20
individuals who were selling Metrocheks on eBay. Every single
one of them was a Federal employee.
A couple of other examples in addition to the ones the
Chairman has articulated, in one a relatively senior IRS
employee received transit benefits since February 2004. This
employee also, however, received parking benefits from the IRS
and drove to work. As a result, he sold his Metrocheks for
nearly $1,000 on eBay. When GAO investigated this seller, they
discovered that he had also stolen numerous computers and
computer parts from the IRS and sold them on eBay, as well. The
employee has been placed on administrative leave indefinitely
without pay.
Moreover, our investigation uncovered a seller who admitted
he was selling his transit benefits in order to pay for his
parking. His eBay auction e-mail is presented in an exhibit.\1\
When asked how he obtained the farecards, he said ``Oh, I got
the cards from the government.'' He then went one step further
and said, ``I sold the cards to pay for my parking.''
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\1\ See Exhibit No. 1 which appears in the Appendix on page 97.
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These Federal employees are taking Uncle Sam for a ride.
Unfortunately, the problems uncovered by GAO in our
investigations are not limited to these examples. GAO examined
only one very narrow category of fraud, recipients who obtained
the maximum benefits even though they are entitled to a lesser
amount. They found that 25 percent of all distributions in
Washington, DC alone were abusive.
This program is nationwide. It is not just in Washington.
But we focused here, in our investigation, on a very narrow
part of the entire program in one geographic locality.
In the Department of Defense, the rate of fraud and waste
related to this one narrow category reached 35 percent in just
the DC area. Thirty percent of distributions of both the
Department of Treasury and the Coast Guard were similarly
improper. Common sense dictates this pattern of fraud would
extend beyond the narrow scope of this investigation.
The obvious question is how did this happen? The answer is
disturbing. No one is minding the store. No governmental entity
actually oversees the program in terms of dealing with concerns
about waste, fraud, and abuse. This is worth repeating. Despite
the fact that this program disburses roughly $250 million each
year and nearly 300,000 Federal employees receive the benefits,
no agency is tasked with managing the program. No agency is
tasked with ensuring that the program runs efficiently. No
agency is tasked with preventing waste, fraud, and abuse.
The Department of Transportation administers the program
for 75 percent of Federal agencies but views its role as a mere
administrative conduit between the agencies and local transit
systems. Individual agencies, which are perhaps in the best
position to verify individual subsidies, do little to certify
whether its employees are eligible for the program or validate
the amount of benefits claimed. Inspectors General in most
agencies do nothing to audit these programs to uncover waste
and fraud. In fact, although more than 100 Federal entities
participate in this program, we could only identify six
Inspectors General that reviewed the program in any way.
It is not a case of someone being asleep at the switch. It
is a case of no one being at the switch at all. For far too
many Federal employees, this program is free money.
Americans expect their government to use their tax dollars
wisely. As a direct result of poor government oversight, tens
of millions of dollars of waste, fraud, and abuse went
undetected. While tens of millions of dollars in context of our
billion-dollar budgets may seem like a drop in the bucket, no
degree of government waste, fraud, and abuse is acceptable. We
have a solemn obligation to ensure that every single text
dollar is spent wisely.
I do not believe that the government is inherently
inefficient. To the contrary, I believe government can work
well. The silver lining today is that the fixes should be
simple. The Chairman himself talked about what we called common
sense solutions. It seems obvious. Before enrolling employees
in this program, agencies should check that the employees are,
in fact, employed there. We have some instance where folks were
receiving benefits and are not employed by the agency, in some
instances having left the agency for a number of years but
still receiving benefits each and every month. When an employee
leaves the agency or is on extended absence, the agencies that
administer the transit benefit should be notified. Agencies
should confirm that their employees are not receiving parking
passes and transit benefits at the same time. There should be
an effort to confirm employees' commuting expenses, such as
requiring applicants to present records to establish their
commuting expenses or using employees' addresses to estimate
reasonable commuting costs. Supervisors could be required to
approve applications.
Clearly, as the Chairman indicated, employees should be
better educated on the proper uses of transit benefits and the
penalties for violating the rules should be made clear.
Inspectors General should be encouraged to conduct audits of
the program to prevent waste and fraud. And most importantly,
there should be greater clarity on precisely which agency or
agencies are responsible for running this program.
All in all, these fixes seem relatively easy. I look
forward to the witnesses' testimony today to examine how we can
tighten this noble program to ensure that we are still
encouraging our employees to take mass transit on the one hand,
but at the same time preventing the waste of American tax
dollars on the other.
In closing, I should mention my sincere appreciation for
the hard work of GAO's Forensic Audit and Special
Investigations Unit which has consistently provided this
Subcommittee with invaluable assistance. I look forward to
hearing their testimony today.
Thank you, Mr. Chairman.
Senator Levin. Thank you so much, Senator Coleman.
Let me now welcome our first panel and would ask them to
stand. All the witnesses before this Subcommittee are sworn in,
as our witnesses know.
Our first panel is made up of Gregory Kutz, Managing
Director of the Forensic Audits and Special Investigations Unit
at the Government Accountability Office and Special Agent John
Ryan, an Assistant Director with the Forensic Audits and
Special Investigations Unit.
We welcome you back. You have been here before, both of
you, and you are welcome and we appreciate your good work, as
Senator Coleman has said.
Let me now administer the oath.
Do you swear that the testimony that you will give before
this Subcommittee will be the truth, the whole truth, and
nothing but the truth, so help you, God?
Mr. Kutz. I do.
Mr. Ryan. I do.
Senator Levin. We will be using a timing system today. We
would ask that your oral testimony be no more than 10 minutes.
Approximately a minute before the red light comes on, you will
see the light change from green to yellow, giving you an
opportunity to conclude your remarks. Your written testimony
will be printed in the record in its entirety.
And we again appreciate the work that you do, not just on
this project but on the other projects that the GAO is involved
with. We understand, Mr. Kutz, that you are going to be
presenting the GAO's testimony. We would ask you to proceed.
TESTIMONY OF GREGORY D. KUTZ,\1\ MANAGING DIRECTOR, FORENSIC
AUDITS AND SPECIAL INVESTIGATIONS UNIT, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE, ACCOMPANIED BY JOHN J. RYAN, ASSISTANT
DIRECTOR, FORENSIC AUDITS AND SPECIAL INVESTIGATIONS UNIT, U.S.
GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Kutz. Mr. Chairman and Senator Coleman, thank you for
the opportunity to discuss Federal transit benefits. Federal
agencies are required to provide employees with tax-free
transit passes to cover commuting expenses. More than 120,000
Federal employees in the National Capital Region claim over
$140 million of benefits annually.
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\1\ The prepared statement of Mr. Kutz and Mr. Ryan appears in the
Appendix on page 35.
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The bottom line of my testimony is that we found
substantial fraud and abuse by Federal employees here in the
National Capital Region.
My testimony has two parts. First, the results of our
investigation; and second, the magnitude of fraud and abuse.
First, our investigations resulted from cases that we
identified from three different sources. First, the Internet
auction site eBay. Second, Craigslist, a website that is very
popular that items are sold on. And third, we used data mining
to identify fraud and abuse.
I have in my hand a paper Metrochek, which is also shown on
the poster board. Hopefully you will not need your Lasik to see
the wording on this.
Metrocheks are issued with a warning that they are to be
used only by the individual that they are issued to and that
resale is illegal.
Transit passes are issued to Federal employees either in
the form of these paper Metrocheks or debit cards called
SmarTrip cards. SmarTrip cards now also carry warnings similar
to paper Metrocheks.
The next poster board shows an application from a fraud
case that we investigated which is similar to applications used
by many Federal agencies. Note that this employee certified
that she would use the Metrocheks to commute to work and would
not transfer them to anyone else. Also note the Title 18
Section 1001 warning for false, fictitious, or fraudulent
statements.
For eBay, we investigated 20 of 58 individuals selling
Metrocheks during several days in late 2006. We investigated
these 20 because we knew for certain that they were Federal
employees. These individuals worked for the Departments of
Commerce, Defense, Homeland Security, State, Transportation,
and Treasury. We found in all 20 eBay cases fraud and false
statements made by Federal employees. Examples include an IRS
IT specialist with free parking that drove to work; an attorney
at Transportation that accumulated excess benefits while on
maternity leave; a specialist at Transportation that admitted
to slugging or carpooling with another driver, thus incurring
no commuting expenses; and a husband and wife team from the
Department of Defense that sold $6,000 of Metrocheks on eBay.
Note that even though our investigators interviewed these two,
they continued to sell their benefits, moving now to
Craigslist.
We question the suitability of any of our case studies to
hold security clearances. You might say, Mr. Kutz, is this not
a bit harsh? My answer is no. My evidence is the IRS IT
specialist that I mentioned and Senator Coleman mentioned. In
addition to transit benefit fraud, he confessed to selling
stolen government property. Specifically, he sold several dozen
IRS computers on eBay between November 2004 and September of
2006.
