Hillard Heintze Metra Office of Inspector General 2010 Annual Report by Hillard Heintze

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METRA AT THE THRESHOLD OF 2011: ON TRACK TO ADVANCING A CULTURE OF TRANSPARENCY AND ACCOUNTABILITY

ABOUT THIS PUBLICATION This report outlines Hillard Heintze’s activities from May 26, 2010, the date of its authorization as Inspector General, through December 31, 2010. In addition to reporting on the Interim Inspector General’s activities and accomplishments during this seven-month period, it identifies several significant challenges the Metra organization and the Metra OIG will face in 2011 as well as our recommendations on how to address these in the year ahead.

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annual report 2010 TABLE OF CONTENTS

Message from the Metra Inspector General

Profile of the Metra Office of Inspector General

Profile of Metra

Actions Taken: Launching the New Metra OIG

Establishment of Hotline and Intake Procedures

Formalization of Core Processes

Outreach and Education

Actions Taken: Communications and Reporting

Advisory Counsel to the Board

Strategic Guidance on Program Development

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Special Areas of Focus: Discipline, Hiring and Promotion, Nepotism, Safety and Procurement

Key Challenges in 2011

Expanding the Focus to Audits, Inspections and Evaluations

Championing the Importance of Ethics, Integrity and Fairness

Building a Long-Term Program that is Effective and Efficient

Interim Metra Office of Inspector General Financial Information

Appendix A: Metra Board Ordinance Number 10-4

Appendix B: Metra OIG Advisory Memorandums

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Actions Taken: Investigation of Complaints and Allegations

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message from the metra inspector general On May 26, 2010, the Metra Board of Directors selected Hillard Heintze to serve as Interim Inspector General for the newly created Metra Office of Inspector General (OIG). The appointment came at a difficult time for Metra. A few weeks earlier, Metra’s long-time Executive Director, Phil Pagano, stepped in front of a moving Metra train and was killed in an apparent suicide. This tragic event occurred just as criminal investigations into his alleged misconduct began to mount and just hours before a Metra board meeting was scheduled to determine his status with the organization. In the aftermath, Metra confronted a surge of allegations and complaints from individuals in various parts of the organization, and faced other sudden challenges from internal and external stakeholders questioning the integrity and effectiveness of its services, practices and operations. These events led to Metra’s decision to create the Office of Inspector General (see Appendix A) and authorize Hillard Heintze to assume these responsibilities immediately in an interim capacity.

I am pleased to report to the Metra Board and to the citizens of Illinois that we found no evidence of widespread or institutionalized fraud, waste or abuse in the Metra organization.

Responding to an Agency Under Fire: The Early Priority On our first day of service, the Chairman of the Metra Board transferred 11 complaint case files to us. Over the next 30 days, we received an additional 42 complaints, bringing the first month’s total to 53, which exceeds the number of complaints typically received annually by similarly sized inspectors general in the public transportation sector. Throughout the remainder of the year, we continued to receive a steady stream of complaints – 104 in total by December 31, 2010. After the first few complainants had been interviewed, and individuals across the Metra organization learned about the Office of Inspector General and its purpose, many more employees stepped forward to air grievances.

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While many organizations deal with individuals seeking personal gain through false allegations, we were pleased most complainants appeared to be more concerned about improving Metra than receiving personal reward or compensation. The high number of complaints drove our early focus on complaint investigation – a focus that remained a leading priority for the duration of the year.

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SERIOUS ISSUES – BUT NO EVIDENCE OF WIDESPREAD OR INSTITUTIONALIZED FRAUD, WASTE OR ABUSE The majority of the complaints shed light on an agency with significant challenges primarily related to perceived or actual misconduct in management and personnel-related matters. Only a few of the complaints alleged corruption. Many of the complaints were several years old and others had previously been adjudicated through the legal system or resolved through arbitration. The most prevalent theme concerned a belief or perception of mistreatment on the part of employees. As we assess our 2010 activities as the Metra Inspector General, I am pleased to report to the Metra Board and to the citizens of Illinois that we found no evidence of widespread or institutionalized fraud, waste or abuse in the Metra organization. In fact, our investigations led us toward a very different perspective. At an operational level – and subject to the results of OIG audits, inspections and evaluations that should be carried out in 2011 – Metra appears to be effective and efficient in carrying out its core mission: delivering suburban rail transportation services to Chicago’s citizens and visitors as well as patrons from Cook, DuPage, Kane, McHenry, Lake and Will counties.

The Key Challenges Ahead: Continuing to Dispel and Dismantle the Negative Facets of the Pagano Legacy Metra, however, is not without serious internal issues. At this stage in our examination, it is clear that the vital challenge for Metra is addressing a number of critical management issues that span the agency – issues largely created, directly or indirectly, by the former Executive Director. It is important to point out that Metra is an agency that was directed, in great measure, for over two decades by a single individual, Phil Pagano. While Pagano’s management style was clearly autocratic and he made the most important decisions himself, he also allowed select subordinate managers wide latitude in administering their individual domains in a decentralized, uncoordinated and disparate manner. The secretive Pagano documented very little and released information only when he had no other choice. We learned of a specific instance, for example, in which he purposely misinformed Metra’s Board, employees and others in order to accomplish his goals, retain control and prevent discovery of his conduct and practices.

In 2010, the Metra Office of Inspector General did not investigate any allegations against former Executive Director Phil Pagano as these matters were being addressed by various authorities including the FBI’s Chicago Office, the Office of Inspector General for the U.S. Department of Transportation and the U.S. Attorney General’s Office. Instead, our mandate was to refer any information or evidence potentially related to Pagano’s alleged civil and criminal activity directly to the appropriate authorities.

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Over time, Pagano’s influence undermined the Metra organization in pervasive and destructive ways. His policies and practices embedded inconsistencies in management and policy. In the course of our investigations, we encountered decision makers at all levels of the organization acting in accordance with their perception of policy as established by the former Executive Director. These subjective interpretations varied significantly by manager and department. The harmful impact of Pagano’s legacy lingers – resulting in an atmosphere of deep mistrust and disillusionment among many employees and a corrosive lack of transparency that is only just beginning to lift today.

From Board and Management to Employees: Strong and Unqualified Support for the OIG There are two major influences on our work this year that I would like to emphasize. One is the fact that OIG investigators found Metra’s Board, management and employees supportive and ready to assist in investigations and fact finding. We found Metra’s internal stakeholders to be routinely candid about the organization’s strengths and weaknesses, and often enthusiastic about opportunities to improve the agency. Within Metra’s ranks are a large number of talented and dedicated individuals with detailed knowledge about their respective domains. The other factor I would like to highlight is our independence – arguably the single most important cornerstone of the OIG function. When we accepted this task, we did so with the understanding that we would function independently and that investigations could and would follow their natural course – in whatever direction they led – uninterrupted and uninfluenced by the Board, management or any external entities. Metra Board Chairman Carole Doris not only allowed us to act independently, she insisted upon it. Through her own actions and the clear example she set for the Board and the organization as a whole, she reinforced the importance of this guiding principle.

The Second Priority: Defining the Cornerstones of a Best-Practice Inspector General Function While the majority of our activity in 2010 concentrated on traditional OIG investigations, we also focused, as originally tasked by the Board of Directors, on advising Metra on the establishment of a permanent OIG function and making recommendations on budget and necessary regulations required for the effective operation of the Office.

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On August 11, 2010, we submitted a comprehensive report on these matters to Metra’s Board titled Launching the New Metra Office of Inspector General. The report set out a practical and achievable vision for the new Metra OIG, outlining three scenarios for launching the permanent Metra Office of Inspector General. It also presented 15 strategic recommendations on how best to establish a strong, independent and sustainable function in the most practical and cost-effective way. Lastly, this report outlined recommendations on how to grow, evolve and refine the OIG over time as a well-founded, high-performing oversight function that plays a strategic role in advancing the Metra mission, service delivery and reputation.

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Revitalization of Management: The Track To a Brighter Future at Metra While we are confident in our opinion that Metra’s need for an Inspector General’s Office to address and prevent fraud, waste and abuse is valid, strategic and continuing, many of the issues at Metra can be addressed through a dynamic revitalization of management. This requires a close and ongoing examination of people, policies, procedures and standards and a sustained focus on reforming these to align with leading management practices in use today. Based on information identified during individual investigations – as well as strategic insights and conclusions reasonably gathered from patterns evident across multiple allegations, complaints and investigative cases – we have made recommendations throughout the year to the Metra Board on ways to enhance transparency and improve performance. This counsel has taken the form of phone calls and conferences, in-person meetings and an ongoing series of OIG Advisory Memorandums on management issues relating to administration, operations and finance (see Appendix B). Over the course of 2010, we developed posters and pocket cards to build awareness among Metra employees, contractors and the general public of the role of the Inspector General and how to file a grievance or complaint. The posters, which are discussed in detail later in this report, will be displayed in trains and Metra facilities beginning early in 2011.

In 2010, Metra OIG funding totaled $700,000.

