District's Department of Public Works Improperly Collected and Retained Millions in Parking Ticket Overpayments
March 19, 1998

Sources: Overpayment Plan Update dated August 23, 1994
Outstanding Overpaid Ticket Analysis dated September 1996
Overpayment Plate/Ticket Report dated October 1, 1997
* Represents additional overpayments of parking and moving tickets not previously included.

Prior to calendar year 1994, the Department of Public Works and Lockheed accumulated and retained overpayments without proposing a valid procedure for refunding the overpayments. During calendar year 1994, in an undated and unsigned document submitted for this audit, Lockheed officials addressed the overpayment problem and proposed the solution as outlined below:

On May 2, 1994, we completed revising the ticket system grace period logic to accept payment in full (fine and penalty) for any mail-in ticket payment received after the ticket value doubles but within the mail delay window. This will prevent artificial overpayments from being registered on the ticket system. The penalty will continue to be backed out if the payment is received in the mail delay window for only the original fine  amount. "

The Auditor notes that this solution did not effectively address the overpayment problem. Overpayment of parking tickets and retention of those payments by the District continued through September 1, 1997, which is the point at which our review ended. Appendix I presents a sample of overpaid parking tickets that continued to be made well into fiscal year 1997.

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DEPARTMENT OF PUBLIC WORKS FAILED TO ESTABLISH A FAIR AND EFFECTIVE POLICY TO GOVERN THE REFUND OF TICKET OVERPAYMENTS

The Department of Public Works' Transportation Systems Administration (l) failed to develop an effective policy for refunding parking ticket overpayments, (2) failed to develop reasonable and adequate procedures for notifying respondents of overpayments, and (3) failed to voluntarily refund any overpayments. Refunds were only issued by DPW when requested by individuals who had made an overpayment. Additionally, the Department of Public Works failed to include provisions in the ticket processing and delinquent ticket collection contracts to govern the refund of overpayments and fees collected by Lockheed on such payments. As a result, between the period pre-986 through September 1, 1997 DPW accumulated and retained a backlog of overpayments on 829,837 tickets with a value of $17.8 million.

DPW officials indicated their intention to begin notifying respondents of overpayments during the first quarter of fiscal year 1998. However, this notification would be limited to overpayments made during the period September 1, 1995 through September 1, 1997. Overpayments for this period are highlighted in Table III.

TABLE III
OVERPAID PARKING TICKETS
SEPTEMBER 1, 1995 THROUGH SEPTEMBER 1, 1997

Source: Lockheed Martin IMS Overpaid Ticket Analysis.

The Auditor's review revealed that DPW has issued 250 initial refund notification letters as of February 3, 1998. Prior to this date, DPW had not initiated any efforts to refund accumulated overpayments.

To address the overpayment issue, DPW reduced overpayments by: (1) reapplying the overpayment to outstanding tickets issued against the same license plate; (2) archiving the overpaid tickets, which involves moving tickets from Lockheed's active database to its inactive database (i.e., moving tickets from on-line to an off-line status) based on a date criteria that includes closed tickets more than one year old and open tickets more than three years old; or (3) refunding the overpayment only if requested by the respondent. Despite these measures, DPW failed to develop an effective policy to voluntarily refund overpayments.

RECOMMENDATIONS

1. DPW immediately develop and implement an effective policy to govern and facilitate the timely refund of overpayments on parking and moving violation tickets.
2. The Transportation Systems Administration (TSA) request monthly overpayment reports from Lockheed that indicate all ticket overpayments received by the District during the reporting period and the ongoing status concerning the disposition of each overpayment.

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DPW REAPPLIED AND ARCHIVED OVER $14.4 MILLION OF OVERPAID TICKETS WITHOUT MAKING AN EFFORT TO REFUND THE OVERPAYMENTS

The Department of Public Works and Lockheed failed to take appropriate measures to refund overpayments on 829,837 parking and certain moving violation tickets totaling $17,847,891. Instead, DPW reduced the pool of 829,837 overpaid tickets through the reapplication and archiving processes. The overpaid tickets were identified in the following Lockheed reports:

Table IV summarizes overpayments that were reapplied and archived for the period pre-1986 through 1997:

TABLE IV
SUMMARY OF OVERPAID TICKETS REAPPLIED AND ARCHIVED FOR THE PERIOD PRE-1986 THROUGH SEPTEMBER 1, 1997

Sources: Overpayment Plan Update August 23, 1994
Outstanding Overpaid Ticket Analysis dated September 1996
Overpayment Plate/Ticket Report dated October 1, 1997

DPW officials inappropriately reapplied and archived approximately $14.4 million in overpayments. DPW reapplied overpayments on 60,989 tickets totaling $1,229,921 to other outstanding tickets issued against the same license plate. Another $13,198,650 in overpayments on 664,238 tickets were removed through archiving. Archiving is an administrative procedure that allows DPW to reduce the number and dollar amount of overpayment tickets that were maintained in the active on-line system. This procedure had the effect of removing 664,238 overpaid tickets, totaling $13,198,650, from an on-line to an off-line status with no effort being made to contact people who had made the overpayments. Discussions with Lockheed and DPW officials indicated that archived ticket data can be retrieved and restored to an on-line status within a twenty-four hour period. However, the Auditor notes that once tickets are moved off-line, they become inactive and are excluded from proposed overpayment notification processes. The Auditor further notes that even though the tickets have been archived, thousands of people are still due a refund for parking ticket overpayments made to the District of Columbia government. As a result of the reapplication and archiving of overpayments, 829,837 tickets and $17,847,891 in overpayments were artificially reduced to 104,610 tickets and $3,419,320 resulting in reductions of 87% and 81% respectively.

Archiving of overpaid parking tickets has resulted in a windfall to the District's general fund of at least $13,198,650. There is no allocation in the current District budget to refund overpayments if individuals request refunds.