We also executed three undercover buys from Federal workers
selling Metrocheks on Craigslist. These individuals worked at
Air Force, Commerce and State.
Based on our data mining we found additional transit
benefit fraud including individuals admitting that they
deliberately falsified their applications, several dozen
individuals receiving benefits that did not work for the
Federal Government, former Federal employees continuing to
receive benefits after leaving the government. For example, the
Commerce Department sent $65 a month to an individual that left
the government in 2001. They did not stop mailing her benefits
until she moved in 2006.
Another Commerce employee picking up $300 of transit
benefits on July 3, 2006 and then left the government on July
5, 2006.
Excess benefits were used for personal travel, sold to
government contractors, and given to friends and family.
This all leads up to my second point. How many dollars of
fraud and abuse are there in this program? Based on our
analysis of limited data, we believe that the number is at
least $17 million annually for seven large agencies. Note that
this is a conservative number as it excludes a substantial
portion of this program and many of the types of fraud that I
have just discussed.
In conclusion, I believe that the vast majority of Federal
employees are honest and do not abuse the Federal Transit
Benefit Program. However, our work has shown that thousands of
Federal workers here in the Washington, DC area have taken
advantage of the opportunity to commit fraud. How has this been
allowed to happen? Because of ineffective management oversight
and internal controls at Federal agencies.
Mr. Chairman, this ends my statement. Special Agent Ryan
and I look forward to your questions.
Senator Levin. Thank you very much, Mr. Kutz.
In your testimony at the top of page 20, you indicated that
you looked at one agency and looked at the benefits that were
claimed and found that $1 million of the transit benefits of
the individuals out of $4 million claimed by the 4,000
individuals were potentially fraudulent. That is a 25 percent
rate. I think that was at seven agencies. I misspoke.
Mr. Kutz. That is correct.
Senator Levin. Extrapolate that. If that were true for all
of the agencies here and for all of the employees here. Is that
where you get the $17 million figure?
Mr. Kutz. Yes. We extrapolated that for the seven agencies
which represent about $70 million of program. So that is about
half of the total program.
One other point is that the $140 million and the $250
million total for the program, that is the part that the
Department of Transportation has records on. Keep in mind the
program is bigger than that because there are other agencies
that administer their own programs and get their benefits
directly from WMATA or their transit programs across the
country.
Senator Levin. So the $250 million is not the total cost of
the Federal employee program?
Mr. Kutz. That is correct, it is bigger.
Senator Levin. What would be the estimate of that?
Mr. Kutz. We have no idea. We just do not have any other
records. So that is the part that the Department of
Transportation administers. So the $17 million is low end here.
If you extrapolate that, we are talking about $20 million or
$30 million or more.
Senator Levin. Out of the $250 million, but $250 million is
only part of the Federal program?
Mr. Kutz. Right.
Senator Levin. And that does not get into the private
program. The private sector has a program, as well.
Mr. Kutz. No, there are other Federal agencies that
administer their own programs outside of----
Senator Levin. I understand.
Mr. Kutz. Yes, the private sector also has programs.
Senator Levin. What I am saying is that the $250 million is
only part of the Federal program.
Mr. Kutz. That is correct.
Senator Levin. On top of the Federal program the private
employers have their own program.
Mr. Kutz. Yes. And we came across a lot of private sector
employees selling their benefits. We could have gone after
them, too, but that was not the scope of this job.
Senator Levin. That was not the scope. Do we know how much
the private sector benefit total cost is to the Treasury?
Mr. Kutz. No.
Senator Levin. And the cost to the Treasury is that the
benefit is not part of taxable income; is that correct?
Mr. Kutz. That is correct.
Senator Levin. So there is a cost to the Treasury, but you
do not know what it is?
Mr. Kutz. We do not know what percentage of companies
participate in the tax-free transit program.
Senator Levin. We asked the--let me see if I got this
right, because it just came in. I think we got a figure from
the President's 2008 budget and this, I think, was a CRS figure
which we just got.
If I am reading this right, the value--and this is our own
notes, so I am not reading something from CRS but this is what
CRS estimates. The value of Federal income tax revenues
foregone as a result of combined Federal and private Transit
Benefit Programs was estimated in the President's 2008 budget
analytical perspectives as $710 million.
Mr. Kutz. That is a lot of money.
Senator Levin. In 2009, $790 million; 2010, $880 million;
2011, $960 million; and 2012, $1.3 billion. So we are talking
here about a significant amount of money. If there is anything
close to a 25 percent rate of abuse, if that figure can be used
for the rest of the Federal program and for the private
program, and if the total cost of all of the programs is $710
million in fiscal year 2008, you are talking about perhaps $150
million to $200 million of waste in 2008.
Now that involves some estimates and extrapolations but
that is a very significant problem. We have either got to cure
this problem, it seems to me, or forget the program. The
question is what will it take to cure the problem? You have
given us some of the recommendations on how to cure the
problem.
But one way it seems to me, Senator Coleman and I both
listed a number of ways of making sure this program is used for
the purpose intended, would be to make it clear that it is
illegal. It does not say anywhere in a law directly, does it,
that this is illegal to transfer these benefits? Are we not
relying on an act which says that a false statement to the
Federal Government will subject you to a crime? But is there
anything in the law that specifically says it is illegal to
transfer this benefit?
Mr. Ryan. I think what we have to do, Senator, is on the
Metro transit it has that statement. What that statement
directly ties into is the application. The application
specifically states that they are not supposed to sell or
transfer. By selling or transferring, they basically have
violated Title 18, 1001.
Senator Levin. That is the false statement?
Mr. Ryan. That is the false statement. Also, the pure fact
that they sell them, they are converting that into a personal
use under title 18, 641.
Senator Levin. Both indirect.
Mr. Ryan. Yes, both indirect.
Senator Levin. Neither one violates a statement which says
it shall be a crime for anybody to take a card and to transfer
it to anybody else. That is not, in and of itself, a crime; is
that correct?
Mr. Ryan. I would believe that you are correct. I think it
is the certification that they are making on their application
which is Title 1001, filing of the false statement.
Senator Levin. One way or another, if this program is going
to continue, since there is obviously a lot of abuse here just
from your own estimate, it has got to be corrected. There is no
use having a program where anywhere close to 25 percent is
abuse. That is not a program we can sustain or should sustain.
So we have either got to--assuming that figure is anywhere
close, and admittedly that is based on estimates and so forth,
there has either got to be some commonsense way of ending the
abuse in this program or, as far as I am concerned, we ought to
forget the program.
What percentage of Federal employees use this program?
Mr. Kutz. We do not know.
Senator Levin. Give us an estimate. How many in the DC
area?
Mr. Kutz. There was 120,000 that used it, so I do not know
how many there are in the DC area. We can respond for the
record to that.
Senator Levin. I would appreciate that. Is it fair to say
that there is probably a greater percentage in the DC area that
use the program than in any other area? Would that be a safe
statement that there is probably a greater percentage of
Federal employees in the DC area that use this program than
would be true in any other area that you can think of?
Mr. Kutz. Certainly this is the biggest part of the
program, $140 million out of $250 million managed by the
Department of Transportation. So presumably, your conclusion
would be correct.
Senator Levin. Then the question becomes what percentage of
Federal employees in this area, compared to other areas, use
this program? And there it would seem to me that a larger
percentage of employees here, given the mass transit system we
have in this city, would be using this system than would be
true in any other city except perhaps New York or Chicago or
Los Angeles, someplace that has a comparable mass transit
system. I would think that common sense would tell us that.
Maybe you could give us some statistics for the record on
that.
Mr. Kutz. We can do that.
Senator Levin. The final statistic, which is also
intriguing to me, gets to the question of what percentage of
Federal employees would take mass transit anyway, without the
subsidy? Somewhere in my notes here is a figure--it is either
your estimate or somebody's estimate--that 10 percent of the
people who use this subsidy would be driving by themselves. Is
that a figure that has come across----
Mr. Kutz. We are not aware of that.
Senator Levin. You do not know where that figure comes
from? I am not sure where it comes from either. Maybe our
second panel has that figure.
But is there anyway of you estimating--it is a CRS
evaluation. So it is CRS evaluation of April 18, 2007. That is
fairly recent.
Mr. Kutz. Pretty fresh, yes.
Senator Levin. It says here that according to a survey done
as part of that evaluation--and I will get to that in a moment
if I can figure out what they are referring to--11 percent of
the participants in the program had switched to transit from
commuting in single occupancy vehicles.
Now we are getting down to a pretty small benefit ratio
here. My hunch is a fairly small percentage of Federal
employees use this.
