Washington Metropolitan Area Transit Authority: Assessing Fiscal Risks and Improving Workforce Management Would Help Achieve Strategic Goals

WMATA transports more than 1 million rail and bus passengers each weekday in the nation's capital and surrounding areas. However, recent safety incidents and declines in ridership and revenues have focused public attention on how WMATA manages its workforce and associated costs.

GAO was asked to review WMATA's workforce management. This report examines, among other things, (1) how WMATA's workforce costs have changed from fiscal years 2006 through 2017 and factors contributing to those changes, and (2) how WMATA has designed and implemented its employee performance management systems. GAO reviewed WMATA's annual financial statements and budgets from fiscal years 2006 through 2017, and compared WMATA's workforce cost and performance management efforts to leading practices and internal control and actuarial principles. GAO also reviewed a non-generalizable sample of employee performance evaluations selected to include occupations with the highest number of evaluations.

The Washington Metropolitan Area Transit Authority's (WMATA) workforce costs—including wages, salaries, and benefits for employees and retirees—increased on average by about 3 percent annually from fiscal years 2006 through 2017. This increase was largely driven by the cost of employee and retiree benefits. Specifically, the amount WMATA was required to contribute to its pension plans increased by an annual average of about 19 percent during this period. Due to their relative size, proportion of retirees compared to active members, and investment decisions, these pension plans pose significant risk to WMATA's financial operations, yet WMATA has not fully assessed the risks. Without comprehensive information on the risks facing its pension plans, WMATA may not be prepared for economic scenarios that could increase its required contributions to an extent that might jeopardize its ability to provide some transit service.

WMATA has implemented two employee performance management systems that cover all employees, but these systems lack some key elements of an effectively designed and implemented performance management system. For example, WMATA's performance management systems are not designed to make meaningful distinctions in performance, a key element of an effective system. This design is due in part to WMATA's lack of comprehensive policies and procedures for its performance management systems. In addition, WMATA lacks sufficient controls to ensure that supervisors complete required performance evaluations accurately and on-time. For example, in 10 of 50 performance evaluations we reviewed, we found scoring errors where employees were assigned a performance rating inconsistent with the supporting review. Without comprehensive policies and procedures or sufficient controls over its performance management systems, WMATA lacks tools and information to move employees toward achieving WMATA's strategic goals.

GAO is making five recommendations to WMATA, including that it develop a comprehensive assessment of risks posed by its pension plans, comprehensive policies and procedures for its employee performance management systems, and controls to ensure supervisors complete required performance evaluations, among other actions.

WMATA agreed with four recommendations and neither agreed nor disagreed with the fifth.

The Washington Metropolitan Area Transit Authority (WMATA) transports  more than 1 million rail and bus passengers each weekday, making it  critical to the mobility and productivity of the nation’s capital and  surrounding areas. Safety lapses such as a January 2015 smoke incident  at the L’Enfant Plaza Metro Station that resulted in the death of one  person and injured 91 others, and multiple electrical fires and derailments  since then, have focused public attention on the management and  performance of WMATA’s workforce. For example, in 2015, the Federal  Transit Administration (FTA) identified deficiencies in WMATA’s staffing,  training, and procedures for its rail traffic controllers that FTA found could  compromise the safety of the Metrorail system. In 2017, WMATA reported  that it had fired 21 rail inspectors and supervisors—about one third of its  inspection staff—for allegedly falsifying inspection reports. Further,  Metrorail has experienced significant losses in ridership and revenues  due in part to persistent reliability problems and planned outages during  its year-long SafeTrack rail rehabilitation program, completed in June  2017. That year, WMATA announced plans to reduce its workforce by  eliminating 6 percent of its 13,000 positions to help bridge a $290 million  gap in its 2018 operating budget.

You asked that we review WMATA’s management of its workforce,  including its workforce costs, planning, and performance. This report  assesses: (1) how WMATA’s workforce costs have changed from fiscal  year 2006 through 2017 and factors contributing to those changes; (2)  how WMATA identifies and addresses its current and future workforce  needs; and (3) how WMATA has designed, implemented, and monitored  its employee performance management systems.

To assess how WMATA’s workforce costs have changed, we used data  from WMATA’s annual budgets and audited financial statements from  fiscal years 2006 through 2017 on the amounts expensed by WMATA on wages and salaries, employee and retiree benefits, and contracted  services, and on the amounts WMATA contributed to its pension plans  and retiree health benefits. We selected 2006 to account for any  potential effects of the 2007-2009 financial crisis on pension or other  costs and because WMATA began contributing to its largest pension plan  again in 2006 after a 6-year period of not contributing to this plan.

We reviewed data WMATA provided on operating and capital overtime  costs and the most recent actuarial reports for each of WMATA’s five  pension plans. To assess the reliability of WMATA’s budget data and  other data WMATA provided, we interviewed WMATA officials on  practices used to assemble these data. We found these data to be  sufficiently reliable for our purposes. We also analyzed characteristics of  WMATA’s five pension plans in consultation with our Chief Actuary and in  relation to actuarial principles and recent literature. To identify factors  contributing to changes in workforce costs, we interviewed WMATA  officials and reviewed information from WMATA’s annual budgets and  annual financial statements on the total number of authorized staff,  changes in overtime costs, changes in pension-related costs, and other  factors that could influence workforce cost changes since fiscal year  2006.

To evaluate how WMATA identifies and addresses its workforce needs,  we compared WMATA’s workforce planning and workforce development  efforts to leading practices we previously identified and to internal control  standards of the Committee of Sponsoring Organizations of the Treadway  Commission (COSO), which WMATA follows. We reviewed WMATA’s  2017-2019 individual department business plans and 2013–2025  strategic plan, and interviewed WMATA officials, to assess how WMATA  identifies its short- and long-term workforce needs. We also obtained  and reviewed WMATA information on the positions WMATA eliminated in  fiscal years 2017 and 2018, including the number that were vacant or  occupied. Lastly, we compared WMATA’s workforce planning approach to  those at five U.S. transit agencies selected based on similarity in size,  age, unions, and stakeholder recommendations.

To evaluate WMATA’s performance management systems, we  interviewed WMATA officials and reviewed documentation on WMATA’s  two employee performance management systems—”PERFORMetro” and  “Performance Conversations.” PEFORMetro applies to staff represented  by (1) the Office and Professional Employees International Union Local 2  (administrative and clerical personnel), (2) the Fraternal Order of Police  (Metro Transit Police), (3) International Brotherhood of Teamsters Local  639 (Metro Special Police), and (4) staff not represented by a union  (management and administrative personnel). Performance Conversations  applies to staff represented by the Amalgamated Transit Union Local 689  or International Brotherhood of Teamsters Local 922 (bus and rail  operations personnel). We compared these performance management  systems to WMATA’s strategic goals in its 2013-2025 strategic plan, key  performance management practices we have previously identified, and to  the COSO internal control standards.

We also assessed whether WMATA had management controls in place to  ensure timely, complete and accurate submissions of performance  evaluations by initially reviewing a selection of 60 PERFORMetro  evaluations from the most recently-completed evaluation cycle at the time  of our review. We selected 20 files from each of the three employee  groups included in the PERFORMetro system (employees not  represented by a union, employees represented by the Office and  Professional Employees International Union Local 2, and law  enforcement officers represented by the Fraternal Order of Police or Teamsters Local 639). Due to inconsistencies in the Teamsters Local 639  evaluation forms, we excluded 10 of the 60 evaluations from our  selection, leaving 50 evaluations. The performance evaluation forms we  reviewed are not generalizable to all performance evaluations submitted  to WMATA’s human resources department or completed by WMATA  supervisors, but they provide illustrative examples of some completed  performance evaluations. We could not review any Performance  Conversation forms because WMATA does not routinely collect or retain  these forms and WMATA did not have any Performance Conversation  forms available for us to review. Finally, we interviewed officials from the  FTA, WMATA, and union leadership from four of the five unions  representing WMATA employees. A more detailed summary of our  scope and methodology appears in appendix I.