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DPW FAILED TO NOTIFY RESPONDENTS CONCERNING THE DISPOSITION OF OVERPAYMENTS

DPW's decision to reapply $1,229,921 in overpayments on 60,989 tickets to other outstanding tickets issued to the same license plate was inappropriate and ineffective in that notice of the overpayment and the disposition of the overpayment was never communicated to the individuals. DPW's failure to notify the respondents meant that overpayments would likely be made on the tickets to which an existing overpayment was reapplied. The decision to apply an overpayment to an outstanding ticket was made without the knowledge or consent of people who made these overpayments and, therefore, exacerbated the overpayment problem rather than corrected it.

The issue of applying overpayments to outstanding tickets (other than for which the payment was sent) was addressed in a memorandum dated August 23, 1994 from Lockheed to the TSA administrator. The memorandum indicated that Lockheed would contact respondents, by letter, who made overpayments after 1993 "...asking their preference for getting a refund of their overpayment or applying it to an outstanding ticket..." This memorandum was approved by the TSA administrator on August 24, 1994. The Auditor notes that this memorandum implies that respondents should have been given the opportunity to choose between receiving a refund or reapplying the overpayment to an outstanding ticket. Despite its acknowledgment that consent should be obtained, neither Lockheed nor DPW made any discernible effort to contact anyone concerning the disposition of their overpayment.

RECOMMENDATIONS

1. DPW immediately notify respondents who have made overpayments during the past five years to facilitate a refund or obtain consent for reapplication. Should DPW be unable to contact individuals who have made overpayments, it should then publish the parking ticket control number, license plate number, state of vehicle registration, amount of the overpayment, and other necessary data in a newspaper of general circulation at least quarterly until all overpayments recorded in the TIMS over at least the past five years are refunded or reapplied to outstanding tickets issued to the same license plate.
2. DPW must discontinue the practice of archiving overpaid parking tickets without first issuing a refund or obtaining consent from the registered vehicle owner to reapply the payment to outstanding parking tickets issued to the same license plate.

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LOCKHEED IMPROPERLY COLLECTED APPROXIMATELY $67,155 IN FEES FROM OVERPAYMENTS OF DELINQUENT TICKETS

The Auditor reviewed a sample of 314,600 delinquent ticket collections for fiscal years 1996 and 1997. The review revealed that approximately , or 1%, of our sample were overpaid in an amount totaling approximately $177,664 with Lockheed receiving fees of approximately $67,155 from the overpayments. Table V highlights fees collected improperly by Lockheed from overpaid parking and certain moving violation tickets.

TABLE V
FEES COLLECTED BY LOCKHEED FROM OVERPAYMENTS:
FISCAL YEARS 1996 AND 1997

Source: Lockheed's Fee Analysis Reports and Office of the D.C. Auditor

Lockheed's collection of these fees was improper because Lockheed had already collected a fee for its efforts from the original payment-in-full. Any subsequent overpayment of parking tickets represented payments to which the District government and Lockheed were not entitled to keep. In a significant number of cases, the overpayments resulted from deficiencies in the ticket processing and delinquent ticket collection systems. For example, the Auditor noted overpayments that were made three (3) to thirteen (13) months after a ticket had already been paid-in-full. TSA officials attributed overpayments to the following:

• initially paying the ticket in full and later paying the same ticket that was listed on a subsequent notice of outstanding tickets sent by Lockheed;
• ticket payments not being recorded in the on-line ticket system in a timely manner;
• parking control aides writing a fine amount on a ticket that was greater than the fine amount shown on Lockheed's online fee tables. The respondent paid the amount written on the ticket but the on-line system reflected and an overpayment;
• a ticket is paid and the infraction is later dismissed hut a refund is not processed.

Moreover, according to the Auditor's review, the primary factors contributing to overpayments being made up to thirteen months after the initial payment-in-full resulted from delinquent notices being continually sent by Lockheed after payment-in-full had already been made and the payment not being timely recorded in the Ticket Information Management System. This indicated that either the payment was not properly entered in the on-line system or the system has a deficiency which allows notices to continue to be sent to individuals for tickets that they have already paid-in-full.

In a review of 70 of the 1,488 overpaid tickets in fiscal year 1996, the Auditor found that approximately 25% continued to receive delinquent notices from Lockheed after tickets had been paid-in- full. Under the threat of having vehicles booted and towed to the impoundment lot and credit histories impaired, individuals have unnecessarily paid parking fines and penalties not legally due to the District.

The second factor contributing to overpayments included a delay between the transaction date and posting date (i.e. the date the payment was received and the date the payment was recorded in the on-line system). The Auditor observed instances in which there was a significant delay in posting payments received through the lockbox to the TIMS system. A sample of the delays in posting is presented in Table VI.

TABLE VI
PAYMENTS NOT TIMELY POSTED IN LOCKHEED'S TICKET INFORMATION MANAGEMENT SYSTEM

As a result of this deficiency (failure to timely record payments in the Ticket Information Management System) District residents, particularly, were prevented from renewing vehicle registration, and their vehicles were placed at risk of being booted and towed unless these improperly assessed fines were paid to the District. The data reviewed by the Auditor indicated that, in fact, some vehicles in our sample were booted and/or towed as a result of this deficiency.

Additionally, the Auditor found instances in which the Office of Information and Telecommunication Services' failure to update DMV renewal records contributed to overpayments. Table VII presents a sample of the impact of this deficiency.

TABLE VII
SAMPLE IMPACT OF FAILURE TO UPDATE DMV RENEWAL RECORDS

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DPW'S OFFICE OF INFORMATION AND TELECOMMUNICATION SERVICES (OITS) ERRONEOUSLY SUBMITTED DOUBLE ENTRIES TO LOCKHEED

In addition to the overpaid tickets, the Auditor noted double entries of parking ticket payments on a sample of tickets taken from Lockheed's fee analysis reports which were submitted to TSA on a monthly basis. The double entries, within our sample, resulted in Lockheed improperly collecting fees totaling approximately $5,368 on 214 tickets during fiscal years 1996 and 1997.