According to this survey, which was done I think for the
Department of Transportation--and we will ask them in a
moment--only 11 percent of the participants had switched to
transit from commuting in a single occupancy vehicle.
At this point if we are going to be spending $1 billion to
help a fairly small percentage of Federal employees switch from
single occupancy vehicle to mass transit, and in any event a
fairly small percentage of Federal employees period, and if
there is a lot of abuse going on in this program it seems to me
there is a heavy burden on people who support this program to
either clean it up or I do not see how we sustain it. That is
my bottom line.
Senator Coleman.
Senator Coleman. Thank you, Mr. Chairman.
Gentlemen, some discussion--and by the way, in essence this
is free money. In other words, you have the pass, you do not
need it to cover any of your costs in the cases that you have
examined. You can convert it into cash simply by going on eBay
or Craigslist and people give you cash for it, or checks or
cash. I presume your investigation did not go this far but
would you venture what the odds are that any of the folks you
investigated are paying taxes or declaring? Did you look at
that?
Mr. Kutz. We did look at that, actually, and none of the
ones that would answer the question had declared it as taxable
income but it is taxable income.
Senator Coleman. One of the things in the GAO report you
had a chart or comparison of written transit benefit controls
on page 17. The chart shows the Departments of Transportation,
Commerce, Patent and Trademark Office, Treasury, Internal
Revenue, State, Defense, Homeland Security, and Coast Guard.
What you have is a series of checks as to what is required on
the application, on the verification, and the implementation.
It is fair to say that there is a great deal of
inconsistency among the agencies as to what they require so
that all of them, by the way, give the false statement warning.
I think that is the only one that I see--that and the
certification statement. Those are the two uniform
requirements.
But everything from home address to work address to
commuting cost breakdown to verification of commuting cost to
eligibility verified by approving official. That is not
uniform. Not each and every agency requires those particular
steps; is that correct?
Mr. Kutz. Yes.
Senator Coleman. In terms of implementation, applicants
checked against parking benefits record, only three of the nine
agencies that you looked at required that.
And then, in terms of removal from Transit Benefits Program
including an exit procedure--in other words, you are leaving
and if you have this benefit we are going to stop it--actually
only two of the nine, Department of Transportation and the
Internal Revenue Service, do that. Is that correct?
Mr. Kutz. Yes.
Senator Coleman. One of the obvious changes would be if
folks are leaving or go on extended leave, you know you are
giving this benefit. If you deal with that, you remove that--
what did you have, at least two instances of folks getting paid
for what, a period of about 4 years, even though they were no
longer employed by the agency.
Mr. Kutz. We had cases just like that, yes. The Commerce
Department example I mentioned in my opening statement.
Senator Coleman. Of these program controls would you list--
do you have a sense of what are the key ones that each and
every agency should implement in order to prevent waste, fraud,
and abuse in the program?
Mr. Kutz. I think both of you mentioned in your opening
statements just making sure that someone works at your agency,
that they have not left your agency, that they are not parking
in the basement or in the free parking lot. Those are just very
basic things and I do not think it would cost much. You also
have to consider cost/benefit in doing fraud prevention
controls but certainly there are some very easy things that
could be done.
I think your line of questioning also leads to another
potential solution, some sort of standardized government
policies and procedures that could be used so you would not see
these checkboxes here, such inconsistent application across the
government.
Senator Coleman. I think why we end up with these
inconsistencies is the lack of clarity of who is responsible
for dealing with the issue of fraud, dealing with the issue of
verification. Who is responsible? Is it specified anywhere as
to whether the Department of Transportation or another agency
is specifically responsible for verifying whether the employees
are using this program properly or not? Is there anywhere where
it identifies the agency that is responsible for oversight of
this program?
Mr. Kutz. I do not think so. And I think that the reality
is the Department of Transportation provides certain services
but internal controls is not one of them. And so the
responsibility falls upon the agencies whose budget is getting
hit by these charges.
Senator Coleman. Did you raise that question with agencies,
as to who was responsible?
Mr. Kutz. Yes, and I think that they would believe that
they are. There may be some confusion with the Departments of
Defense and Transportation.
Senator Coleman. When you say there may be some confusion,
what does that mean?
Mr. Ryan. When we started the work, we actually went to the
Department of Defense and spoke to them. And there was concern
on their part that they were paying a large fee to have the
Departmentof Transportation come in and distribute these
benefits. It was their impression that the Department of
Transportation was more involved in the overseeing of the
program than actually the Department of Defense. And that is an
issue that----
Senator Coleman. Transportation--you said Transportation
was more involved than----
Mr. Ryan. The Department of Defense thought the Department
of Transportation was more involved in the process and they
really were not.
Senator Coleman. Do you know if that has been clarified?
Mr. Ryan. I think that the second panel can handle that.
Senator Coleman. Which government agency then would be the
best to provide oversight? Is the agency where the employee's
work? Is that your testimony.
Mr. Kutz. I think OMB is the place that could help set
policy, possibly. But the actual agencies themselves are going
to have to implement, is our view.
Senator Coleman. Was the lack of implementation simply
because it is a small benefit per employee? I am trying to
understand how we get a point where if you look at a program,
that ultimately if you look at the sum total that it is
significant dollars according to the figures the Chairman
indicated, perhaps a billion-dollar program in the next 5
years. But were you able to get a sense of why there has not
been oversight?
Mr. Kutz. Not really. Some of the IGs, and some of them
coming up to the table here, have done oversight and reported
to their management that there are problems. So it is not
really surprising. We actually raised, in a predecessor program
to this, in 1993 certain issues about controls with respect to
a predecessor program that was optional. This program is
required, that program was optional.
I think you said it well, that there was no one at the
switch. It was not that people were asleep at the switch. There
was really no one looking at fraud, waste, and abuse in this
except us and IGs. So it is really a lack of management
oversight.
Senator Coleman. Is that a cost issue? You talked about
cost/benefit analysis. To do the oversight here, is this
costly? Perhaps more costly than the benefit?
Mr. Kutz. No, not at all. I think there is certainly some
cost to oversight but we are not talking about elaborate types
of controls here. We are talking about making sure the people
actually work at your agency. I do not see how that can be more
than a short exercise. But we had agencies, surprisingly, that
took months to tell us they could not figure out who the people
were that they were paying. That, to me, is not a good thing.
Senator Coleman. So again, we are looking for solutions
here. If OMB were to grab the bull by the horns here and say
for this program we are going to perhaps recommend or require
agencies to do A, B, C, and D, some sense of uniformity, that
would go a long way to providing what I am hearing, what I
believe to be after reviewing your report, pretty simple steps
that in the end could prevent at least $17 million a year in
waste and probably a lot more than that if one looks at all the
figures.
Mr. Kutz. Yes, I think that is part of the solution. If I
could just mention one more thing along Senator Levin's line of
questioning, is that also the people that are caught cheating
here, there has to be consequences for them or people are not
going to believe--first of all, there is the risk of detection.
If there is no risk of detection, people are going to try to
get away with it. But once people are actually detected,
something has to happen here, whether it is their security
clearances are revoked or they are suspended from work for a
month without pay, or are terminated. Something has to happen.
Now certainly the IRS case I mentioned, the stolen
computers, that individual has been indicted. Not necessarily
for what we found in the transit but for what we found on the
computers.
But it really is a matter of can we trust these people and
should there be severe consequences? And those should be
published, also. People should be told that people were caught
cheating in the program, there are certain consequences for
those people, and therefore people will maybe think twice about
doing this.
Senator Coleman. Are you aware of any government-wide
policy guideline that addresses the appropriate disciplinary
actions for employees inappropriately receiving or selling
transit benefits?
MR. Kutz. No, and this is something that we have seen in
other programs, too. All of the issues we had with travel
cards, purchase cards, and other things like that, oftentimes
people that are involved with small frauds, the U.S. attorneys
will not take the cases. Nothing ever happens to them.
Senator Coleman. Are you aware of any agency that perhaps
has a model of administrative disciplinary action for
inappropriately receiving or selling transit benefits?
Mr. Kutz. No.
Senator Coleman. So there is no model out there?
Mr. Kutz. Not that we are aware of.
Senator Coleman. There is not a single agency that says we
know this is a problem, we want to deal with the problem, we
are going to provide for certain penalties for those who are
found doing these kind of illegal things? No clear statement of
actions, consequences for this kind of action?
Mr. Kutz. Not that we are aware of. You may ask the second
panel if the Departments of Transportation or Defense have that
but we are not aware of anything that specific.
Senator Coleman. Thank you. Here is just a last thought. I
remember, I was a prosecutor for many years and I remember when
Mayor Giuliani was Mayor of New York. One of the things that he
did is early on he kind of jumped in and got folks to--forced
folks who were going through turnstiles and not paying, to pay.
And it was not a lot of money.
