The list of sample transactions including grant number, transaction date, and amount
should be sent to the grantee prior to the site visit. The grantee should be asked to have
all supporting documentation for these transactions available for examination.
- Has FTA conducted a Financial Management Oversight
(FMO) review or a Financial Capacity (FC) Analysis during the past two
fiscal years? If yes, when was the site visit? Is a review scheduled
for the current fiscal year?
Explanation
FMO reviews and FC analyses are oversight mechanisms of FTA.
If an FMO review has been conducted in the past two fiscal years, or
if one is scheduled for the current fiscal year (FYs 2005, 2006 and
2007), the questions under Part B: Funds Management and Part C: Audits
in the Financial area of the triennial review will be eliminated.
If an FCA has been conducted in the past two fiscal years, or if one is
scheduled for the current fiscal year (FYs 2005, 2006, and 2007), the
questions in Part A – Financial Capacity in the Financial area of the triennial review can be eliminated.
FTA also performs Follow-up FMO reviews to ensure that recommendations
resulting from full scope reviews were implemented and working properly.
If a Follow-up FMO review has been conducted in the past two fiscal years,
or if one is scheduled for the current fiscal year, triennial reviewers should
still ask the questions in the Financial area.
Reason for the Question
Input to triennial review
Sources of Information
The regional office staff will have information on completed and scheduled FMO reviews and FC analyses.
Determination
None.
Suggested Corrective Action
None.
Back to Questions
Part A. Financial Capacity
- What are the grantee’s sources of non-FTA funding for operating and capital expenses?
- Is there any pending legislation or
“sunset” provision in existing legislation that could affect the
grantee’s sources of state or local funding or financial capacity?
- In the next few years, does the grantee
anticipate any significant changes in the levels of local funding for
transit, the sources of local funding for transit, or the current
transit service levels?
- What is the grantee’s current financial status? Please provide a multi-year financial plan.
- Has the grantee had unfunded operating or
capital deficits or liabilities? If so, what are the amounts, nature
and forecast of these deficits/liabilities?
- Based on the responses from above questions, does
the grantee have the financial capacity to match and manage FTA grant funds?
Explanation
Grantees generally have three basic sources of local funding:
a perpetual or permanent local tax (e.g., a sales tax, income tax, or property tax);
a limited or “sunset” source of funding that expires at some future date;
and/or annual appropriations from local, regional, and state governments.
Information on the sources of local funding assists in making determinations
concerning both the existing financial condition and the future financial capacity of the grantee.
A grantee’s financial condition, future financial capacity, and ability to match
FTA funds could be affected greatly if one of its sources of non-FTA funding is
impacted by pending legislation or “sunset” provisions in current legislation.
Financial condition is reflected in working capital levels, current assets versus liabilities,
capital reserves, and the present status of depreciation accounts.
Grantees should have multi-year financial plans (three to five years) that project operating
and capital revenues and expenses. The financial plans should indicate adequate revenues
to maintain and operate the existing system and to complete the annual Program of Projects.
Revenue sources must be stable and reliable enough to meet future capital, and operating costs.
Any sign of major decreases in service levels or operations must be explained. .
Financial capacity considers the nature of funds matched to support operating deficiencies
and capital programs, along with forecasted changes in fare and non-fare revenues.
If a grantee is forecasting new funding sources, strategies for ensuring their availability must be identified.
Unfunded capital or operating deficits could indicate a grantee’s lack of financial capacity to fund the
projects programmed in the TIP, and/or adequately maintain and operate FTA-funded assets at the current level of service.
Reason for the Question
49 USC 5307(d)(1)(a)
FTA Master Agreement Sect. 5
Sources of Information
Information on local funding sources can be found in annual audits, budgets, local or state legislation,
multi-year financial plans, National Transit Database reports, and the TIP. The current year’s budget,
including capital and operating expenses and multi-year financial projections is a source of information for
financial condition and capacity. The grantee should be asked about pending legislation or “sunset”
provisions in current legislation.
Determination
The grantee is not deficient if the current year’s budget and the multi-year financial plan demonstrate:
stable transit revenues, an ability to maintain current operations, and the ability to complete the forecasted
Program of Projects; and there is no pending legislation or sunset provision in the current legislation that will
impact local funding negatively. If the grantee has a limited period of funding or relies on annual allocations,
the funding should be examined to determine that financial capacity exists to maintain the transit system.