Discussions with DPW's TSA administrator and project monitor indicated that double entries occurred in DPW's OITS when payments were made in connection with Division of Motor Vehicle registration renewals. In an April 11, 1997 letter from Lockheed's project manager to TSA's project monitor/technical representative, the contractor identified 1,447 double entries and approximately $10,882 in fees erroneously collected between 1990 and 1996 as a result of double entries of the same payment. The TSA administrator, in a May 14, 1997 memorandum, indicated "that OITS erroneously ran certain transactions more than once in extracting ticket payments made through the Signet Bank lockbox utilized by Motor Vehicle Services for mail registrations." The TSA administrator indicated that the double entry transactions, which resulted in duplicate fees being paid to the contractor, would be resolved with a one-time adjustment. Lockheed adjusted its May 6,1997 invoice by approximately $11,168 for fees improperly paid on double entries under its delinquent ticket collection contract.

The Auditor obtained from Lockheed's project manager for ticket processing a copy of a document entitled "Method for Handling Duplicate Payment Batches Received from OITS." The document set forth the following procedures to detect duplicate entries:

... "Each night, a single file is sent via the Daily File Transfer from OITS to IMS [Lockheed] containing payments processed for tickets included on registration hold notices. The file has a header that contains the date and the number of records. IMS accumulates these headers and compares the transmitted file with all others sent before it. If there is a duplicate header, the job is aborted and the file le is deleted. This is a standard procedure to ensure that batches that may be transmitted twice are not updated twice. This happens as part of the nightly update cycle and is not included on any standard reports. "

Lockheed's project manager for delinquent ticket collections indicated that these procedures were implemented in November 1996. Despite the implementation of these procedures, the Auditor found that double entries continued to occur through September 1997. The Auditor notes that Lockheed's TIMS failed to identify and delete double entries. As a result of this failure, DPW should require Lockheed to review its files for all double entries of parking ticket payments over the past two (2) years and make the appropriate adjustments and reimbursements to the District.

RECOMMENDATIONS

1. DPW immediately request reimbursement of approximately $67,155 in fees improperly collected by Lockheed from overpayments identified by the Auditor, and request reimbursement on all improperly collected fees not included in the Auditor's sample.
2. DPW's OITS immediately institute necessary changes to prevent double entries within its system that are subsequently transferred to Lockheed's Ticket Information Management System (TIMS).
3. DPW include appropriate language in future contracts to prohibit contractors from collecting fees on ticket overpayments and double entries.
4. DPW immediately request reimbursement of approximately $5,368 in fees collected on double entries by Lockheed, during fiscal years 1996 and 1997, as identified by the Auditor.
5. DPW must require Lockheed to review its files for all double entries and make the appropriate adjustments and reimbursements.

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STATUS OF RECOMMENDATIONS MADE SINCE THE AUDITOR'S LAST AUDIT OF THE TICKET PROCESSING AND DELINQUENT TICKET COLLECTION CONTRACTS

The status of recommendations made in the Auditor's report entitled, "Review of the Award and Administration of Parking Ticket Processing and Delinquent Ticket Collection Services Contracts," dated July 12, 1995, are as follows:

• The Auditor recommended that the District require Lockheed to obtain consent from the contracting officer subcontract any further work to be performed under the ticket processing contract.
• The Auditor recommended that the District require the subcontract with PRWT be terminated immediately.
• The Auditor recommended that any future subcontracts for imaging or any other services under the ticket processing contract must be approved by the District's contracting officer for the ticket processing contract, the Director of Administrative Services, before the subcontracts are awarded by Lockheed.

No action has been taken concerning these recommendations. The contractor for the ticket processing and delinquent ticket collection contracts has three subcontractors: (1) Independence Federal Savings Bank provides lock-box services under the ticket processing contract; (2) PRWT Services and its affiliate D.C. PRWT Services provide ticket imaging and correspondence imaging under the ticket processing contract; and (3) KIDD International Data Processing Inc. provides data processing and administrative support under the delinquent ticket collection contract. These subcontracts were in place at the time of the last audit. The District's Department of Public Works has refused to require Lockheed to obtain TSA's consent or approval of subcontracts. DPW officials noted in their response to the Auditor's report of July 12, 1995 that, "...disclosure of subcontracting activities is not mandatory under Chapter 28 of the District's procurement regulations. In addition, it has always been the District Government's policy to [honor] a contractor's agreement with its subcontractors." Additionally, the Auditor found that Lockheed utilized the services of a private attorney in connection with the delinquent ticket collection contract.

• The Auditor recommended that the Department of Public Works and the D.C. Treasurer's Office take immediate steps to ensure that revenue collections reported by Lockheed and the District's Financial Management System are reconciled on a regular basis but not less than quarterly.

The Auditor in the previous audit report identified a $13 .3 million discrepancy between revenue data in Lockheed's revenue reports and the District's financial management system. In response to the Auditor's recommendation, DPW concurred and noted that a review of revenue source code 1501 would be conducted within 30 days.

The only actions taken by TSA to date was to convene a meeting on May 23, 1996 to address the audit recommendations and referred the matter to the District's independent auditor KPMG Peat Marwick. The independent auditor was unable to reconcile the difference due to a lack of resources and "the lack of sufficient information." No further actions have been taken by DPW or the D.C. Treasurer to reconcile revenue collections reported by Lockheed and the District's Financial Management System.

[Some words are missing in the original audit at this point.] Marwick. The independent auditor was unable to reconcile the difference due to a lack of resources and "the lack of sufficient information." No further actions have been taken by DPW or the D.C. Treasurer to reconcile revenue collections reported by Lockheed and the District's Financial Management System.

