Status of Latest Management Audit?

What is the status of the latest independent audit of SEPTA management? I seem to recall that one is in progress and should be done by the end of this year, but I have not been able to find any information about it through Google.

I have come to the conclusion that SEPTA, like any other huge bureacracy, is hoarding information about their internal operations like gold from us. I have tried to find information about how many people SEPTA employs, how it spends its money, and information about its past financial results, but none of this is online.

I did, however, find an article from 1998 by Wally Nunn, former board member at SEPTA, who recounts a tale that sounds eeriely familiar: a $75 million budget shortfall, plans for massive service cuts and fare increases, and a general media frenzy over the latest "crisis," wrote Nunn.

It turns out that through an independent, objective audit of SEPTA's management, they were able to balance the SEPTA budget without service cuts or fare increases, and in fact "identified potential cost savings of at least $150 million a year."

What I think has happened since then is that SEPTA has gone back to their old ways of keeping real information from its board members, from elected officials, and from the voters in the region. Wally Nunn is no longer a SEPTA board member, and now is tackling the issue of Pennsylvania school funding, but hopefully the latest audit will be as useful as the one he intiated.

What I want to see is an independent, objective analysis of what is going on at SEPTA before I decide whether the latest "crisis" is real or not. Please read this article to see what I mean: http://www.policyreview.org/sept98/labs2.html

Based on what Matthew Mitchell said in another thread, I doubt we'll see much from the audit besides back-patting and mental masturbation...

Matthew Mitchell wrote:

jfrey40535 wrote:Firstly, we need Rendell to finish his promise of auditing SEPTA's books to determine where the money is going. Is it all going to transit operations & projects? How much waste is there? Where can things be trimmed?

If you're talking about the regular management audit, it is underway, and should be finished soon (though it's been "soon" for a coupla months now). I've heard that a first draft has been given to SEPTA for its comments. However, I'm not confident that this audit is going to "determine where the money is going." The budget for the audit is small (less than $200K) and SEPTA is a target-rich environment. Because of the budget, the scope of the audit is limited, and stuff like the Schuylkill Valley fiasco isn't going to be investigated. Furthermore, the consultants doing the study are paid and selected by SEPTA, not by the Auditor General or another outsider.

(my emphasis)

There's no way we can expect an objective audit if the people were both handpicked by SEPTA, and they're getting paid by them too. Looks like Fast Eddie let SEPTA pull a fast one on him.

I'll reserve judgement on the objectivity of the consultants until after I see the report, but they did meet with DVARP and listen to our concerns.

That said, one of the primary concerns was over the scope of the report: what SEPTA functions would be audited and to what level of depth. The consultants said they were constrained by both time and money (the total budget was in the 100-200K range), and that scope was going to be determined largely by SEPTA.

Which is a genuine shame if SEPTA makes the scope so narrow as to exclude some of these projects they've been kicking around and making no progress on for years, like SVM.

Lucius Kwok wrote:What is the status of the latest independent audit of SEPTA management? I seem to recall that one is in progress and should be done by the end of this year, but I have not been able to find any information about it through Google.

The initial draft of the report is apparently complete, however I have yet to recieve a copy of it. I can tell you that SEPTA did issue a response to nearly 80 points raised by the audit; I will have more comments on it once I've had a chance to read it through completely.

R3 Rider wrote:Which is a genuine shame if SEPTA makes the scope so narrow as to exclude some of these projects they've been kicking around and making no progress on for years, like SVM.

I doubt SVM is going to get anywhere near the investigation it merits. The auditors told us that they would be looking at operating (and by this I mean as opposed to capital) matters first.

What is really called for in the Schuylkill Valley fiasco is a blue ribbon investigation along the lines of the investigation of SEPTA's claims handling practices in the aftermath of the subway elevator suit. That was a good investigation: it was done by outsiders, they had free rein to follow leads, and the results were reported to the public in depth.

I guess we will have to wait and see how this audit pans out. One thing is clear: without independent, objective measurement and analysis of the situation, we cannot effectively evaluate SEPTA's plans for either operation or capital budgets. In general, it has always been in a bureacrat's interest in self-preservation and expansion of bureacracy to withhold information from elected representatives and the public, so that only the bureaucrats will understand how the agency is run. We are unable to ask difficult questions and get intelligent answers.

Lucius Kwok wrote:I have come to the conclusion that SEPTA, like any other huge bureacracy, is hoarding information about their internal operations like gold from us. I have tried to find information about how many people SEPTA employs, how it spends its money, and information about its past financial results, but none of this is online.

Yes, that information is made available by SEPTA regularly in the operating budget, and it is indeed online too.

