Audit of Public Transportation 

Benefit Program 

March 27, 2009 

Report No. 456
Audit of Public Transportation Benefit Program March 27, 2009 

Report No. 456 

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Audit of Transportation Subsidy Program 

Executive Summary 

Background: The U.S. Securities and Exchange Commission’s (SEC or 

Commission) Public Transportation Benefit Program (transit benefit program) 

was established in 1992 to encourage employees to commute to and from work 

by means other than single occupant vehicles. To achieve this goal, the transit 

benefit program provides financial incentives to employees who regularly 

commute via public transportation, not to exceed the lesser of the Federal taxexcludable amount (currently $120 per month for 2009), or the actual commute 

cost. Executive Order 13150, “Federal Workforce Transportation,” was issued on 

April 21, 2000, and mandated all Federal agencies in the national capital region 

(Washington, D.C. metropolitan area) to implement a “transit pass” benefit 

program by October 2000. 

The SEC’s transit benefit program is administered by the Office of Human 

Resources (OHR). The Commission spent approximately $1.3 million on the 

transit benefit program in Fiscal Year 2007 and $1.6 million in Fiscal Year 2008. 

As of July 18, 2008, approximately 1,655 headquarters employees and 1,067 

regional office employees participated in the transit program. 

Objectives: The Office of Inspector General conducted this audit in accordance 

with our annual audit plan. The objectives of the audit were to: 

(1) Determine if the Commission has sufficient policies and procedures (i.e.,

management controls) in place to ensure compliance with applicable laws, 

regulations, and other requirements and to prevent and detect waste, 

fraud, and abuse in the transit benefit program, and 

(2) Assess whether employees are complying with transit benefit program 

participation requirements. 

Results: The audit found that the Commission has established some 

management controls over the transit benefit program. However, there are 

several areas in which significant improvements are needed. 

Specifically, the transit benefit application form and application process need to 

be strengthened to ensure compliance with the Office of Management and 

Budget (OMB) internal control guidelines. In addition, we found that transit 

benefit program participants were not always timely removed from the 

Department of Transportation’s (DOT) transit database based upon when they 

separated from the Commission. As a result, the audit found that some 

employees inappropriately collected benefits after leaving the Commission. 

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While we generally found that transit benefit program participants were 

complying with the program requirements, we also found that some participants 

did not adjust benefits when teleworking or taking extended leave. Further, OHR 

was unable to provide complete transit application data for nearly 50 percent (24 

of 50) of the transit benefit program participants in our sample that we selected to 

test compliance with program requirements. 

Summary of Recommendations 

To strengthen management controls, OHR should: 

(1) Finalize its revised transit application by April 30, 2009, and ensure 

that the application requires transit benefit program participants to 

provide a breakdown of commuting costs in accordance with OMB 

guidelines and includes a certification below the Administrative 

Officer’s signature line that clearly states that the application has 

been reviewed for verification of eligibility and commuting costs; 

(2) Conduct periodic training and issue reminders to Administrative 

Officers on their responsibility to verify the eligibility and commuting 

costs of transit benefit program participants; 

(3) Put in place a process to require transit benefit program 

participants to annually recertify their eligibility and commuting 

costs (i.e., complete a new transit benefit program application); 

(4) Implement a process to obtain separation data on all Commission 

employees and compare that data to the DOT’s transit database to 

ensure that all separated employees who participated in the transit 

program have been promptly removed from DOT’s database; 

(5) Pursue collection of $394 in erroneous benefits collected by transit 

benefit program participants after they separated from the 

Commission; 

(6) Ensure for each file identified as missing or incomplete that OHR 

obtain the necessary documentation to create a file (electronic or 

hard copy) containing, at a minimum, a copy of the participant’s 

transit benefit program application, SmartBenefit application, and 

documentation to support changes in commuting costs; 

(7) Put in place a process to conduct periodic internal reviews of transit 

benefit program participants who are on extended leave and/or 

frequently telework to ensure they are properly reducing benefits; 
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(8) Remind transit benefit program participants that they are required 

to reduce benefits if they are on extended medical or personal 

leave, travel, and any other situation that results in their commuting 

cost to be less than the amount of benefits they are eligible to 

receive in the applicable month. Additionally, OHR should provide 

instructions on how benefits are adjusted under the SmartBenefits 

program; 

(9) Seek recovery of the estimated $225 in overpayments erroneously 

collected by transit benefit program participants while they were on 

leave; 

(10) Implement additional management controls over regional office 

transit benefit program operations to ensure they are in compliance 

with SEC requirements, including: (a) performing periodic reviews 

of regional offices to examine their transit benefit program 

processes, (b) requesting that regional offices provide semiannual 

reports to headquarters in addition to the Regional Directors 

discussing the results of their program audits, and (c) requiring 

regional offices to have written policies and procedures tailored to 

their specific transit benefit programs. 
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TABLE OF CONTENTS 

Executive Summary......................................................................................................iii 

Table of Contents ......................................................................................................... v 

Background...................................................................................................................1 

Objectives .....................................................................................................................3 

Findings and Recommendations...................................................................................4 

Finding 1: The Transit Benefit Application Form and Process Should Be 

Strengthened ................................................................................................................4 

Cost Breakdown ...................................................................................................5 

Independent Verification of Commuting Costs and Eligibility................................6 

Re-certifications ....................................................................................................7 

Recommendation 1...............................................................................................7 

Recommendation 2...............................................................................................8 

Recommendation 3...............................................................................................8 

Finding 2: Employees Separating the Agency Are Not Always Removed In a 

Timely Manner from DOT’s Transit Database...............................................................8 

Recommendation 4.............................................................................................10 

Recommendation 5.............................................................................................10 

Finding 3: Transit Benefit Application Data Was Not Always Available or 

Complete ....................................................................................................................10 

Maintenance of Transit Benefit Program Applications and Related 

Documentation....................................................................................................11 