• The Auditor recommended that the traffic enforcement program, with particular emphasis on revenue collections by the District and the District's ticket processing and delinquent ticket debt collection contractor, be included in the forthcoming annual audit conducted by the District's independent auditor.
• The Auditor recommended that the Council of the District of Columbia consider amending D.C. Code, Section 40-608 to change the period that data is reported by the Department of Public Works for the parking enforcement and adjudication programs from a calendar year basis (January 1st to December 31st) to a fiscal year basis (October 1st to September 30th. This change will facilitate comparisons, evaluations, and reviews of financial and management data concerning the parking enforcement and adjudication programs. Currently, some parking enforcement and traffic adjudication financial data is reported on a fi seal year basis (October 1st through September 30th) and other parking enforcement and traffic adjudication data is reported on a calendar year basis (January 1st through December 31st). This disparity in reporting requirements defeats meaningful, effective and efficient analysis and monitoring of program and financial activities.

The traffic enforcement program, with particular emphasis on revenue collection by the District's ticket processing and delinquent ticket debt collection contractor, was not included in the fiscal year 1996 and 1997 annual audit conducted by the District's independent auditor. Further, the Council of the District of Columbia has not taken any action to amend D.C. Code, Section 40-608 to change the reporting period from a calendar year basis to a fiscal year basis for all data reported by the Department of Public Works for the parking enforcement and adjudication programs. Until changes are made to report program and financial data within compatible time frames, the data cannot be put to effective and meaningful use, is limited in value and usefulness to decision-makers and managers, and is a costly waste of revenue.

• The Auditor recommended that the Department of Public Works' controllers off ice provide a history of how, why, when and by whom the practice of paying the ticket processing and delinquent ticket debt collection contractor from unappropriated traffic fine revenue through the revenue refund method was established.
• The Auditor recommended the Department of Public Works immediately cease the practice of paying Lockheed from unappropriated revenue, and seek an appropriation to pay for these services for the remainder of fiscal year 1995 and in future fiscal years or seek the passage of legislation which would establish a special account into which parking revenues necessary to pay for ticket processing and delinquent ticket collection services could be deposited and from which the contractor providing these services would be paid.
• The Auditor recommended that those employees and officials of the District government authorizing the obligation and expenditure of unappropriated parking revenue in violation of the Anti-Deficiency Act be held accountable according to the requirements of the Act.

• Those authorizing payments by using Revenue Refund Vouchers in the future should be held accountable for making vendor payments by improperly using these vouchers.

The Controller of DPW was unable to provide a history of how, why, when and by whom the practice of paying the contractor from unappropriated traffic fine revenue was established. The DPW Controller further stated that it was an existing practice that predated him and that the persons responsible for this practice were no longer in government. Further, the DPW Director, thus far, has not obtained an appropriation to support the cost of this contract or the passage of legislation to establish a special account for parking revenues and the authority to pay for ticket processing and delinquent ticket debt collection services in the absence of an appropriation from Congress.

In fiscal year 1996, the contractor received $4.6 million in revenue reimbursements from the District under the ticket processing contract and $2.8 million under the delinquent ticket debt collection contract for a total payment of $7.4 million. In fiscal year 1997, the contractor received $6.0 million in revenue reimbursements from the District under the ticket processing contract and $3.3 million under the delinquent ticket debt collection contract for a total payment of $9.3 million. All of these payments were made by Revenue Refund Vouchers and therefore do not appear as expenditures in the District's FMS.

As previously noted, no action has been taken by the Department of Public Works or the District's Chief Financial Officer to cease this practice.

• The Auditor recommended that in future contracts for delinquent ticket debt collection, the District include a provision in the request for proposals and the resulting contract that delinquent tickets for parking violations written on vehicles registered in the District of Columbia will not be eligible for delinquent ticket collection assignment for at least twelve months after the date of issuance or until the registration for the tag or inspection sticker expires and the owner of the vehicle has not sought to renew for at least three months after the expiration date.

The Request For Proposals to provide parking ticket processing and delinquent ticket debt collection services to the District includes Section B 5.8 (2) which states that District of Columbia parking tickets shall be assigned 30 days after the expiration date of the vehicle registration in effect at the time of the issuance of the ticket. If the date cannot be determined by the ticket system, these tickets shall be assigned 365 days after the date of ticket issuance.

• The Auditor recommended that the Department of Public Works' Office of Information Services work in concert with the Bureau of Motor Vehicle Services and the Bureau of Traffic Adjudication to devise a methodology to share vital information which would result in tracking those individuals whose vehicles are registered in the District of Columbia that have outstanding parking violation tickets and prevent them from renewing a driver license, renewing vehicle registration, obtaining an inspection sticker, and obtaining a new license plate until they have satisfied their obligations to the District of Columbia for delinquent tickets. The District of Columbia should use all of the tools and methodologies available to it before assigning tickets to its collection contractor which charges extraordinary fees for tickets that will likely be paid within a six month period.

There have been several meetings in an effort to define the necessary system modifications to allow the Department of Public Works' Bureau of Motor Vehicle Services and the Bureau of Traffic Adjudication to share vital information. To date, this sharing of information has not been efficient.. Therefore, Lockheed continues to be paid unnecessarily for collecting revenue that the District would likely be able to collect.

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CONCLUSION

The Auditor concluded that DPW improperly accumulated and retained parking and certain moving violation ticket overpayments totaling approximately $17.8 million between 1981 and 1997. The collection and retention of parking ticket overpayments has been a longstanding problem that managers of this contract have failed, over many years, to effectively address. Individual overpayments ranged from $5 per ticket to $310 per ticket.

