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Oversight agency immediately launched an investigation when Metra improprieties surfaced
The Regional Transportation Authority (RTA) confirmed today that it has been actively engaged in reviewing the allegations of financial impropriety at Metra since they were first reported last month. To date, the RTA had elected not to comment publicly on its auditing activities out of respect for the ongoing investigations being conducted by state and federal law enforcement agencies.
“We need our two million riders and all stakeholders in our transit system to know that our agency has never wavered from exercising our audit authority per the RTA Act and we have taken immediate and aggressive actions in response to financial improprieties at Metra,” said Steve Schlickman, RTA Executive Director. “In order to help protect the integrity of ongoing investigations, the RTA has limited its public comments on specific oversight steps being taken, but we now feel that we must assure riders and taxpayers that we are actively fulfilling our responsibilities,” he added. The RTA serves as the financial and management oversight agency for the Chicago Transit Authority (CTA), Metra and Pace.
When the allegations that former Metra Executive Director Phillip Pagano received an unauthorized bonus of $56,000 became public, the RTA had already begun its annual audit of the RTA-Metra-Pace Pension Plan for 2009. The RTA’s independent auditors, McGladrey & Pullen LLP, reviewed 2008 salaries and compensation for senior management at all three participating agencies as reported to the Plan in 2009, and uncovered irregularities with respect to certain information provided by Metra. Schlickman immediately contacted Metra Acting Executive Director William Tupper to inform him of the initial audit findings. RTA legal counsel also contacted Metra’s independent investigator, James G. Sotos, regarding the pension audit prior to the release of his report at the May 14 meeting of Metra’s Board of Directors.
Metra has been forthcoming with all requested information, and continues to cooperate fully with the RTA’s investigation. The pension audit is continuing on schedule. Again, however, the RTA is declining further comment until findings and recommendations are completed and reported to its Board of Directors at its next scheduled meeting on June 24.
The executive summary of the report prepared by Mr. Sotos for Metra’s board had portions withheld at the request of the U.S. Attorney’s office. The RTA requested and received a complete copy of that report pursuant to investigatory powers granted to the RTA Executive Director under the 2008 amendment to the RTA Act. RTA staff is now reviewing the full report and integrating its findings into the 2009 pension audit of Metra.
As a result of these investigations, the RTA is expanding its review and conducting an in-depth audit of executive compensation policies and practices at Metra over the past five years. The RTA is working with outside, independent auditors for this project, and the full report will be publicly available when completed. Following the audit at Metra, the RTA will conduct similar reviews of the CTA, Pace, and the RTA, which will also be publicly released. ”We know everyone is anxious for immediate answers and solutions, but due diligence is required on this very serious matter, and we are confident in the approach that the RTA is taking,” said Patrick Durante, Chairman of the RTA Board’s Audit Committee. The executive compensation audits will be added to a comprehensive five-year audit program of each Service Board that the RTA is already developing and implementing in response to additional audit authority provided under 2008 legislation.
Fully supported by its Board of Directors, the RTA plans to work with Metra, the CTA and Pace to enhance internal controls and mechanisms that can help detect and deter the types of intentional, criminal acts that were uncovered last month. “Acts such as forgery and fraud, particularly at the hands of senior executives, are more likely to be detected through internal safeguards as opposed to traditional financial audits typically conducted by the RTA in its capacity as a financial oversight agency,” Schlickman noted.
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