Transit Application Authorizations.......................................................................12 

Adjusting Benefits Due to Telework/Leave .........................................................12 

Recommendation 6.............................................................................................14 

Recommendation 7.............................................................................................15 

Recommendation 8.............................................................................................15 

Recommendation 9.............................................................................................15 

Finding 4: SEC Headquarters Should Increase Monitoring of Regional Office 

Transportation Benefit Programs ................................................................................15 

Recommendation 10...........................................................................................17 
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Appendices 

Appendix I: Acronyms. .....................................................................................19 

Appendix II: Scope and Methodology...............................................................20 

Appendix III: Criteria.........................................................................................22 

Appendix IV: List of Recommendations ...........................................................23 

Appendix V: Management Comments..............................................................25 

Appendix VI: OIG Response to Management’s Comments .............................26 
Background and Objectives

Background 

The U.S. Securities and Exchange Commission’s (SEC or Commission) Public 

Transportation Benefit Program (transit benefit program) was established in 1992 

to encourage employees to commute to and from work by means other than 

single occupant vehicles. To achieve this goal, the transit benefit program 

provides financial incentives to employees who regularly commute via public 

transportation, not to exceed the lesser of the Federal tax-excludable amount 

(currently $120 per month for 2009) or the actual commute cost. Executive 

Order 13150, “Federal Workforce Transportation,” was issued in April 21, 2000, 

and mandated that all Federal agencies in the national capital region 

(Washington, D.C. metropolitan area) implement a transit pass benefit program 

by October 2000. 

In April 2007, the Government Accountability Office (GAO) provided testimony to 

a Congressional Subcommittee regarding the Federal Transit Benefits Program, 

entitled “Ineffective Controls Result in Fraud and Abuse by Federal Workers.” 

GAO found that individuals were selling Metrocheks on eBay and Craigslist, as 

well as claiming benefits to which they were not entitled, and identified 

weaknesses in the design of program controls at several agencies.1

 As a result 

of the GAO review, the Office of Management and Budget (OMB) issued a 

memorandum to the Executive departments and agencies in May 2007 requiring 

all agencies with transit benefit programs to implement several internal controls 

designed to deter fraud, waste, and abuse.2

 The OMB required internal controls 

included application requirements, independent verification of eligibility, and 

program implementation controls. 

The SEC’s transit benefit program is administered by the Office of Human 

Resources (OHR). A program manager oversees the daily operations of the 

transit benefit program at the SEC’s headquarters location (Washington, D.C. 

metropolitan area). In participating regional offices, a program coordinator 

administers the transit benefit program under the direction of the office’s 

Regional Director. 

 

1

 GAO-07-724T, Testimony Before the Permanent Subcommittee on Investigations, Committee on 

Homeland Security and Governmental Affairs, U.S. Senate: Federal Transit Benefits Program, Ineffective 

Controls Result in Fraud and Abuse by Federal Workers, April 24, 2007. 

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2

 M-07-15, Memorandum For All Heads of Departments and Agencies, dated May 14, 2007, Subject: 

Federal Transit Benefits Program. 

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arding 

nts in 

dles 

fit 

 

To assist in administering the program, the SEC entered into an interagency 

agreement with the Department of Transportation (DOT).3 Under this 

agreement, DOT is responsible for processing enrollment applications, 

safeguarding and distributing fare media, providing monthly statements reg

employee participation, maintaining a database that identifies all participa

the program, and providing customer service support for the headquarters 

location, as well as the Los Angeles and Atlanta regional offices. OHR han

all enrollments, terminations and employee record changes for the transit bene

program. 

The Commission spent approximately $1.3 million on the transit benefit program 

in Fiscal Year 2007 and $1.6 million in Fiscal Year 2008. As of July 18, 2008, 

approximately 1,655 headquarters employees and 1,067 regional office 

employees participated in the transit program. Based on DOT data as of 

November 2008, approximately 1,206 headquarters employees received 

SmartBenefits by downloading them on a SmarTrip Card. 

SmartBenefits is a web-based program that allows employers to assign a value 

to the employees’ SmarTrip card. Effective in March 2009, employees 

commuting to and from work via Metrorail and Metrobus must use SmarTrip 

cards. A SmarTrip card is a rechargeable fare card that can be purchased and 

registered through the Washington Metropolitan Area Transit Authority 

(WMATA). In order for employees to gain access to their SmartBenefits, they 

have to download their benefits electronically from a Metro station passes/fare 

card machine onto their SmarTrip cards each month. Use of the SmarTrip card 

provides employees a way to recoup losses if the card is lost or stolen. It also 

gives employees the ability to consolidate all transit benefit funding into one 

place, including adding their own money, up to the $300 card maximum funding 

capacity. Employees who do not download the monthly benefit to their SmarTrip 

cards by the last day of the benefit month lose that month’s funding, which 

automatically reverts to the Agency as a credit on a future WMATA monthly 

invoice. 

Effective March 2009, employees who commute to work on any form of 

transportation that does not accept the SmarTrip card (e.g., certified vanpool, 

Virginia Railroad Express or MARC train) have the option of receiving their 

approved monthly transit benefits by paper fare (SmartTrip vouchers). These 

participants will still go to the regularly scheduled transit disbursements at the 

SEC’s headquarters location at Station Place and the Operations Center in 

Alexandria, VA to pick up their benefits covering a two-month period. Annually, 

participants are provided a schedule of distribution dates and are also reminded 

by email of upcoming distribution dates. 