DPW failed to establish a fair and effective policy to govern the prompt refund of ticket overpayments. Instead, DPW inappropriately reapplied some overpayments to other outstanding tickets without the consent or knowledge of persons making the overpayment, and DPW archived (removed ticket overpayments from the on-line ticket information system) most overpayments as a means of avoiding making refunds.

Some of the factors contributing to overpayments, as identified by the Auditor included: (1) delinquent parking notices being continually sent by Lockheed after payment had already been made; (2) delays in posting ticket payments to the Ticket Information Management System (TIMS); and (3) the failure of the Department of Public Works' Office of Information and Telecommunications Services (OITS) to timely update Division of Motor Vehicle (DMV) records when parking tickets were paid through the vehicle registration renewal process.

Within the sample of 314,600 ticket payments, the Auditor found that DPW's contractor for ticket processing and delinquent ticket collection services improperly collected over $67,155 in fees from overpayments of delinquent tickets. Additionally, the Auditor found that the contractor collected $5,368 in fees on double entries of ticket payments that were erroneously made by DPW's Office of Information and Telecommunication Services.

The Auditor's review of the status of recommendations made in a previous report dated July 12, 1995 found that, the Department of Public Works has implemented only one of the recommendations. DPW has not implemented any of the Auditor's other recommendations. The one recommendation that was addressed by DPW related to the assignment Lockheed Martin IMS of delinquent parking tickets to issued to District registered vehicles. The Auditor recommended the inclusion of a provision in future requests for proposals (RFP) and resulting delinquent ticket collection contracts requiring that delinquent tickets issued on vehicles registered in the District of Columbia would not be eligible for delinquent ticket collection assignment for at least twelve months after the date of issuance or until the registration for the tag or the inspection sticker expires and the owner has not sought to renew for at least three months after the expiration date.

The Department of Public Works has included a provision in the (RFP) issued January 28, 1998 that requires the assignment of District of Columbia parking tickets 30 days after the expiration date of vehicle registration. If that date cannot be determined, tickets will not be assigned for delinquent ticket collection activity until after a 12 month period.

Respectfully submitted,

Deborah K. Nichols
Interim District of Columbia Auditor

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Auditor's Evaluation of Agency Comments

On March 6, 1998, the District of Columbia Auditor submitted this report in draft for review and comment to the Director of the Department of Public Works, the Office of the Chief Financial Officer and the Office of the Chief Management Officer. Comments were received from the Director of the Department of Public Works on March 16,1998 and are appended in their entirety to this report.

Overall, the comments received from the Department of Public Works did not adequately address the issues raised in the draft report concerning the collection and retention of overpaid tickets. In determining the approximate amount of ticket overpayments that are presently stored in Lockheed's Ticket Information Management System, the Auditor relied on data contained in three separate reports prepared by Lockheed at the request of the Transportation Systems Administration. These reports were prepared before the current audit was initiated and focused on ticket overpayments. The administrator of TSA relied upon these reports for an assessment of the overpayment problem. The Office of the Auditor used the same reports to develop an analysis of DPW's ticket overpayment problem.

On January 14, 1998, the Auditor requested a consolidated and updated overpayment report from DPW and Lockheed officials.. At that time, the Auditor was informed that such a report would not show any significant changes from the overpayment information previously made available to the Auditor.

On February 1, 1998, the Auditor held a meeting with DPW/TSA and Lockheed officials to specifically discuss overpayments identified by Lockheed in the three separate overpayment reports. At no time did DPW or Lockheed officials indicate that the information contained in the three reports did not accurately assess DPW's overpayment problem. Additionally, at no time did DPW or Lockheed officials indicate that a cumulative overpayment report could be made available to the Auditor as earlier requested. Therefore, the Auditor questions the credibility of an unaudited overpayment report that was develop by DPW and Lockheed after the issuance of and in response to the draft audit report.

Because the information contained in the March 11, 1998 overpayment report, attached to DPW's comments, represents unaudited data, the Auditor stands by the original finding that DPW accumulated and retained overpayments on 829,837 tickets totaling approximately $17,847,891.

The Auditor further recommends that an assessment of ticket overpayments be conducted by the Office of the Auditor in conjunction with an independent information systems expert to determine the accuracy of Lockheed's March 11, 1998 overpayment report.

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
DEPARTMENT OF PUBLIC WORKS
2000 14TH STREET. N.W.
6TH FLOOR
WASHINGTON. D.C. 20009

OFFICE OF THE DIRECTOR
(202) 939-8000

March 16, 1998

Ms. Deborah K. Nichols
Interim District of Columbia Auditor
415 12th Street, N.W., room 210
Washington, D.C. 20004

Dear Ms. Nichols:

Thank you for the opportunity to respond to the draft audit report entitled "Follow-Up Audit of the Ticket Processing and Delinquent Ticket Collections Contracts." The responses of the Department of Public Works are outlined in this letter and were prepared within the time constraints imposed by the response deadline.

The draft audit report raises issues concerning the refund of overpayments made on parking tickets. The Department of Public Works is committed to quality service to the public and intends to provide a fair and equitable process for the refund of overpayments. We have already initiated a proactive policy to identify persons in overpayment status and notify them by mail of the overpayment status. We are in the process of refining our policies in this area and, in the best interests of everyone, will formally publish rules within 120 days. Our final determination of the cutoff period for issuance of refunds will be guided by provisions of the Unclaimed Property Act, applicable statute of limitations, and any legal determinations on the propriety of issuing refunds.

To the extent that some overpayments may have been tied to the interaction of the ticket system with the aged Motor Vehicle Information System (MVIS), the pending modernization of MVIS should minimize problems resulting from the "registration hold" process and the communication of records to the ticket system.

We are convinced that overpayments are largely unavoidable and will always occur as a small percentage of total revenue collected. Historically, this percentage has ranged between one and two percent of gross collections. While we are reviewing current processes to minimize avoidable overpayments, there are many causes of overpayments, some of which are behavioral rather than system-based, and it is unlikely that we will ever reach a point of a zero overpayment balance.