But by doing that it did kind of set a standard. And what I
am hearing from you is if we make it clear that this kind of
conduct is illegal, violates specific conditions that you have
agreed to, that if you make that clear and you act on it, then
down the road you can prevent a lot of other worse things from
happening. Is that a fair statement?
Mr. Kutz. Yes, we would agree with that.
Senator Coleman. And in addition, save the government a lot
of money.
Mr. Kutz. Yes.
Senator Coleman. Thank you. Thank you, Mr. Chairman.
Senator Levin. This Transit Benefit Program exists in the
private sector, as well; correct?
Mr. Kutz. Yes.
Senator Levin. But that was not part of your job?
Mr. Kutz. No, but it came up a lot. There were a lot of
cases but we intentionally tried to limit. So we really cannot
speak much to what happens outside the Federal Government.
Senator Levin. In the private sector program, the farecards
to the employee are deductible as an expense to the employer;
is that right?
Mr. Kutz. I believe it would be, yes.
Senator Levin. But it is not income to the employee?
Mr. Kutz. It depends on how their program is set up. If
they follow the Federal program that would be the case. I
believe that there are some that would do that. Whether they
all do it that way or not, we do not know.
Senator Levin. What other way is there?
Mr. Kutz. There could be a way where you could just use
tax-free dollars to buy them versus actually get them for free.
So there is a number of possible ways that you could do it and
I believe that those are multiple types of programs out there.
Senator Levin. If it is the way I describe, where the
employer hands out the benefit in the form of farecards--
Mr. Kutz. That would be deductible as an expense for the
employer, that is a legitimate expense, yes.
Senator Levin. But it is not income to the employee?
Mr. Kutz. Because I believe that the law that was passed
would apply to private sector people, also.
Senator Levin. Can you check with the IRS and ask them what
they know about this deduction? How common is it? What is the
estimated cost? Just try to give us a feel for that and as to
whether or not they feel that, in fact, there is abuse? Can
they tell anything about the employees' use of that benefit?
How many employees would use that benefit properly? How many
evade paying tax if they sell it? Is it illegal to sell a
privately dispensed benefit if they, for instance, include the
income in their tax return? Would the employee be violating any
law?
Mr. Kutz. We can research that and get back to your staff
on that, if you would like us to, yes.
Senator Levin. That would be great. Thank you.
Senator Coleman. If I could follow up on that because I was
trying to figure out--I went on eBay and looked at a bunch of
these actions. But it would appear that in order to make any
money on eBay, if you use this program the way, Mr. Kutz, you
describe with tax-free dollars and the employer has already
paid for it, the only benefit the non-government employee has
is the tax savings. So it would seem to be improbable that
somebody could sell $100 worth of Metro cards for $65 since
they do not have a $35 or even a $25 tax benefit. They would
have to be in a pretty high--it just does not work out.
So either all of the individuals or most on eBay are
Federal employees or there are employees then who have to do
this like the Federal program. Otherwise, there would be no
benefit for the individual if they paid dollars and the only
benefit they are getting is pre-tax, then they could not sell
it at a 25 percent or 35 percent discount. Is my math correct?
Mr. Kutz. Your math is correct because the highest
incremental tax rate is in the 30s. So if people are getting 70
cents, 75 cents on the dollar, it would make no sense to buy
them and then sell them.
Senator Coleman. Like the Chairman, I would be interested
to look on the private side to see what the scope of this is
and whether there are additional tax issues here.
Thank you, Mr. Chairman.
Senator Levin. Thank you so much. We will excuse our first
panel with our thanks and call our second panel.
Let me now welcome our second panel of witnesses. We have
with us Calvin Scovel, the Inspector General with the
Department of Transportation; Linda Washington, the Deputy
Assistant Secretary for Administration at the U.S. Department
of Transportation; Thomas Gimble, the Acting Inspector General
at the Department of Defense; and Michael Rhodes, the Deputy
Director of Administration and Management and Director of
Washington Headquarters Services at the Department of Defense.
As I mentioned for our first panel, Rule 6 of this
Subcommittee requires that all witnesses who testify before the
Subcommittee are required to be sworn. So at this time I would
ask all of you to please stand and raise your right hand.
Do you swear that the testimony you will give before this
Subcommittee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Scovel. I do.
Ms. Washington. I do.
Mr. Gimble. I do.
Mr. Rhodes. I do.
Senator Levin. The same timing system will be used here but
because we have a larger panel, we would ask you to limit your
oral testimony to no more than 5 minutes and we will have that
same yellow light come on that will give you some warning.
Ms. Washington, we are going to have you go first, followed
by Mr. Rhodes, then Mr. Scovel, and then Mr. Gimble. And then
we will turn to our questions. Ms. Washington.
TESTIMONY OF LINDA J. WASHINGTON,\1\ DEPUTY ASSISTANT SECRETARY
FOR ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION
Ms. Washington. Thank you, Mr. Chairman, Ranking Member
Coleman, and Members of the Subcommittee for the opportunity to
testify on the Department of Transportation's role in
implementing the Federal Transit Benefit Program. My statement
today will address both the Department's own participation in
the Transit Benefit Program and its role as the home agency for
TRANServe, the organizations used by 108 Federal entities
nationwide to distribute transit benefit fare media.
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\1\ The prepared statement of Ms. Washington with attachments
appears in the Appendix on page 63.
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The Transit Benefit Program is a proven means to help
increase the use of mass transit in line with DOT's strategic
objective of reducing congestion. Estimates indicate there are
163,000 participants in the National Capital Region accounting
for nearly half of the Federal workforce in the area. The
Transit Benefit Program's importance is particularly evident
when considering specific transportation alternatives in the
National Capital Region.
For example, the Virginia Railway Express (VRE), a growing
commuter railroad serving the National Capital Region, relies
on transit benefits for about 65 percent of its revenue, with
fiscal year 2006 average daily ridership of nearly 15,000
people. Federal employee's transit benefits used on the VRE
alone are responsible for removing a significant number of
motor vehicles off of the highly congested I-95 and I-66
corridors in Virginia.
TRANServe has evolved over the years to offer transit
benefit distribution services nationwide to organizations
throughout the Federal Government. It now distributes over $200
million in fare media annually, servicing over 230,000
participants nationwide. TRANServe enters into a customer
agreement with each of the Federal entities it services,
specifying that TRANServe will obtain and distribute transit
fare media while it is the customer agency's responsibility to
verify the eligibility of its employees to receive the transit
benefits.
Participating agencies are responsible for identifying
eligible employees, determining the amount of eligibility, and
overseeing the participation of their employees in the Transit
Benefit Program. TRANServe recognizes that the fare media it
distributes is actually cash equivalent and has an extensive
system of internal controls to provide oversight for inventory
and distribution management. Its internal controls have been
tested and strengthened through the years with the help of
independent auditors and security experts.
Recently TRANServe hired an internal controls officer
specifically responsible for monitoring the organization's
internal controls and sharing best practices with customer
agencies.
Each time a transit benefit recipient receives his or her
fair media, he or she must sign for it. On the form there is an
explanation of general requirements for continued participation
in the program and recipient responsibility.
In August 2006, TRANServe began distributing to DOT
recipients a plain language reminder highlighting requirements
that they must not be on a parking permit, the benefit is only
for commuting to and from work, the amount does not exceed
actual cost, and that it is a violation of law to provide false
or fraudulent information to obtain transit benefits or to
transfer or sell transit benefits.
Last year DOT initiated the first of what is now an annual
recertification requirement to maintain current accurate
information on transit benefit recipient commuting costs. In
addition, by July 2007 DOT will require its National Capital
Region employees using the Metro system to transition to Smart
Benefits which will reduce program cost and further improve
internal controls.
Mr. Chairman, we recognize that it is in the best interest
of the Federal Government, the taxpayer, and commuters, in
general, to make the Transit Benefit Program work as
effectively as possible. We have initially identified areas for
improvement including participant education and administrative
remedies. For example, TRANServe is developing an electronic
learning package that will be pilot tested with DOT employees.
It will reemphasize recipient responsibilities, identify
prohibited practices, and enumerate the potential penalties for
inappropriate actions. We are working to incorporate this
tutorial into DOT's online annual recertification process and
will be required to be completed each year before
recertification can occur.
We believe that the vast majority of Federal employees who
participate in the program do so honestly, responsibly, and
with integrity. However, we recognize that there may be
individuals who are intent on using the system for personal
gain at taxpayers' expense. DOT is prepared to deal with such
individuals. I have already met with our Office of Human
Resources and our Office of General Counsel to discuss
appropriate administrative penalties for proven instances of
misuse, and I have instructed them to act swiftly and
decisively.
In conclusion, the Federal Transit Benefit Program is an
important tool to help address congestion, air pollution, and
save fuel. DOT is prepared to deal with any of its employees
again who are misusing the program, and we stand ready to work
with your Subcommittee to take all appropriate measures within
our authority to make this program work as intended for the
American people.