3

 Interagency Agreement Between SEC and DOT dated September 11, 2008, Agreement Number 021-TFC3017010201-09. 
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Objectives 

The Office of Inspector General (OIG) conducted this audit in accordance with 

our annual audit plan. The objectives of the audit were to: 

(1) Determine if the Commission has sufficient policies and procedures (i.e., 

management controls) in place to ensure compliance with applicable laws, 

regulations, and other requirements, and to prevent and detect waste, 

fraud, and abuse in the transit benefit program, and 

(2) Assess whether employees are complying with transit benefit program 

participation requirements. 
Findings and Recommendations 

The audit found that the Commission has established some management 

controls over the transit benefit program. However, additional improvements can 

be made in the areas of: 

 

(1) Strengthening the transit benefit program application process; 

(2) Timely removing separated employees from DOT’s transit database; 

(3) Maintaining complete pertinent data on current program participants; and 

(4) Increased monitoring of regional office transit benefit programs. 

Additionally, while we generally found that transit benefit program participants 

were complying with the program requirements, we also found that some 

participants may not be adjusting their benefits due to telework schedules and 

extended leave. 

Finding 1: The Transit Benefit Application 

Form and Process Should Be Strengthened 

The Commission’s internal policies and procedures 

for the transit benefit program, SECR 5-9, Public 

Transportation Subsidy Program,4

 generally reflect 

current processes and procedures and appear to be 

consistently followed; however, the program 

application form and application process need to be 

strengthened to ensure compliance with the OMB 

Memorandum M-07-15, Federal Transit Benefits 

Program, dated May 14, 2007 (OMB Memorandum 

M-07-15). 

The OMB Memorandum M-07-15 was issued in response to an April 2007 GAO 

review in which numerous instances of fraud and abuse of Metrocheks by 

Federal employees were disclosed. The memorandum required agencies to 

confirm in writing, by no later than June 30, 2007, that certain internal controls 

had been implemented regarding the transit application process, including the 

following: 

 

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4

 SECR 5-9, SEC Administrative Regulation, Public Transportation Subsidy Program, February 16, 2005. 

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Application Requirements 

• Commuting Cost Breakdown 

Independent Verification of Eligibility 

• Commuting Cost Verified by Approving Official (e.g., employee’s 

home address validated and commuting cost correctly calculated). 

• Eligibility Verified by Approving Official5

 

The SEC’s response to OMB stated that the OHR Transit Benefit Program 

Manager routinely verifies that all applications include a home address, 

employee work address, commuting cost breakdown, and an employee 

certification of eligibility. Additionally, the OHR Transit Benefits Manager 

currently verifies all applications by utilizing the WMATA trip planner tool to 

ensure employees request the correct amount of transportation benefits. 

Based on our review of the Commission’s internal policies and procedures, and 

interviews of transit benefit program representatives, we found that the SEC has 

not fully implemented the following OMB required internal controls: 

1. Cost Breakdown

The current SEC application for transit benefits, SECR 2445, Application 

for Transit Benefit, dated April 2004, does not require a cost breakdown of 

a participant’s commuting costs. The application contains a certification 

that states, “I certify that my average monthly commuting cost on public 

transportation is $___________________. This amount does not include 

parking or expense for my personal vehicle. It does not reflect 

consideration for periods of regular and/or recurring extended business 

travel when I will not commute from home to work.” 

An attachment to OMB Memorandum M-07-15 contains a mass transit 

expense worksheet showing that participants should be required to list 

their mode(s) of transportation (e.g., bus, light rail subway, train or 

vanpool), daily expense, weekly expense and monthly expense. 

Additionally, teleworkers and part-time employees must complete a 

specific section of the worksheet showing the appropriate reductions in 

benefits. 

Based on discussions with the SEC’s current OHR Transit Program 

Manager during the course of this audit, the SEC’s application for transit 

benefits is being revised to include a cost breakdown and a draft is 

currently being circulated for comment. 

 

5

 OMB Memorandum M-07-15, page 2. 
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2. Independent Verification of Commuting Costs and Eligibility 

The OMB’s internal control guidelines require that an approving official 

verify a transit benefit program participant’s eligibility and commuting 

costs. Currently, the SEC’s OHR Transit Program Manager primarily 

relies on the Administrative Officers within each office/division to perform 

this function as part of their review of the transit benefit program 

application prior to its submission to OHR. The Transit Program Manager 

then performs a second, more cursory review of the application prior to 

submitting it to DOT. 

The SECR 5-9, Public Transportation Subsidy Program, states that the 

Administrative Officer will review the application for accuracy, indicate the 

month that the participant is eligible to start receiving the transit benefit, 

enter the organizational name and code, sign on the appropriate line and 

forward the application to OHR.6 However, there is no documentation to 

support that the Administrative Officers are independently verifying 

employees’ commuting costs and eligibility. 

We noted the following specific issues. First, while the SEC has 

designated Administrative Officers as approving officials for transit 

applications and requires them to sign the application prior to submission 

to OHR, it is not clear what the Administrative Officer’s approval 

represents (i.e., the signature line does not currently contain a certification 

of any kind). Second, without having some type of cost breakdown on the 

transit application, the task of verifying commuting costs is difficult to 

perform with any accuracy. For example, in order to verify commuting 

costs appropriately, Administrative Officers would have to determine the 

closest rail or train station based on the participant’s home address and 

estimate costs without knowing if the person also took a vanpool, bus, etc. 

Moreover, there is no evidence that the Administrative Officers are 

actually performing this calculation. Third, based on our review of a 

sample number of transit benefit program files containing application 

information, the files generally do not contain supplemental information 

(e.g., a WMATA trip planner or equivalent) documenting that commuting 

costs were verified. 

Based on discussions with the current OHR Transit Benefit Program 

Manager, and after the auditor brought this matter to OHR’s attention, 

OHR has modified the transit benefit program application to include a 

certification statement below the Administrative Officer’s contact signature 

block to clearly indicate what the signature represents. We believe that in 

addition to this certification, OHR should periodically train and remind 

 

6

 SECR 5-9, page 5. 
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Administrative Officers of their responsibilities with respect to verifying 

eligibility and commuting costs. 

3. Re-certifications 

The SEC currently does not require transit benefit applicants to recertify 

their eligibility and commuting costs on a periodic basis (i.e., complete a 

new transit benefit program application). As a result, the SEC may have 

outdated information on file for many program participants. 

