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Audit Finds MTA Paid Millions in Cost Add-Ons : Finances: Transit agency contracts grew an average of 388% after they were awarded, review shows. Chief financial officer denies that improprieties occurred.

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TIMES STAFF WRITER

An exhaustive audit has found that because of lax controls, a vast array of Los Angeles County transportation contracts skyrocketed in cost after new expenses were routinely added on after initial approval of the agreements.

In one case, auditors found that a consulting contract for the proposed Green Line grew from $1.4 million to $64.4 million in one year--a 4,511% increase. In all, the study showed that contracts increased an average of 388% after they were awarded.

“It is terrible, terrible management,” said Nick Patsaouras, an alternate board member of the Metropolitan Transportation Authority.

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MTA Chief Executive Officer Franklin White, who joined the agency last spring, said: “On the surface, the findings appear troublesome. We, of course, have to look at the explanations in each case. Where the explanations appear inadequate, we will be putting in place procedures that will prevent a recurrence.”

The audit was conducted after reports last year in The Times disclosed that the now-defunct Los Angeles County Transportation Commission’s staff had spent at least $2.9 million on travel, meals, entertainment and automobile expenses during an 18-month period. The LACTC merged with another agency this spring to form the Metropolitan Transportation Authority.

The audit was conducted by Ernst & Young, which studied 279 contracts to reach its conclusion that periodic internal audits should be conducted to ensure that sound spending practices are followed by the agency’s management.

Auditors examined the contracts from July 1, 1988, to Dec. 2, 1992. They found the average increase in contract costs was $1.9 million. According to the audit, 38% of the contracts with large variances were for construction or legal services.

Of the total 1,861 contracts awarded during the period under review, 27% spiraled upward, well exceeding the initial contract amount, the audit stated. In one case, a $6,209 contract went to Tetra-Tech Inc. for hazardous waste services. The contract grew more than 11,000%, reaching $715,924.

The agency’s former executive director, Neil Peterson, approved 1,272 contracts under $50,000, the threshold required for board approval, during the review period. Almost one-fourth--including the hazardous waste contract--increased beyond the amount awarded.

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“This is a continuous problem where the staff finds ways to circumvent board review,” Patsaouras said. “The management (staff) has not changed one iota from then to today.”

Peterson was unavailable for comment.

Terry Matsumoto, the MTA’s chief financial officer, said he did not believe that any improprieties had occurred and that the agency often decided on multiyear contracts that were funded one year at a time--an action that could make the initial contract appear as though it were being inflated when, in fact, it had been planned. The audit did not take this practice into account, he said.

The practice “gives us better control. The vendor has to come back every year,” he said. “Is there a problem? No. Any significant contract and any amendment that brought the contract to more than $50,000 was brought before the board for approval.

“I thought they were coming in to do a witch hunt and they did,” said Matsumoto, former controller of the LACTC, which oversaw the construction of the Red Line subway and the Blue Line trolley between Long Beach and Los Angeles.

Auditors found that 72% of the contracts were competitively bid. (The remainder were issued on a sole-source basis).

Major project contracts jumped 1,442%, or an average of $17.6 million. Engineering contracts rose 365%, or an average of $7.4 million. The audit does not indicate how most contracts increased--by change orders or amendments.

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“The increases in changes may be due to procedures for establishing contract amounts . . . inaccurate information in the (database) system, or insufficient contract monitoring efforts,” the audit said.

The auditors also discovered that documents were missing or incorrectly filed. Sometimes, the agency’s records contained incorrect information about authorized dollar amounts and project dates, the audit said.

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