Managing OIG Costs in 2011 and Beyond: An Emerging Issue

It is important to place the OIG’s activity over its first seven months of operations within the context of its mandate over the next 12 months and in the years to come. The Actual OIG costs first year has required a concentration almost exclusively for the year totaled on investigating complaints and the deferral to 2011 of other common OIG responsibilities (audits, inspections $688,411. and evaluations). While the annual Metra OIG budget costs are likely to flatten and stabilize over time (assuming a moderate number of investigations, audits, evaluations and inspections), an emerging challenge will be how to best contain and control OIG-related costs without undercutting the function’s mission and performance. As outlined in our report on establishing a strong, independent and sustainable OIG function – described in detail in this report – we see three strategic options confronting the Metra Board. The first is to fund and establish a full-scale, in-house function. This is the most common option among government agencies, one that we estimate would cost Metra $1.2 million to $1.5 million per year. The second option is to outsource the entire function to a third party such as an Independent Private Sector Inspector General, a strategy we estimate would cost between $500,000 and $700,000 in its first year. The third option is to craft a hybrid solution by combining aspects of an in-house OIG with those of an external provider at a cost we estimate to range between $700,000 and $900,000. We outline the various advantages and disadvantages of these three strategic options at the end of this report.

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The Challenges Ahead In conclusion, I want to thank Metra Chairman Carole Doris, Metra Board members and Metra employees for the support they have provided throughout the year to our office and to our investigators. I would also like to credit their courage and consistency, among other factors, with our shared success in capitalizing on the unique advantages inherent in the Inspector General function – such as independence and objectivity – and their crucial role in helping to advance reforms at Metra systematically, day after day and month after month. I address my final comments to Metra stakeholders directly. As a new year begins – and we collectively raise the bar on what we expect the OIG and Metra to accomplish – we look forward to working closely with you on your vision of establishing Metra as one of the best suburban commuter rail systems in the country. It will take a great deal more work. It will involve sacrifices and compromises. It will require hard choices and sometimes painful changes to the status quo. But, in the end, it will be enormously rewarding. At the threshold of 2011, we see a renewed Metra beginning to emerge. HILLARD HEINTZE LLC

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Arnette F. Heintze

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profile of the metra office of inspector general VISION, MISSION AND AUTHORITY Vision: As the Interim Office of Inspector General, Hillard Heintze will provide Metra’s employees, customers, the public and the Metra Board of Directors with the integrity, independence, objectivity, accuracy, vigilance and other important guiding principles vital to identifying and resolving issues of fraud, waste and abuse at Metra – continuously delivering to all Metra stakeholders the highest quality in OIG services. Mission: As Metra OIG, Hillard Heintze will conduct and supervise independent investigations, proactively carry out inspections and evaluations, and perform audits of Metra activities to deliver on our mandate by Board ordinance to investigate allegations of fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance and malfeasance in order to root out wrongdoing, improve efficiency and effectiveness and promote and advance a culture of integrity, transparency and accountability at Metra. Authorization and Mandate: On May 26, 2010, the Metra Board of Directors passed Ordinance Number 10-4. This Ordinance articulated the Metra Board’s commitment to honest and efficient operation of commuter rail services and affirmed its belief that the establishment of a new Metra Office of Inspector General (OIG) would substantially further these goals.

The Ordinance also (1) established the OIG and gave the Office jurisdiction over Metra, including its operating corporation, the Northeast Illinois Regional Commuter Railroad Corporation (NIRCRC) and all Board members, officers, employees, contractors, subcontractors, suppliers and others doing business with Metra; and (2) charged it with investigating allegations of fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance and malfeasance with respect to Metra. (See Appendix A)

GUIDING PRINCIPLES AND VALUES We view the Metra OIG vision and mission as both drivers and outcomes of our core values and beliefs – as experienced professional leaders with lifelong commitments to pursuing excellence in security and investigative planning and oversight and, more importantly, as individuals with deep personal integrity. Our core values and beliefs include the following:

• We insist on excellence – in everything that we do. • We are committed to the highest standards of ethics, integrity, character, trust and confidence. • We strive to exemplify diversity. We value inclusion. We approach everyone with respect. • W e pay acute attention to detail. We know from experience that in our line of work it represents one of the most crucial determinants of success. • We speak the truth – and communicate with candor.

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• W e place an enormous emphasis on collaboration and teamwork – among ourselves, with our clients and within our network of professional colleagues, security specialists and business partners.

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The Hillard Heintze and Metra Interim Office of Inspector General Code of Professional Investigative Ethics* Every member of the Metra Interim Office of Inspector General ascribes to the Hillard Heintze Code of Professional Investigative Ethics:

• W e shall demonstrate, at all times, a commitment to professionalism and diligence in the performance of our duties. • W e shall not engage in any illegal or unethical conduct, or any activity which would constitute a conflict of interest. • A t all times, we shall exhibit the highest level of integrity in the performance of all professional assignments, and will accept only assignments for which there is reasonable expectation that the assignment can be completed with professional competence. • W e will comply with lawful orders of the courts and will testify to matters truthfully and without bias or prejudice. • I n conducting investigations, we will obtain evidence or other documentation to establish facts and a reasonable basis for any opinion rendered. • W e shall not reveal any confidential information obtained during a professional engagement without proper authorization. • W e shall reveal all material matters discovered during the course of an investigation which, if omitted, could cause distortion of the facts. • We shall focus upon evidence, not the status, rank or position of the parties to the investigation. • W e shall continually strive to increase the competence and effectiveness of professional services performed under our direction.

* Adapted from the American Society for Industrial Security (ASIS)

ABOUT HILLARD HEINTZE Hillard Heintze provides the strategic thought leadership, trusted counsel and end-to-end services that help leading public and private corporations as well as government agencies and major public service organizations advance best-in-class security strategies and investigations to protect and preserve the safety of their people, property, performance and reputation. Formed in 2004 by Terry Hillard and Arnette Heintze, the firm today is considered by many of its clients, its professional peers and its competitors to be one of the leading private strategic security advisory and management companies in the United States. With global headquarters in Chicago, Hillard Heintze has operations in Washington, DC, Dallas/Fort Worth, Denver, Raleigh and Miami, as well as operating capabilities in the Middle East and both South and Central America.

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CHAIRMAN METRA BOARD OF DIRECTORS Carole Doris

INTERIM INSPECTOR GENERAL Arnette F. Heintze LEGAL JOHNSTON GREENE

AUDIT BLACKMAN KALLICK

METRA BOARD OF DIRECTORS

MANAGEMENT POLICY AUDIT

INVESTIGATIONS METRA

INSPECTIONS AND EVALUATIONS

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RESEARCH AND ANALYTICS

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More than 700 trains each weekday serve the Metra system’s 240 stations.

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Geographically, Metra is the largest and one of the most complex commuter rail systems in the nation. Since Metra assumed railroad operations in Northeastern Illinois, ridership has grown by 54 percent – an average annual growth rate of two percent – and train miles have increased by 37 percent. More than 700 trains each weekday serve the Metra system’s 240 stations. In 2010, Metra provided an estimated 81 million rides.

The railroad has more than 1,000 pieces of rolling stock, more than 2,000 signals, 23 rail yards and seven maintenance facilities.

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The current Metra system is comprised of 11 separate commuter lines radiating north, west and south of downtown Chicago. Services are provided by the following rail lines: the Milwaukee District, Rock Island District, Metra Electric and Heritage Corridor, Southwest Service and North Central Service – as well as contract services provided by commercial carriers. Contract services are presently operated by the Burlington Northern Santa Fe Railroad Company, Union Pacific Railroad Company and the Northern Indiana Commuter Transportation District.

Metra is a suburban rail system that serves the city of Chicago, Illinois and surrounding suburbs. Metra oversees railroads that serve all commuter rail operations in the 3,700 square mile Northeastern Illinois region.

Metra’s rail system is comprised of 11 rail lines operating over more than 1,100 miles of track and 800 bridges.

profile of metra

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Museum Campus/11th St.

35th St. (under construction)

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actions taken: launching the new metra oig Establishment Of Hotline And Intake Procedures

On May 26, 2010 – the day of our authorization – Hillard Heintze established a Metra OIG hotline for complaints: (877) 482-4962. By day’s end, we briefed all members of the Hillard Heintze team who would be serving as principal OIG investigators or supporting the Metra OIG in any capacity and provided key individuals with specific guidance and direction on their roles, responsibilities and tasks. The next morning, the Metra OIG team began investigating the 11 case files provided by Metra Board Chairman Carole Doris the day before. After four weeks, the total number of case files received by the Office increased to 53 – approximately the full annual complement of cases investigated by other similarly sized OIG functions in the public transportation sector. Key highlights of the Metra OIG hotline and intake process – in effect from the morning of May 27, 2010 to present – include:

• Th e OIG accepts complaints or referrals from any Metra employee, member of the public or any person who wishes to file a complaint or register a concern about Metra. • Th e Office accepts complaints or concerns in person or via telephone, email, facsimile or U.S. mail. Complaints may be made anonymously. • Th e Metra OIG hotline number is published through multiple channels, including flyers distributed throughout Metra facilities, bulletins on Metra trains, press releases and media exposure through local print and television coverage. • Th e Metra OIG hotline is staffed during business hours and available to record messages and accept faxes at other times. Web inquiries are accepted at all hours, any day of the week and are reviewed immediately. Additional intake policies and practices include the following:

• E very complaint received is reviewed by investigative and analytical specialists on the Metra OIG team. • Every interview with a complainant is conducted in person whenever possible. • Th e OIG team does not provide legal opinions or advice to complainants. Instead, it informs each complainant about the role of the OIG to identify and investigate fraud, waste and abuse at Metra and makes it clear that the OIG is not acting as the complainant’s legal counsel, advocate or solely on his or her behalf.