The data in the budget includes total headcount on one page, headcounts per department on the department's respective page, and a one-page summary of all changes in departmental headcounts (they account for things like shifting some customer service personnel from one department to another, and redeploying tower operators when the new control center was cut in).

For those of you who are going to take a look at the budget, here are some helpful explanations. "A-payroll" refers to supervisory, administrative, and management personnel considered "exempt" personnel for purposes of federal laws on overtime pay etc. A-payroll extends from the General Manager all the way down to street supervisors for bus operations, so calling all those employees "management" might be a bit of a stretch. "B-payroll" is a small category for certain administrative positions which I assume are non-exempt. The largest category is "H" or hourly workers. I'm not sure, but I am assuming that all personnel in this category are represented by unions.

You'll also see personnel slots in some departments 'allocated to capital.' That doesn't mean that they're lobbying in Harrisburg (though they might be), it means they're paid through the capital budget instead of the operating budget. Obviously, much of SEPTA's project planning and contract administration staff fit this category, but you'll also see things like PR staff so allocated, and even sometimes some bus and rail operating personnel, such as when a capital project calls for and funds shuttle bus operations during construction.

To address your other concerns, the operating budget also has a departmental spending breakdown, though the level of detail is less than satisfactory for trying to analyze and look for potential savings. SEPTA does keep more detailed records internally, and their books have to be audited just like any other company's.

And the budget includes long-term history of the very basic revenue and expense numbers, but not at the departmental spending level.

Lucius Kwok wrote:I have come to the conclusion that SEPTA, like any other huge bureacracy, is hoarding information about their internal operations like gold from us.

Is information hard to get? Sure. Is SEPTA deliberately concealing it? No, except for a few isolated instances (such as Faye Moore and Pat Nowakowski's stonewalling in response to DVARP questions on the September 2003 RRD meltdown), and those instances pertain more to operations and planning rather than budget and audit matters.

In fact, staff tries to be reasonably forthcoming where they can. For example, we've had no problem getting responses to questions we've asked at operating budget hearings (kudos here to Joe Casey, now SEPTA treasurer). Staff may not have all the answers immediately, but they have responded later in writing, and have tried to be helpful, even with stuff that doesn't make SEPTA look good.

I did, however, find an article from 1998 by Wally Nunn, former board member at SEPTA, who recounts a tale that sounds eeriely familiar: a $75 million budget shortfall, plans for massive service cuts and fare increases, and a general media frenzy over the latest "crisis," wrote Nunn.

The article was published by the Heritage Foundation, a leading conservative public policy organization (think tank). Like most other conservative groups, Heritage opposes a lot of government programs, including public transit (many of them use Amtrak as a favorite whipping boy, and a litmus test for politicians' perceived desire to cut government spending).

Whether or not you agree with their viewpoint, Heritage is pretty good on the intellectual honesty scale. They're not trying to pass off half-truths like the various state and local anti-tax groups that use Wendell Cox as a hired gun in efforts to try and stop new rail projects.

Nunn of course was on the SEPTA Board at the time, and was one of the main people pushing a management audit on SEPTA and getting the contract directed to Phoenix Management Services, which is the audit mentioned below.

It turns out that through an independent, objective audit of SEPTA's management, they were able to balance the SEPTA budget without service cuts or fare increases, and in fact "identified potential cost savings of at least $150 million a year."

While Phoenix did find a lot of inefficiency in SEPTA's management and operations, I disagree with Nunn's characterization of the results. You couldn't have balanced the budget with those kind of painless measures, and you probably couldn't have gotten close; which is the same situation SEPTA is in now.

Part of the problem is that Phoenix had little or no transit experience--their expertise is in decision-making structures, labor-management, and other general business functions. Some of the recommendations were indicative of their ignorance of the specific business SEPTA is in, and SEPTA's particular marketplace. For example, they called for SEPTA to cut fare collection costs by eliminating passes, transfers, and zone fares, and collecting a single flat fare for each vehicle ridden. While that was a big industry fad at the time, and Phoenix was citing several other cities that had implemented the policy, they didn't recognize that they had different route structures from SEPTA's, and that the flat fare would distort travel patterns (moving people off efficient subways and onto less efficient buses) and increase SEPTA's operating costs.

Now the stuff Phoenix said about management: that Lou Gambaccini's management structure and style was highly "stovepiped" (i.e. most decisions went up to the top and back down rather than being made at lower levels of management), and that SEPTA had done little to control inventories and materials costs, and that they could save money by contracting out certain functions, was well founded. But it wasn't going to be a magic bullet that cured SEPTA's financial woes.

This year's audit is being done by a firm with ample transit industry experience, but the scope and budget of the study is going to be a lot less than that of the Phoenix audit.