We conducted our work from July 2017 to September 2018 in accordance  with generally accepted government auditing standards. Those 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.

WMATA operates the nation’s second largest heavy rail transit system  (Metrorail) and fifth largest bus system (Metrobus), accounting for about  1.1 million passenger trips per weekday. Metrorail runs 6 train lines  connecting the District of Columbia to various locations in Maryland and  Virginia. A portion of the latest addition, the Silver Line, was opened in  2014. WMATA was created in 1967 through an interstate compact— matching legislation passed by the District of Columbia, the state of  Maryland, and the Commonwealth of Virginia, and then ratified by  Congress—to plan, develop, finance, and operate a regional  transportation system in the National Capital area. A board of eight  voting directors and eight alternate directors governs WMATA. The  directors are appointed by the District of Columbia, Virginia, Maryland,  and the federal government, with each appointing two voting and two  alternate directors.

WMATA’s operating revenues from rider fares, parking fees, and paid  advertisements, do not cover its annual costs, so it relies on year-to-year  funding commitments from Maryland, Virginia, and the District of  Columbia, and various forms of federal funding to cover gaps in its capital  and operating budgets. WMATA’s operating budget covers personnel  costs and contracted services; in fiscal year 2017 about 75 percent of its  $1.8 billion operating budget went to personnel costs. WMATA’s capital  budget, which covers short-term maintenance and long-term capital  projects, totaled $1.2 billion in fiscal year 2017. In 2018, Maryland,  Virginia, and the District of Columbia each passed legislation to provide  additional recurring annual funding to WMATA generally for capital  purposes, totaling $500 million annually across the 3 jurisdictions.

In recent years, WMATA added new rail service while also experiencing  declines in ridership. From fiscal years 2006 through 2017, WMATA  increased Metrorail service about 23 percent as measured in total railcar  revenue service miles, or the miles traveled when the vehicle is in  revenue service; WMATA increased Metrobus service slightly, by about 4  percent. Over this same time, ridership declined—by about 17 percent on  Metrorail and 12 percent on Metrobus. (See fig. 1).

WMATA attributes this ridership decline to multiple factors, including  growth in telecommuting, the expansion of alternative transportation  options, and a decline in service quality and reliability. In addition,  between June 2016 and June 2017, WMATA completed SafeTrack, a  large-scale accelerated maintenance program that suspended service on  portions of Metrorail, resulting in delays and additional ridership  declines.

WMATA’s workforce is composed of bus and rail operations staff, as well  as managers, administrators, law enforcement, and others. In September  2017, after reducing its workforce by eliminating 6 percent of its 13,000  positions, WMATA reported that it had 12,217 employee positions across  6 different employee groups, of which 11,341 were filled. Most WMATA  employees—83 percent—are represented by one of WMATA’s five  unions, depending on the employees’ positions. The Amalgamated  Transit Union Local 689 is the largest union, representing 67 percent of  WMATA employees (see table 1). Each union negotiates its own terms on  wages, salaries, hours, working conditions, and pensions or retirement,  and generally documents these terms in its collective bargaining  agreement.

WMATA provides a defined benefit pension for almost all of its  represented employees and for non-represented employees hired before  January 1, 1999. In these pension plans, the benefit a retiree receives is  generally based on the retiree’s age and/or years of service and  compensation, which may include overtime wages for represented  employees. WMATA’s annual contributions to its pension plans are  invested in portfolios that include stocks, bonds, and real estate to fund  future pension benefits. The Local 689 pension plan is WMATA’s largest,  and covered 80 percent of all WMATA pension plan members in fiscal  year 2017. Each of the five pension plans is governed by a separate  group of trustees responsible for administering the plan. The trustees  are composed of a mix of members selected by WMATA and by the  respective union or employee group. For example, the trustees for the  Local 689 plan include three appointed by WMATA and three by Local  689.

WMATA makes payments for four defined benefit retiree health plans.  These plans generally cover Local 689 employees, Local 2 employees,  Metro Transit Police, and Metro Special Police, in addition to non- represented employees. According to WMATA officials, WMATA’s four  retiree health plans are “pay-as-you-go,” meaning WMATA pays for  benefits as they become due each year, and funds necessary for future  benefits are not accumulated.

Increases in WMATA’s Workforce Costs since Fiscal Year 2006 Are Largely Driven by the Cost of Benefits, with Pensions Posing Particular Risk

WMATA’s total workforce costs—composed of wages, salaries, and  benefits for current and retired employees—increased modestly in  inflation-adjusted dollars (on average by about 3 percent annually) from  fiscal years 2006 through 2017. This modest increase reflected small  increases in wage and salary costs and substantial increases in  employee and retiree benefit costs. In particular, WMATA’s required  annual contributions to its pension plans increased by an annual average  of almost 19 percent and were WMATA’s fastest growing workforce cost  component from fiscal years 2006 through 2017. The possibility of further  increases in the costs of WMATA’s pension plans poses significant risk to  the agency’s financial operations, yet WMATA has not fully assessed  these risks.

Since 2006, WMATA Wages and Salaries Increased Modestly While Contract Costs More Than Doubled

WMATA’s total workforce costs increased by about 3 percent annually on  average between fiscal years 2006 and 2017 in inflation-adjusted fiscal  year 2017 dollars, with wages and salaries increasing an average 1.1  percent per year, from $645 million in 2006 to $728 million in 2017. These  costs grew at a slower rate than the costs of contracted services (7.3  percent annually on average) and employee and retiree benefits (5.6  percent annually on average), as discussed below (see table 2).

The total number of employees WMATA budgeted for each year  (authorized positions) grew slightly faster than wages and salaries—about  2 percent per year on average—increasing from 10,451 in 2006 to 13,032  in 2017, with similar growth in the number of occupied positions. Wages  and salaries increased at a slower rate than WMATA’s workforce in part  because, according to WMATA officials, non-union employees did not  receive a salary increase for several of these years. In contrast,  employees represented by one of WMATA’s five unions generally  received annual wage and salary increases, as laid out in their collective  bargaining agreements. WMATA officials also estimated that since 2008,  between about 10 and 14 percent of its annual wage and salary costs  were composed of operating overtime. WMATA officials stated that  operating overtime is used to fill gaps in schedules or staffing in positions  that have high vacancy rates, such as Metro Transit Police.

While wage and salary costs increased modestly, the cost of WMATA’s  contracted services more than doubled from fiscal years 2006 through  2017. During this time contracted services costs increased more than 7  percent per year on average, from $123 million in fiscal year 2006 to $267  million in fiscal year 2017. WMATA officials reported large increases  during this period in repair and maintenance, custodial services,  professional and technical services such as attorneys and management  consultants, and WMATA’s MetroAccess contract that provides  paratransit door-to-door service for riders unable to use bus or rail.  WMATA officials attributed these increases to several factors. First, they  stated that paratransit service ridership and the contractor cost per trip  have increased. The officials estimated that providing paratransit service  currently costs WMATA about $50 per passenger trip. Second, WMATA  officials said adding five new Silver Line stations resulted in increases in contract costs because some of the services already provided by  contractors, including custodial services and some track work, were  extended to the new stations. Third, WMATA officials said they have been  using more contractors in recent years to control costs and improve  efficiency. For example, they stated they may use contracts to address  problems such as a backlog of track inspections because they can  procure contractors to complete the work more quickly than they could  with current WMATA staff who would have to be pulled away from other  duties or new WMATA staff who would have to be hired and trained.