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• I f the complaint’s issue is outside the scope of the Metra OIG’s mandate, it is referred to an appropriate agency depending on the nature of the complaint.

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FORMALIZATION OF CORE PROCESSES The next step in establishing the new OIG was defining and formalizing core processes. A brief outline of these distinct procedures is presented below. Investigations: Metra OIG investigations cover a variety of complaints, but must meet the Metra Board’s

mandate involving fraud, waste and abuse concerning employees, contractors, consultants or other entities conducting business with Metra.

The process typically starts with the receipt of an allegation. The investigator assigned to a case conducts a preliminary review and interviews the complainant to determine if an investigation is warranted. If an investigation is warranted, the case is formally opened and pursued based on OIG priorities and procedures. When issues do not fall within the OIG mandate but require action by Metra, they are referred to Metra staff for a response. The OIG monitors the progress of these referrals to determine whether actions taken by Metra staff are appropriate and aligned with Metra policies. By mutual agreement with Metra’s Acting Executive Director, Metra has committed to responding immediately to all matters referred to it by the OIG and providing updates every 30 days until the issue is resolved. Audits: OIG audits are generally independent reviews of business assets or practices related to areas such as

financial reporting, accounting, human relations, information technology, information security, cost management, pricing, sales strategies and compliance with contractual requirements or with federal, state and local regulations. Given the high volume of initial complaints and Metra’s contractual relationship with the audit firm Blackman Kallick since the onset of the Pagano investigation, the OIG did not initiate any audits in 2010. As the Metra OIG expands its activities in 2011, a significant amount of time will be spent reviewing and acting upon any findings in Blackman Kallick’s 2010 audits. By late 2011, fulfilling the OIG mandate will require ensuring that audits begin in the areas of Metra’s internal controls, financial reporting and information security. Inspections and Evaluations: Carried out proactively and sometimes on a planned schedule, OIG inspections

and evaluations allow the Office to gain critical insight into the agency’s operations with less formality than required by a full-scale investigation or audit. While inspections and evaluations were not a priority for the Metra OIG in 2010, they will begin to play an important role in OIG oversight later in 2011.

CORE PROCESSES What are the actions that Metra OIG investigators take in a typical investigation?

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onduct interviews C Collect evidence Undertake surveillance Review Metra policies E xamine employment files Review information with auditors or legal staff Consult with prosecutorial agencies and other third-party authorities

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A Visual Guide to the Metra OIG Complaint Process Complaint Initiated Through Hotline, Fax, Web or In Person

Yes

OIG Closes or Refers Complaints Not Meeting Jurisdiction/Mandate

Preliminary Review for Jurisdiction and OIG Mandate Compliance

Yes

Case Closed Confidential Report

OIG Investigator Interviews omplainant - Determines if C Investigation is Warranted

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Investigation Initiated Complaint Founded

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Potential Criminal Activity

Case Closed Confidential Report Referred to Appropriate Authority

Findings Against Individual or Metra

Referred to Metra Executive Director for Disciplinary Consideration/Process

Advisory Memorandum Policy Recommendation

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Report to Chairman

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It’s your Metra. And it’s your new Metra OIG.

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Same trains. A clearer direction. A brighter future.

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The new Metra Office of Inspector General (OIG) is now firmly in place – fully independent of Metra but aligned in the same direction. Working every day toward ensuring vigilance, accuracy and integrity across every facet of the organization.

DO YOU HAVE INFORMATION ON FRAUD, WASTE OR ABUSE? If so, email the Metra Office of Inspector General at MetraIG@hillardheintze.com. Or call the Metra OIG Hotline 24 hours a day, 7 days a week, at:

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(877) 482-4962 N S P E C TO R

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In 2010, the Metra Office of Inspector General began developing an awareness campaign to support its mission. In addition to press releases, pocket cards and other channels of outreach, the OIG team developed several posters that will be displayed in Metra trains, stations and the administrative office in 2011.

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Why was the Metra Office of Inspector General (Metra OIG) established?

These posters are designed to inform all key internal and external stakeholder audiences – including Metra employees, suppliers and contractors as well as the public – of the creation and existence of the IG function, its purpose and primary activities and the importance to Metra’s future of reporting any information pertaining to incidents of fraud, waste or abuse.

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To provide increased accountability and oversight of the agency.

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To assist in improving agency operations.

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And to deter and identify waste, fraud, abuse and illegal acts.

The Metra OIG maintains a hotline to report allegations and other irregularities in Metra programs or operations. Allegations may be reported by Metra employees, contractors or members of the general public. The Metra OIG Hotline is available 24 hours a day, 7 days a week. To report an allegation of fraud, waste, abuse or mismanagement at Metra, you may do so by using one of the following methods: • Phone: 877-482-4962 (Metra OIG Hotline) • E-mail: MetraIG@hillardheintze.com Metra Office of Inspector General c/o Hillard Heintze 30 South Wacker Drive, Suite 1730 Chicago, Illinois 60606

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actions taken: communications and reporting ADVISORY COUNSEL TO THE BOARD Throughout 2010, the Metra OIG was in regular communication with Chairman Carole Doris and the Metra Board of Directors. This communication centered primarily on information emerging from individual investigations as well as strategic insights and conclusions reasonably gathered from patterns evident across multiple allegations, complaints and investigative cases. While discussions and exchanges typically took the form of phone calls, conferences and in-person meetings, the most formal counsel included submission of strategic advisory memorandums to the Metra Board Chairman on a range of management issues. These Metra OIG Advisory Memorandums were designed to help ensure that some of the more critical issues emerging from investigations – especially those that collectively suggested a pattern of inappropriate or inefficient organizational practices or behaviors – resulted in concrete change at various levels within the Metra organization. The brief, two-page memorandums contain three sections generally focused on: (1) the strategic issue and its broader context; (2) examples or implications for Metra; and (3) a numbered set of specific recommendations to the Board and Metra management on strategies for correction, mitigation and improvement. The four 2010 Metra OIG Advisory Memorandums 2010-1, 2010-2, 2010-3 and 2010-4 (see Appendix B) address the following topics:

• Defining a Clear, Actionable and Long-Term Strategic Plan • Improving the Discipline and Enforcement Process • Reinforcing the Importance of Ethics and Integrity

Metra employees have been very cooperative and receptive to OIG requests. OIG investigators requested dozens of employment, audit and contract files, among other documents. Metra’s management staff released the files to OIG investigators without hesitation. OIG investigators conducted hundreds of interviews with Metra employees at all levels of management and across nearly all functions and divisions within the organization. In all but a few instances, employees were willing to meet with OIG investigators and provide information to assist in furthering our investigations.

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• Making Hiring and Promotion More Transparent

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Strategic Guidance On Program Development In 2010, Hillard Heintze authored, at the Board’s request, a detailed and comprehensive report outlining our strategic recommendations on how to lay the proper long-term foundation vital to establishing a strong, independent, sustainable and cost-effective function. During June, July and early August, Hillard Heintze: • Identified other public transit organizations with an Inspector General function

• A nalyzed core Inspector General program development areas • D eliberated internally as a team on these findings and insights as well as their strategic implications for Metra and the organization’s current objectives, resources and environment This report was delivered to Metra’s Board on August 11, 2010 and published, by Board decision, on the Metra website shortly thereafter. Briefly, the report sets out a practical and achievable vision for the new Metra OIG, describes how other public transit organizations have established the function, and examines the most critical building blocks necessary to establish the Office – from mission and authority to staffing, operations and funding.

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mETRA Oig: 2010 pUBLiCATiONS LAUNChiNg ThE NEW mETRA OFFiCE OF iNSpECTOR gENERAL Strategic Recommendations on Establishing a Strong, independent and Sustainable Function Hillard Heintze published and presented a 103-page report to Metra’s Board of Directors on August 11, 2010. The Board released this publication to the public and posted it on the Metra website.