I would be happy to answer any of your questions.
Senator Levin. Thank you so much. Mr. Rhodes, you are next.
TESTIMONY OF MICHAEL L. RHODES,\1\ DEPUTY DIRECTOR,
ADMINISTRATION AND MANAGEMENT, DIRECTOR, WASHINGTON
HEADQUARTERS SERVICES, U.S. DEPARTMENT OF DEFENSE
Mr. Rhodes. Mr. Chairman, Senator Coleman, thank you for
the opportunity to discuss transit benefits for Department of
Defense personnel in the National Capital Region.
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\1\ The prepared statement of Mr. Rhodes appears in the Appendix on
page 73.
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My organization, Washington Headquarters Services, provides
a broad range of administrative, infrastructure and support
services, and programs for defense personnel and organizations
in the National Capital Region.
Washington Headquarters Services has overall responsibility
for administering the Transit Benefit Program in the National
Capital Region. We execute this responsibility with and through
the multiple military components and organizations in the area.
We, and the approximately 40 designated points of contacts for
these organizations, all have specific roles and
responsibilities concerning implementation of the program.
The Department of Defense program in the National Capital
Region has 34,000 participants. They average approximately $83
per month in subsidy benefit per participant. In fiscal year
2006, the Department of Defense program was $35.9 million in
expenditures in the National Capital Region.
To effectively execute this program we established a
partnership agreement with the Department of Transportation.
They provide an efficient means of implementing important
administrative and logistical functions. Of note among these
are acquisition and distribution of the fare media, maintaining
the database of program participants, and providing detailed
reports for validation and reconciliation by our components and
organizations.
If I can just highlight a few steps in our process, when a
program application is completed, but before it is forwarded to
the Department of Transportation for inclusion in their program
database, we first search our Pentagon Force Protection Agency
parking roster to ensure the applicant does not have a parking
permit. As an ongoing safeguard, our Force Protection Agency
parking office also retains an up-to-date database from the
Department of Transportation which lists those who are
participating in the program. And this is referenced every time
someone applies for a parking permit to ensure they are not
also enrolled in the transit subsidy program.
Another aspect of the transit subsidy program that you both
mentioned in your opening comments is the self-certification.
And this, as you stated, is where the employee attests to their
eligibility, to the fact that they will only use the benefit
for specified and authorized purposes, and that the amount that
they received does not exceed their costs. In addition, it has
a warning statement that describes the punishment involved for
false or fraudulent certification.
I wanted to highlight that in addition to this
certification, each time an individual receives their transit
benefit on a quarterly basis they sign a roster that restates
their self-certification. Further, at the time they receive
their benefit, the individual participant must present their
Department of Defense identification to confirm their identity
and their employment status.
I would also highlight that the Department of
Transportation provides detailed reports of participants and
these are instrumental. These are instrumental in allowing
reconciliation by the military departments and Defense
components. We receive these reports monthly and the individual
components reconcile those with their employment and payroll
records to ensure currency. In addition, they go through other
steps to confirm appropriate program and eligibility issues and
then they use this reconciliation process to pay the cost of
their employees' participation.
Last, I would mention that in 2003 the Department of
Defense Inspector General conducted an audit and at that time
they did identify a need to strengthen our reconciliation
procedures for a few of the components. Subsequently, we worked
with those components to modify the report that they receive in
a manner that enhanced their ability to implement
reconciliations.
We look forward to the information from the GAO
investigation report to determine if there are weaknesses
applicable to our Department of Defense National Capital Region
program. We are always looking for sound and effective
improvements. This program is an important benefit to a
significant number of our personnel but at the same time we
want to ensure we are prudent stewards of the resources
entrusted to us.
I look forward to your questions.
Senator Levin. Thank you, Mr. Rhodes. Next will be Mr.
Scovel.
TESTIMONY OF HON. CALVIN L. SCOVEL, III,\1\ INSPECTOR GENERAL,
U.S. DEPARTMENT OF TRANSPORTATION
Mr. Scovel. Chairman Levin, Ranking Member Coleman, Members
of the Subcommittee, I am pleased to be here today to testify
on opportunities to improve internal controls over the Federal
Transit Benefit Program. Of foremost concern of all
participating agencies is to maintain the integrity of this
important program and to ensure that it remains free of
employee fraud and abuse.
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\1\ The prepared statement of Mr. Scovel appears in the Appendix on
page 80.
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The GAO's current work found weaknesses in Transit Benefit
Programs at several agencies that make the program susceptible
to employee abuse or fraud. Those findings underscore the need
to review and improve internal controls at all agencies
participating in the program. Today, the DOT Transit Office
facilitates the distribution of about $200 million in annual
benefits for 108 Federal organizations to provide transit
incentives to over 230,000 Federal employees nationwide.
An important point is that while DOT provides support for
other agencies, it does not manage their Transit Benefit
Programs. Each agency is responsible for ensuring the integrity
of its own program and establishing appropriate internal
controls. We see the role of the Inspectors General in the
Federal Transit Benefit Program as one of oversight to ensure
that internal controls are sufficient and that they are adhered
to.
Today, I would like to discuss two points regarding the
Federal Transit Benefit Program. First, the strengths and
weaknesses of DOT's internal controls over the program. DOT has
implemented internal controls designed to prevent potential
fraud or abuse within the program. For example, DOT has
established a series of initial controls to ensure that
employees are eligible to receive benefits. These include
completing an application that includes information about an
employee's city of residence, work location, mode of
transportation, and commuting costs. A significant weakness in
the current process is that DOT has no uniform process to check
the accuracy of information provided on an employee's transit
benefit application. Instead, DOT employee applications are
approved by a transit coordinator who is responsible for
approving benefits for an entire agency.
We think involving supervisors in the application process
could help prevent cases where employees misrepresent their
commuting methods or distance and obtain more transit benefits
than they are eligible to receive. Supervisors are in a better
position to know information about employees such as their home
location, commuting methods, and schedule. Our investigations
over the last several years have uncovered several cases of
this type of abuse and we are currently working several other
cases recently referred to us by GAO.
DOT also recently established a new internal control to
check that employees remain eligible for the amount of benefits
that they were originally authorized to receive. Last month DOT
began requiring DOT employees to recertify annually their
eligibility for transit benefits. Participants are required to
update and verify such items as their mode of transit and
monthly commuting costs.
However, other than employee's self-certification, no
procedure requires employees to update personal information for
changes when they occur. Changes such as commuting method or
work schedule affect the amount of benefits an employee is
eligible to receive. In our opinion, DOT should require
employees to update their information and recertify whenever
meaningful changes in their commuting methods or schedules
occur. Requiring an employee's supervisor to review and approve
this information, too, will help improve this aspect of the
process.
Second, opportunities to improve internal controls over the
program throughout the Federal Government. Our work at DOT has
identified areas where the Department, as well as other Federal
agencies, can proactively improve controls over their programs.
We see five specific actions that should be taken.
One, include the program in agencies' assessments of their
internal controls during the A-123 process. OMB Circular A-123
requires Federal managers to assess the adequacy of internal
controls of their programs to include the government purchase
and travel card programs. In DOT's case, the Department
includes controls over safeguarding paper fare media as part of
its A-123 process but it does not include an assessment of
other aspects of its Transit Benefit Program, such as the
application and distribution processes. Including an assessment
of the internal controls over the program in the A-123 process
could be an effective means for proactively preventing fraud or
abuse.
Two, require employees to recertify annually their
eligibility. As I just mentioned, DOT recently initiated an
online process to require its employees in the Washington area
to update and recertify their enrollment information annually.
All Federal agencies that have not already done so should
implement a similar recertification requirement to ensure the
accuracy of program data and to clearly communicate the
responsibilities of program participants.
Mr. Chairman, I am nearly out of time. If I may ask for
another minute to 2 minutes, I will wrap up.
Senator Levin. Sure thing.
Mr. Scovel. Thank you.
Three, review and apply appropriate lessons learned in
other government programs. For example, in 2002 OMB made
significant government-wide improvements to both the government
purchase card program and the travel card program. Those
programs are also susceptible to fraud and abuse by employees
and OMB directed agencies to evaluate their internal controls
and develop remedial action plans. In both cases, well
developed training programs were key to reducing the risk of
fraud and abuse.
For example, all Federal employees must complete a training
course before they are authorized to use government purchase
cards. We think similar trainings should be established for the
Transit Benefit Program.
Four, develop and enforce consistent administrative
policies. While potential criminal and civil penalties could
result from transit benefit fraud, this type of fraud is
unlikely to be prosecuted. For this reason, it is important
that management pursue appropriate disciplinary action.
