MBTA Management Discussions: Where Did They Go?

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The government works for the people. As with any employee, the employer (citizens of Massachusetts) would prefer that the employee admit its errors or problems outright, instead of trying to cover up the tracks. Apparently, the MBTA needed this principle explained in greater detail.

The T’s independent auditor, KPMG, recently said that the T has failed to include a critical part of its financial statements, the management discussion and analysis. This section is meant to cut through the numbers and accounting lingo to provide a layman’s understanding of the state of the agency’s financial situation.

Starting in 2002, the T began including this section in its financial statements to comply with new standards set by the Governmental Accounting Standards Board (GASB). By 2008, as the T’s internal finances and the nation’s economy both slipped into danger, the management discussion was no longer included in annual financial statements.

The MBTA has pledged to begin including a management discussion section again in 2016 – kudos to the new management.

Considering the drastic steps that have been taken to restructure the troubled agency since last winter’s debacle, it sure would have been nice to have offered the public (not to mention the bondholders) a more concrete grasp on the agency’s problems over the better part of the last decade.

A $7 billion maintenance backlog doesn’t exactly sneak up on you.

The management discussion brings context to the figure-heavy reports and identifies primary issues and concerns regarding the agency’s financials. The omission of this section ensures that the average T rider is unaware of the agency’s major problems, and therefore is in no position to demand that they be remedied.

The easiest way for a struggling government agency, or an employee, to receive the help it needs is to be upfront about the problems that it faces. If the T had continued to include this section in its financial statements since 2008 then maybe the T’s struggles last winter would have been lessened, and maybe the current problems would be easier to solve.

Regardless of any what-ifs or could-have-beens, the bondholders who rely on these statements as well as the riders who pay into the system through taxes and tickets deserve access to this information. At the very least, continuing to include the management discussion would allow the T to make the claim that it had been sounding the alarm bells, and that it understands and is supportive of the need for reform.

There’s a reason GASB required these discussions to be included with financial statements, and there’s a reason why the T didn’t comply – we just won’t know it.


Scott Haller is a senior at Northeastern University who began working at Pioneer Institute through the Co-op Program