RTD Received Warning of Fare Box Thefts

A report prepared last spring for the Southern California Rapid Transit District warned RTD officials that “casual pilferage and organized theft” from bus fare boxes were taking place because of lax security and haphazard money-handling procedures.

The study by outside auditors, which some transit directors said they never saw, also disclosed that $200,000 in interest payments are lost each year because of delays in processing cash revenues from the fare boxes.

Meanwhile, other sources close to the fare-box inquiries also reported “a multimillion-dollar loss” annually from theft and missing fare-box revenues because of inadequate safeguards. One RTD director said he has been told that the losses add up to about $2 million a year.

“It’s a couple million dollars a year, and it’s an ongoing problem,” said another source who asked not to be named.

Comment Declined

The district attorney’s office has been investigating several issues at the RTD but declined to discuss possible fare-box theft.

“We have no comment,” Deputy Dist. Atty. Herb Lapin said Wednesday.

Alan F. Pegg, RTD general manager, could not be reached for comment. But RTD President Gordana Swanson called the estimates of losses exaggerated and said fares are much better protected since the district started placing new, electronic fare boxes on its 2,400 buses.

“It is my understanding that with the way the old boxes worked there could have been an occasional minor theft situation, but nothing like millions lost,” she said.

RTD Director Nikolas Patsaouras said that while district officials have informed him that fare-box losses have amounted to $2 million a year, he contended that the amount can be “recouped” with the new fare-box system and tighter security controls by the district.

The report on the fare-box losses was completed last May by the district’s office of inspector general and the firm of Peat Marwick Main & Co. but was never publicly released. A copy of the 19-page report was obtained this week by The Times, and some RTD directors said Wednesday that they could not recall seeing the document.

The report described cash fare-box collections as the second-largest single revenue source for the district--generating more than $128 million during the last fiscal year--but concluded that there is “a general lack of accountability over such (cash) transactions.” The RTD gets most of its funds from government subsidies.

The Peat Marwick report, which covered a period from mid-January to March, 1988, said the RTD had a fare-box collection system “over which there are virtually no financial controls or checkpoints.”

Malfunctioning System

“The entire system relies on mechanical control mechanisms, which frequently malfunction, to one degree or another,” the report said, adding that without a new electronic system “there is no effective way of determining whether any fare-box revenue is lost in the collection process through casual pilferage and organized theft.”

Although RTD officials claim that the new fare boxes being installed will alleviate some of the problems outlined in the report, others at the RTD are not so sure.

“The jury is still out on this,” said RTD Director Charles Storing, who chairs the equipment and operations committee, and added that he never saw the Peat Marwick report. “God only knows how much money we’ve lost over the years from the fare box, but let’s just see if things change.”

Under the current system, which will not be phased out until February, drivers make sure the right fares are dropped into the boxes. With movement of a simple lever, the money falls into a “vault” at the bottom of the box.

Special Key

At the end of the bus runs, the vaults are removed by other employees using a special key. The boxes are carried on special vault carts to trucks that carry the cash to sorting facilities where the money is counted and processed. But according to the Peat Marwick report, the RTD lacked both adequate procedures and security personnel to properly monitor the cash-handling process.

On one occasion, the report said, after a work shift ended money could be seen lying loose on the floor of the sorting and counting rooms and that several garbage bags containing materials and “partial pieces of (damaged) currency” were stored in different places and appeared to be “in limbo.”

Employees were also allowed to leave the counting facility to go to their automobiles without being accompanied by security guards or supervisors and visitors were not subjected to any particular security precautions, the report said.

“Each of the above conditions reflects a general lack of control consciousness on the part of the district,” the report concluded.

‘Bagfuls’ of Money

One source familiar with the investigation told The Times that auditors found that “money was literally stacked up by the bagful” as it awaited processing.

“A couple of people with Uzis could have backed up a van and stepped in there and gotten away with $5 million,” the source said.

The auditing firm acknowledged that the district has worked to improve the fare-box system, and RTD officials said a change in contractors plus stricter security measures have tightened fiscal controls.

Although the report did not estimate how much money is lost to theft each year, it did say that the district was losing about $200,000 in annual interest because of delays in processing cash revenues. At one point, the report said, vendor pickups were approximately two weeks late, resulting in about $3.3 million sitting idle. The district also reportedly stored a similar amount of unprocessed cash in the vault of a major bank, the report said.

The report surfaced at a time when the district is engaged in a feud over jurisdiction and authority with the county Transportation Commission.

The commission has withheld $50 million in transit funds from the district but has proposed a compromise plan to settle the dispute. Another meeting aimed at resolving the dispute is scheduled for today, when the RTD is scheduled to vote on the latest settlement proposal.

Times Staff Writer Tracy Wood contributed to this story.