The current application contains a box at the top of the form in which 

transit benefit program participants can place a check to change a name, 

address, or commuting cost. They can also apply as a new enrollee or reenroll after a period of non-participation. The application currently does 

not have a box or requirement to have program participants periodically 

recertify their transit information. 

While OMB’s internal control guidelines do not explicitly require recertification, OMB attached to M-07-15 an application adopting OMB’s 

required controls that includes a box at the top of the form for individuals 

to check for re-certification. Also, the OIG believes that periodic recertification is a necessary internal control to help ensure that OHR has 

current commuting information on transit benefit program participants. 

Additionally, as the application for transit benefits is modified in the future, 

participants will be required to sign the new forms and related 

representations/certifications. 

In response, the OHR Transit Benefit Program Manager agreed there is a 

need to implement a recertification requirement (i.e., have participants 

periodically fill out new transit benefit program applications that would 

contain cost breakdowns, etc.). However, he noted that in December 

2008, DOT required all participants to sign a declaration form stating 

whether they would be using the SmartTrip card or SmartTrip vouchers, 

and that this declaration also required participants to provide their monthly 

commuting costs. 

Recommendation 1

The Office of Human Resources should finalize its revised transit benefit program 

application by April 30, 2009, and ensure that the application: 

(1) Requires transit participants to provide a breakdown of commuting costs 

in accordance with OMB guidelines; and 
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(2) Includes a certification below the Administrative Officer’s signature line 

that clearly states that the application had been reviewed for verification of 

eligibility and commuting costs. 

Recommendation 2

The Office of Human Resources should conduct periodic training and issue 

reminders to Administrative Officers on their responsibility to verify transit 

participants’ eligibility and commuting costs. 

Recommendation 3

The Office of Human Resources should put in place a process to require transit 

participants to re-certify annually their eligibility and commuting costs (i.e., 

complete a new transit benefit application). 

Finding 2: Employees Separating From the 

Agency Are Not Always Removed In a Timely 

Manner From DOT’s Transit Database 

We found that transit benefit program participants 

were not always removed in a timely manner from the 

DOT transit database upon separation from the 

Commission. As a result, we found that some 

employees inappropriately collected benefits after 

leaving the Commission. 

We obtained employee separation data from OHR for Fiscal Year 2008 and 

compared the information to a DOT list of all transit benefit program participants 

as of November 2008. We also identified 38 participants who had separated 

from the SEC, but were still active in DOT’s transit benefit program database. 

We brought this issue to the attention of the OHR Transit Benefit Program 

Manager, who in turn asked DOT to clean-up the database by removing 

applicants who had been inactive for three or more months. Through this 

process, the OHR Transit Benefit Program Manager also discovered that DOT 

was not automatically purging the database every three months as the SEC had 

requested. The SEC has instructed DOT to do so going forward. 

We then identified and gathered detailed information for 13 transit benefit 

program participants who remained in DOT’s transit database after the clean-up 

of records, to determine why they were still active participants in the SEC’s 
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transit benefit program when they were shown as having separated from the 

Commission. Based on available data from DOT and OHR, we found: 

• For 10 of 13 participants (which included two student interns and 

one employee who subsequently became a contractor), OHR and 

the Office of Financial Management (OFM) could not locate a copy 

of an exit clearance form (SEC Form 1455), as required by SECR 

7-4, Employee Clearance Process, dated December 31, 1999. As 

a result, according to the OHR Transit Benefit Program Manager, 

OHR was unaware that these individuals had left the agency and, 

therefore, did not initiate action to have them removed from DOT’s 

transit database. Further, we found that three of the 10 transit 

participants withdrew benefits using their SmartCards or picked up 

benefits totaling $624, after they separated from the SEC as 

detailed in the table below. OHR, in conjunction with OFM, 

required Participant B to return the $230 in erroneous benefits after 

another SEC employee notified DOT that the individual had 

become a contractor and was no longer entitled to the benefits. 

Table 1: Transit Participants Withdrawing Benefits After Separation 

Participant Separation 

Date 

Dates and Amounts of 

Drawdowns/Pickups 

Amount of 

Benefits 

Received After 

Separation 

A 1/19/08 Drawdown: 6/29/08, 

$92, 10/26/08, $92 

$184 

B 7/20/08 Pickup: 8/6/08 for 

August $115 and 

September $115 

$230 

C 8/8/08 Drawdown: 10/26/08, 

$105, 11/29/08, $105 

$210 

Total $624 

 Source: OIG Generated 

• An OFM representative responsible for the exit clearance process 

was unable to provide the OIG with an explanation for why there 

were no exit clearance forms for the 10 participants. 

• For 2 of 13 participants, an OHR transit benefit program 

representative signed the exit clearance form, but there was no 

documentation to show that OHR had instructed DOT to remove 

the participants from its database. For one of the two participants, 

the OHR transit benefit program representative who signed the 

form was no longer employed at the SEC and, therefore, was 

unavailable for comment. 
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• For 1 of 13 participants, an exit clearance form was completed by 

the participant and signed by the Administrative Officer, but the 

OHR Transit Benefit Program Manager never received it. As a 

result, the OHR Transit Benefit Program Manager was unaware 

that the participant had separated from the SEC and did not 

remove him from DOT’s transit database. It should be noted that 

the employee exit clearance form does not provide specific 

instructions as to who should sign off on particular items, such as 

transit benefits. 

Due to the unreliability of the exit clearance process, OHR should periodically 

review separation data to identify any transit benefit program participants who 

need to be removed from DOT’s transit database so these participants are no 

longer eligible to collect benefits. OHR should also make efforts to recover the 

$394 in erroneous benefits collected by participants after they separated from the 

Commission. 

Recommendation 4

The Office of Human Resources should implement a process to obtain data on 

all separated Commission employees and compare that data to the Department 

of Transportation (DOT) transit database to ensure all separated employees who 

participated in the transit benefit program have been promptly removed from 

DOT’s records. 