However, there are no required or recommended disciplinary
actions for transit benefit fraud. The development of uniform
recommended penalties including suspension or debarment from
the program and consistent enforcement of those penalties will
be important steps to prevent this type of abuse.
Five, mandate the use of electronic fare media or SmarTrip
cards. These are rechargeable fare cards that have benefit
amounts electronically loaded each month. SmarTrip cards reduce
the potential for fraud and abuse because it is more difficult
to sell or transfer benefits compared to paper fare media.
Let me close, Mr. Chairman, by noting that each of these
actions do not require mandates from OMB or legislation and
could be taken by agencies today to improve internal controls
over their programs.
That concludes my statement, Mr. Chairman, and I would be
happy to address any questions you or other Members of the
Subcommittee may have.
Senator Levin. Thanks so much. Mr. Gimble.
TESTIMONY OF THOMAS F. GIMBLE,\1\ ACTING INSPECTOR GENERAL,
U.S. DEPARTMENT OF DEFENSE
Mr. Gimble. Mr. Chairman, Ranking Member Coleman, thank you
for the opportunity to appear before the Subcommittee today to
discuss the Department of Defense (DOD) National Capital Region
Transit Subsidy Program. The DOD Transit Subsidy Program was
established in fiscal year 2000 and paid out about $35.9
million in benefits in fiscal year 2006. The work performed by
the DOD Inspector General (IG) and the Government
Accountability Office (GAO) indicates that the program does not
yet have the internal controls needed to limit the
susceptibility of transit benefits to fraud, waste, and abuse.
My testimony this afternoon will describe the work my office is
performing to assess the effectiveness of internal controls for
the program.
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\1\ The prepared statement of Mr. Gimble appears in the Appendix on
page 90.
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The DOD Inspector General became aware of the potential
abuse of the DOD program through the complaints received
through our hotline and these allegations involved employees
transferring Metrocheks to friends or selling them through the
Internet or to coworkers.
In response to a hotline complaint received in January
2003, we conducted an audit on allegations concerning controls
over DOD transit subsidies within the National Capital Region.
The final report was issued on October 14, 2003. We
substantiated allegations that there was no verification of
applicants' employment and that DOD employees could be selling
or giving away their transit subsidies.
The audit partially substantiated the allegations that
controls had not been established to ensure employees do not
receive transit subsidies while receiving subsidized parking
and that the billing information received from the Department
of Transportation (DOT) did not include sufficient detail to
facilitate the reconciliation of the quarterly DOD billings.
We recommended that the military departments and the
Defense Logistics Agency (DLA) develop procedures to require
the reconciliation of all transit subsidy billings received
from DOT and that DLA develop a policy to check transit subsidy
applications against its parking permit roster.
In early 2005, during the regular meetings between GAO and
the DOD IG, we discussed allegations of abuses in the Transit
Benefit Program that included the sale of Metrocheks on eBay.
In February of 2006, we announced a data mining review to
research this issue for DOD within the National Capital Region.
We performed tests to determine whether DOD program enrollment
data and disbursement data substantiated the individual's
eligibility for the Metrochek program and that the amount of
the benefit was received by the individual. We identified the
following potential issues: That employees were receiving
Metrocheks while using subsidized parking; over reliance on the
honor system where employees self-certify and submit the
program application without review; individuals were receiving
benefits in excess of the monthly costs; individuals outside
the National Capital Region were receiving the benefits; and
there was insufficient data to validate the benefits for over
28 percent of the active participants.
We continue to coordinate and share information with GAO,
which has been conducting an investigation into the Transit
Benefit Programs in the National Capital Region.
Based on the data mining review we conducted and
investigative work by GAO, we announced an audit in November
2006 of the internal controls of the DOD Transit Subsidy
Program within the National Capital Region. Specifically, we
are reviewing internal control activities over the transit
subsidy application process, including the initial enrollment,
status changes, and de-enrollment from the program, management
of the enrollment database and retention of the supporting
documentation to comply with audit requirements.
We have also performed analysis to test the accuracy and
completeness of the data elements within the enrollment
database, including the calculation of the allowable monthly
transit subsidy benefit by the DOD participants. Furthermoe, we
have reviewed the transit subsidy policies and procedures. We
plan to issue our report in July 2007.
Investigative work by GAO identified potential abuse of the
agency Transit Subsidy Programs within the National Capital
Region, including the DOD Transit Subsidy Program. We have
recently met with the GAO investors and anticipate receiving
information on specific abuses they have identified. The cases
will be referred to the appropriate investigative agency within
DOD for further investigation. Additionally, we expect to make
referrals to our Defense Criminal Investigative Service (DCIS)
as a result of our audit work.
The Transit Benefit Program is a valuable program which, if
properly administered, can help alleviate traffic congestion
and reduce automobile emissions. However, the continuing abuse
of the use of the transit benefits make clear the need for
additional controls to help prevent fraud, waste, and abuse. We
believe that the work that we are performing in our audit will
assist the Department in identifying areas needing further
improvement.
That concludes my statement.
Senator Levin. Thank you, Mr. Gimble.
You made reference to a meeting that you are going to be
having with the GAO coming up to review the problems and the
need for additional safeguards?
Mr. Gimble. Yes, sir. What we also are doing is getting a
referral. They have identified, I think, eight or so
individuals, DOD employees, that have potential abuses.
Senator Levin. In terms of the process used in the
Department, you will be meeting with the GAO. Can you give us a
report after that meeting as to what steps you will be taking?
Mr. Gimble. We can do that.
Senator Levin. Ms. Washington, there was a Department of
Defense \1\ report that I made reference to before that the
number of Federal employees participating in the Transit
Benefit Program rose from 53,000 prior to an Executive Order,
which I believe was 2003, to 114,000 within a year after the
order was being signed.
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\1\ DOD 16 Note: Should be the Department of Transportation.
---------------------------------------------------------------------------
Do you know approximately how many Federal employees now
use Metro?
Ms. Washington. Throughout the Nation?
Senator Levin. No, Metro in Washington.
Ms. Washington. About 106,000.
Senator Levin. That would be less than it was a couple of
years ago. OK, say 106,000.
Then it said, according to the survey done as part of the
DOT evaluation, 11 percent of the participants had switched to
transit from commuting in a single occupancy vehicle. What
percent of that population was already taking Metro?
Ms. Washington. I am not sure, sir. I do not know the
answer to that question. I am familiar that there was a study
done that mentioned 11 percent but I do not have the
information on that.
Senator Levin. Do you know whether that study identifies
what percentage of the Federal employees, which was
approximately 114,000 at the time of the survey, what
percentage of them were taking Metro anyway?
Ms. Washington. No, I do not.
Senator Levin. So we do not know really what affect this
subsidy has had. We can tell what percentage of employees are
riding Metro but we do not know what percentage of employees
would have ridden Metro anyway?
Ms. Washington. That is correct.
Senator Levin. That seems to me to be one of the real
problems with this program, it is hard to identify what
percentage of employees were moved or attracted or given an
incentive to leave either a single occupant vehicle or a
multiple occupant vehicle or a carpool or whatever, moved to
Metro as a result of this subsidy.
If only 10 or 15 percent of the Federal employees who use
Metro are using it because of an incentive, and 80 percent or
more would have been using Metro anyway, you do not need the
incentive for 80 percent of the employees. And then you have
got to compare that with what Federal employees may or may not
get in other parts of the country who do not have Metro or do
not have the access to a mass transit system. And so there is
an equity issue in terms of Federal employees, too, that I
believe has to be placed on these scales.
Do you have any idea in the Department of Defense what
those numbers might be? The number of people that use Metro at
the Department of Defense or other mass transit that would
otherwise be in a single passenger vehicle or in a multiple
passenger vehicle?
Mr. Rhodes. No, Senator, I do not.
Senator Levin. Is there a way practically to find out
without surveying the whole world?
Mr. Rhodes. Short of surveying, I do not know, sir.
Senator Levin. I think that you made reference, Mr. Gimble,
to an audit by the Department of Defense Inspector General back
in 2003 which said that ``controls over the transit subsidies
program within the Army, Navy, Air Force, and the Defense
Logistics Agency needed improvement'' as the IG said. And then
you quoted the following line ``that our review substantiated
the allegations that there is no verification of an applicant's
employment and that DOD employees could be selling or giving
away their transit subsidies.''
What steps have been taken since that audit to avoid that,
to improve internal controls?
Mr. Gimble. Several of the Defense components have
implemented reconciliation procedures which would be a big step
in accomplishing that. The idea of stopping people from selling
or moving the card--giving their cards away. That is a little
tougher to deal with.
What we did there is initiate a data mining project, but
you have to weigh the benefit that you get.
Senator Levin. I am not following you. You have to weigh
the benefit, what did you say after that?
Mr. Gimble. You have to weigh the benefits, the costs
versus the benefits.