LAUNCHING THE NEW METRA OFFICE OF INSPECTOR GENERAL (OIG): Our Strategic Recommendations on Establishing a Strong, Independent and Sustainable Function

August 11, 2010

In the report, Hillard Heintze outlined 15 strategic recommendations on establishing an effective and efficient Inspector General program. These recommendations were crafted with the intent to help Metra (1) capture and implement best practices in use today by other rail transportation OIG programs, (2) proceed in a financially practical manner; and (3) increase the likelihood that the program would provide a continuous stream of value to Metra over time. Submitted to: Chairman Carole R. Doris Metra Board of Directors

In short, we recommended that beginning in 2010, Metra should: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Expand the existing authority for the OIG through an amended ordinance or statute. Institute a clear, direct and best-practice based reporting channel. Establish an appointment process that ensures independence. Finalize a complete job description for the new OIG position. Evaluate IG candidates by looking for signs of integrity, neutrality and experience. Clarify the grounds on which the IG can be removed from office. Designate a funding source for the Metra IG function. Establish the right scope for the Metra IG’s authority. Authorize the Metra IG to engage the services of external third parties. Extend to the Metra OIG the appropriate powers. Authorize the Metra IG to engage in eight specific activities. Establish an independent information technology function. Require strict conformity with professional standards. Set clear ethical guidelines. Require that the OIG’s annual report include fact-based reporting on the function’s performance.

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At the close of 2010, many of these recommendations have been authorized or are currently in effect. A few others are nearing completion. Still others have yet to be addressed. In 2011 and beyond, as Metra and its stakeholders evolve their approach to positioning the OIG function for maximum impact at the most efficient cost, we recommend that each one of these recommendations be implemented and sustained.

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actions taken: investigation of complaints and allegations Given the volume of complaints received since May 2010, one of the Metra Office of Inspector General’s leading priorities – in addition to establishing the first-year cornerstones of the Office’s activities – was reviewing all complaints received and conducting investigations on those with merit. As Inspectors General associated with any organization commonly encounter, the validity of complaints received by the Metra OIG in 2010 varied tremendously. Some were baseless on their face. Others involved the complainant’s dissatisfaction with labor-related issues already addressed through arbitration or adjudication. Quite a few centered on minor events many years in the past or were based not on fact, but on rumor or innuendo.

Complaints Received

104

Of the 104 complaints received this year, we found that 78 merited investigation. While these investigations addressed a variety of issues, most concentrated on one or several of the following areas: discipline, hiring and promotion, nepotism, safety and procurement.

Cases Reviewed Complaint Irrelevant to OIG Mission

Cases Referred to Metra Management Issue Resolved

Cases Still Open as of December 31, 2010

104

Total Cases Opened

104

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Cases Investigated Complaint Not Substantiated

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Cases Opened

Cases Investigated Closed with Findings/Recommendations

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SPECIAL AREAS OF FOCUS

Discipline

Cases Investigated/ Reviewed by Metra OIG - Resolved

75%

11%

Inconsistencies in Discipline Applied

Our investigation confirmed that in multiple instances, the absence of common policies and protocols for employee conduct and disciplinary actions led to confusion among employees about what consequences would result from specific behaviors. For example, one employee was terminated for excessive tardiness while another received only a minor suspension for a similar infraction.

14% Cases Open as of 12-31-10

In 2010, thirteen investigations involved issues of inappropriate or excessive discipline or a perception of unfair treatment.

Cases Referred to Metra - Resolved

Number of Complainants Interviewed*

96 Number of In-Person Interviews with Complainants

82 Number of Individuals Interviewed

275

Leniency ReINstatement Leniency reinstatement is a practice used by Metra and many other carriers in the rail transportation sector. According to this practice, when a Metra employee violates a major policy rule, he or she can waive their right to an investigation and hearing on their case. In many cases, Metra terminates employment, but soon rehires the individual and provides them with a position within the organization on a probationary basis. This frequent practice is often applied in an arbitrary manner at management’s discretion. For example, we determined that on several occasions employees had been terminated for committing serious acts (including criminal acts) and then rehired, pursuant to the leniency reinstatement practice. Leniency reinstatement bypasses the arbitration process and is decided solely by a discipline committee composed of senior Metra managers.

Number of Interviews**

541 * Eight (8) complainants were anonymous or refused interview ** Most complainants and many witnesses were interviewed multiple times

Our investigations revealed that Metra’s discipline process needs revision. As outlined in the 2010 Metra OIG Advisory Memorandum, Improving the Discipline and Enforcement Process (Number 2010-2), we recommend that Metra (1) direct management to create a best-practice based discipline and enforcement policy; (2) mandate the use of a “discipline matrix” to support progressive discipline for policy non-compliance and define egregious violations that trigger automatic termination; and (3) take practical steps to help employees understand the policies and rules and how discipline is enforced.

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Hiring and Promotion

In 2010, the Metra OIG received 21 complaints regarding irregularities in the promotion process. These related, on the whole, to favoritism, position changes, political influence and treatment of referrals.

FAVORITISM Over and over, we encountered a popular belief among Metra employees that jobs and promotions are secured through relationships and influence rather than earned on the basis of skills, experience, education and work history. In most instances, internal or public job postings announced the opening according to standard Metra protocol. Metra management panels interviewed the candidates and subsequently made primary and secondary selections. In some cases, job announcements and postings were not made and people were hired or promoted into positions based upon management’s decision to do so. This practice is within Metra management’s purview. ABILITY TO CHANGE POSITIONS Several of the complaints involved allegations that employees were not allowed to transfer or bid on certain jobs they desired. Upon examination, OIG investigators found this to be true for a specific category of skilled workers because the need for their highly specialized skills (concentrated primarily in the Mechanical Department) was vital to keeping the trains running safely and on time. More than 50 percent of Metra’s skilled mechanical employees are aged 50 or older and are eligible to retire at age 60. The Metra Apprentice Training Program is not producing enough highly specialized personnel with the prerequisite skills necessary to replace Mechanical Department employees who wish to transfer to other positions. This practice – restricting workforce mobility for key personnel with high value, hard-to-replace skills – also falls within the scope of acceptable management practice and, viewed from the perspective of Metra’s mission, is a prerogative that should be protected and sustained. POLITICAL REFERRALS After media stories were aired on the practice of using political standing to influence the hiring process at Metra, the Metra OIG received several allegations concerning this matter. Our investigation determined that the hiring of several current Metra employees was initiated by personal referrals made by Illinois state legislators to Phil Pagano. While it is clear that these Metra employees have a connection at some level to Illinois politicians, OIG investigators uncovered no evidence to support a quid pro quo agreement or an illegal action taken by either an Illinois state legislator or by any Metra management employee. TREATMENT OF REFERRALS One of the issues most resented by Metra employees is the inability to apply for positions they believe they are qualified for – or could have qualified for given proper training and guidance on pursuing career paths at Metra. The perception is that unannounced, no-bid positions are occasionally given to individuals who may not have the appropriate qualifications, but who know the right people. These negative perceptions undermine morale at Metra and hinder management’s ability to hire and promote qualified people who are well suited for the job.

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Job referrals are commonplace at Metra – as they are in most large organizations. In such cases, Metra’s Human Resources department typically conducts exploratory interviews with referrals to gauge the prospective employee’s experience, skills and abilities and determine if the applicant is an appropriate match for any current openings or needs at Metra. While some interviews result in job offers, more often than not the person is found to be unqualified and no offer is made. As outlined in the 2010 Metra OIG Advisory Memorandum, Making Hiring and Promotion More Transparent (Number 2010-4), we recommend that Metra establish hiring and promotion practices that support transparency, clarify career paths and engender trust among current and prospective Metra employees.

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A SHORT NOTE ON ONGOING INVESTIGATIONS The Metra Office of Inspector General enters 2011 with 11 open investigations. Two are investigations we are pursuing cooperatively with Blackman Kallick on issues related to overtime and contract irregularities. One complaint has led to an evaluation of salary irregularities. The remaining eight focus on allegations of procurement irregularities, purchasing kickbacks, inappropriate hiring, intimidation and workplace violence. Most, if not all, of these investigations will be concluded early in 2011.

Nepotism

In 2010, eleven complaints related either directly or indirectly to the issue of nepotism.

Complainants alleged that some hiring at Metra has been based upon familial relationships and that family members of Metra employees are favored for new positions over those without a family member working at the organization. Similar allegations were made concerning promotions at Metra, in that those with family members in management positions are favored for promotions or career advancement over other Metra employees. OIG investigators confirmed that there are â&#x20AC;&#x201C; and have been â&#x20AC;&#x201C; many Metra employees who are related to one another, which is common among large organizations. Investigators did not uncover any evidence of hiring or promotion based exclusively on familial relationships. The perception of nepotism, however, continues to undermine the Metra culture and work environment at many levels. Information concerning this issue and recommendations were brought to the attention of the Metra Board Chairman by the OIG. Subsequently, the Metra Board of Directors passed Ordinance No. MET 10-16 establishing a policy forbidding nepotism and a restriction against the creation of situations in which nepotism can occur. This issue and related recommendations were also addressed in the 2010 Metra OIG Advisory Memorandum, Making Hiring and Promotion More Transparent (Number 2010-4).