Perhaps most importantly, we wish to point out that the data utilized by the auditors has been incorrectly aggregated, resulting in an exaggeration of both ticket and overpayment amounts. This is understandable, since one cumulative report was not available to the auditors during their review and three separate reports with different timeframes, parameters and formats were utilized instead. In order to obtain a more accurate assessment, we requested the ticket processing contractor to run a cumulative report to include all data from the earliest year in system files, which is 1981. This report, received after the date of the draft audit report, indicates a cumulative overpayment balance of approximately $12.4 million, which is considerably less than the approximate balance of $17.8 million indicated on the auditor report. It should also be noted that the majority of the total balance (approximately $7.7 million) represents overdue balances from years prior to 1992.

The Department of Public Works offers the following specific comments with respect to the audit comments and findings cited:

FINDING:

The Department of Public Works has taken no action concerning previous audit recommendations to:

• require the contractor to obtain consent from the contracting officer to subcontract any further work to be performed under the ticket processing contract;
• require the subcontract with PRWT to be terminated; and

• require approval from the District's contracting officer, the Director of Administrative Services, before any future subcontracts for imaging or any other services under the ticket processing contract are awarded to the contractor.

RESPONSE:

While it is clearly an option for the contracting officer to independently determine a prospective subcontractor's responsibility, this is not a general practice in the District Government, and Title 27 DCMR sec. 2203.1 only requires that a prospective prime contractor shall be accountable for determining the responsibility of prospective subcontractors. The District contracted with the prime contractor, Lockheed Martin IMS, through an open and competitive process. In addition, there is no established contractual relationship between the District and the subcontractor. It is not the role of the Contracting Officer to subject his or her will on the prime contractor with reference to who will perform as subcontractors.

The prime contractor, Lockheed Martin IMS, retains full responsibility for the quality of service delivery to the District and management of its subcontractors. In this regard, we have found the performance of Lockheed Martin IMS to be satisfactory.

FINDING:

The Department of Public Works and D.C. Treasurer's Office have not taken adequate steps to ensure that revenue collections reported by Lockheed and the District's Financial Management System are reconciled on a regular basis but not less than quarterly.

RESPONSE:

We are concerned that there are large discrepancies between the revenue data in the contractor's revenue reports and the Financial Management System. There were initial attempts made, as noted in the draft report, which did not rectify the discrepancies. Data discrepancies within the Financial Management System (FMS) are not limited to the ticket revenue collection program. There have been reconciliation issues with most agency feeder systems to FMS, which is a major reason why the District is moving to a new financial system.

We will initiate a review of past financial data, to the extent that it is available, to determine causes for past discrepancies. Outside resources will be necessary to accomplish this, and we anticipate that this review will commence within six months. More importantly, we will establish an ongoing reconciliation process to be effective as soon as staff resources can be assigned and procedures developed.

FINDING:

The traffic enforcement program, with particular emphasis on revenue collections and the ticket processing and collection contractor, should be included in the forthcoming annual audit conducted by the District's independent auditor.

RESPONSE:

The scope of the annual D.C. independent audit is within the purview of the Office of the Inspector General and is not an agency-based decision. If the ticket revenue collection program is not included in the annual audit program, it may be appropriate for the Office of the Inspector General to review the program from time to time in addition to its other monitoring responsibilities. We propose to assign additional in-house resources to monitor the ticket revenue collection contracts, in order to better focus on quality assurance and data integrity.

FINDING:

The Council of the District of Columbia should consider amending D.C. Code, sec. 40-608 to change the period that data is reported by the Department of Public Works for the parking enforcement and adjudication programs from a calendar year basis to a fiscal year basis.

RESPONSE:

We concur with this finding.

FINDING:

The Department of Public Works has not ceased the practice of paying the contractor from appropriated revenue, and should seek an appropriation to pay for these services.

RESPONSE:

We have worked diligently to obtain the necessary approvals for the funding of ticket processing operations from appropriated funds. In FY 1996, we requested that the FY 1998 budget be corrected to include funding for the ticket processing and collection contracts. This was not done at that time. We have maintained communication with the Office of the Chief Financial Officer, and by letter dated January 28, 1998 (enclosed), the Chief Financial Officer committed to begin funding the ticket revenue collection contracts from appropriated funds. In addition, we have submitted a decision package to adjust the appropriated budget in FY 1999, and are seeking to determine the appropriation source to be charged.

FINDING:

The Department of Public Works' Office of Information and Telecommunications Systems should work in concert with the Bureau of Motor Vehicle Services and the Bureau of Adjudication to devise a methodology to share vital information which would result in tracking those individuals whose vehicles are registered in the District of Columbia that have outstanding parking violation tickets and prevent them from receiving motor vehicle services until they have satisfied their obligations to the District of Columbia for outstanding tickets.

RESPONSE:

The Bureau of Motor Vehicle Services currently works in concert with the Office of Information and Telecommunications Systems to ensure that vital information is available in the Motor Vehicle Information System. The Bureau of Motor Vehicle Services currently follows a standard procedure to withhold the issuance of all vehicle related transactions until satisfaction of outstanding parking tickets, to include payment in full or evidence of dismissal of liability resulting from a hearing. Lists of parking tickets in default status are included with registration renewal applications, which are mailed monthly. These tickets must be satisfied as a precondition to registration renewal.

The registration hold process will be revisited in the transition to a new motor vehicle information system, which is scheduled for implementation in the first quarter of calendar year 1999.

FINDING:

DPW failed to establish a fair and effective policy to govern the refund of ticket overpayments and improperly accumulated and retained parking ticket overpayments.

RESPONSE:

We have been diligent in processing refunds when persons have applied for them, and we have established a refund program to prevent the continuation of the overpayment problem. We will promulgate a clear, equitable policy in the near future which will be consistent with District law, customer service and sound fiscal management.