If the grantee does not have a multi-year financial plan, it requires corrective action to produce one.
Corrective action may be warranted if major service reductions are projected, cost projections appear
unreasonable, or annual local funding is not secure. If there is pending legislation that could impact
local funding sources negatively, the grantee may be deficient, depending on its ability to continue to
provide local match for federal funding. If the local sources of revenue are not sufficient, the grantee is deficient.
Suggested Corrective Action
If a grantee does not have a multi-year financial plan, it should develop one and forward it to the FTA regional office.
If the grantee has a “sunset” provision in current local funding legislation or if there is
pending legislation that will affect local funding negatively, the grantee needs to show that local funding
will be received to replace current funding or that actions will be made to compensate for the lack of local funding.
Where the source of local funding is dependent upon an election, action by local governmental body,
or other event, a determination may need to await such an event.
If the local sources of funding are not sufficient to meet expected operating or capital costs,
the grantee should provide a plan for reducing expenditures, increasing revenues, or a
combination of both to compensate for a budget shortfall.
For any corrective actions, the grantee needs to provide documentation
of the anticipated sources of local funding, revenue increases, or planned service reductions.
Back to Questions
Part B. Funds Management
- Do records support the ECHO system
requests for and disbursement of funds? Are drawdown requests signed by
an authorized official other than the individual who requests the
payment?
Explanation
General financial management capabilities need to be reviewed to
ensure that the grantee is requesting and matching federal funds properly.
Grantees request federal funds through the Electronic Clearinghouse (ECHO)
system. Federal funds that have been requested are to be disbursed promptly.
In many cases, grantees will request funds after expenses have been incurred and paid.
In certain cases (e.g., large bus procurements), the federal funds may be requested
prior to issuing a check. This procedure is acceptable as long as the monies are
disbursed promptly (within three business days). Note that disbursement means that
the grantee no longer controls the money (e.g., a check has been sent to a vendor).
If the funds are not disbursed promptly, FTA can charge interest beginning on day four.
A grantee must maintain effective control and accountability for all grant and subgrant cash.
Internal control includes having the drawdown requests signed by a person other than the person
requesting payment to ensure segregation of duties.
Reason for the Question
49 CFR Part 18.20
FTA Master Agreement 9.b
Sources of Information
A sample of disbursement transactions will be examined.
The sample will be selected according to the process identified under the
“Areas to be Examined” section on page 2-1 of this document.
The ECHO system documentation should support each request for disbursement.
The information should track back to an invoice for goods or services, and be
supported by information from the grantee’s accounting system.
The review should identify when checks that used the federal funds were issued
to ensure that funds were not held longer than three business days, particularly in
cases where federal funds were requested in advance of payment to a vendor or contractor.
Another source of information is to compare disbursements with the quarterly
Financial Status Reports, Line C. The annual financial audit should be checked to see if any audit findings exist in this area.
Determination
If the grantee requests funds after incurring the expenses and has
supporting documentation, it is not deficient. If supporting documentation
generally is good but problems are found or if the system appears to be in
place but is not being followed, the grantee is deficient. If a system is lacking,
the grantee is deficient. Note that findings in this area can result in interest
being paid to the FTA when excessive funds have been requested or funds
have been held for more than three days.
If the grantee is holding federal funds for an excessive period of time
(four or more days after federal funds have been deposited into the grantee's bank account),
the grantee is deficient. If such situations have occurred but corrective actions took place,
the grantee is not deficient. If the grantee has repeated instances of requesting incorrect
amounts through the ECHO system, it is deficient and must take corrective action to repay
any over-requested amounts.
If the grantee has different people signing the drawdown request and making the drawdown,
the grantee is not deficient. When the person requesting funds is the same person making the drawdown,
the grantee is deficient.
Suggested Corrective Action
Documentation must be improved and procedures must be in place to disburse federal monies promptly.
The grantee may have to reimburse the Federal Treasury for interest owed.
Procedures must be revised to separate the duties in terms of the
person requesting the drawdown and the person making the drawdown.
Back to Questions
- Are grantees in areas with populations
under 200,000 calculating the amount eligible for operating assistance
funding appropriately?
Explanation
FTA operating assistance is available to grantees in urbanized areas with populations under 200,000.