Origin of OIG Complaints Email

OIG Hotline

From Metra

IG Initiated

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Safety

In 2010, five complaints involved safety. All were referred to Metra management – which took appropriate action.

Most of the referrals did not center on issues that significantly impacted the employees of Metra or the operation of the trains. Several complaints received by the OIG did not fall within the OIG mandate, yet required management action. These cases were referred to Metra management for a response. The referrals were monitored by the OIG to determine if the actions taken by Metra management were appropriate and in alignment with Metra policies.

Safety

Customer Service

Station Facility Management

Payroll/Pension Irregularities

Human Resources

Contractor Payment 1 Employee Conduct

Total Cases Referred to Metra Management

Note: Referred cases were management issues that did not fall within the scope of the OIG mandate

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The second case involved two employees reported to be under the influence of narcotics. Working with the OIG, Metra management acted quickly, observed the employees’ abnormal behavior and immediately suspended them. When a subsequent drug test confirmed the employees were under the influence of narcotics, their employment was terminated.

Cases Referred to Metra Management Resolved

Two complaints, however, involved safety. In the first case, an employee reported that water leaks in a yardmaster’s office resulted in standing water in the building, the development of mold and, through this contamination, an unsafe work environment. The issue had allegedly been reported to Metra management by employees to no avail. Upon receiving the complaint, the OIG advised Metra management of the issue and requested action and a response. Metra management immediately acted upon the complaint and resolved the issue satisfactorily within four days.

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2010 Conduct Allegations Most Frequently Reported Unfair Discipline Disparate Compensation Procurement Management Misconduct Improper Hiring Promotion Irregularities Disparate Compensation - Pension Improper Termination Safety Contract Irregularities Purchasing Violations Human Resources Workplace Violence Irrelevant to IG Mission

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13 11 11 10 10 9 5 5 5 4 4 2 1 18

Procurement

The Metra OIG received 11 complaints regarding irregularities in the procurement process. These related, in general, to the following areas:

BID SOLICITATION AND CONTRACT AWARD PROCESS The OIG received several allegations or complaints concerning questionable contractual agreements between Metra and several outside companies. The complaints were credible and provided sufficient information to warrant a review of a number of contractual agreements and an analysis of the processes through which the vendors were selected. For example, it was alleged that the manner in which Metra selected vendors for a specific area was fraught with favoritism, bias and deceptive practices. OIG investigators examined the process through which bids were solicited and received, as well as conducted many interviews with Metra managers who were involved in the screening and selection process. Although the initial allegations contained enough credible information to trigger an OIG investigation, investigators uncovered no evidence of undue influence and determined that the process was fair, open and impartial.

DISADVANTAGED BUSINESS ENTERPRISES (DBEs) An OIG investigation was initiated pursuant to an allegation that federal funding for Disadvantaged Business Enterprises had not been awarded fairly by the Metra DBE Department and that favoritism and ethnicity play a significant role in funding for contracts. Our investigators found no wrongdoing with respect to funding or contracts steered to favored ethnicities by anyone in the DBE Department. OIG investigators determined that businesses owned by African Americans are awarded contracts at a lower level than their percentage in the Metra DBE Certification Program Directory would suggest due to the low number of African American contractors that submit bids for large monetary contracts. The OIG team also determined that Subcontinent Asian Americans participate at a higher level than their percentage in the Metra DBE Certification Program Directory and that statistically, Hispanic-owned businesses receive a significantly larger share of federal funding than businesses owned by African Americans and at a number higher than their participation level in the program. It appears that DBE contracts are awarded based on availability of vendors in specific trades, on various types of construction projects and on the relationships and history between the prime contractors and the subcontractors. The bidding process was found to be compliant with rules for federal funding and bids were posted openly, indicating fair and impartial processes without undue influence. REAL ESTATE TRANSACTIONS An OIG investigation was also initiated pursuant to allegations that Metra employees profited from real estate transactions for land in which Metra may have had either a current or future interest. OIG investigators conducted interviews and examined the deeds, titles, plat of surveys and other documents related to the land acquisition. Metra may, in fact, have a future interest in the land in question for the construction of a new station or other facility. This complaint, however, was determined to be unfounded as no evidence was discovered that Metra employees profited or stand to profit from future transactions should Metra purchase the property.

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The Metra OIG will continue to investigate procurement in other departments. The investigations will be intensive and time consuming, but necessary to ensure fairness, impartiality and transparency in the process.

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key challenges in 2011

At Hillard Heintze, we see the Office of Inspector General

Continuing to establish the foundations for a best-practice based Metra OIG program is essential to Metra’s vitality and performance in the years ahead – for every stakeholder vested in its success. When Hillard Heintze accepted responsibility as Metra Inspector General in May of this year, the Hillard Heintze team stepped into the assignment without prior knowledge, preconceptions or judgments about Metra’s effectiveness or efficiency in carrying out its mission to the public. As the year’s work came to a close – after more than 500 interviews with individuals working across Metra’s various operations and examinations of thousands of pages from hundreds of files and documents – a clearer picture of Metra is emerging.

as an independent and critical function that plays a unique role in fostering public integrity and eliminating waste, fraud and abuse within a large, complex organization.

It is apparent that Metra – like most large, complex organizations – is not without challenges, but we find the agency demonstrates a well-honed ability to carry out its service commitments. This ability, however, stands side-by-side with vulnerabilities that range from strategic to tactical – vulnerabilities that will continue to undermine Metra’s performance unless the OIG function is firmly, visibly and permanently maintained in place. At Hillard Heintze, we see the Office of Inspector General as an independent and critical function that plays a unique role in fostering public integrity and eliminating waste, fraud and abuse within a large, complex organization.

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Bringing this perspective to Metra, and systematically translating it into measurable, mission-aligned value, will require a sustained focus. It will also require time. While the inaugural program-building OIG activities completed in 2010 represent a strong step in the right direction, continuing this success and momentum in 2011 and beyond will require a proactive and energetic approach to three challenges. These include: (1) expanding the focus of OIG resources beyond investigations to audits, inspections and evaluations; (2) continually championing the importance of ethics, integrity and fairness; and (3) establishing a strong, long-term foundation for the OIG program that is both effective at meeting the OIG mandate and also highly cost effective, given Metra’s financial objectives and constraints.

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Expanding The Focus To Audits, Inspections And Evaluations Now that the initial wave of complaints has been largely addressed, we anticipate the volume of complaints and allegations will stabilize in 2011 and perhaps even decline. This will allow the OIG to shift more resources from complaint review and investigation to other mandated requirements. In 2011, the OIG should begin conducting independent audits of business assets or practices related to areas such as financial reporting, accounting, human relations, information technology, information security, cost management, pricing, sales strategies and compliance with contractual requirements and with federal, state and local regulations. Among these, special attention should be paid to Metra’s internal controls, financial reporting and information security. In addition to these audits, inspections and evaluations should be undertaken proactively – particularly reviews of adherence to agency-wide policies, safety procedures and procurement rules. Conducting such inspections in conjunction with other internal functions and units – such as the Equal Employment Opportunity Office, the Department of Human Resources and the Office of Labor Relations – will help the OIG fulfill its advisory role within the agency to improve management accountability and practices.

CHAMPIONING THE IMPORTANCE OF ETHICS, INTEGRITY AND FAIRNESS One of the most critical roles of the Inspector General function – in any organization – is to maintain an unwavering spotlight on how ethics, integrity and fairness are advanced and reflected in the organization’s day-to-day activities. While every Metra employee, department and management committee carries the same responsibility to keep these principles at the heart of the agency’s operations and activities, the Metra OIG’s duty is to carry the flag in three very different ways: Action: The first and most obvious manner is through the direct execution of its duties – in investigating allegations of fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance and malfeasance with respect to Metra. Presence: The second way, though more subtle, is enormously important. As employees, staff, suppliers and other stakeholders increase their awareness of the Metra OIG’s role and begin to see changes – whether small or large – in various policies and practices across the organization, a number of positive outcomes begin to emerge. Over time, transparency increases and behaviors change. Efficiencies grow, morale improves and rumors decline. As these changes are institutionalized, sustaining a renewed culture of ethics, integrity and fairness becomes important not just to the Metra Board and management team, but also to individual employees who increasingly identify their future as closely aligned with the reputation and practices of the organization. Leadership: Distinct from its investigative responsibilities and, by extension, the outcomes these actions foster is the OIG’s proactive role in serving as Metra’s unofficial Chief Integrity Officer – in effect, as the mentor and champion of fair and ethical actions and decisions at every level of the agency. As with other challenges confronting Metra and the Metra OIG in 2011, refreshing and renewing a culture of ethics, integrity and fairness is not an objective that can be achieved in a year or two. Essential to this goal, as well as others, is ensuring that the OIG is established in some form as a permanent function at Metra in a sustainable way.

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Building A Long-Term Program That Is Effective And Efficient As of December 31, 2010, the Metra Board has been unable to move forward with a permanent solution for structuring the Office of Inspector General due to several factors, including a lack of political consensus and legislation pending in the Illinois General Assembly. Current bills in the Assembly call for a variety of structures. These structures vary with respect to their implications on the most critical program elements, such as independence, scope of authority and reporting channels.

