Press Release: 2025-01-17

Latest Audit of MBTA Identifies Areas for Improvement Regarding Project Delays, Contract Management and Surety Bond Compliance

 

Automated Fare Collection System 2.0 Project

FOR IMMEDIATE RELEASE:

1/16/2025

MEDIA CONTACT 

Andrew Carden, Director of Operations

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Call Andrew Carden, Director of Operations at 617-631-5692

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Email Andrew Carden, Director of Operations at andrew.carden@massauditor.gov

BOSTON — Today, State Auditor Diana DiZoglio’s Office released an audit report of the Massachusetts Bay Transportation Authority Automated Fare Collection System 2.0 Project, reviewing the period from January 1, 2018 to September 30, 2023.

This audit is one of a series of reports that the Office of the State Auditor is issuing as part of a performance audit of the Massachusetts Bay Transportation Authority (MBTA).

The automated fare collection system (AFC) 2.0 project was created by the MBTA to replace the current Charlie Ticket / Charlie Card fare collection system with an advanced tap-and-go system that would allow the public to use multiple forms to pay fares. The new AFC 2.0 system is being developed for subway, commuter rail, bus, trolley, and ferry lines.

Among the audit’s findings was that the MBTA was not properly managing its financial risk associated with this contract. Our audit identified additional areas of concern regarding MBTA oversight of this contract, including properly monitoring the “day to day” management of the project.

The Office of the State Auditor also found that the MBTA spent a previously unreported $7.9 million on its own staff, contractors and sub-contractors supporting this project. The audit also found a variance of $349,523 in payroll across a sample of employees examined in the MBTA systems, for which the MBTA could not provide an adequate explanation.

The MBTA’s failure to reconcile its payroll records to its general ledger is concerning. By not reconciling the payroll records to its general ledger, payroll could be misstated and project costs attributed to the AFC 2.0 project and other MBTA projects and services could be inaccurate, making it difficult or impossible to determine the cost and cost-effectiveness of different services offered to the public.

The audit found that the MBTA’s Amended and Restated Project Agreement allowed deadlines to be overridden. By not having controls in place to verify and report on timely delivery of projects’ milestones, the MBTA risks encountering additional, significant delays related to the AFC 2.0 project. This affects the people of the Commonwealth by delaying their use of a more efficient system that will lead to quicker service. It could also result in overspending of public funds due to change orders, price escalation due to inflation and other cost pressures.

This report notes the Office of the State Auditor found the MBTA’s Amended and Restated Project Agreement to be an unwieldy contract, containing more than 1,300 pages, with over 20 articles and more than 15 appendices. Such a length, with so many amendments and references, each of which can modify or be modified by the other, could make this contract more difficult to manage. These findings are consistent with past findings from the Office of the State Auditor and the Office of the Inspector General regarding poor contract management at the MBTA.

Moreover, the MBTA did not ensure that the systems integrator, Boston AFC 2.0 OpCo LLC, obtained a surety bond for certain work performed on the new AFC system, as required by state law. By not obtaining a security bond for the AFC 2.0 project, the MBTA may not be able to recover money it paid under the contract in the event that some, or all, of the contract is not completed.

Additionally, a contractor may not fulfill the contract if a security bond is not in place. A surety company holds assets of the contractor to ensure the contractor is incentivized to fulfill the contract. The lack of a security bond potentially puts a drain on public resources to complete a project for which the MBTA has already committed time and money. A security bond in place would, at the very least, allow the MBTA to recover some of its expended funds.

“The MBTA’s response to our audit team was to defend the status quo instead of working together to improve services on behalf of taxpayers,” said Auditor DiZoglio. “The AFC 2.0 project is a substantial undertaking by the MBTA, spending nearly one billion in public dollars. We urge the Administration to ensure the MBTA recognizes their responsibility to work toward a better future for the MBTA and its riders by reconsidering its defensive unwillingness to work to implement improvements, highlighted by our audit recommendations. We will be revisiting the MBTA’s actions, or lack thereof, in roughly six months as part of our post-audit review.”