Recommendation 5

The Office of Human Resources, in coordination with the Office of Financial 

Management, should pursue collection of the $394 in erroneous benefits that 

were collected by Participants A and C after they had separated from the 

Commission. 

Finding 3: Transit Benefit Application Data 

Was Not Always Available or Complete 

The audit found that transit benefit application data 

was not always available or complete. Additionally, 

transit benefit program participants may not always be 

adjusting their transit benefits while on leave and 

teleworking. As a result, management controls are 

not always functioning as intended. 
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Where documentation was available for our judgmental sample of 50 transit 

benefit program participants, we generally found that the applications were 

complete, the participant was eligible to collect transit benefits (e.g., was not a 

government contractor, non-paid intern, etc.), claimed commuting costs were 

reasonable, OHR timely processed the applications, and employees adjusted 

their transit benefits while on extended leave. 

However, OHR was unable to provide complete application data for nearly half of 

our sample (24 of 50 participants) and, therefore, we were unable to determine 

for those participants whether the application was processed timely and claimed 

commuting costs were reasonable. We also identified three instances where 

transit benefit applications were not signed by the Administrative Officers or by 

OHR, prior to being sent to DOT. Further, we found that two transit participants 

did not adjust benefits due to extended leave. Lastly, we were unable to obtain 

telework data detailing actual days or hours of telework for any of the sampled 

transit benefit program participants to determine if participants had appropriately 

reduced benefits while teleworking. 

Maintenance of Transit Benefit Program Applications and Related 

Documentation 

We requested OHR to provide OIG with transit benefit program applications and 

supporting documentation, such as SmartBenefit applications, transit benefit 

increase requests, and emails showing when OHR processed the application and 

forwarded it to DOT for the 50 participants in our sample.7

 OHR was unable to 

provide any information or files for seven applicants. Additionally, for 17 

applicants, OHR provided files, but they did not contain copies of the transit 

benefit applications, which are the primary documents containing the participants’ 

transit-related information and approvals by the applicable Administrative Officer 

and OHR. 

The OHR Transit Benefit Program Manager explained that prior to the time he 

took over responsibility for the transit benefit program in May 2008, there was no 

centralized OHR filing system for the program. Transit benefit applications and 

related information were kept in prior OHR Transit Benefit Program Managers’ 

personal hard copy files, as well as personal emails. The OHR Transit Benefit 

Program Manager provided documentation to show that OHR is working with the 

SEC’s Office of Information Technology to develop a database to house key 

transit benefit data, as well as electronic copies of applications and other related 

forms. Additionally, OHR has set up a dedicated Outlook mailbox and drive for 

transit benefit program correspondence and documents. 

7 It should be noted that these participants were active in the transit benefit program during Fiscal Year 

2008; however, many of them entered the program several years earlier. Accordingly, the scope of our 

review of transit benefit application processing extended beyond Fiscal Year 2008 activities.
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Transit Application Authorizations 

We also found that three transit benefit applications were not signed by the 

Administrative Officers or OHR, as required by the SEC internal guidelines. 

SECR 5-9, Public Transportation Subsidy Program, requires transit benefit 

applications to be approved by both the Administrative Officer and OHR prior to 

submission to DOT.8

 These authorizations are necessary to ensure that the 

participant is eligible for the program and commuting costs are properly 

calculated. 

Based on available transit benefit program files and data for our judgmental 

sample of 50 participants, we found one application that did not contain a 

signature to show that it was reviewed by the Administrative Officer, prior to 

submission to OHR. Additionally, two applications did not contain signatures 

from the OHR Transit Benefit Program Manager to show they were reviewed and 

authorized by OHR. We found, however, that all applications processed by the 

current OHR Transit Benefit Program Manager contained the required OHR 

signatures. 

Adjusting Benefits Due to Telework/Leave 

The audit found that transit benefit program participants may not always be 

adjusting their transit benefits when they are on recurring telework schedules or 

are on extended leave. As a result, they were collecting benefits to which they 

were not entitled. 

SECR 5-9, Public Transportation Subsidy Program, requires transit benefit 

program participants who are on extended leave, personal leave, travel, or any 

other situation that causes their commuting costs to be less than the amount they 

are eligible to receive in any particular month to reduce the amount of transit 

benefits they claim. If they receive the full monthly benefit and did not use the full 

amount due to unanticipated personal leave or business travel, they must 

appropriately reduce their benefit at the next transit disbursement.9

Based on our sample of 50 transit benefit program participants, 30 participants 

had telework agreements on file with recurring telework schedules of six or more 

days per pay period, according to OHR records. Additionally, based on our 

review of payroll records, 18 participants took 32 or more hours of extended 

leave during Fiscal Year 2008 (e.g., sick leave, leave without pay). 

We found that 17 participants who were approved to work a recurring telework 

schedule of six or more days per pay period still claimed the $115 maximum 

8

 SECR 5-9, page 5. 

9

 SECR 5-9, page 6. 
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transit benefit during Fiscal Year 2008 each month. It should be noted, however, 

that there is no system for tracking actual days or hours of telework. 

Consequently, OHR was unable to provide actual telework data for the 

participants. Therefore, we could not confirm whether participants actually 

worked their approved telework schedules. 

The Work Life Program Manager is responsible for maintaining telework 

agreements filed with the Work Life Program Office. The Work Life Program 

Manager explained that the SEC’s time and attendance system, Quicktime,10 has 

a telework code available that employees can use to denote the number of hours 

teleworked per pay period; however, many employees are not aware of the code 

and few are using it. Additionally, Quicktime does not provide a report form for 

accessing and analyzing the telework code data, so it is not yet a viable system 

for tracking or reporting actual telework hours or days. The Work Life Program 

Manager stated that she is beginning a pilot program with a subgroup of 

employees to test a campaign to raise awareness of the telework code and the 

proper procedures employees are to follow to report actual telework hours. 

