Massachusetts Bay Transportation Authority-Accounts Receivable
November 22, 2016 · Read the full official report (PDF) ↗
Published November 22, 2016 Audit covers July 1, 2012 – June 30, 2015 Under Suzanne M. Bump · 2011–2023
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“The MBTA did not properly administer its trade accounts receivable.”
Read the plain-English breakdown
This is a Massachusetts State Auditor performance audit of the MBTA’s accounts receivable for July 1, 2012 through June 30, 2015.
“In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of the Massachusetts Bay Transportation Authority (MBTA) for the period July 1, 2012 through June 30, 2015.”
Auditors checked whether the MBTA was properly managing money customers owed it for goods and services.
“The objective of our audit was to determine whether the MBTA has effectively managed its trade accounts receivable (amounts owed by customers for goods and services) in accordance with its established policies and procedures for customer accounts, billings, payments, overdue accounts, and uncollectible accounts.”
If the MBTA does not follow its own rules, it may fail to collect money it is owed.
“Without following its established policies and procedures in this area, the MBTA cannot be certain that it is effectively collecting all the money it is due.”
For ordinary riders and taxpayers, this matters because the MBTA is a large public transit agency serving many people every day, and weak money controls can affect public resources.
“It is the fifth-largest mass transit system in the United States as measured by ridership, serving approximately 1.3 million passengers each day.”
The MBTA needed stronger controls, better collection follow-up, and clearer decisions about when old unpaid balances should be written off.
“The MBTA should implement monitoring controls to ensure that all trade accounts receivable are administered in accordance with its established policies and procedures.”
The report says the MBTA should collect what it can, review old balances, and properly record or write off uncollectible amounts.
“The MBTA should make reasonable efforts, including collection and legal action, to collect all outstanding balances.”
The weaknesses were significant because they increased the risk that money could be stolen, lost, or recorded incorrectly.
“Because they did not follow MBTA policies and procedures, ensure that balances for trade accounts receivable were properly reported to ARG, and establish proper segregation of duties for this process, these departments placed funds at greater risk of theft and of being recorded inaccurately in ARG’s financial records.”
“Trade accounts receivable” means money owed to the MBTA by customers for normal goods and services, not grant money or state assistance timing differences.
“The scope of our audit focused on the MBTA’s management of its trade accounts receivable (which represent amounts owed from normal business activities, whereas receivable amounts derived from federal grants and from financial-assistance contracts with the Commonwealth are the result of timing in the receipt of annual operating subsidies).”
6 figure(s) pending source verification - not shown
What the Auditor checked
- Did not comply Is the MBTA effectively managing its trade accounts receivable in accordance with its established policies and procedures for collection and write-offs/adjustments of uncollectible accounts?
- Did not comply Is the MBTA ensuring proper adherence to its established policies and procedures regarding establishment of customer accounts, invoicing, cash receipts, and collection of overdue accounts for its trade accounts receivable?
What the Auditor found
Why it matters: The MBTA could not be certain that it was collecting all money due and risked improper write-offs or loss of collectible funds.
Standard: MBTA Accounting Policies and Procedures Manual, Sections 1.3 and 1.5, requiring collection procedures, past-due notices, documentation, referral, review, and approval of write-offs greater than $5,000. ( Section 1.3 of the MBTA’s Accounting Policies and Procedures Manual; Section 1.5 of the MBTA’s Accounting Policies and Procedures Manual )
3 recommendations
- The MBTA should implement monitoring controls to ensure that all trade accounts receivable are administered in accordance with its established policies and procedures.
- The MBTA should make reasonable efforts, including collection and legal action, to collect all outstanding balances.
- When collection efforts are exhausted or a balance remains outstanding for a long period of time, MBTA management should review it and determine whether it should be written off as uncollectible.
Agency response & Auditor reply
Agency: "The majority of the accounts referenced in this area were related parties or contractual partners on existing construction and infrastructure projects with the Authority."
Auditor: "We agree that the resolution of these receivable balances can be a long process that requires the Authority to strive to adhere to its established policies and procedures to ensure that accounts are properly monitored and controls are in place to advise management when monitoring procedures are not followed."
Why it matters: The departments placed funds at greater risk of theft and inaccurate recording in ARG’s financial records.
Standard: The MBTA Accounting Policies and Procedures Manual requires ARG to establish customer accounts, assign contract work orders, account for invoices billed, maintain accounts-receivable subsidiary ledger balances, and process payments through the Treasurer-Controller’s Department and Cashier’s Office. ( The MBTA’s Accounting Policies and Procedures Manual )
3 recommendations
- The MBTA should immediately implement controls to ensure that all of its departments that conduct transactions for trade accounts receivable comply with ARG’s policies and procedures.agency: agreed
- The MBTA should verify that all amounts owed to each of its departments have been properly billed, collected, and forwarded to its Cashier’s Office and that all transactions have been properly entered in ARG’s financial records.agency: agreed
- The MBTA should determine all uncollected amounts owed to all of its departments as of the end of the audit period, review validity and collectability, and ensure proper recording in ARG’s financial records.agency: agreed
Agency response & Auditor reply
Agency: "We are in agreement with the finding and had begun to incorporate the billing, accounts receivable and cash collection processing with the Police details performed by the Transit Police during the period under review for this audit."
Auditor: "According to its response, the MBTA is taking measures to ensure that all of its departments that conduct trade accounts receivable transactions comply with established ARG policies and procedures."