WMATA’s Employee and Retiree Benefit Costs Increased Substantially since 2006, but WMATA Has Not Fully Assessed Risks Posed by Its Pension Plans

From fiscal years 2006 through 2017, WMATA’s annual costs for its  employee and retiree benefits increased substantially in inflation-adjusted  fiscal year 2017 dollars. Employee and retiree benefit costs—which  include benefits for current employees, such as health care and vacation,  and benefits for retired employees such as pensions and health care— increased at an average annual rate of 5.6 percent, from $327 million to  $593 million (see table 2 above). These cost increases are reflective of  substantial increases in the amount WMATA contributed to its pension  plans. These costs increased by an average of 18.9 percent annually,  from $25 million in fiscal year 2006 to $168 million in fiscal year 2017.  WMATA payments for retiree health benefits increased less dramatically,  on average 2.7 percent per year from fiscal years 2008 through 2017($39  million to $49 million). (See fig. 2). WMATA officials attributed increases  in employee and retiree benefit contributions to multiple factors including  market losses to pension assets incurred after the 2007–2009 financial  crisis and an increase in the cost of providing healthcare benefits.

Despite paying more for its retiree pension and health plans since 2006,  in fiscal year 2017 WMATA had large unfunded retiree health and  pension liabilities. Unfunded liabilities are the estimated value of the  amount of additional assets, beyond any existing plan assets, that would  be required to fully fund accrued liabilities of a plan. The assets of  WMATA’s pensions largely consist of investments in stocks, bonds, and  real estate. Unfunded liabilities are similar to other kinds of debt because  they constitute a promise to make a future payment or provide a benefit.

According to WMATA’s fiscal year 2017 Comprehensive Annual Financial  Report, WMATA’s pension plans were underfunded by $1.1 billion for  fiscal year 2017, of which $814 million was attributed to WMATA’s largest  pension plan—Local 689. In contrast, WMATA’s four retiree health  plans were pay-as-you-go during fiscal years 2006 through 2017,  meaning WMATA’s annual plan contributions were benefit payments for  retirees each year in that period. Since WMATA did not make  contributions to prefund retiree health benefits, funds necessary for future  benefits were not accumulated as assets. As a result, the entire accrued  liability was an unfunded liability, and WMATA’s four retiree health plans  were unfunded by over $1.8 billion in fiscal year 2017.

WMATA officials said they have made several changes to reduce  unfunded pension and retiree health liabilities through negotiations with  WMATA’s unions. For example, in 2014, Local 689 employees began  contributing a portion of their compensation (1 percent) to the Local 689  pension plan. This amount increased to 3 percent in 2015. Local 689  employee contributions reported for fiscal year 2017 were about $22  million, which was about 17 percent of the $127.5 million reported for  WMATA’s contribution to their pension plan for that year. In addition,  according to WMATA’s fiscal year 2017 Comprehensive Annual Financial  Report, non-represented and Local 2 employees hired on or after January  1, 1999 are not eligible for the defined benefit pension plan. WMATA also  reported that Local 689 and Local 2 employees hired on or after January  1, 2010, Metro Special Police hired after February 25, 2016, and non- represented employees hired after January 1, 2017 are not eligible for  retiree health benefits. Most recently, WMATA created a trust to fund  WMATA’s retiree health benefits and invested $3 million in the trust.

WMATA’s pension plans, due to their relative size and maturity and  investment decisions, pose a particular risk to WMATA’s financial  operations:

Relative size and maturity: The size of WMATA’s pension plans and  the overall maturity of the plans’ participants pose a combined  financial risk to WMATA. WMATA’s pension plans assets and  liabilities are large relative to its business operations. For example, in  fiscal year 2017, WMATA’s pension assets ($3.6 billion) were about 5  times more, and its pension liabilities ($4.7 billion) about 6.5 times  more than its annual wages and salaries ($728 million). Because of  their relative size, changes in the value of these assets or liabilities— for example, as a result of underperforming investments or revisions  to actuarial assumptions—could significantly affect WMATA’s  operations. In addition, WMATA’s pension plans are considered  “mature” by actuarial measures, meaning, for example, that they have  a high proportion of retirees compared to active members. A 2017  WMATA Board of Directors Pension Subcommittee report indicated  that if WMATA’s assumed rate of return across all five plans  decreased from 7.66 percent to 7 percent, WMATA’s required annual  pension contribution would increase $42 million, a 26 percent  increase, from 22 percent of wages and salaries ($160.7 million) to  about 28 percent of wages and salaries ($203 million).

Investment decisions: WMATA’s pension plans assume higher rates  of return than state and local pension plans generally do, according to  a recent National Association of State Retirement Administrators  report. For the 2017 plan year, WMATA’s largest pension plan had  an assumed rate of return of 7.85 percent per year, and the weighted  average assumed rate of return for WMATA’s five plans combined  was 7.66 percent. The average assumed rate of return among the  largest state and local government plans was 7.52 percent in 2017,  and dropped to a planned 7.36 percent for fiscal year 2018. If  WMATA’s pension plan assets return significantly less than assumed,  WMATA’s unfunded liabilities will be higher than anticipated,  potentially resulting in a spike in required contributions, as occurred in  the years following the 2007-2009 financial crisis (see fig. 2 above).

WMATA’s pension plans are largely invested in the stock market,  which also poses risk. For example, according to a November 2017  report to WMATA’s Board of Directors Pension Subcommittee, 69  percent of WMATA’s plan assets across all five pension plans were  invested in the stock market, and only 18 percent in fixed income or  cash. Investing in assets such as stocks may increase expected  investment returns, but it also increases risk because stock returns  are more volatile than investments in high quality bonds that provide a  more stable rate of return. In addition, with its mature plans,  WMATA faces a shorter time horizon before benefits for its retirees  and older workers will become due, leaving less time to recover from  investment shortfalls. According to literature on challenges facing U.S.  pension plans, plans should take on less risk as they become more  mature. This is because investment losses—and corresponding  required increases in contributions—can potentially be a high  percentage of wage and salary costs, with less time to make  adjustments. As described above, WMATA’s pension plans are  considered mature, yet they still have a high percentage allocated to  risky assets.

Although WMATA recently hired a consultant to complete a high-level  review of its pensions, it has not fully assessed the risks of its five  pension plans to the agency’s financial operations. In 2016 and 2017  WMATA hired a consultant to provide an overview of its five pension  plans, including reviewing the plans’ funding strategies and performance.  However, the stated purpose of these reports did not include an  assessment of risk, and the reports included only limited analysis of the  various risks facing WMATA from the plans, for example forecasting  WMATA’s pension contributions over the next 10 years, but only under  one scenario. In addition, WMATA provided us with analyses conducted  by an actuary for each of its five pension plans, which included some  limited risk analysis for three of the five pension plans, and no risk  analysis for the other two plans, including the Local 689 plan—WMATA’s  largest. Neither WMATA nor the trustees for the Local 689 plan have fully  assessed the risks of that plan. WMATA’s Office of Internal Compliance  has developed a process to periodically assess risks across the agency,  known as an Enterprise Risk Management Program, and reported that  pension risks could be assessed within this framework. However,  WMATA has not yet assessed the fiscal risks from its pension plans  within this program. WMATA officials said they are in the process of  identifying risks to include in this program for 2019.