However, until the Department of Interior includes a reporting capability for the 

telework code, the SEC will not be able to track employees’ actual telework 

hours. Also, once the reporting capability is in place and employees are 

educated on the proper use of the telework code, the data will still be subject to 

each employee’s accurate self-reporting of telework hours. 

We also identified two participants who were on extended leave during Fiscal 

Year 2008, per the SEC’s payroll records, but did not appear to have adjusted 

their benefits per DOT records, as shown in the Table 2 below. Payroll records 

from OHR show that Participant 1 was on extended sick leave for the entire 

month of July 2008 and the first half of August 2008; however, the participant 

collected the full $115 transit benefit for both July and August. Based on the 

participant’s total monthly estimated commuting costs of $150, we calculated the 

participant’s total actual commuting costs were approximately $75 altogether for 

July and August. This resulted in the participant receiving approximately $155 in 

benefits that the participant was not entitled to receive. 

Participant 2 was on extended sick leave during the second half of December 

2007 and the first half of January 2008; however, the participant collected $110 

per month for both December and January. Based on the participant’s total 

monthly estimated commuting costs of $150, we calculated that the participant’s 

total actual commuting costs were approximately $150 altogether for December 

and January. This resulted in the participant receiving approximately $70 that 

the participant was not entitled to receive. 

10 Quicktime is the time and attendance system that the SEC uses and it is operated by the 

Department of Interior. 
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Table 2: Participants on Extended Leave That Did Not Adjust 

Benefits During FY 2008 

Participant 

No. 

Dates Extended 

Leave Taken 

Number of 

Commuting 

Days in 

Month 

(Excluding 

Holidays and 

Leave Taken) 

11

Total Monthly 

Commuting 

Costs 

Claimed Per 

Transit 

Application 

Monthly 

Benefit 

Received 

Monthly 

Estimated 

Commuting 

Costs 

Estimated 

Amount of 

Overpayment 

for the Month 

1 Jul 1-31, 2008 0 $150 $115 $0 $115 

Aug 1-16, 2008 10 $150 $115 $75 $40 

Dec 9-22, 2007 9 $150 $110 $67.50 $42.50 

Jan 6-19, 2008 11 $150 $110 $82.50 $27.50 

2 

Total 

Overpayments $22512

Source: OIG Generated 

OHR should seek recovery of the $225 in estimated overpayments shown in the 

table above. OHR should also remind transit participants that they are required 

to reduce benefits if they are on extended leave (i.e., annual, sick, etc.), travel, 

recurring telework and any other situation that causes their commuting costs to 

be less than the amount they are eligible to receive in a given month. Further, 

OHR should provide instruction on how benefits can be adjusted under the 

SmartBenefits program. Finally, OHR should periodically conduct reviews of all 

participants to ensure they only collect the benefits they are entitled to receive. 

Recommendation 6 

The Office of Human Resources should ensure for each file identified as missing 

or incomplete that it obtains the necessary documentation to create a file 

(electronic or hard copy) containing, at a minimum, a copy of the participant’s 

transit benefit program application, SmartBenefit application, and documentation 

to support changes in commuting costs.

 

11 Participant 1 and Participant 2 had recurring telework schedules in place during the relevant timeframe for 

four and two days, respectively. Our calculation of the number of commuting days for the applicable months 

does not take into account the number of days the person may have teleworked as the data was not readily 

available. Consequently, further reductions in benefits may be necessary. 12 This amount only represents overpayments identified based on a sample of 18 transit participants who 

took extended leave during FY 2008. Accordingly, the actual amount of overpayments for the entire 

population of transit benefit program participants may be significantly higher. 
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Recommendation 7 

The Office of Human Resources should develop a process to conduct internal 

reviews periodically of transit benefit program participants to ensure they properly 

reduce benefits as required and only collect the benefits they are entitled to 

receive. 

Recommendation 8 

The Office of Human Resources should periodically remind transit benefit 

program participants that they are required to reduce benefits if they are on 

extended medical or personal leave, travel, recurring telework or any other 

situation that causes their commuting costs to be less than the amount they are 

eligible to receive for that month. Additionally, OHR should provide participants 

with instructions on how benefits are adjusted under the SmartBenefits program. 

Recommendation 9 

The Office of Human Resources, in coordination with the Office of Financial 

Management, should seek recovery of the estimated $225 in overpayments that 

were improperly collected by transit benefit program participants while on leave. 

Finding 4: SEC Headquarters Should Increase 

Monitoring of Regional Office Transportation 

Benefit Programs 

We found that SEC headquarters performs minimal 

oversight of the transit benefit programs in the 

regional offices. Increased monitoring by 

headquarters is necessary to ensure that regional 

offices have proper internal controls in place for their 

transit benefit programs and to ensure regional office 

employees are complying with program requirements. 

SECR 5-9, Public Transportation Subsidy Program, states that a Program 

Coordinator administers the Transportation Benefit Program under the direction 

of the Regional Director in participating field (now regional) offices.13 Regional 

Directors are responsible for developing a Transportation Benefit Program for 

their offices, providing overall guidance for their programs, and overseeing the 

Program Coordinators, Recording Agents, Disbursing Agents and Local Program 

 

13 SECR 5-9, page 11. 
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Auditors. Each member is responsible for specific duties according to his or her 

designations. Other specific duties are designated as follows: 

(1) Program Coordinators - Oversee the daily operations of the program for 

their field offices; 

(2) Recording Agents - Keep updated records of all benefit transactions and 

enroll employees into the program; 

(3) Disbursement Agents - Disburse transportation benefits to participants; 

and 

(4) Local Program Auditors - Perform semiannual audits and provide the 

results to the Regional Directors. 