While an overpayment plan could have been put into place earlier, we note that other cities under similar circumstances have not had long-standing programs. For example, Boston and Philadelphia both implemented initial overpayment plans in the mid-1990's.

FINDING:

DPW improperly accumulated and retained parking ticket overpayments totaling approximately $17.8 million.

RESPONSE:

As we indicated during the audit, available data reports that were provided to the auditors were not designed to accurately assess the cumulative overpayment picture. Enclosed with this response are data tables which more accurately reflect the overpayment balances. On the following page, the totals on these tables are contrasted with the totals in the draft auditor report.

The numbers on the enclosed tables are still substantial, but we will initiate an overpayment reduction plan.

FINDING:

DPW's decision to reapply overpayments on 60,989 tickets to other outstanding tickets issued to the same license plates was inappropriate and ineffective, and should request overpayment reports from the contractor.

RESPONSE:

DPW has arranged with the contractor for monthly reports to document the effectiveness of the overpayment notification process. The initial report is expected by the end of March, 1998, and we will share the findings with the Office of the D.C. Auditor.

The practice of offsetting amounts owed to other tickets on the same plate number is routine in other cities, including Boston and Philadelphia, and we are advised that this practice has been noncontroversial, as well as effective and appropriate. In Chicago, it is a policy to withhold refunds to persons who owe the city any money in any city program.

FINDING:

DPW reapplied and archived over $14.4 million of overpaid tickets without making an effort to refund the overpayments and failed to notify respondents concerning the disposition of overpayments.

RESPONSE:

Archiving is a commonly used strategy in many computing organizations to reduce the size of the record database and to place on inactive status those records which have not had activity over a designated period of time. As indicated in the audit report, archived records can easily be retrieved. Since the District did not have a formal written overpayment notification policy in place at the time of prior archives, the archiving did not make it any less likely that persons whose records were archived would receive refunds.

The notion that overpayments should be subject to archiving is not new. We have located in our records an archive criteria document from 1982 which lists tickets in overpaid status as eligible for archiving in the same manner as other tickets. Although eligible for archiving, tickets in overpaid status were not archived for a number of years. The archive policy will be reconsidered as part of our ongoing assessment and will be consistent with published rules.

We intend to notify persons when a payment reapplication has been made in order to minimize the possibility that the same ticket may be paid twice.

FINDING:

The contractor improperly collected approximately $67,155 in fees on overpayments of delinquent tickets.

RESPONSE:

The draft report notes that Lockheed's collection of these fees was improper because the contractor had already collected a fee from the original payment in full.

The ticket collections contractor is paid on the basis of a contingency fee on revenue collected. Tickets are regularly assigned to the contractor for collections activity. Fees can only be collected on payments made on assigned tickets. The fees in question were billed by the contractor after it was requested by the District to reapply, on two occasions, outstanding overpayment balances to other tickets on the same tags. In some instances, the oldest outstanding ticket had already been assigned for delinquent collections and collections activity had been initiated.

The draft report also notes four reasons why overpayments were attributed by officials of the Division of Motor Vehicles (formerly known as the Transportation Systems Administration). There are myriad causes for overpayments, and in fact nine reasons were provided to the auditor during the review. The additional reasons not listed in the report include overlapping overdue notices that arrive after payments are made; mistaken double payment on the same violation; charging of tickets to the wrong tags; more than one person remitting payment on the same ticket; and payments received by mail after the fifteenth day and prior to the twenty fifth day, in which a penalty for late payment is included (the latter reason applies to overpayments made prior to May 2, 1994).

Prior to authorizing payment to Lockheed Martin IMS for fees billed as a result of the 1996 overpayment reapplication process, we had discussions with the company and the Office of the Corporation Counsel on the basis for the fees. The company advised that the ticket collections contract does not exclude overpayments from fee collection and that overpayments applied on a case-by-case basis always had fees applied or removed. Further, the work performed to determine overpaid status and correctly apply or archive overpayments, and to ultimately print and mail overpayment letters, was beyond the scope of the contract and represents an ongoing expense to the company. In a discussion with the Office of the Corporation Counsel in October, 1996, we were advised that the company's position in assessing contingency fees on overpaid tickets is fairly compelling and that it would be difficult to argue an implied exclusion if the payments were legitimately applied to assigned tickets.

When refunds are made by the District resulting from overpayments applied to tickets in collections status, the refunded amounts are reduced from future contractor billings to the District.

A new solicitation for ticket processing and collections services has been advertised and responses are due to be received on March 31, 1998. DPW has inserted language in this RFP to deny payment of a contingency fee as the result of an overpayment on any ticket.

FINDING:

Some payments were not posted to the ticket system on a timely basis, thereby contributing to overpayments.

RESPONSE:

The audit report noted instances of delays in posting payments through the lockbox to the ticket system. In the fall of 1996, Lockheed implemented a "point of proof" quality control methodology which ensured that all payments received are updated and that payment batches are tracked more effectively. In calendar 1997, Lockheed processed in excess of one million payments in the ticket processing contract, and only 3.94% of payments were updated later than 48 hours after receipt. Many of the payments which were not updated in this timeframe were payment research items or resulted from faulty tapes, and updates generally occurred within a week. We can confirm that some payments which updated late to the ticket system prior to the implementation of the new quality control methodology were the result of delayed batch update by Lockheed. Not all delayed payment entries, however, are attributable to the contractor.

The contractor has mailed millions of notices during the years covered by the audit, and there will certainly be instances when a person may receive a notice after a ticket has already been paid. Usually this is due to notices crossing in the mail or payment of the original fine and not the penalty amount. System logic prevents notices from being mailed less than thirty days apart.

FINDING:

DPW's Office of Information and Telecommunications Services (OITS) erroneously submitted double entries to Lockheed.