The internal control standards WMATA follows state that organizations  should identify, analyze, and respond to risks related to achieving their  objectives. Further, a Society of Actuaries Blue Ribbon Panel reported  that it is important for stakeholders—such as trustees, funding entities,  plan members, union officials, and, in WMATA’s case, its Board of  Directors—to have comprehensive information about the current and  expected future financial position of pension plans and the extent of risks  facing pension plans. According to the Blue Ribbon Panel, this  information should include, among other things, “stress testing,” which  projects a plan’s financial outcomes under adverse scenarios.

WMATA officials told us that WMATA has not fully assessed pension  risks because WMATA’s management does not have control over  decisions related to the risks its pension plans take. For example,  WMATA officials told us that given that both asset-allocation and  investment-return assumptions are the purview of plan trustees who are  required to act independently, WMATA has left the decision to determine  if risk analysis is necessary to the individual plans’ trustees. WMATA  officials stated that even if they were to identify risks, there are not many  actions WMATA management could take to change them because  trustees have ultimate control over the plans’ investment decisions.  However, the investment risks taken by the pension plans’ trustees  ultimately affect the amount that WMATA is required to contribute, and  assessing those risks could help WMATA better anticipate its required  future pension contributions.

Without a comprehensive assessment of these risks, WMATA and its  stakeholders—such as its Board of Directors—are limited in their ability to  prepare for economic scenarios that could ultimately increase the amount  WMATA is required to contribute to its pension plans. In addition, if  disappointing market returns were the result of a broader economic  downturn, WMATA’s revenues—such as those from local jurisdictions— could decline at the same time as higher pension contributions were  required. For example, as noted earlier, if WMATA’s pension plans’  assets of $3.6 billion return significantly less than assumed, WMATA  could experience a spike in required contributions, as it did in the years  following the 2007–2009 financial crisis. Such a spike would further  constrain WMATA’s operating budget, and potentially jeopardize its ability  to pay for pension contributions or provide transit service. Moreover,  without a comprehensive assessment of these risks under various  scenarios, WMATA may lack useful information to develop risk mitigation  efforts and to inform its collective bargaining negotiations about pay and  benefits. Such information would also be useful to WMATA to inform its  Board of Directors, and the jurisdictions that fund WMATA, about the  impact that adverse economic scenarios could have on WMATA’s ability  to provide future service at anticipated funding levels.

WMATA Lacks a Strategic Process to Identify and Address Future Workforce Needs

WMATA identifies the staffing levels it needs each year through its annual  budgeting process, but does not have a strategic process to identify and  address its long-term workforce needs to meet the agency’s goals. For  example, in preparing the annual budget request for the Board of  Directors, WMATA officials identify the number of staff needed in  individual departments the following fiscal year. However, WMATA does  not have a process for identifying and addressing agency-wide workforce  needs beyond one year or in relation to agency-wide goals, contrary to  leading practices. In addition, WMATA has some workforce development  programs, including some that are piloted or planned, but these programs  are not based on an agency-wide assessment of the skills the agency  needs to meet its strategic goals. Instead, WMATA’s workforce  development programs are directed to short-term needs such as filling  vacancies.

WMATA Identifies Short- Term Staffing Levels for Its Annual Budget but Has Not Set a Direction for its Long-Term Workforce Needs

WMATA officials identify staffing levels needed by individual departments  annually, in preparation for WMATA’s annual budget. The annual budget,  once approved by WMATA’s Board of Directors, sets a ceiling for the  number of positions WMATA can employ in the next fiscal year. For  example, in fiscal year 2016, WMATA was authorized to fill up to 13,032  positions in fiscal year 2017. WMATA officials told us that each  department, such as Rail Services or Bus Services, estimates the number  of positions they will need to meet their mission the following fiscal year.  According to WMATA officials, this estimation is based in large part on  the number of positions allotted to them in the previous fiscal year.  WMATA officials said the budget office assembles this department-level  data into WMATA’s agency-wide budget request for the board of  directors.

WMATA’s recent restructuring of its workforce was also guided by the  annual budget process. Beginning in June 2016 in preparation for the  fiscal year 2018 budget proposal, WMATA eliminated 800 positions, most  of which were vacant. To identify these positions, WMATA’s General  Manager directed department heads to help identify any positions that  were redundant or obsolete. WMATA officials reported that 637 of the 800  positions eliminated were already vacant, and of the 163 occupied  positions most were reassigned to other existing positions. Ultimately,  WMATA terminated 62 employees during this time for an estimated  savings of $7.3 million (about $116,000 per employee in salary and  benefits).

Although WMATA estimates departmental staffing needs annually,  WMATA officials said the agency does not have a process for identifying  the agency’s long-term workforce needs. Instead, officials said that each  department typically completes a 3-year business plan through which it  may identify the number of employees needed over that period. However,  none of the 8 department business plans that we reviewed for calendar  years 2017 through 2019 identified the number of employees needed.  Further, WMATA’s Chief Operating Office business plan identified the  lack of long-term workforce planning as a risk to the office’s ability to meet  its core organizational goals. WMATA’s four organizational goals are  creating a safety culture and system, delivering quality service, improving  regional mobility, and ensuring financial stability and investing in people.

According to leading human capital practices we have previously  identified, agencies should have a strategic workforce planning process  that identifies the workforce, including full-time, part-time, and contracts,  needed to meet the agency’s strategic goals now and in the future.  Strategic workforce planning helps an agency align its human capital  program with its current and emerging mission and ensures that it will  have the workforce it needs to accomplish its goals. According to these  leading practices, the first step of strategic workforce planning is for top  management to set a strategic direction for the agency’s workforce  planning efforts, and to involve employees and other stakeholders in the  development and communication of these efforts.

WMATA does not have a strategic workforce planning process that would  address its workforce needs beyond the next fiscal year because it has  not prioritized that effort. WMATA officials told us they were interested in  creating a strategic workforce plan, and had made previous plans to do  so. Specifically, WMATA’s 2013–2025 Strategic Plan reported that the  agency was creating a “Strategic Human Capital Plan” that would have  developed long-term workforce planning strategies. However, WMATA  officials told us that the Strategic Human Capital Plan was never  completed due to other, competing priorities such as filling vacant  positions and addressing other workforce issues in the upcoming budget.

Without a strategic workforce planning process to establish a long-term  direction for its workforce, WMATA does not have a clear plan for how it  will acquire, develop, and retain the workforce needed to achieve its  strategic goals of creating a safety culture, delivering quality service,  improving regional mobility, and financial stability. Further, without such a  process, WMATA lacks reasonable assurance that its short-term annual  budget requests for staff, including the recent restructuring, will move the  agency toward these strategic goals.

WMATA’s Workforce Development Programs Are Not Based on an Agency-wide Assessment of Gaps in Critical Skills and Competencies

WMATA officials told us they have some established workforce  development programs, and others piloted or planned. For example,  WMATA currently has three specialized recruitment programs to identify  qualified veterans, Latinos, and persons with disabilities for WMATA  positions. WMATA also provides targeted training for employees such as  “principles of supervision” for all new supervisors. WMATA officials told us  the agency is also developing a “People Strategy,” which will include  multiple workforce development programs for certain entry-level workers  and managers to improve their skills and help them to advance in the  agency. One component of the People Strategy will be to establish a  program to identify and train “high-potential” staff for leadership positions.