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In our report to the Metra Board, Launching the New Metra Office of Inspector General, we outlined several viable options for establishing a long-term foundation for the Office. We see three strategic options confronting the Metra Board. These options are presented in detail on the pages that follow.

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option 1: fund and establish a full-scale, in-house function

This is the most common approach among government agencies. If the founding authority for the OIG chose to pursue this option, it would systematically create a self-sufficient, independent, fully-staffed professional office dedicated to fulfilling the new Metra OIG mission.

ADVANTAGES

DISADVANTAGES

• E nsures an IG function deeply committed to Metra’s mission, purpose and operations.

• H igh cost of employing personnel – from hiring, onboarding and supervision to mentoring, training and professional development.

• D emonstrates organizational stability and is best suited to set long-term reform goals.

• L onger lead time required to establish and cultivate a fully mature, high-performing office.

Estimated First-Year Cost Range: From $1.2 million to $1.5 million

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option 2: outsource the entire function

This option involves fully outsourcing Metra’s OIG to a third party – such as an Independent Private Sector Inspector General (IPSIG) or other IG services firm. In this model, the external firm reports to the individual or body designated by the founding authority and conducts all IG activities and functions.

ADVANTAGES

DISADVANTAGES

• Provides Metra with on-demand

Typically, the external service provider may be perceived by internal and external stakeholders as not having the same connection and dedication to the agency that an in-house OIG may have.

access to a broader pool of more experienced specialists and subject-matter experts in a wider set of OIG-related domains. • R esults in lower cost for this expertise. • O ffers Metra the immediate benefits of a fully mature OIG function.

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Estimated First-Year Cost Range: From $500,000 to $700,000

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option 3: craft a hybrid solution

This model combines aspects of an in-house OIG with those of an external provider. Metra would employ an in-house Metra Inspector General. The new Metra IG would be supported by an external IG services firm that conducts operational functions at the direction and oversight of the Metra IG.

ADVANTAGES

DISADVANTAGES

• A llows Metra to quickly establish a ful ly functioning IG capability.

As with option 2, the external IG services firm is not solely focused on one entity. The risks associated with this, however, are mitigated by having a full-time IG supervising the external service provider’s priorities, activities and overall performance on a constant basis.

• L owers Metra costs by accessing a wider portfolio of expertise and skill sets on an as-needed basis. • E nsures greater independence by having a third party conduct core OIG operations. • P rovides the Metra Board with assurance that the mission and needs of the agency remain a primary focus.

Estimated First-Year Cost Range: From $700,000 to $900,000

Based on the knowledge, insights and hands-on experience Hillard Heintze has gained over the year as Metra’s Interim Inspector General, we firmly believe that the third option – a hybrid solution – would best advance Metra’s interests in terms of both effectiveness and efficiency in 2011 and beyond.

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interim metra office of inspector general financial information

Interim Metra office of inspector general

Summary of 2010 Funding 2010 Initial funding (May 26, 2010)

$ 100,000

Change Order No. 1 (July 9, 2010)

$ 100,000

Change Order No. 2 (September 17, 2010)

$ 500,000

Total Metra OIG 2010 Funding

$ 700,000

Total Metra OIG 2010 Actual Costs

$ 688,411 $ 11,589

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Carry-Forward Funding to 2011

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interim metra office of inspector general financial information

Interim Metra office of inspector general

Budget Projections for 2011 and 2012 Based on Option 3 2011

2012

$ 50,000

Investigations

$ 260,000

$ 230,000

Audits

$ 175,000

$ 210,000

Inspections and Evaluations

$ 100,000

$ 130,000

Outreach and Education

$ 90,000

Full Time Metra Inspector General (6 months 2011)

$ 75,000*

$ 150,000*

OIG Administrative Assistant (6 months 2011)

$ 20,000

$40,000

Total

$ 770,000

$ 900,000

Funding Approved to Date (Change Order No. 3, 12/20/2010)

$ 200,000

Strategic Guidance on Program Development

Carry-Over Funding to 2011 Funding to be Approved

$ 11,589 $ 558,411

*B ased on review of industry norms which indicate a salary range between $120,000 and $150,000, depending on qualifications

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appendix a

Metra COMMUTER RAIL Board Ordinance Number 10-4 WHEREAS, the Board of Directors (“Board”) of the Commuter Rail Division of the Regional Transportation Authority (“Metra”) is committed to honest and efficient operation of commuter rail services; WHEREAS, the Board believes that the establishment of an Office of Inspector General substantially furthers these goals; NOW, THEREFORE, BE IT ORDAINED BY THE BOARD AS FOLLOWS: 1.

The Board hereby creates the Office of Inspector General (“OIG”).

The OIG’s jurisdiction and duties shall be as follows.

2.1. The OIG shall have jurisdiction over Metra (which includes its operating corporation, the Northeast Illinois Regional Commuter Railroad Corporation) and all Board members, officers, employees of, contractors, subcontractors, suppliers, and others doing business with, Metra.

2.2. The OIG shall investigate allegations of fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance, or malfeasance with respect to Metra.

2.3. Investigations may be based on complaints from any source, including anonymous sources, and may be self-initiated, without a complaint.

3. The OIG’s investigation results shall be handled as follows. 3.1. If the OIG, upon the conclusion of an investigation, determines that reasonable cause exists to believe that fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance, or malfeasance has occurred, the OIG shall issue a summary report of the investigation to the Board.

3.2. If the OIG, upon the conclusion of an investigation, determines that it is appropriate and warranted to refer an investigation to a federal, state or local law enforcement agency, then the OIG shall make such referral and provide a copy of the summary report to the appropriate agency.

3.3. If the OIG, upon conclusion of an investigation, determines that there is insufficient evidence that fraud, waste, abuse, mismanagement, misconduct, nonfeasance, misfeasance, or malfeasance has occurred, the OIG shall close the investigation.

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4. The OIG shall: have access to all information and personnel necessary to perform the duties of the office; request any information or assistance that may be necessary for carrying out the duties and responsibilities provided by this Ordinance from any local, state, or federal governmental agency or unit thereof; establish a policy that ensures the appropriate handling and correct recording of all investigations conducted by the Office, and ensures that the policy is accessible in order that those seeking to report suspected wrongdoing are familiar with the process and that the subjects of those allegations are treated fairly; receive and investigate complaints or information concerning the possible existence of an activity constituting a violation of law, rules or regulations, mismanagement, abuse of authority, or substantial and specific danger to the public health and safety; and review, coordinate, and recommend methods and procedures to increase the integrity of Metra. 5. Any employee of Metra who knowingly files a false complaint or files a complaint with reckless disregard for the truth or falsity of the facts underlying the complaint may be subject to discipline. 6. All Board members, officers and employees of Metra have a duty to cooperate with the OIG in any investigation undertaken pursuant to this Ordinance. Failure to cooperate includes, but is not limited to, intentional omissions and knowing false statements. Failure to cooperate with an investigation pursuant to this Section is grounds for disciplinary action, including termination of employment. However, nothing in this Ordinance purports to limit or alter a personâ&#x20AC;&#x2122;s existing rights or protections under State or federal law or any collective bargaining agreement. 7. The OIG shall prepare an annual written report to the Board, outlining the activities of the OIG for the preceding year. The OIG shall also make interim reports to the Board, as it deems necessary or as requested by the Board. 8. Upon passage and approval of this Ordinance, the Board shall designate a firm or individual (â&#x20AC;&#x153;Interim Inspector Generalâ&#x20AC;?) to staff and lead the OIG on an interim basis. The compensation of the Interim Inspector General shall be determined by the Board. The Interim Inspector General shall exercise and have the jurisdiction, duties, rights and responsibilities of the OIG until such time, if any, as a permanent Inspector General is designated. The Interim Inspector General shall also recommend to the Board a budget and any necessary rules that are required for the effective operation of the OIG. 9. The Chairman of the Board is hereby authorized to take such actions as necessary to implement this Ordinance.

