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Metrolink begins making financial repairs

Steps to improve record-keeping and financial reporting follow a scathing internal audit.

March 08, 2013|By Dan Weikel, Los Angeles Times
  • Commuters pour out of a Metrolink train at a busy station just east of Harbor Boulevard in Fullerton.
Commuters pour out of a Metrolink train at a busy station just east of Harbor… (Luis Sinco / Los Angeles…)

Reacting to a scathing internal review, Metrolink officials are moving to correct serious accounting problems that led to the recent resignation of the commuter railroad's chief financial officer.

Michael DePallo, Metrolink's top executive, on Friday detailed for the rail line's board of directors a variety of ideas designed to improve bookkeeping and provide accurate financial information.

"Metrolink has taken a number of steps in a positive direction," DePallo said. "We are confident we can address the issues raised by the ad hoc committee," a panel of two board members that reviewed the railroad's accounting practices.

Describing the financial reporting system as a morass, the committee found that Metrolink has inadequate cash reserves to meet current obligations and that another cash account was underfunded by an estimated $66 million.

Certain funds were improperly commingled, and poor record-keeping made it hard to track the railroad's cash flows, according to the committee's report, which was issued in early February.

The report said a lack of sound business practices left board members unable to understand Metrolink's true financial situation. The system serves more than 42,000 riders a day from six Southern California counties.

Nancy Weiford, the railroad's treasurer and chief financial officer, resigned two days after the board discussed the report.

Since then, Metrolink has made a number of improvements, including to the computer systems that record and track financial information and by adding more accounting staff, DePallo said. The agency also restructured its finance department, creating an audit division and a unit to ensure that financial data is accurate and up-to-date.

In addition, DePallo hired a financial consultant and reached out to the transportation agencies in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties that help fund Metrolink. They have formed a financial advisory committee.

"We need to get this resolved," said Richard Katz, who serves on the Metrolink and Los Angeles County Metropolitan Transportation Authority. "The important thing is we've taken ownership of this issue, and we should be able to get where we need to be."

A second audit released Friday also uncovered serious accounting deficiencies and confirmed many of the ad hoc committee's findings.

Among the most serious problems was Metrolink's failure to seek reimbursements quickly from its funding agencies for tens of millions of dollars it paid for capital improvements.

Under its agreement with the five county transportation authorities, Metrolink builds rail projects, pays its contractors and then bills the agencies to recover its costs. Failing to do so in a timely way can lead to cash flow problems for the railroad, auditors said.

dan.weikel@latimes.com

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