Although WMATA has some limited workforce development programs,  these programs are not based on an agency-wide assessment of skill and  competency gaps. According to the COSO internal control standards and  leading practices we have previously identified, once an organization’s  leadership sets a strategic direction for workforce planning efforts, it  needs to conduct a “workforce gap analysis”—a data-driven assessment  of the critical skills and competencies the agency will need to achieve its  current and future goals. Agencies can use different approaches for this  analysis. One example is using information on retirements and attrition to  identify future gaps in staffing or skills. Another is “scenario planning” in  which an agency identifies how its activities might change in scope and  volume in the next 5 years, and then identifies gaps in skills and  competencies needed to fill the likely scenarios, rather than planning to  meet the needs of a single view of the future. An agency can then  develop strategies that are tailored to address any gaps between the  skills and competencies they need and the ones they already have.

WMATA officials reported that they identify workforce gaps by tracking  vacancy rates (percentage of budgeted positions that are vacant) and  consulting department leaders about employees departing or retiring.  However, WMATA officials said they do not monitor trends in agency- wide retirements and had not projected the number of employees eligible  to retire in the future—essential components of a data-driven workforce  gap analysis. In comparison, officials from four of the five similar transit  agencies we interviewed project the percentage of staff who are eligible  to retire in the future, ranging from 3 to 10 years.

WMATA officials said the agency has not conducted an agency-wide  assessment of its skill and competency needs because it has been more  reactive than proactive in response to attrition and retirements and relied  on promoting staff to higher-level positions to fill vacancies. For example,  until 2017, WMATA had a Superintendent Succession Planning Program,  which was designed to prepare bus and rail employees for management  roles. WMATA officials reported that this program was initiated in 2009  but is currently on hold as the agency develops its People Strategy.  WMATA officials said they plan to implement a different succession  planning program, which will offer financial incentives for some managers  to transfer knowledge to staff before they retire, as part of the People  Strategy. However, without conducting a data-driven assessment of the  critical skills and competencies WMATA needs to fill any gaps and  achieve its strategic goals, WMATA lacks complete information on where  the gaps in its workforce lie, and if its workforce development programs  are addressing those gaps or ultimately moving the agency closer to its  strategic goals.

WMATA Lacks Some Key Elements of an Effective Performance Management System and Sufficient Controls to Ensure Accurate and Timely Performance Reviews

WMATA has implemented two performance management systems to  cover its various employee groups, but these systems lack some key  elements of an effective performance management system.   Specifically, WMATA has linked employee performance to pay for some  employees; however, WMATA’s performance management systems do  not (1) consistently align employee and agency goals or assign  responsibilities, (2) make meaningful distinctions in performance, or (3)  consistently use competencies to identify the behaviors individual  employees need to contribute to strategic goals. In addition, WMATA  does not have sufficient controls to ensure that performance reviews are  complete, accurate, and submitted within established timeframes and  does not use performance management information to track progress  towards strategic goals.

WMATA’s Performance Management Systems Cover All Employees but Design Lacks Some Key Elements

WMATA has implemented two performance management systems that  cover all employees: PERFORMetro for non-represented staff and staff  represented by Local 2, Fraternal Order of Police, or Local 639; and  Performance Conversations for staff represented by Local 689 or  Teamsters Local 922. The features of the PERFORMetro and  Performance Conversations systems vary somewhat in terms of the  frequency of performance reviews, the use of objectives to assess  performance, and other characteristics (see table 3).

WMATA links pay increases to positive performance for some employees  under PERFORMetro, a key element of effective performance  management. For example, Metro Special Police must earn a solid  performer or better rating to be eligible for salary increases. We have  previously noted that high-performing organizations seek to create pay  systems that clearly link to employee contributions. WMATA does not  link pay to performance for employees who fall under Performance  Conversations. Pay increases for these employees—who are represented  by two of the largest unions at WMATA—are determined by years of  service as described in the collective bargaining agreements. WMATA  officials said they had considered linking some pay to performance in the  past, but had not pursued this since they believe any changes to how pay  is awarded would have to be negotiated between WMATA and each  respective bargaining unit.

Although WMATA has linked individual performance to pay for some  employees, the design of WMATA’s performance management systems  lacks three additional key elements of an effective performance  management system as identified in our prior work and internal control  standards followed by WMATA. Those key elements are: aligning employee and agency goals and identifying responsibilities making meaningful distinctions in performance, and using tailored competencies to define needed skills and behaviors.

Aligning employee and agency goals and identifying responsibilities:  PERFORMetro is not designed to align individual employee performance  with all of its strategic goals. While Performance Conversation forms  guide supervisors to discuss the employees’ performance in relation to  each of WMATA’s four strategic goals, supervisors under PERFORMetro  are required to evaluate employees on individual performance objectives  that are aligned with three of these goals. Supervisors under  PERFORMetro are not required to evaluate employees on a performance  objective aligned with WMATA’s fourth strategic goal—improving regional  mobility. WMATA officials told us it is up to individual supervisors to  determine whether to evaluate an employee on the fourth strategic goal.  Of the 50 performance reviews we assessed, we observed one that  aligned an employee’s performance objectives with the organizational  goal of improving regional mobility. According to leading performance  management practices we previously identified, aligning individual  performance objectives with organizational goals helps individuals see  the connection between their daily activities and the organization’s  goals. Without a mechanism in place to do this for PERFORMetro staff,  WMATA may not know how these employees are contributing to  increasing regional mobility, and employees may not know how they are  performing relative to this goal.

In addition, WMATA has not consistently identified how its performance  management systems support its overarching strategic goals or assigned  responsibilities for implementing these systems. While WMATA issued a  staff memo in April 2016 that identified a goal for Performance  Conversations—to ensure that employees understand how their  performance supports Metro’s strategic goals—WMATA has not done so  for PERFORMetro. In addition, none of the performance management  documents we reviewed clearly assigned authority or defined  responsibilities for implementing either PERFORMetro or Performance  Conversations. According to the COSO internal control standards, setting  program goals is a key part of the management process, and program- level goals should cascade from agency-level goals. Additionally, these  standards include establishing policies and procedures that effectively  document a program’s design, delegation of authorities, and assignments  of responsibilities.

Making meaningful distinctions: WMATA’s performance management  systems are not designed to make meaningful distinctions in  performance. According to leading performance management practices,  the organization’s leadership should make meaningful distinctions  between acceptable and outstanding performance of individuals.

However, both of WMATA’s performance management systems lack  clear definitions for supervisors and employees to use in assessing  performance. For example, WMATA leaves it up to employees and their  supervisors to identify and define many of the objectives on which  employees under PERFORMetro are evaluated. WMATA officials said  this provides supervisors some flexibility to account for the responsibilities  of employees in different positions. However, the result is that two  employees performing the same functions may be evaluated on different  objectives, making it difficult to distinguish their performance. Further,  under PERFORMetro supervisors are required to rate employees on each  objective as “met,” “did not meet,” and “exceeded,” but WMATA does not  provide definitions for these categories for each objective. As a result, two  employees rated under PERFORMetro could receive different ratings for  comparable performance. In addition, for employees under the  Performance Conversations system, WMATA does not require  supervisors to rate employee performance. Rather, officials told us that  WMATA implemented Performance Conversations as a way to  encourage more positive, performance-based interactions between  employees and management that expanded beyond discipline. WMATA  has a discipline-based program for most employees under Performance  Conversations (Local 689 bus and rail operations employees and Local  922 bus operators) that establishes standards of conduct these  employees must adhere to, and identifies penalties if they do not. This  discipline-based program lays out the penalties for violations of employee  standards of conduct such as speeding or failing to stop at a red signal.  The penalties for conduct violations range from written warnings, to  suspensions, to termination.