Senator Levin. I got that part, but what came after that I
could not follow.
Mr. Gimble. Abuse of transit benefits is a fairly low
occurrence. Through our data mining we are able to capture some
of these occurances. Also, GAO has identified 8 or 10 people
that go out on eBay. But in DOD we have not had a widespread
occurrence of that. So either that control is there as one
that--if you do not identify it by data mining, it is really
kind of hit or miss, is the point.
Senator Levin. Are you saying that basically the benefits
here may not justify the cost of doing that kind of a survey?
Is that what you are saying?
Mr. Gimble. That, but there is a benefit of doing the
reconciliations and the verifications of employment and I think
the comparison to the subsidized parking. Those are fairly
cheap ways to do things. And I think these are some of the
better internal controls that you can have.
Senator Levin. That has not yet been done?
Mr. Gimble. Many DOD organizations are doing those. It is
my understanding the Army has still not formally issued their
policy but it has issued draft guidance which is being
coordinated with affected Army organizations. But everybody
else has issued reconciliation procedures. And also, I think
Mr. Rhodes alluded to the parking lot scans.
Senator Levin. Back to you, Ms. Washington. You said that
there is proven value to this program and you said there are
163,000 participants, nearly half the work force. But you are
not able to say what percentage of those participants would
have been on mass transit anyway?
Ms. Washington. That is correct.
Senator Levin. Then how do you say there is great proven
value to the program when you have no way of assessing how many
people were motivated by the program to do something and may
have done it the same way anyway?
Ms. Washington. Well, we are looking at some of the
statistics, as I mentioned, on VRE. You are absolutely right,
Senator, we cannot empirically say that they may have taken VRE
anyway. But we are looking at 65 percent of the riders on VRE
or 15,000 people take VRE from outlying areas in Virginia. I
would venture to say that WMATA probably has some similar
figures, as well.
But you are absolutely right, we cannot say empirically
that it has been proven that it is increased. What it has done
is taken--into account the earlier study that the Texas
Department of Transportation, which did say that there was less
congestion on the roads, that there was less fuel emissions and
things like that. But you are absolutely right, we cannot
empirically say that it has taken more people off of the road.
Senator Levin. That study in Texas, is that a recent study?
Ms. Washington. It was actually conducted in 2003.
Senator Levin. Could you furnish that? I do not know if we
have that study or not.
Ms. Washington. Absolutely.
Senator Levin. That is one of the intriguing aspects of
this matter, it seems to me, is it is kind of hard to state
with any confidence as to how many people would be riding Metro
or some other form of mass transit who otherwise would not be.
We know there are a large number of Metro customers who are
using these tickets, these cards. VRE apparently has a whole
lot of folks that are riding VRE who use these cards. But we
have no idea how many of those folks would be using those
cards, would be paying for it themselves.
And that raises the equity issue, it seems to me, because
if there are a lot of people who are getting their
transportation paid for by the government, who would have paid
for that mass transit from their own pay, where you have other
folks in other parts of the country without mass transit who
work for the Federal Government who do not have that benefit,
it seems to me there is an inequity there. And so there are a
lot of intriguing aspects to this program in addition to the
question of waste, fraud, and abuse, the misuse of the cards by
sale or by transfer to other people.
We will leave my role there and turn this over to Senator
Coleman, again with our thanks.
Senator Coleman. Thank you, Mr. Chairman.
Let me first get to the question of or the issue of who is
responsible for checking into waste, fraud, and abuse. Ms.
Washington, what is the Department of Transportation
perspective? Who has the responsibility in individual agencies
for determining whether, in fact, employees are complying with
the rules for this program?
Ms. Washington. It is the individual agency. We actually
order and disburse the fare media, but the individual agencies
are to certify and account for the use of the fare media within
their organizations.
Senator Coleman [presiding]. You do the program for 75
percent of the Federal agencies? Do you receive a user fee from
the agencies?
Ms. Washington. Yes, we do.
Senator Coleman. What does that user fee cover?
Ms. Washington. I will mention what Mr. Rhodes said
earlier. We input all of the applications into a database. We
provide reports for them to help them administer their program.
We also negotiate with fare media organizations so that we can
buy in bulk and get discounts for the fare media. So we provide
reports to them, we administer it, we go out and we set up the
programs within the agencies. So it is administrative
oversight.
Senator Coleman. Were you aware of any agencies that
thought that DOT had the responsibility for oversight and did
not understand their own role in managing the program? Has that
come to your attention?
Ms. Washington. It has come to my attention. However, on
the statements that we give to the agencies each month, and
also on the memorandum of understanding that we have with every
agency, it clearly states who is responsible for what.
Senator Coleman. So when it comes to your understanding, do
you simply refer them to that statement? What do you do?
Ms. Washington. Yes.
Senator Coleman. Mr. Rhodes from the Department of Defense,
at least it appeared that GAO, in their investigation, had the
belief that Defense thought it was somebody else's
responsibility. Can you give me your understanding of who has
responsibility for oversight regarding waste, fraud, and abuse
in this program?
Mr. Rhodes. Sir, my organization has responsibility for
implementation, which means, I think we have responsibility for
that as well. We partner tightly with the Department of
Transportation in that those reconciliations--the reports that
they provide to do the reconciliation, as Mr. Gimble referred
to, is a critical piece of the process because those are
verified every month by each of the military organizations and
components to validate that those employees that drew the
benefit are actually on their rolls and somebody that they are
paying. Therefore, they reimburse for those costs.
I believe there was some confusion at one of the exit
briefings and some of the discussion on who has what role.
From the Department of Defense there was about 5 percent of
our costs that went to the administration and distribution fees
that covered the services provided by the Department of
Transportation. They allow for distribution of the fare media
at 30 different locations around the area. Again, they maintain
the databases for us. They provide reports that are customized
and modified to facilitate some of the reconciliation process
that we have there. They also provide a daily download of DOD
enrollment data to our Pentagon Force Protection Agency so they
can continually cross check against the parking records,
whenever anybody is applying for the subsidy, which is another
one of the safeguards in the process.
Senator Coleman. Ms. Washington one of the concerns that I
have as I look at the GAO report, do you have a copy? Could
someone give a copy of the report, page 17, comparison of
written transit benefit program controls.
Ms. Washington. Yes, sir, I have it here.
Senator Coleman. This document reflects a lack of
consistency across the agencies in terms of application
requirements verification implementation. Should anyone have
the responsibility for ensuring that there is greater
consistency in the areas of application requirements
verification implementation?
Ms. Washington. I definitely think that there should be
some consistency. For example, in the Department of
Transportation there is more that we can do to get additional
information. Again, each department should determine what they
need to certify their program. But I agree, there should be
consistency.
Senator Coleman. The concern, though is individually within
the departments, as one looks at the state of things as they
are today, there is a great deal of discrepancy between what is
and what is not required. How do we deal with that?
Ms. Washington. Well, I think that once we get the
recommendations and we have heard the recommendations from the
IGs and GAO, then we will work together to have some
consistency across the board.
Senator Coleman. I am going to suggest, Ms. Washington,
since you administer the program for 75 percent of the Federal
agencies, since they may or may not have IG audits, apparently
just six of the agencies have, that Transportation take the
lead in communicating with agencies the list of best practices.
Ms. Washington. We certainly can do that now that we have
our internal controls officer, we can certainly do that.
Senator Coleman. Clearly one of them, among the egregious
findings are agencies sending payments to folks who have not
worked for the agencies for 4 or 5 years. There should be a
pretty obvious one that there should be some kind of system of
removal from Transit Benefits Program, including exit
interviews.
Ms. Washington. Correct.
Senator Coleman. I would ask that you come back to this
Subcommittee with some indication of some kind of uniformity
and directions provided to the other agencies.
Ms. Washington. OK.
Senator Coleman. Mr. Scovel, Mr. Gimble, I appreciate the
very specific recommendations, Mr. Scovel in particular, that
you have laid out. Training programs, appropriate disciplinary
actions. I am looking for is there a best practice? Is there
clearly, as you have indicated, the U.S. Attorneys are not
going to prosecute these cases. Individually, they are not
rising to the level of fraud. But collectively, they are very
significant fraud. But individually they are not going to do
that.
What type of disciplinary actions would be appropriate? Do
you have any recommendation or does any member of the panel
have any recommendations?
Has any agency put in place a disciplinary system that
effectively deals with folks who violate the terms and
conditions of the use and sale of their Metrocheks or Smart
cards?
Mr. Scovel. Thank you, Senator Coleman. If I can take first
crack at your question, in preparing for today's hearing my
staff conducted a quick survey around our Department as well as
a few other departments in the Federal Government. We have
found that within the Department of Transportation there is no
uniform table of penalties or system of punishments to take
into account DOT employees who may have violated the Federal
Transit Benefit Subsidy program.
