The regional authority overseeing one of the largest public works projects in the country is rife with mismanagement, a glaring lack of transparency and lavish spending habits that have included thousand-dollar dinners and a $9,200 plane ticket to Prague, according to a scathing interim report from the U.S. Department of Transportation’s inspector general.

The wide-ranging audit report, released Tuesday, came after a yearlong investigation of the policies and effectiveness of the Metropolitan Washington Airports Authority (MWAA), which operates two of the region’s major airports and is overseeing the $6 billion Dulles rail project.

Inspector General Calvin L. Scovel III noted in the 16-page report that the authority has an ethics code for its board of directors, but does not provide enough oversight and support to ensure that it’s followed.

Mr. Scovel pointed out that MWAA has policies that approve travel and expenses for meetings and business events, but that they do not provide suggested limits for travel expenses, which can lead to expenditures “that may appear excessive.”

One example cites a $238 request for reimbursement a member of the 13-member board of directors submitted for two bottles of wine. Regular MWAA employees are forbidden to be reimbursed for alcohol.

The report says a handful of board members also hosted three dinners at a cost of $4,800 during a trip to Hawaii for a conference.

MWAA policy says directors should make every effort to find the cheapest way to travel, but investigators found one member regularly was reimbursed for one-hour round-trip flights to board meetings - purchased less than a week in advance - at costs ranging from $761 to $1,125. Another member bought a ticket to a conference in Prague for $9,200 just 10 days before the trip.

Investigators sampled 44 out of 144 travel vouchers worth $131,000 from board members between January 2010 and March 2011. They found six of the 44 vouchers were for first-class tickets, including a flight from the D.C. area to Hawaii to Florida, totaling almost $4,800. None had followed the MWAA policy of getting authorization from the board chairman and the executive committee.

“According to an MWAA official we interviewed, first-class flights are at the discretion of the traveler and do not need to be pre-approved - raising questions about how strictly MWAA follows its own policies in this matter,” Mr. Scovel wrote.

‘Deeply troubled’

Rep. Frank R. Wolf, Virginia Republican, who requested the audit along with Rep. Tom Latham, Iowa Republican, said in a letter to U.S. Transportation Secretary Ray LaHood that he was “deeply troubled” by the findings in the report and that the authority’s contracting practices were “most egregious.”

The Virginia Republican pointed out that MWAA by law is required, with some limited exceptions, to bid competitively any contract worth more than $200,000. He said the report found five contracts for more than $200,000 that were not competitively bid but did not fall under any of MWAA’s exemptions. Those contract awards, which amounted to $6 million, did not have board approval, according to the report.

“Not only did MWAA abuse the exemptions permitted under federal law, they issued numerous contracts that failed to meet even these basic standards,” Mr. Wolf wrote.

The authority has responded to discussions with the inspector general, Mr. Scovel said in the report, revising its bylaws in February in an effort to be more transparent. The authority now posts online meeting announcements, agendas and minutes, among other items.

But the report also dinged MWAA for conducting business in closed session that the public could have a right to hear.

“For example, MWAA’s recent revisions to its bylaws were discussed in a closed executive session - even though the revisions included enhancements to transparency,” Mr. Scovel wrote.

John “Jack” Potter, president and CEO of the airports authority, said MWAA is committed to confronting every concern the inspector general identified.

“We will do whatever is necessary to revise and strengthen our policies and procedures to ensure transparency and accountability,” he said.

A spokesman for Virginia Gov. Bob McDonnell, who has sparred with the board over its decision to favor contractors bidding on Phase 2 of Dulles rail that employ a union-friendly labor agreement, said the report seems to validate many of the administration’s grave concerns with the authority’s governance and decision-making.

“This is why Governor McDonnell has been calling for substantial reforms and additional representation from Virginia to influence decisions by this entity,” spokesman Jeff Caldwell said in a statement.

Federal involvement

A federal provision introduced by Mr. Wolf has granted Virginia increased representation on the board, but MWAA has cited an outside legal opinion saying that Virginia and the District must sign off on the changes before the law can take effect.

Mr. Wolf took issue with the report’s finding that a senior MWAA official awarded a sole-source $100,000 contract to the law firm Jenner & Block, which issued the outside legal opinion, and wrote a letter to managing partner Michael B. Desanctis asking the firm to return the money.

“While your firm was likely not privy to the circumstances surrounding the contract, it nevertheless was awarded in a way that runs counter to MWAA’s own procurement practices,” Mr. Wolf wrote. “Regardless of the conclusions of your firm’s opinion, MWAA should not have issued the contract in the way that it did.”

Indeed, MWAA’s procurement and contracts manager was not even aware of the award until the inspector general asked about it, and the contract wasn’t signed until three weeks after the firm’s work was finished.

The authority’s projections for future Dulles Toll Road revenues - which are supplying the bulk of the money for Phase 2 of the rail-to-Dulles project - appear reasonable, Mr. Scovel wrote.

At the request of Mr. Wolf and Mr. Latham, his office is also conducting an audit specifically focusing on Phase 2 of the project. A report on whether the authority has sufficient policies in place to complete Phase 1 of the Silver Line on time and on budget is scheduled to be released in the coming weeks.

Mr. Wolf introduced legislation last month to create a permanent inspector general for the airports authority, who would have access to all of the board’s actions, including executive sessions.

“If the IG determines that it is necessary to ‘clean house’ in order to implement the recommendations of the audit team, so be it,” Mr. Wolf wrote. “The responsibilities of the MWAA board are so important to the region that no necessary effort needed to restore public trust should be omitted.”

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