May 26, 2010

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appendix b metra OIG advisory memorandums Metra Oig Advisory Memorandum No. 2010-1 - Defining a Clear, Actionable and Long-Term Strategic Plan Metra Oig Advisory Memorandum No. 2010-2 - Improving the Discipline and Enforcement Process Metra Oig Advisory Memorandum No. 2010-3 - Reinforcing the Importance of Ethics And Integrity

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Metra Oig Advisory Memorandum No. 2010-4 - Making Hiring and Promotion More Transparent

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Defining a Clear, Actionable And Long-Term Strategic Plan The Critical Need to Clarify Metraâ&#x20AC;&#x2122;s Mission, Vision and Values, Set Strategic Objectives, and Define the Path the Organization Must Follow to Achieve Them

September 29, 2010 A METRA OIG ADVISORY MEMORANDUM No. 2010-1

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ADVISORY MEMORANDUM No. 2010-1 Defining a Clear, Actionable and Long-Term Strategic Plan

TO: FROM: DATE: RE:

Chairman Carole Doris and the Metra Board of Directors Arnette Heintze, Hillard Heintze September 29, 2010 Defining a Clear, Actionable and Long-Term Strategic Plan

I. Strategic Issue and Context Shining a bright light on the path ahead isn’t just important. It’s mission critical especially for Metra at this point in its evolution. As you know, the Metra OIG team at Hillard Heintze is systematically (1) investigating allegations, (2) making determinations on reasonable cause and (3) referring case files, if necessary, to you and the Board or to appropriate law enforcement authorities. As we are doing so, however – and as we shift from a “crisis footing” to a more proactive, forward-facing posture – we are on alert for strategic opportunities to improve the integrity of Metra’s operations and performance. We’re looking, for example, for root causes, for commonalities across signs of fraud and symptoms of inefficiency, and for significant windows of opportunities to build trust among Metra’s stakeholders and to advance the effectiveness and efficiency of the organization as a whole. At this point – after 125 days of concentrated activities and after initiating investigations of more than 85 allegations – we find that one of the most critical deficits is the absence of an overall agency-wide strategic plan. While some Metra departments have produced various components of a plan (and many take a strategy-driven approach to decisionmaking), the lack of a strategic plan at the enterprise level makes it almost impossible to guide the organization and all 2,850 employees in a common direction and align the activities of every single division, department, and individual with Metra’s strategic objectives. II. Implications for Metra •

Metra’s identity, objectives and strategy should not be left for others to define. In the absence of a clear roadmap, it’s much easier for others to misinterpret the organization’s trajectory, the rationale and logic that drive its major decisions, and the Metra leadership’s ability – at the board and management level – to marshal internal resources, manage complexity and lead the agency in a positive, planned and promising direction.

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Clarifying this path is particularly critical right now. As a Board, you are in the process of making quite a number of changes at this point – and may very well increase the pace, intensity and ultimate impact of your direction to management in the months and quarters ahead. A strategic plan and its key elements – from vision and values to priorities and objectives – would provide an indispensable framework for almost every decision you will make and nearly every stakeholder group you will either directly or indirectly ask to support the overall success of your plans.

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ADVISORY MEMORANDUM No. 2010-1 Defining a Clear, Actionable and Long-Term Strategic Plan

III. Our Recommendations 1. Identify an executive champion for the strategy initiative. Select a senior executive who will act as a leader, mentor and champion for a Metra strategic planning initiative. Ask this individual to play a bold and ongoing leadership role in transforming Metra into an organization that embraces a strategy-driven approach to decision-making and thinking at every level of the enterprise. 2. Establish a Strategic Planning Steering Committee. Ensure that the Committee is composed of representatives from all areas of Metra’s operations as well as from various levels of the organization. 3. Direct the Strategic Planning Steering Committee to: •

First develop Vision, Mission and Values statements – and then agency-wide objectives.

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Define a strategic framework for the planning process. Ensure that the process results in a plan that supports the coordination of priorities and objectives across individuals, work groups, departments and key operating divisions.

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Align the organization behind this plan and its success. Re-position Metra’s performance measurement, compensation and recognition systems to measure and reward personnel based on their accomplishment of the goals outlined in the strategic plan.

Key Take-Away

Your plan isn’t just a roadmap. It’s also a common language. The clearer the path ahead, the more likely stakeholders – from employees to the general public – will be to (1) understand the Board and Management’s reforms and changes in a broader strategic context, (2) view their individual professional goals in light of the objectives of their group or their department, and (3) see their own success and Metra’s as the same.

About This Publication: This Metra OIG Advisory Memorandum is part of a regular and ongoing series of briefings and recommendations prepared by Hillard Heintze, as the Metra Office of Inspector General, and presented to the Metra Board of Directors on a wide range of issues, strategies and opportunities vital to advancing the integrity of Metra’s performance and operations.

HILLARD HEINTZE – The Metra Office of Inspector General

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Improving the Discipline and Enforcement Process The Importance of Bringing a More Consistent Approach to How Policies and Regulations Are Defined, Applied and Enforced Across the Metra Organization

September 29, 2010

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ADVISORY MEMORANDUM No. 2010-2 Improving the Discipline and Enforcement Process

TO: FROM: DATE: RE:

Chairman Carole Doris and the Metra Board of Directors Arnette Heintze, Hillard Heintze September 29, 2010 Improving the Discipline and Enforcement Process

I. Strategic Issue and Context Metra’s hidden potential, of course, is its people. And Metra’s future success depends in great measure on encouraging the “behaviors” important to high performance. Structure matters. So does a clear definition of the rules and what to do when they’re not followed. Discipline and enforcement – when used in a careful, balanced and consistent way – are crucial tools. Applied correctly, they can alert an employee that a particular behavior is unacceptable, provide a window of opportunity to change it, and save the agency the negative impacts associated with frequent terminations, high turn-over rates and the high costs of finding and hiring a replacement. This area is a key challenge for Metra. One of the recurring themes emerging from our investigations involves complaints, allegations and evidence of disciplinary and enforcement measures applied in an unfair and inconsistent manner. It’s clear that, over the years, this situation has drained Metra resources and employee morale by (1) fanning perceptions of arbitrary action and “favoritism”, (2) fueling a pervasive mistrust of management, and (3) contributing to exorbitantly high costs, long delays and unnecessary complexity across investigation and arbitration processes. II. A Sampling of Disparities and Inconsistencies •

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Metra’s discipline and enforcement policies are vague and incomplete. Employees are often unclear about what consequences will result from specific behavior. At the same time, there is no policy directing decision-makers to review and consider precedents of similar violations in the past to ensure consistent interpretation and application across the agency. Guidance for supervisors is absent. Managers do not have the training and experience to conduct investigations. Yet they are given excessively wide latitude in determining whether to conduct an investigation, how far to press it, and what the sanctions, if any, should be. Investigations often lack depth, quality and consistency. Some allegations, such as falsifying time cards, are investigated only to the extent of disciplining a single employee – even when the evidence collected indicates a wider, chronic deficiency requiring a broader scope of inquiry over a longer time period or across the agency as a whole. The “leniency” reinstatement and appeals process includes serious deficiencies. At Metra, the threat of getting fired for bad behavior is no deterrent, as many employees get their jobs back regardless of the offense. Metra’s policy of allowing employees to appeal to an arbiter is inconsistently applied. In some cases, employees who committed criminal acts have been rehired quickly after termination. Some get their jobs back, and others don’t – even under similar or significantly less severe circumstances.

HILLARD HEINTZE – The Metra Office of Inspector General

ON TR ACK TO ADVANCING A CULTURE OF TR ANSPARENCY AND ACCOUNTABILITY

ADVISORY MEMORANDUM No. 2010-2 Improving the Discipline and Enforcement Process

III. Our Recommendations 1. Direct management to create a best practice-based discipline and enforcement policy. Insist that it be designed to guide employee misconduct investigations across their full lifecycle – from complaint intake and investigation to enforcement, appeal and reinstatement. Ensure the policy mandates training for supervisors for common violations as well as those of a sensitive nature – and acknowledges the fact that some investigations require a specialized approach that supervisors cannot be expected to understand and follow. Also discontinue the overly broad use of the “leniency reinstatement” policy as a mechanism for discipline. Instead, use it only as an opportunity for an employee to seek review and leniency – and then base its application on the merits of the case. 2. Mandate the use of a “discipline matrix”. The matrix (Figure 1) should support progressive discipline for policy non-compliance but also define egregious violations that trigger automatic termination. These include, for example, acts of violence, illegal drug or alcohol use on duty, wanton disregard of safety rules, theft, destruction of Metra property and falsifying documents. 3. Take practical steps to help employees understand both what the policies and rules are and how discipline and enforcement are enacted. As this awareness increases, the number of employee misconduct investigations and the frequency of disciplinary actions will decline. These improvements, in turn, will lower administrative burdens, improve employee morale and generate financial savings associated with the costs of terminating employees and replacing them with newly hired personnel. Figure 1: Use of a “discipline matrix” like the one below is a best practice for large organizations.

First Offense

Second Offense

Third Offense

Fourth Offense

Fifth Offense

Sixth Offense

Seventh Offense

Level 1

Reprimand to 3 Days

1 to 5 Days

3 to 10 Days

7 to 14 Days

15 to 45 Days

30 to 90 Days

Level 2

3 to 10 Days

7 to 14 Days

15 to 45 Days

30 to 90 Days

90 Days to Termination

Level 3

7 to 14 Days

15 to 45 Days

30 to 90 Days

60 to 180 Days

Level 4

15 to 45 Days

30 to 90 Days

60 to 180 Days

Level 5

30 to 90 Days

60 to 180 Days

Level 6

60 to 180 Days

Level 7

90 Days to Termination

60 to 180 Days 90 Days to Termination

90 Days to Termination

= Non-Adverse Actions = Adverse Actions

NOTE: This table refers to the federal government distinction between two types of behavior that trigger different threshold levels of investigations. “Non-adverse” actions include suspensions of 14 days or less, letters of reprimand and verbal reprimands. “Adverse” actions include suspensions of greater than 14 days, demotions and termination. About This Publication: This Metra OIG Advisory Memorandum is part of a regular and ongoing series of briefings and recommendations prepared by Hillard Heintze, as the Metra Office of Inspector General, and presented to the Metra Board of Directors on a wide range of issues, strategies and opportunities vital to advancing the integrity of Metra’s performance and operations.