RESPONSE:

We will review the data which you have used to verify that the transactions are in fact double entries and that the records were not part of the population for which the District has already been compensated by the contractor. We request that data provided for our review be relatively recent to better ensure that the originally transmitted data can be located intact by OITS. We request that you submit all available information at your earliest convenience. DPW will coordinate its review with the contractor.

If our review of your data indicates that the contractor has taken fees on additional double entries which were not previously compensated, we will be reimbursed.

The data transmission process will be revisited in the transition to a new motor vehicle information system. In addition, we will request OITS and the contractor to work together on quality controls to minimize the possibility of future double entries.

Corrections:

The contractor is identified, on page 2, as Lockheed Information Management Systems. The company name has been Lockheed Martin IMS Corporation since 1995. Two subcontractors are identified on page 7; a third subcontractor, Kidd International, should also be listed as a subcontractor on the ticket collections contract.

Both the District and the contractor are identified, on page 13, as retaining overpayments. The contractor does not retain overpayments; all funds received are deposited into the District bank depository.

On page 4 of the Background, the comment is made that the contractor, not the District, determines when tickets are eligible for assignment. The District's contract with Lockheed establishes the criteria by which tickets are to be assigned for delinquent collections activity. Scheduling logic in the ticket system compares ticket status with the contract criteria to identify those tickets eligible for assignment in accordance with the criteria, on a monthly basis.

Conclusion

DPW is dedicated to continuing its efforts to improve the quality of service extended to its customers. With this in mind, we are pleased to receive any constructive criticism of our processes which will improve service delivery.

Sincerely,
Cell Bernardino
Director

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Government of the District of Columbia
Chief Financial Officer

Anthony A. Williams

January 28, 1998

Dr. Andrew F. Brirnmer, Chairman
District of Columbia Financial Responsibility And Management Assistance Authority
One Thomas Circle, N.W., Suite 900
Washington, D.C. 20005

RE: Parking Meter Contracts

Dear Dr. Brimmer

As requested by the Council. we have reviewed two contracts for the Department of Public Works for parking meter management. As you know, there is no budget authority for these contracts in the FY 1998 budget. My office has therefore reviewed the contracts to determine if the) qualify for certification under Public Law 105-100 Sec. 138 (a)(1)(B)(ii), which states in part

Notwithstanding any other provision of law, the total amount appropriated in this Act for operating expenses for the District of Columbia for fiscal year 1998...shall not exceed the lesser of $4,811,906,000 (of which $118,269,000 shall be from intra-District funds), which amount may increase by the following: ... additional expenditures which the Chief Financial Officer ... certifies will produce additional revenues awing such fiscal year at least equal to 2()0 percent and is approved by the "Authority".

In. determining whether proposed expenditures qualify under this section we reviewed the reasonableness of the assumptions for revenues and examined the availability of funding in the current financial plan and budget for the current fiscal year.

Parking Meter Contract

We have reviewed the projections and assumptions used to determine the potential revenue that would be generated under this contract.

The fiscal year 1998 parking meter revenue budget includes revenue projections of $9.9 million for parking meter collections. This projection was based on having a collection contract in place on October 1, 1997. It is because the contract has not yet been signed, that the revenue projection is revised downward to $5.5 million. Without a contract for the remainder of the year, the revenue projection will continue to decrease to $3.2 million.

The cost of the parking meter replacement contract for FY 1998, which is not currently included in the budget, is $2.9 million. As shown in the table below, additional budget authority of $12.8 million for FY 1998-2001 is estimated to result in increased parking meter revenues of $27.8 million over the same period.

A comparison of additional budget authority required for the parking meter replacement contract and the resulting estimated change in parking meter revenues is also presented below.

Based on these projections, the potential lost revenue of $2.3 million for fiscal year 1998 cannot be certified under P.L. 105-100 Sec. 138(a)(1)(B) as being two hundred percent of the contract cost of $2.9 million for the current fiscal year. In absence of this certification, the contract could be considered under management reform without additional cost to the management reform projects, by identifying existing funds to be used until the point in the contract when revenue is sufficient to fund two hundred percent of the cost. If these options are not used, the cost of this contract would have to come from other resources either within the Department of Public Works or a reprogramming from other parts of the government.

Ticket Processing Contract

The ticket-processing contract includes revenue projections of $40.1 million for traffic fees. The Ticket Processing contract will cost $9.3 million for FY 1998. With the contract, revenues arc projected to increase to $58.8 million. The assumptions associated with this contract appear reasonable based on our review.

The costs for both the Parking Meter Replacement and Ticket Processing contracts total $12.2 million. The budget authority needed is $12.2 million. The Parking Meter contract does not meet the requirement of P.L. 105-100. It does not generate additional revenues at least equal to 200 percent of the expenditure. However, the Ticket Processing contract would generate additional revenues at least equal so 200 percent of the expenditure and can be certified under P.L. 105-100.

Conclusion

The ticket processing contract is hereby certified by the Chief Financial Officer of the District of Columbia under the provisions of P.L. 105-100 Sec. 138(a)(1)(B)(ii).

There are three options available to fund the parking meter contract.

• Management reform
• Identifying existing resources until such time as the contract will qualify for management reform
• Reprogramming other funds

The parking meter contract is projected to generate funds at least equal to the expenditure. Therefore, we recommend that the contract be considered for management reform. I would be happy to discuss the other options to ensure this important contract is funded.

Sincerely,
Anthony A. Williams
Chief Financial Officer

AAW/SRM

cc Marion S. Barry, Mayor
Linda W. Cropp, Chairman, Council of the District of Columbia
Harry Thomas, Councilmember
Camille Cates Barnett, Chief Management Officer

1. The Procurement Practices Act of 1985 (D C. Code, Section l-1181.5), and Mayor's Order 90-178, effective November 19, 1990.