Using competencies tailored to each position: WMATA’s performance  management systems do not consistently use competencies to identify  the behaviors individual employees are expected to contribute to strategic  goals. Although WMATA has established competencies as part of its  PERFORMetro system, these competencies are defined in a uniform  manner that does not reflect the varied job responsibilities of its  employees. Inclusion of such competencies tailored to each position’s  responsibilities is a leading practice for an effective performance  management system. Competencies, which define the skills and  supporting behaviors that individuals are expected to exhibit to carry out  their work effectively can provide a fuller picture of an individual’s  performance. WMATA defines four competencies for all employees under PERFORMetro—”focuses on safety,” “serves customers,”  “accountability,” and “teamwork.” However, these competencies are  defined in the same way for all employees under PERFORMetro and are  not based on the job responsibilities of each position. For example,  WMATA assesses the performance of individuals performing different job  functions—such as administrative staff and police officers—by the same  competencies and without consideration for how skills and behaviors vary  by job function. As such, some portions of the competency descriptions  are not applicable to all employees. For example, all PERFORMetro  employees are evaluated on the extent that they wear required personal  protective equipment and/or clothing, but this may not apply to someone  in accounting or human resources. WMATA officials said they are aware  of this, and that supervisors choose which portions of the competency  descriptions to apply to their employees. Finally, WMATA officials said  they do not include competencies for employees under Performance  Conversations because Performance Conversations are intended to  promote performance discussions, not to evaluate employee  performance. However, without competencies tailored to employees’  positions, supervisors are limited in their ability to assess employee  performance.

WMATA’s performance management systems lack key elements of an  effective performance management system in part because the agency  has not established comprehensive policies and procedures, as called for  by COSO, for its performance management systems. Instead, the agency  relies on piecemeal documents—such as staff memos and training—and  individual supervisors to define and carry out performance management.  By establishing comprehensive policies and procedures that document  key elements, such as defined objectives and rating categories, WMATA  would be better positioned to assess staff performance and ensure  performance management is consistently implemented across  supervisors. Additionally, WMATA would be better positioned to use its  performance management systems to move employees toward achieving  its strategic goals.

Better Controls Could Improve the Completeness, Accuracy, and Timeliness of WMATA’s Employee Performance Reviews

We found that, in implementing its most recent performance evaluation  cycle, WMATA’s reviews of employee performance were often  incomplete, inaccurate, or untimely. First, officials said that they do not  routinely collect or retain the forms for its Performance Conversations and  that accordingly, WMATA does not know the extent to which these  reviews were completed. Second, in our review of a non-generalizable  sample of 50 PERFORMetro performance evaluations for fiscal year  2016, we found that WMATA supervisors frequently submitted  evaluations that were incomplete, inaccurate, or not submitted within  established timeframes. Specifically:

25 of the 50 selected files we reviewed were missing either the  employee’s or supervisor’s signature required on the initial  expectations setting portion of the form; 3 of those 25 files were also  missing a required signature on the final review portion of the  evaluation form, which provides assurance that the performance  evaluation was completed;

10 of the 50 selected files we reviewed were scored incorrectly and  thus assigned a performance rating inconsistent with the supporting  review. WMATA determines an employee’s final rating based on  scores tabulated by supervisors for an employee meeting his or her  objectives and demonstrating competencies. Specifically, employees  receive separate ratings for objectives and competencies, which are  then combined together to yield a final overall rating of “role model,”  “solid performer,” or “improvement required”. We found tabulation  errors in 10 of the files where, for example, a “solid performer” was  given a “role model” rating. Without accurate information about  employee performance, WMATA may not be able to recognize  employees’ achievements or address potential performance  challenges.

22 of the 50 selected files we reviewed were not submitted on time  according to timeframes established in a 2016 WMATA staff notice  and a 2017 agreement between WMATA and one of its unions. This  includes 9 files of employees not represented by a union, 5 law  enforcement staff files, and 8 Local 2 staff files. Local 2 officials told  us they filed a grievance following delayed performance reviews for its  members. Pursuant to the grievance, Local 2 officials signed an  agreement with WMATA that if a supervisor does not submit a  scheduled performance evaluation within 30 calendar days of a Local  2 employee’s anniversary date, that employee will receive an  automatic solid performer rating and any associated pay or step  increase.

COSO internal control standards state that management should establish  control activities, such as policies and procedures, to achieve its goals.  Examples of control activities include management reviews and controls  over information processing, among other things. A specific type of  control activity is a “transaction control,” which helps management ensure  that all transactions (in this case, performance reviews) are completely  captured, accurate, and timely. Transaction controls may include  authorizations or approvals by a higher level of management, or  verifications to compare transactions to a policy and then follow-up if the  transaction is not consistent with the policy. In the case of WMATA’s  performance reviews, this could include comparing a list of employees  who should have received a performance review per WMATA policy to a  list of the reviews that were submitted to the human resources office.

We found that WMATA does not have sufficient controls in place to  ensure that supervisors accurately complete performance reviews and  submit them to the human resources department within established  timeframes. WMATA human resources officials said that for the 2016  review cycle, they emailed a report to supervisors listing year-end  performance reviews that were due within 90 days, but did not  subsequently ensure that they were completed correctly and on time.  Officials said that once supervisors emailed these reviews to the human  resources department, human resources staff manually recorded these  reviews into WMATA’s personnel information system. WMATA officials  told us that human resources staff examined the performance reviews for  completion and accuracy. Despite this process, WMATA officials could  not provide us reliable information on the number of 2016 performance  reviews that were completed, and as previously mentioned, said they did  not routinely collect or retain Performance Conversations forms. WMATA  officials said they have plans to upgrade their current performance  management information technology system, but descriptions of the  upgrade that WMATA provided to us do not identify how the upgrade will  address the issues we identified. Without controls to ensure that  supervisors submit complete, accurate, and timely performance reviews,  WMATA lacks information on the performance of its workforce, and  employees lack information needed to improve performance.

WMATA Does Not Have a Process to Use Employee Performance Information to Monitor Progress toward Strategic Goals

WMATA officials told us that they do not have a process to use  information from their performance management systems to identify  performance gaps, or pinpoint improvement opportunities. We have  previously identified that routinely using performance information to track  individual contributions to organizational priorities, and then requiring  follow-up actions to address gaps, are key performance management  practices. This approach allows an agency to use its employee  performance information to monitor progress towards its strategic goals.  Officials from two transit agencies we spoke to told us they use  information from their performance management systems to track  performance gaps related to strategic goals. For example, Chicago  Transit Authority officials told us that they evaluate employees on  competencies related to the organization’s strategic goals of safety,  customer service, and teamwork, and then aggregate performance review  information to assess the organization’s performance on these goals.  WMATA does not make use of employee performance information in part  because it has not developed a process to do so. Without a documented  process to use employee performance management information to  monitor progress on its strategic goals, WMATA may miss opportunities  to identify and follow-up on performance gaps and to make full use of the  information collected through its performance management systems.

WMATA transports more than 1 million passengers each weekday,  making it central to the mobility and productivity of the nation’s capital.  Recent safety incidents and declines in ridership place additional  pressure on WMATA to effectively manage its most expensive resource— its workforce. If increases in WMATA’s workforce pension costs continue  to outpace increases in WMATA’s other workforce costs, WMATA will be  under greater pressure to manage its costs and balance competing  priorities. A comprehensive assessment of the fiscal risks these pension  investments could pose to WMATA could help it prepare for various  economic scenarios and ensure that it can continue to provide benefits to  its employees without having to compromise future service to riders to  pay for these benefits.