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Reinforcing the Importance of Ethics and Integrity Key Strategies Metra Leadership Can Take to Begin Rebuilding Trust Among Employees, the General Public and Other Stakeholders October 29, 2010 A METRA OIG ADVISORY MEMORANDUM No. 2010-3

ON TR ACK TO ADVANCING A CULTURE OF TR ANSPARENCY AND ACCOUNTABILITY

ADVISORY MEMORANDUM No. 2010-3 Reinforcing the Importance of Ethics and Integrity

TO: FROM: DATE: RE:

Chairman Carole Doris and the Metra Board of Directors Arnette Heintze, Hillard Heintze October 29, 2010 Reinforcing the Importance of Ethics and Integrity

I. Strategic Issue and Context Perceptions matter. Today both internal and external perceptions of Metra are major obstacles to the organization’s transformation. Among the most common and recurring threads across the investigation-related interviews the Hillard Heintze team is conducting is an abiding perception among a significant number of Metra employees that Metra management is a “good old boys’ club” and that decisions – from small to strategic – are routinely made without regard for ethics, integrity and fairness. At the same time, since the Pagano matter, some segments of the general public the Metra organization operates in a patronage-driven, “politics as usual” environment. It will be significantly more difficult if not impossible to enact the extensive improvements the Board desires at Metra without changing these beliefs and their corrosive effect on employee behavior and the public’s expectations. While addressing individual acts of malfeasance can be effectively managed through mechanisms such as background screening and a transparent disciplinary system, high tolerance levels for misbehavior and mismanagement that are institutionalized are much harder to identify, more difficult to correct and exponentially more dangerous to the agency. II. Reinforcing Ethics and Integrity Can Bring a Virtuous Cycle of Benefits Acknowledging that ethics and integrity need attention will take strong leadership. Statements highlighting past actions to address these issues will be perceived as defensive in nature and “out of touch” with the long-standing concerns of employees, the public and the body politic.

Board and management champion ethics and integrity

Employees take note of new programs and cases high-profile cases

Choose instead to be a champion of this issue. Emphasize that the right actions and A new culture of appropriate behaviors on the part of many ethics and current Metra managers and employees will integrity take root root be overshadowed until a renewed platform of ethics and integrity is firmly established. Then take immediate action to do so. If you are consistent, compelling and committed in this Employees raise expectations of effort, you will trigger er a virtuous cycle that will themselves and yield benefits to the organization for years to come.

Acts of dishonesty (overt, repetitive, egregious) decline decline

another one another

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ADVISORY MEMORANDUM No. 2010-3 Reinforcing the Importance of Ethics and Integrity

III. Our Recommendations 1. Form a Metra Ethics and Integrity Committee. Make sure that it is not only truly representative of both management and employees but also perceived as such. Consider making membership total from 15 to 20 people. 2. Charge it with developing a Statement of Values and Ethics and a Code of Conduct. The former should define the values and principles that the Metra organization aspires to embody. The latter codifies the responsibilities and restrictions necessary to support these and outlines a comprehensive set of policies that guide ethical behavior across Metra’s various operations and divisions. 3. Next, have the committee develop a concrete and practical plan to communicate and embed awareness of these ethics and policies throughout the organization. The plan should consider and coordinate a wide range of effective strategies such as mounting awareness building campaigns, mandating ethics training, establishing a program that identifies and rewards ethical behavior in the workplace, and ensuring proper reporting mechanisms and protections for whistle-blowers.

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Making Hiring and Promotion More Transparent The Need to Develop Employment and Advancement Processes That Are Open, Clear and Consistently Applied October 29, 2010

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ADVISORY MEMORANDUM No. 2010-4 Making Hiring and Promotion More Transparent

TO: FROM: DATE: RE:

Chairman Carole Doris and the Metra Board of Directors Arnette Heintze, Hillard Heintze October 29, 2010 Making Hiring and Promotion More Transparent

I. Strategic Issue and Context Few issues are more important to employees than opportunities to advance or change their position, job responsibilities and pay. Yet when the evaluation and decision-making processes supporting hiring, promotion, salary increases and termination are not fully transparent and understood, even actions that adhere to policy can be perceived – accurately or inaccurately – as driven by favoritism, discrimination or another form of misguided intent. A great number of the Metra OIG investigations relate to this area. While some of these have factual merit, others involve perceptions of inappropriate managerial decisions in these areas. We regard both – for different reasons – as equally damaging to Metra’s current and future vitality. II. Three Specific Examples •

Common Observation: “Metra employees are continually passed over for promotion due to cronyism, nepotism or political favoritism.” – Statements like these emerge from every large organization. But when they emerge in number, it’s usually a sign that the organization is not shining the light brightly enough, among other strategies, on precisely how employment decisions are made as well as which paths are available to employees to improve their positions. Take the latter, for example. If an employee is seeking promotion but lacks the skills, education or training for serious consideration, feedback mechanisms, counseling and improvement programs should be available to guide the employee up the path towards a successful career.

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Common Observation: “Management is always switching the organizational structure around to justify undeserved promotions or salary increases.” – An organizational chart often defines the scope of a manager’s authority, responsibility and scope of control. Because it’s a visual, easily understandable depiction of rank and chain-of-command, it’s also frequently used to justify both promotion and compensation. Unfortunately, the Metra organizational structure has shifted and reshifted constantly over the last few years. We have interviewed several mid-level Metra managers who couldn’t produce a relevant “org chart” or hadn’t seen one recently. Realigning the organizational structure is sometimes essential, for strategic reasons. But doing so should be a relatively rare, tightly monitored and board-sanctioned process that is appropriately explained to employees at the time.

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Common Observation: “Metra managers are regularly hired and promoted without regard to professional credentials and qualifications.” – This perception among employees and other stakeholders is damaging to Metra. It’s also largely false. Our investigations and review of dozens of complaints has confirmed that the majority of senior managers possess a level of education, experience, qualifications and commitment to Metra appropriate to their seniority, responsibilities and duties. In some cases, it appears that a few promotions at the executive and mid-management level involved individuals with less than stellar credentials. What hurts Metra most, however, is the perception that incompetence is pervasive.

HILLARD HEINTZE – The Metra Office of Inspector General

ON TR ACK TO ADVANCING A CULTURE OF TR ANSPARENCY AND ACCOUNTABILITY

ADVISORY MEMORANDUM No. 2010-4 Making Hiring and Promotion More Transparent

III. Our Recommendations 1. Mandate the public posting of Metra’s Organizational Chart. Also require that these postings identify the rules requiring Board approval for changes to the chart at the senior manager level. 2. Review and validate the credentials of the senior management team. After the Board selects a permanent Executive Director, require that the Director review the top ten executive management positions and report back to the Board with a recommendation – for each position – on whether it should be consolidated, eliminated, retained or filled with a more qualified leader. Unless the Director is convinced the incumbent is both qualified for the job and capable of supporting the new vision and direction at Metra, the Board should publicly post the position and allow the incumbent to reapply for it. 3. Establish hiring and promotion practices that support transparency, clarify career paths and engender trust. These practices should include the following: •

Publically post a description of every open position at Metra. Post the position internally prior to initiating an external search. If you anticipate difficulty finding a qualified internal candidate for the position, state in the job posting that you are advertising the position externally at the same time.

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Require feedback. Create a policy that requires feedback to employees not selected. Use this feedback as an opportunity to help the employee continue to develop their capabilities.

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Create career paths, mentoring programs and educational programs for entry level and mid managers. Help them clearly understand not just how to exercise appropriate managerial behavior but also how to improve their value to Metra and advance their career at the organization.

4. Prohibit nepotism. Continue with Metra’s recent progress on this issue. On September 17, 2010, based on the recommendation of the OIG, the Metra Board passed Ordinance 10-16 and established a clear policy that does not allow any manager to participate in or influence the hiring or promotion of any family member, “significant other” or personal friend and prohibits any reporting relationship between such parties. Task the Metra Executive Director with now requiring the full disclosure of these relationships to the Metra HR Department as well as any changes in personal circumstances addressed by the nepotism policy. The Executive Director should also make sure that communications about the policy are well crafted to address effective supervision, internal discipline and morale within the Metra organization while also avoiding the perception of favoritism, discrimination, conflicts of interest and the appearance of impropriety.

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THE METRA OFFICE OF INSPECTOR GENERAL

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30 South Wacker Drive, Suite 1730 Chicago, Illinois 60606 Phone: 877-482-4962 (Metra OIG Hotline) Email: MetraIG@hillardheintze.com