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. 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. 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. 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. 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. 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. Making meaningful distinctions: WMATA’s performance management  systems are not designed to make meaningful distinctions in  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. Examples of control activities include management reviews and controls  over information processing, among other things. 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. Conclusions

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. 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. Recommendations

We are making the following five recommendations to WMATA:  1. 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.
Why GAO Did This Study

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.

What GAO Found

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.

What GAO Recommends

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.