Effective workforce planning could also help WMATA by ensuring that  WMATA has the people and skills it needs to achieve its goals of safety,  customer service, financial stability, and regional mobility now and in the  future. Establishing a strategic workforce planning process that involves  employees and other stakeholders, and that uses data on WMATA’s  workforce to assess competency and skill gaps would provide WMATA  with critical information that could help it address any identified gaps and  ultimately move it closer to its strategic goals. With effective employee  performance management, WMATA also would be better positioned to  achieve its goals by explicitly aligning them with the daily tasks of its  employees. By establishing comprehensive policies and procedures for  its performance management systems that align employee performance  objectives with WMATA’s strategic goals and define performance  objectives, rating categories, and competencies, WMATA will be better  able to steer employees towards behaviors that support the agency’s  goals and away from behaviors that do not. Further, establishing controls  for supervisors to submit complete, accurate, and timely performance  reviews would help ensure that staff receive information needed to  improve their performance. Finally, a documented process to make use of  the performance information WMATA collects could help it track progress  in meeting its organizational goals and identify and address performance  gaps. In light of WMATA’s uncertain financial future, improvements in  WMATA’s workforce planning and performance management could better  position WMATA to navigate that future.

We are making the following five recommendations to WMATA:  1.  WMATA’s General Manager should conduct a comprehensive  assessment of the financial risks to which WMATA is exposed from its  pension plans and communicate the results to its pension plan  trustees and other stakeholders, such as its Board of Directors. This  assessment should include information about WMATA’s current and  potential future required payments and unfunded liabilities, including  under potentially adverse economic scenarios. (Recommendation 1)  2.  WMATA’s General Manager should develop a strategic workforce  planning process that (1) sets a strategic direction for WMATA’s  workforce planning and involves employees and other stakeholders in  developing and communicating the process, and (2) includes a data- driven assessment of the critical skill and competencies WMATA  needs to fill any gaps. (Recommendation 2)  3.  WMATA’s General Manager should establish comprehensive policies  and procedures for both of its performance management systems that  document the goals of the systems and individuals’ responsibilities for  implementing these systems; align employee performance objectives  with all of WMATA’s strategic goals; and define performance  objectives, rating categories, and competencies tailored to individual  positions’ responsibilities. (Recommendation 3)  4.  WMATA’s General Manager should establish controls to ensure  supervisors fully and accurately complete employee performance  reviews and submit them to human resources within established  timeframes. (Recommendation 4)  5.  WMATA’s General Manager should develop a documented process to  use employee performance management information to monitor  progress toward WMATA’s strategic goals. (Recommendation 5)

We provided a draft of this report to WMATA and DOT for review and  comment. WMATA provided written comments, which we have reprinted  in appendix II, and technical comments, which we incorporated as  appropriate throughout our report.

Regarding our first recommendation that WMATA conduct a  comprehensive assessment of the financial risks to which it is exposed  from its pension plans, WMATA concurred but stated that the agency has  already completed such an assessment and does not believe that any  additional assessment would add value. As stated in our report, WMATA  hired a consultant in 2016 and 2017 to provide an overview of its five  pension plans, including reviewing the plans’ funding strategies and  performance. However, the stated purpose of these reports did not  include an assessment of risk, and the reports included only limited  analysis of the various risks WMATA is facing from the plans, and only  considered a single scenario for estimating WMATA’s future pension  obligations. As such we concluded that these reports did not constitute a  comprehensive assessment of risks facing WMATA from its pension  plans. Given the plans’ large size relative to WMATA’s business  operations, high proportion of retirees compared to active members, high  percentage allocation to risky assets, and high assumed rates of return,  WMATA’s pension plans pose significant risk to its financial operations.  Without a comprehensive risk assessment, WMATA and its Board of  Directors are limited in their ability to prepare for economic scenarios that  could compromise WMATA’s ability to provide future service. Thus, we  continue to believe that our recommendation is valid and that WMATA  should fully implement it.

Regarding our second recommendation that WMATA develop a strategic  workforce planning process, WMATA concurred and described actions it  has underway to address the recommendation.

Regarding our third recommendation that WMATA develop  comprehensive policies and procedures for both of its performance  management systems, WMATA concurred and stated that it is in the  process of hiring a consultant to evaluate and redesign WMATA’s  performance management systems for fiscal year 2020. WMATA also  noted that the agency published a performance management handbook  and guide in July 2018 that, among other things, provides definitions and  indicators for behaviors assessed in performance evaluations. As part of  our recommendation follow up process, we will obtain and review the  handbook to determine whether it fully addresses our recommendation.

Regarding our fourth recommendation that WMATA establish controls to  ensure that supervisors complete and submit employee performance  reviews to human resources within established timeframes, WMATA  concurred and described actions it plans to take in response.

Regarding our fifth recommendation that WMATA develop a documented  process to use employee performance management information to  monitor progress towards WMATA’s strategic goals, WMATA neither  agreed nor disagreed. WMATA stated that it already ties individual  employee performance to the agency’s strategic goals, but is open to  considering improvements through the third-party consultant it plans to  hire to review its performance management systems. In our report we  note that WMATA’s PERFORMetro performance management system is  not designed to align individual employee performance with all of its  strategic goals. Specifically, supervisors under PERFORMetro are  required to evaluate employees on individual performance objectives that  are aligned with three of WMATA’s strategic goals, but not with WMATA’s  fourth strategic goal—improving regional mobility. Further, WMATA  officials told us that they do not have a process to use information from  their performance management systems to identify performance gaps, or  pinpoint improvement opportunities. Thus, we continue to believe that our  recommendation is valid and WMATA should fully implement it.

We are sending copies of this report to the General Manager of WMATA,  the Secretary of Transportation, and the appropriate congressional  committees. We provided a draft of this report to WMATA and DOT for  review and comment.

If you or your staff have any questions about this report, please contact  Mark Goldstein at (202) 512-2834 or goldsteinm@gao.gov or Frank  Todisco at (202) 512-2700 or todiscof@gao.gov. Mr. Todisco meets the  qualification standards of the American Academy of Actuaries to address  the actuarial issues contained in this report. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. Major contributors are listed in Appendix III.

Appendix I: Objectives, Scope and Methodology

This report assesses (1) how the Washington Metropolitan Area Transit  Authority’s (WMATA) workforce costs have changed from fiscal years  2006 through 2017 and factors contributing to those changes; (2) how  WMATA identifies and addresses its current and future workforce needs;  and (3) how WMATA has designed, implemented, and monitored its  employee performance management systems.

To assess how WMATA’s workforce costs have changed since 2006, we  used data from WMATA’s annual budgets and annual audited financial  statements from fiscal years 2006 through 2017 on the amounts  expensed by WMATA on wages and salaries, employee and retiree  benefits, contracted services, and other information on WMATA’s pension  and retiree medical plans. We selected 2006 to account for any potential  effects of the 2007-2009 financial crisis on pension or other costs, and  because WMATA began contributing to its largest pension plan again in  2006 after a 6-year period of not contributing to this plan. To adjust  WMATA’s costs for inflation, we used quarterly data on the GDP price  index, which we obtained from the Bureau of Economic Analysis. Inflation  adjustment factors are calculated to align with the definition of WMATA’s  fiscal year, which begins on July 1 and ends on June 30 of the following  calendar year. Our calculations adjust nominal values for inflation to find  real values are expressed in fiscal year 2017 dollars, where fiscal year  refers to WMATA’s fiscal year. We also reviewed data WMATA provided  on operating and capital overtime costs, and the most recent actuarial  reports for each of WMATA’s five pension plans for more information on  WMATA’s pension obligations. Additionally, we analyzed characteristics  of WMATA’s five pension plans in consultation with GAO’s Chief Actuary  and in relation to actuarial principles and recent literature. Further, we  consulted with GAO’s Chief Actuary for assistance in interpreting  information about WMATA’s pension and retiree medical plans.