What I think has happened since then is that SEPTA has gone back to their old ways of keeping real information from its board members, from elected officials, and from the voters in the region.

As I said above, I don't think it's a concerted effort by management--it's more that the Board and the elected officials are very hands-off, and deferential to management. If you read my column in this month's DVARP newsletter, you'll learn about an interesting parallel in San Jose, where there also is inadequate board oversight of an agency even more troubled (at least financially) than SEPTA.

You gotta have somebody ask for the information, take the time to understand it, and hold management accountable when things aren't being run well. Here, nobody cared about what was going on with the railroad until DVARP made a public stink about its horrible on-time performance and the media picked up on it.

What I want to see is an independent, objective analysis of what is going on at SEPTA before I decide whether the latest "crisis" is real or not. <snip>

I'm sure you're not the only one. SEPTA's credibility is shot, which is why Faye Moore and Pat Deon were so vigorously denying that SEPTA was bluffing with its service cut threats even before anyone accused them of bluffing. The process of rebuilding credibility (which is gonna take years) needs to begin with SEPTA admitting they really do have problems that go beyond not getting enough money from Harrisburg.

Thanks for the info. I have been downloading annual reports from transit agencies across the country and trying to figure out why some agencies do a better job than others. My aim is to try to understand these topics:

1. Governance & oversight (boards of directors, taxpayer & rider representation).
2. Non-operating funding sources (dedicated taxes, parking, bridge & tunnel tolls).
3. Ridership & size of system compared to size of workforce & budget.
4. Goodwill (attitude of community to agency).

The first two are really the responsibility of the state & local governments in the charter that created the agency. The latter two have some bearing on the management at the agency. I'm still going through the reports, but compared to other transit agencies, SEPTA doesn't look too good.

The article was published by the Heritage Foundation, a leading conservative public policy organization (think tank).

I have come to expect a certain level of bias, both pro and anti-rail, in web sites and magazine articles. I try to strip away the rhetoric and ideology, and double-check their data, since they are often the only source of news in this topic. There's also a dearth of articles rebutting the conservative arguments, which tend to be more eloquently made than the pro-rail ones. Whichever side you're on, you need to know what the other side is saying.

While that was a big industry fad at the time, and Phoenix was citing several other cities that had implemented the policy, they didn't recognize that they had different route structures from SEPTA's, and that the flat fare would distort travel patterns (moving people off efficient subways and onto less efficient buses) and increase SEPTA's operating costs.

Part of the problem is that SEPTA still largely operates the same route structure that was in place in the 1950's, when the streetcars, railroads, and subways were competitors. You have routes like the C bus and the 23 parallelling the subway.

SEPTA is essentially a special form of government, like California's special districts, one that was created only 40 years ago, in some ways young compared to state and city governments, but old enough to have bureaucratic inertia ("we've always done things this way" and "not invented here"). I think it has some flaws that are structural, due to the way it was created, but I have not yet looked at SEPTA's enabling legislation.

Probably the most important missing piece is SEPTA's taxing authority. I have read a summary of Senator Greenleaf & Representative Taylor's bills, and I think it's flawed because in most states, the taxing authority only covers the areas which the transit agency serves, not the entire state.

I still have a lot of reading to do, but I think that there is a lot that can be changed, both with the current system of board of directors, and with funding.

Lucius Kwok wrote:There's also a dearth of articles rebutting the conservative arguments, which tend to be more eloquently made than the pro-rail ones. Whichever side you're on, you need to know what the other side is saying.

Actually, there have been several good rebuttals of Wendell Cox et al., starting with some of the papers by Paul Weyrich, which you can find on the APTA site. Cox's argument is that rail and transit is irrelevant because it carries such a small market share of travel in a region. The problem is that Cox's statistics lump together routes with rail lines and routes without rail lines, and you aren't ever going to get a satisfactory market share for rail if you don't have any trains.

It would be like saying I-95 is a waste of money because it carries only one percent of journey-to-work trips in the Delaware Valley.

Lucius Kwok wrote:Part of the problem is that SEPTA still largely operates the same route structure that was in place in the 1950's, when the streetcars, railroads, and subways were competitors. You have routes like the C bus and the 23 parallelling the subway.

Well, some of the redundancy is gonna be inevitable, and some is even beneficial (for example, the C bus is particularly convenient for the elderly, who might need something closer to a door to door ride), but the fact is SEPTA has managed a decent amount of route rationalization the past twenty years or so (like the reorg some years ago that eliminated one of those N-S routes east of Broad), and the various phases of Northeast Philadelphia and Red Arrow restructuring.

Would we get the current route structure if we handed planners a clean sheet of paper? Of course not. But I think we're closer to that ideal now than to where we were in 1950.