OHR provides overall guidance for the Transportation Benefit Program at 

headquarters, as well as the regional offices.14

SECR 5-9, Public Transportation Subsidy Program, also states that Regional 

Directors are required to submit annual program activity reports (SEC 2416 and 

SEC 2418) to OHR, by no later than November 30th of each year.15 OHR then 

reviews and consolidates the annual reports from the field offices (now regional 

offices) into the overall agency report. 

Based on discussions with the current OHR Transit Benefit Program Manager, 

we found that basic program data (e.g., number of participants, type of fare 

media, etc.) is collected from regional offices in order to recommend an annual 

level of funding for the transit benefit program. However, according to the OHR 

Transit Benefit Program Manager, regional offices are no longer required to 

provide the annual activity reports referenced in SECR 5-9, nor are regional 

offices required to provide a copy of their semiannual audit results to OHR. 

We performed a limited review of the transit benefit programs in the regional 

offices, which consisted of interviewing officials responsible for transit benefit 

program operations in the New York, Boston, and Chicago regional offices. The 

regional offices generally represented that they follow the policies and 

procedures in SECR 5-9, Public Transportation Subsidy Program, with regard to 

enrolling and disbursing transit benefits, records maintenance and segregation of 

duties. However, because the transit systems within each region vary widely, 

internal processes may differ according to the regional offices’ individual needs. 

These unique processes are not documented in written policies and procedures 

specific to each regional office. 

14 SECR 5-9, page 12. 15 SECR 5-9, page 14. 
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Additionally, the three regional offices indicated that they perform internal 

program reviews according to the SEC guidelines; however, the reviews are not 

necessarily documented in a report format and the results are not provided to 

OHR. 

The OIG believes that because OHR has overall responsibility for transit benefit 

program policy, it should implement additional internal controls to ensure that 

regional offices adhere to the SECR 5-9 requirements, including conducting 

semiannual program reviews. Ensuring appropriate internal controls are in place 

is particularly important for the regional offices since most are not included in the 

SEC’s interagency agreement with DOT, and therefore, are fully responsible for 

enrolling applicants and disbursing, recording, changing, and terminating transit 

benefits. 

According to the OHR Branch Chief responsible for the transit benefit program, 

new and additional transit benefit program requirements call for added resources 

and perhaps improved technological approaches to monitor the nation-wide 

transit benefit program. Currently, the headquarters transit benefit program is 

staffed with one full-time person and one part-time student. These individuals 

remain busy administering the headquarters program, including advising 

employees on updated enrollment requirements, processing transit applications 

and terminations from the program, managing program communications and 

coordinating program changes for headquarters. 

We recommend that OHR perform periodic reviews of regional offices (including 

site visits) to examine their transit benefit program processes and ensure 

compliance with SEC requirements, including those for proper recordkeeping, 

segregation of duties and program reviews. Additionally, OHR should require 

regional offices to provide semiannual reports to headquarters, in addition to the 

Regional Directors discussing the results of their program audits. These reports 

should include audit results, statistical data on the regional office’s transit benefit 

program (e.g., how many participants are in the program, how many participants 

joined the program and have exited the program during a semiannual period, 

etc.) and perhaps optional information (e.g., what types of issues the office has 

encountered during the period. Further, each regional office should have written 

policies and procedures tailored to its specific transit benefit program. A copy of 

these policies and procedures should be provided to headquarters for its records, 

and updates should also be provided as they become available. 

Recommendation 10

The Office of Human Resources should implement additional management 

controls over regional office transit benefit program operations to ensure 

compliance with required SEC guidelines, including (1) performing periodic 

reviews of regional offices to examine their transit benefit program processes, (2) 
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requesting that regional offices provide semiannual reports to headquarters, in 

addition to the Regional Directors discussing the results of their program audits, 

and (3) requiring regional offices to have written policies and procedures tailored 

to their specific transit benefit programs. 
Appendix I 

Acronyms

DOT Department of Transportation 

GAO Government Accountability Office 

OFM Office of Financial Management 

OHR Office of Human Resources 

OIG Office of Inspector General 

OMB Office of Management and Budget 

SEC or Commission U.S. Securities and Exchange Commission 

WMATA Washington Metropolitan Area Transit Authority 

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Appendix II 

Scope and Methodology

We conducted this performance audit in accordance with generally accepted 

government auditing standards. These standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. 

Scope. We obtained data from OHR, OFM and DOT covering transit benefit 

activities during Fiscal Year 2008. The scope of our review included transit 

benefit program participants and activities at the SEC’s headquarters office, as 

well as a limited review of transit activities at the SEC’s New York, Boston, and 

Chicago regional offices. We conducted our fieldwork from November 2008 

through February 2009. 

Methodology. We interviewed staff and managers in the Office of Human 

Resources, as well as the New York, Boston, and Chicago regional offices, to 

gain an understanding of the operations of the transit benefit program. We 

reviewed available documentation, including transit benefit program files 

maintained by the OHR and information available on the SEC’s intranet. We 

attended a scheduled bi-monthly transit benefit disbursement session to observe 

the roles and responsibilities of both OHR and DOT officials. We held 

discussions with, and obtained documentation from, DOT officials regarding the 

SEC’s transit benefit program and DOT’s responsibilities under their interagency 

agreement with the SEC. Lastly, we tested data to determine if transit benefit 

program participants were complying with program requirements. 

Management Controls. We reviewed internal controls that were considered 

significant within the context of the audit objectives. We interviewed OHR 

management and staff, identified and reviewed applicable policies and 

procedures, obtained and reviewed available transit benefit program 

documentation, and tested data for compliance with selected policies and 

procedures. 

Prior Audit/Investigative Coverage. The SEC OIG issued a previous audit 

report on the transit benefit program (Audit Report No. 237, August 1996). The 

audit found that controls were generally functioning as intended and 

recommended some improvements to internal controls. All recommendations 

from the prior audit have been closed. Also, as a result of two investigations 

related to the transit benefit program, the SEC OIG issued investigative 

memoranda in February 1998 and September 2001, respectively (OIG-248 and 

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G-335), which recommended program changes to enhance management 

controls over the transit benefit program. 