To assess WMATA’s pension costs, we reviewed pension expense—  which reports WMATA’s expense for its pension plans during a year, as  measured in accordance with pension accounting standards for financial  reporting purposes—and pension contributions, which reports the amount  WMATA paid into its pension plans during a year. Both pension expense  and pension contributions increased substantially from fiscal years 2006  through 2017. While pension expense is the pension component of  WMATA’s employee and retiree benefit cost data described above,  changes in pension accounting reporting standards in 2014 resulted in  pension expense being reported differently before and after 2014. As  such, we relied on pension contributions as our primary measure of  growth of WMATA’s annual pension costs. To assess the reliability of  WMATA’s budget data, and other data WMATA provided, we interviewed  WMATA officials on practices used to assemble these data. We found  these data to be sufficiently reliable for our purposes. To identify factors  contributing to changes in workforce costs, we interviewed WMATA  officials and reviewed WMATA’s annual budgets, annual financial  statements, and actuarial statements for information on the total number  of authorized represented and non-represented staff, changes in  operating overtime costs, changes in pension-related costs, and other  factors that could influence workforce cost changes since fiscal year  2006.

To evaluate how WMATA identifies and addresses its workforce needs,  we compared WMATA’s workforce planning and workforce development  efforts to leading practices we previously identified and the Committee of  Sponsoring Organizations of the Treadway Commission (COSO) internal  control standards, which WMATA follows. We previously developed  these leading strategic workforce planning practices based on a review of  documents from (1) organizations with government-wide responsibilities  for or expertise in workforce planning models and tools, such as the  Office of Personnel Management and the National Academy of Public  Administration, and (2) federal agencies recommended as having  promising workforce planning programs. Additionally, to identify these  practices we reviewed our prior reports and testimonies on human capital  issues and met with officials from the aforementioned organizations  concerning existing workforce planning models and lessons learned from  workforce planning experiences.

In addition to comparing WMATA’s workforce planning efforts to leading  practices and COSO standards, we reviewed WMATA’s 2017–2019  individual department business plans and 2013–2025 strategic plan to  describe how WMATA identifies its short- and long-term workforce  needs. Furthermore, we obtained and reviewed WMATA information on  the positions WMATA eliminated in fiscal years 2017 and 2018, including  the number of positions that were vacant or occupied. Lastly, we  compared WMATA’s workforce planning approach to those at a non- generalizable sample of five similar U.S. transit and rail agencies,  selected based on similarity in size, age, unions representing agency  staff, and stakeholder recommendations. Agency size was measured  according to unlinked passenger trips and passenger miles data in the  American Public Transportation Association’s 2016 Public Transportation  Fact Book, the most recent issue available at the time of selection.  System age and union status were determined by a review of publicly  available information about each transit system such as academic papers  and transit agency websites. With input from industry, federal, WMATA,  and union stakeholders, we selected the following peer agencies: (1)  Chicago Transit Authority, (2) Los Angeles County Metropolitan  Transportation Authority, (3) San Francisco Bay Area Rapid Transit  District, (4) Southeastern Pennsylvania Transportation Authority, and (5)  Metropolitan Transportation Authority, Metro-North Commuter Railroad.

To evaluate how WMATA designed, implemented, and monitored its  performance management systems, we reviewed documentation on  WMATA’s two employee performance management systems— ”PERFORMetro” for non-represented, Office and Professional Employees  International Union Local 2, Fraternal Order of Police, and International  Brotherhood of Teamsters Local 639 employees; and “Performance  Conversation” for Amalgamated Transit Union Local 689 and International  Brotherhood of Teamsters Local 922 employees. We compared these  systems to leading performance management practices we have  previously identified and to the COSO internal control standards. We  previously identified these key practices for modern, effective, and  credible performance management systems by synthesizing information  contained in its previous performance management work. These  practices were also provided for comments to officials from the Office of  Personnel Management, the Senior Executives Association and the  Center for Human Resources Management at the National Academy of  Public Administration. In addition to comparing WMATA’s performance  management systems to key practices and COSO internal control  standards, we also reviewed WMATA’s 2013–2025 strategic plan, which  outlines WMATA’s four strategic goals: (1) build and maintain a premier  safety culture and system, (2) meet or exceed expectations by  consistently delivering quality service, (3) improve regional mobility and  connect communities, and (4) ensure financial stability and invest in our  people and assets.

To assess how WMATA implemented its performance management  systems, including what management controls it had in place to track the  completion of required annual employee performance reviews, we  interviewed WMATA human resources officials and assessed the data  they collected on the number of 2016 PERFORMetro year-end reviews  that were required and submitted by supervisors. WMATA officials could  not tell us how many PERFORMetro reviews or Performance  Conversation forms were required over the period we requested. WMATA  officials said that they had data on the number of 2016 PERFORMetro  reviews submitted to human resources, but did not collect any data on  Performance Conversation forms. As such, we requested the list of  submitted 2016 PERFORMetro reviews. WMATA human resources  management sent an email to all supervisors asking them to send the  reviews they had conducted in the 2016 performance period if they had  not already done so. While this information met our purposes for  performing a non-generalizable review of selected completed  performance reviews, data on the number of employees who were  required to have a performance review under PERFORMetro in the 2016  performance period and the number of those employees who received a  review were not reliable for reporting purposes. WMATA officials agreed  with our assessment that these data were not reliable for reporting  purposes.

From the list of PERFORMetro reviews we received, we selected an initial  non-generalizable sample of 60 files to assess based on employee group  (non-represented, Local 2, and Metro Transit Police) and job title. We  selected 20 files from each of the three employee groups—10 files each  from the two job titles within each employee group with the highest  number of identified reviews. We selected the 60 files by assigning  random numbers to each file within the six selected job titles and  selecting the first 10 files in the sorted, randomized list. We adjusted our  random selection as needed to ensure our selection included  performance reviews completed by multiple supervisors. Our final  selection included the following performance review files:

Non-represented employees (20 files total)

Transit Field Operations Supervisor (10 files)

Training and Safety Instructor (10 files)

METRO Transit Police Department (20 files total)

While conducting our file review, we found that the Special Police Series  evaluation forms were significantly different than the other files and did  not align with the data collection instrument we had designed. As a result,  we did not include these 10 files, leaving us with 50 files included in our  final analysis. Lastly, as discussed in our report, we did not review any  Performance Conversation files as WMATA officials told us that they do  not track the completion of these forms and therefore did not have any  data on the number of Performance Conversation year-end reviews that  were completed in fiscal year 2017, the first year Performance  Conversations were implemented. Finally, we interviewed officials from  the FTA and union leadership from four of the five unions representing  WMATA employees.

We conducted our work from July 2017 to September 2018 in accordance  with generally accepted government auditing standards. Those 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.

Appendix II: Comments from the Washington Metropolitan Area Transit Authority

Appendix III: GAO Contacts and Staff Acknowledgements

In addition to the contacts named above, Matt Barranca (Assistant  Director), Sarah Farkas (Analyst in Charge); Namita Bhatia Sabharwal;  Lacey Coppage; Tom Gilbert; Josh Ormond; Steve Rabinowitz; Michelle  Weathers; Hannah Weigle; and Elizabeth Wood made key contributions  to this report.

In recent years, Washington, D.C.'s Metro transit system has had serious safety problems and has lost revenue during lengthy maintenance. These conditions put pressure on Metro to effectively manage its most expensive resource—its workforce.

Metro's pension costs are increasing faster than other workforce costs, which could make it hard to continue providing employee benefits without compromising future service.

Metro's workforce management policies and processes don't help it achieve safety and customer service goals.

We recommended fully assessing Metro's pension risks and improving workforce planning and performance management.