It is one of our recommendations that departments give
serious thought to that, realizing of course that discussion
belongs with the manager and supervisor and, in our Department,
the administrator of each operating administration. In past
cases that my office has worked, we have seen penalties ranging
the gamut from admonishment and counseling, on the one hand,
all the way to termination of employment, depending upon the
facts of the offense and, frankly, the character of the
offender as well. We think those are useful benchmarks.
We think that something that has been lacking, however, is
virtually an automatic consideration of suspension or debarment
from the transit subsidy program. We think that should be step
one, in fact. But both in our Department and elsewhere we have
found that that has not been the case.
Senator Coleman. Ms. Washington, I am going to kind of put
it back on your shoulders. And in part, and I do understand,
the agreement that you have with the agencies is very clear. It
is the responsibility of the customer to verify eligibility of
the recipients. I think it would be helpful, though, to the
agencies to have a little direction, again not to provide exact
specificity of penalties but to indicate that there needs to be
appropriate action.
I would think the comments of the Inspector General here
that, at a minimum, if somebody is violating their agreement
that they face some sanction regarding participation in the
program for at least a period of time, something to say this is
wrong.
The case the GAO highlighted was that folks that you
investigated, and they were still back on eBay selling the
Metrocheks even after they understood that they were subject to
investigation. I think you have got to get people's attention.
Ms. Washington. We agree. At the Department of
Transportation, and in fact, we have already initiated meetings
with our departmental director of human resources and our
general counsel to put in place some guidelines. So we will
absolutely do that.
Senator Coleman. Thank you.
Mr. Gimble, let me get a little better understanding from
the Department of Defense. Does the Department of Defense have
a uniform policy or do the various branches have their own?
Does the Navy policy on this differ from the Air Force, differ
from the Army or any other service branch?
Mr. Gimble. You are talking about the reconciliation
process?
Senator Coleman. Yes.
Mr. Gimble. As I understand it, each one develops their own
but there are some basic things that they should have in there.
Essentially, you would have the controls over the enrollment
application process. You would verify the eligibility of the
employee for the benefits. And it should have a process and
method for reviewing the applications. What we are looking at
now, is once you are in the program how often do you go back?
If you have a change, is that properly handled, for example, if
employees drop out? And that gets back to your point about the
folks that have been gone for 4 years and still drawing the
Metrocheks.
So these reconciliations we think will accomplish most of
that.
I would just tell you, back to your other question, we have
a fairly low occurrence of referrals to date in the Department.
But to provide a couple of examples: We had one person that got
caught up in this and did not receive a promotion. The other
paid back all of the monies and got a letter of counseling.
Predating those audits though, when the program first stood
up, we in DOD IG discovered one of our junior people who was
double collecting for a couple or three quarters, which cost
him his job. We removed him from service.
Senator Coleman. I would hope, again, that we have some
clarity as to what is allowed and what is not allowed, and
clearly it is not allowed to sell these, to transfer these. And
that there is clarity in terms of action will be taken and some
kind of disciplinary action. Again, it may depend on the
nature, may depend on a whole range of things regarding the
individual. But I think it has to be clear that this is not
allowed. This is not legal and there are consequences.
Otherwise, I think the behavior continues.
In regard to the Department of Defense, I am just trying to
understand the system. In the GAO review, they noted that the
Department of Defense does not verify commuting cost by
approving official, it does not review or does not have
benefits adjusted due to travel, leave, or change of address.
And it does not have a removal of benefits program, including
exit interviews. Are those things that they do not do, are
those across the board or are those simply--again, because you
have a decentralized program; is that correct?
Mr. Gimble. That is correct. We are specifically looking at
those issues in the audit that we are going to be issuing this
summer. We are going to deal with the application process to
include the initial enrollment, status changes and de-
enrollment, also the quality of the data in the database and
the retention of the documentation. So we think if we address
those issues along with the reconciliation procedures that are
already in place, we will start having pretty good control over
the DOD program.
Now I need to say this: We believe that it is the
administrator's responsibility to establish those internal
controls. And we believe that it is our IG responsibility in
the waste, fraud, and abuse area to periodically test. So what
we would plan to do is periodically test the controls of the
program.
Senator Coleman. I would hope, though, that based on your
review that you can provide some direction to the
administrators so they have a sense of how best to ensure that
this does not occur in the future.
Mr. Gimble. Based on our audit done in 2003, we got an
excellent response to our recommendations. All our
recommendations were concurred with and all except one have
been completed.
We would expect this new audit to go a little further and
establish some additional controls.
Senator Coleman. Just to clarify again the state of things,
you state DOD verifies active employment status and whether the
employee has parking; is that correct?
Mr. Gimble. DOD?
Senator Coleman. Yes.
Mr. Gimble. We are saying that we are working on the
verification.
Mr. Rhodes. Senator, if I might, for the Department of
Defense for our program in the National Capital Region, the
individual participants pick up their fare media on a quarterly
basis. At that quarterly basis when they pick up their fare
media, they have to identify a DOD identification to the--
though it is the Department of Transportation that is
facilitating the process for us, our requirement that we lay
out for them is they have to identify the personal individual
identification as they sign for it.
Additionally, when they sign for it on a quarterly basis,
there is a reattestation of that certification. So the self-
certification happens when they apply and then it also happens
each quarter when they pick up their benefits.
Additionally, a third piece of that on the reconciliation
that does happen at each of the military organizations and
components, they do that on a monthly basis. That is a roster
of all the people who were currently enrolled. They compare
that against their personnel and employment databases to ensure
that they are all active valid individuals. So if somebody were
to have departed but for some reason we did not collect their
identification badge, within that month we would also get the
reconciliation process in there.
Senator Coleman. Is anybody aware of anyone ever returning
excess benefits upon departure?
Mr. Rhodes. Yes, Senator. That has occurred.
Ms. Washington. Yes.
Senator Tester. Tell me about that, how that works?
Ms. Washington. In our system, it is part of our exit
process and employees have to go through the Transit Benefit
Office; they do indeed turn in their benefits.
Senator Coleman. So the key though is, particularly in
Transportation, you have that as part of your exit process?
Ms. Washington. That is correct.
Senator Coleman. And agencies that do not, I do not think
the Defense has it as part of their exit process. Mr. Rhodes,
are you aware of folks turning back any benefits?
Mr. Rhodes. Yes, I am, Senator. And in fact, each of the--
again, we have 70 military components and organizations that is
subdivided down to we use 40 points of contact in those
organizations. But in that element we do have requirements that
they include that in their out-processing process. So I am not
sure of what criteria exactly got you a check on the box. We
may not have specifically formed it in the manner that gets a
check in the box on the GAO report, but we do have that as a
requirement in our processes.
Senator Coleman. The GAO indicated, at least the review in
the DOT program, they estimated that 35 percent of DOD
employees are improperly receiving the maximum amount of
transit benefits. Does that number surprise you, Mr. Gimble?
Mr. Gimble. It does, frankly, a little bit. But our data
mining effort that we ran on the 2005 records indicated about
28 percent of the data was not verifiable at that point in
time. So I really do not have an opinion as to whether that is
high or low.
Mr. Rhodes. Senator, at the last check, about 51 percent of
our enrollees have self-certified for the maximum benefit. I am
not sure if the 35 percent is of that 51 percent.
Senator Coleman. I think of those receiving the maximum.
The investigation for GAO only focused on those receiving
maximum benefits. It did not include any others. So this whole
GAO report really focuses on just a small slice of the universe
of folks involved in the program.
Mr. Rhodes. I know that we have about 51 percent that are
certified for the max benefit, that they have self-certified
and identified that amount. So if it is 35 percent of that
number, that seems high. It will be interesting to see the
information to try to see what we can do to modify.
Senator Coleman. The Subcommittee found at least one of the
Federal employee unions actually offered to be helpful and work
on this issue. They see it as a good program and there is
concern about whether the program continues. What role,
anybody, either Ms. Washington or Mr. Rhodes, role for the
unions in helping to avoid some of the problems that the GAO
found in this program?
Ms. Washington. We will certainly consider that. We had not
considered that before. We certainly will consider that.
Senator Coleman. I think it would be, again, worth having
the discussion.
I think I will conclude my questioning. I do believe again
that Transportation can play a more active role in educating
the other agencies about their responsibilities and providing
them with some understanding of the types of things that should
be done in application requirement verification and
implementation, to have perhaps a better system of uniform and
consistent penalties, again providing some leeway, obviously.
But there should be some bottom line in all of this.
I think all of those would help prevent some of the abuse
that the GAO report found. So I appreciate the efforts that
have been already accomplished. I think there is more work to
be done. I would expect the agencies to file these materials
with the Subcommittee and we will go from there. But I want to
thank all of the witnesses for their testimony today.
With that, this hearing is now adjourned.
[Whereupon, at 4:18 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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