Use of Computer-Processed Data. We used computer-processed data such 

as emails, Excel spreadsheets, and DOT transit database information. We did 

not test the DOT database. To the extent practical, we compared the data with 

source documents. We did not perform extensive testing of system general or 

application controls. DOT data was used to identify the total population of 

headquarter transit benefit program participants and relevant data such as 

participants’ claimed and collected benefits. 

Judgmental Sample. We used two separate judgmental samples for data 

testing. The first sample consisted of 13 of 38 transit participants who had 

separated from the Commission, but were still listed as active transit participants. 

The second sample consisted of a review of application data for 50 out of 

approximately 1,650 headquarters transit benefit program participants. The 

OIG’s basis for selecting the 50 participants consisted of identifying individuals 

claiming the maximum transit benefit per month and individuals who were on 

extended leave and or had re-occurring telework schedules during Fiscal Year 

2008. 
Appendix III

Criteria

Executive Order 13150, April 21, 2000 - Mandated all Federal agencies in the 

National Capital Region (Washington, D.C. metropolitan area) to implement a 

transit pass benefit program by October 2000. 

SEC Administrative Regulation SECR 5-9, February 16, 2005 - Established 

policies and procedures for the SEC’s Public Transportation Benefit Program as 

an incentive for its employees to use public transportation and to rideshare. 

Office of Management and Budget Memorandum M-07-15, May 14, 2007-

Required all agencies with a transit program to implement several internal 

controls designed to deter fraud, waste, and abuse. 

SEC Administrative Regulation SECR 7-4, Employee Clearance Process,

December 31, 1999 – Establishes a method for all personnel who are leaving 

the SEC to return any documentation or other Government property which they 

have obtained during the course of employment. 

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Appendix IV 

 List of Recommendations

Recommendation 1 

The Office of Human Resources should finalize its revised transit benefit 

program application by April 30, 2009 and ensure that the application: 

(a) Requires transit benefit program participants to provide a 

breakdown of commuting costs in accordance with the Office of 

Management Budget guidelines; and 

(b) Includes a certification below the Administrative Officer’s signature 

line that clearly states that the application had been reviewed for 

verification of eligibility and commuting costs. 

 

Recommendation 2 

The Office of Human Resources should conduct periodic training and 

issue reminders to Administrative Officers of their responsibility to verify 

transit benefit program participants’ eligibility and commuting costs. 

Recommendation 3 

The Office of Human Resources should put in place a process to require 

transit participants to re-certify annually their eligibility and commuting 

costs (i.e., complete a new transit benefit application). 

Recommendation 4 

The Office of Human Resources should implement a process to obtain 

data on all separated Commission employees and compare that data to 

the Department of Transportation’s (DOT) transit database to ensure that 

all separated employees who participated in the transit program have 

been promptly removed from DOT’s records. 

Recommendation 5 

The Office of Human Resources, in coordination with the Office of 

Financial Management, should pursue collection of the $394 in erroneous 

benefits that were collected by transit participants after separating from 

the Commission. 

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Recommendation 6 

The Office of Human Resources should ensure for each file identified as missing 

or incomplete that it obtains the necessary documentation to create a file 

(electronic or hard copy) containing, at a minimum, a copy of the participant’s 

transit benefit program application, SmartBenefit application, and documentation 

to support changes in commuting costs

Recommendation 7 

The Office of Human Resources should develop a process to conduct 

internal reviews periodically of transit participants to ensure they properly 

reduce benefits as required and only collect the benefits they are entitled 

to receive. 

Recommendation 8 

The Office of Human Resources (OHR) should periodically remind transit 

benefit program participants that they are required to reduce benefits if 

they are on extended medical or personal leave, travel, recurring telework 

or any other situation that causes their commuting costs to be less than 

the amount they are eligible to receive for that month. Additionally, OHR 

should provide participants with instructions on how benefits are adjusted 

under the SmartBenefits program. 

Recommendation 9 

The Office of Human Resources in coordination with the Office of 

Financial Management should seek recovery of the estimated $225 in 

overpayments that were erroneously collected by transit benefit program 

participants while on leave. 

Recommendation 10 

The Office of Human Resources should implement additional 

management controls over regional office transit benefit program 

operations to ensure compliance with SEC requirements, including: 

(a) Performing periodic reviews of regional offices to examine their 

transit benefit program processes, 

(b) Requesting that regional offices provide semiannual reports to 

headquarters in addition to the Regional Directors discussing the 

results of their program audits, and 

(c) Requiring regional offices to have written policies and procedures 

tailored to their specific transit benefit programs. 
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Appendix V 

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 Management Comments
Appendix VI 

 Office of Inspector General 

Response to Management’s Comments

The Office of Inspector General is pleased that the Office of Human Resources 

(OHR) concurred with the report’s 10 recommendations. We believe that OHR’s 

proposed actions are responsive to our findings and recommendations and are 

pleased that OHR has already taken action to implement many of the 

recommendations that are identified in our report. Once all of the 

recommendations are fully implemented, we believe the Commission’s internal 

controls over the transit benefit program will be strengthened. 

 

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Audit Requests and Ideas

The Office of Inspector General welcomes your input. If you would like to request an 

audit in the future or have an audit idea, please contact us at: 

U.S. Securities and Exchange Commission 

Office of Inspector General 

Attn: Assistant Inspector General, Audits (Audit Requests/Ideas) 

100 F Street, N.E. 

Washington D.C. 20549-2736 

Tel. # 202-551-6061 

Fax # 202-772-9265 

Email: oig@sec.gov 

Hotline To report fraud, waste, abuse, and mismanagement at SEC, 

contact the Office of Inspector General at: 

Phone: 877.442.0854 

Web-Based Hotline Complaint Form: 

 www.reportlineweb.com/sec_oig