After the state sued Academy Bus last month, alleging it defrauded NJ Transit out of more than $15 million by underreporting the number of trips it missed and charging for others that never ran, board members demanded more oversight over data provided by the bus companies they hire.
Academy was previously fined $5.9 million by NJ Transit, said Kevin Corbett, agency CEO. The fines were assessed for missed trips from fiscal year 2013 to fiscal year 2020, which ended on June 30, said Nancy Snyder, an agency spokeswoman.
“It’s disappointing if it’s true,” Corbett said of the Academy suit. “We can tighten things up.”
However, going back to 2012, the start date the suit names for the alleged reporting discrepancies, the agency was strapped for people in information technology and in other functions, he said.
“The tracking wasn’t adequate to catch it. We fined Academy $5.9 million and those are the ones we caught,” Corbett said. “It was like whack-a-mole.”
Board members want better tracking of the data private bus companies provide as proof for payment. That comes on the heels of Gov. Phil Murphy vetoing approval of a $31 million contract awarded to Academy on Nov. 12 to operate bus service in Middlesex County. That contract was awarded before NJ Transit was aware of the lawsuit.
“NJ Transit will be evaluating options (for that contract) in light of the governor’s veto,” Snyder said.
Murphy’s Nov. 25 veto message said NJ Transit’s board must examine “the overall performance of Academy under the existing contracts” and, given the allegations of fraud, “investigate what, if any impact the allegations have on awarding the Middlesex County contract.”
Board members want the agency’s scrutiny of data to go further.
“We were relying on the numbers they (Academy) report. I feel strongly that we need our own internal controls and don’t rely entirely on their self-reporting,” said Shanti Narra, an NJ Transit board member, who is a regular bus commuter. “We need to get the figures so we can audit them and base our decision making on it.”
Both Narra and Board member Robert Gordon said the allegations in the attorney general’s lawsuit mean there were flaws in how private bus companies are monitored. Those companies also receive NJ Transit buses, which are leased at the nominal sum of $1 annually, as required by the 1979 law that created the agency.
“The allegations about Academy raised questions about our financial control systems, they’re either weak or non-existent,” Gordon said. “The governor’s veto called for us to investigate these issues.”
Gordon suggested NJ Transit hire one of its independent auditors to investigate and make recommendations to “straighten out our controls.”
The suit filed against Academy on Nov. 16 by the state Office of the Attorney General intervenes in a whisteblower suit brought by former Academy employee Hector Peralta.
Academy was paid to operate seven NJ Transit routes in Hudson County, including the busy 119 route, with the alleged fraud taking place between April 2012 and December 2018, with the routes handling about 175,000 trips per year. The suit charged that Academy missed tens of thousands of bus trips, stranding riders.
Private companies hired to operate NJ Transit bus routes are required to report the number of bus trips that were missed for each bus route on a monthly basis and money is deducted for missed trips from their payment.
The state attorney general’s lawsuit contends Academy internally tracked two sets of numbers – the real number of missed bus trips and an adjusted set of false numbers, which was significantly lower and that Academy reported to NJ Transit.
Last month, Academy said it is taking steps to “improve its performance.”
“(Academy) will detail its good faith efforts to perform the service in issue and to properly tally and submit ‘missed trip’ information to New Jersey Transit,” spokesman Ben Martin said in an emailed statement. “Prior to this filing, (Academy) took corrective actions to improve its performance and the (Academy) will continue to work diligently to accomplish that objective. “(Academy) values its relationship with (New Jersey Transit) and regrets that this matter has been moved to litigation.”
NJ Transit is working on a technological solution “to move away from private carrier self-reporting of trips,” that could be running on a trial basis by the end of the month, said John O’Hern, agency general auditor.
“What we want to look at is, not just the IT (Information Technology) system itself, but the plan for business controls, who has access to the data, who can monitor the data and who can manipulate the data,” O’Hern said. “We want to see that.”
A auditor used by NJ Transit’s internal audit department would be asked to check the technological solution and the business controls around it, based on 60-90 days of data, if the system is running by the end of 2020, O’Hern said.
NJ Transit also recently introduced previously unavailable automated exception reports that are produced for scheduled trips that did not operate, using the GPS technology installed on its buses, Snyder said. An exception report is generated when the driver log does not match the trip data.
Those reports are augmented with reports generated by NJ Transit employees working as starters at major terminals and park/rides, and regional supervisors strategically deployed along the route, she said.
“A compilation of our data is compared to the reports submitted by the private carriers to identify any discrepancies,” Snyder said.
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Larry Higgs may be reached at lhiggs@njadvancemedia.com.
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