It is the responsibility of the grantee to calculate net eligible operating costs properly. The grantee should
demonstrate that the amount of funds being requested for operating assistance is no more than half the
operating expenses, after fare and other system-generated revenues (such as advertising or contract revenues)
are used to reduce the operating costs to a net operating project cost and ineligible costs (such as costs for charter,
school bus, sightseeing service, and lobbying activities) are eliminated. The federal share of any operating
assistance project shall not exceed the lesser of:
a) the local match, b) the currently available apportionment to the urbanized area plus any carryover funds available
from past years, or c) 50 percent of the net project cost incurred in the provision of transit services during the period.
These grantees also may use FTA funding at the 80/20-match level for ADA paratransit, maintenance,
and capital cost of contracting. These funds could increase the total amount of FTA funds the grantee could
be eligible to request, but would reduce the net project cost eligible for 50/50 operating assistance.
Reason for the Question
FTA C 9030.1C, Appendix D
Sources of Information
Detailed operating budgets showing operating expenses eligible for
FTA urbanized area operating assistance funding will be reviewed for
the past three years. FTA C 9030.1C Appendix D provides grantees with a
worksheet to determine the amounts of available Urbanized Area Formula
Program funds that may be requested. The grantee is not required to
submit this worksheet as part of its grant application. However, the
grantee must maintain records to support charges to a grant.
Determination
If the grantee can provide documentation showing that operating assistance
amounts are based on net eligible project costs in accordance with 9030.1C,
it is not deficient. If the documentation is lacking or shows ineligible project costs
included in the calculation of operating expenses, the grantee is deficient.
Suggested Corrective Action
The grantee must improve its documentation and must ensure that procedures
are in place to calculate net eligible project costs for operating assistance funds properly.
If an inappropriate payment or an overpayment of operating assistance has occurred, the grantee
should be directed to reimburse the FTA.
Back to Questions
- Is the grantee properly completing the
unliquidated obligations line (Line D) of the Financial Status Report
(FSR)? If no, should the grantee be reporting amounts? If yes, describe
the methodology for arriving at amounts recorded.
Explanation
Unliquidated obligations are funding commitments that have been incurred, but for which outlays have not yet been recorded because goods and services have not been received. Examples of these are: a signed contract for bus purchases for which delivery of vehicles has not yet occurred, a contract for construction services not rendered, open purchase orders, and contract retentions. These unliquidated obligations should be accounted for on Line D of the FSR. The purpose of this question is not necessarily to ascertain the accuracy of the information on Line D, but to determine if the grantee is reporting unliquidated obligations at all. If the grantee is reporting unliquidated obligations, ask for an explanation of the methodology for arriving at the amounts recorded.
Reason for the Question
FTA C 5010.1C, Ch. I, 5
49 CFR 18.41
Sources of Information
Milestone/Progress Reports and FSRs should be reviewed to determine if Line D should be completed. If there are awarded contracts, for which deliverables have yet to occur, the dollar amount associated with the undelivered portion of those contracts should be represented as unliquidated obligations.
Determination
If a grantee is reporting unliquidated obligations properly, or has no commitments that should be classified as unliquidated obligations, the grantee is not deficient. If a grantee is not completing the unliquidated obligations portion of the FSR properly, the grantee is deficient.
Suggested Corrective Action
The grantees should develop and submit to FTA procedures to track and report unliquidated obligations correctly on the FSR. The next quarter’s FSR must be submitted properly.
Back to Questions
- Are indirect costs being charged to
grants? If yes, does the grantee have a cost allocation plan to support
indirect administrative costs related to a grant program? If yes, what
agency approved the plan? Has the grantee been following the plan?
Explanation
Under federally funded grant programs, recipients may incur both direct and indirect costs. A cost allocation plan is required to support the distribution of indirect costs related to the grant program, and it must be approved by FTA or by the cognizant federal agency. Cost allocations often are found in municipal systems where overhead/ administrative charges are allocated to the transit system. Any and all such charges need to be addressed in the cost allocation plan. In addition to the initial approval by its cognizant agency, a grantee must resubmit the plan for approval in any of the following circumstances:
- The grantee has made a change in its accounting system, thereby affecting the previously approved cost allocation plan/indirect cost rate and its basis of application, or
- The grantee’s proposed cost allocation plan/ indirect cost rate exceeds the amounts approved previously by more than 10 percent.
Reason for the Question
49 CFR 18.10
OMB C A-87
FTA C 5010.1C, Ch. III, 2
Sources of Information
Grant files and correspondence will provide information at the desk review. On-site discussions with a PMO contractor and grantee staff can provide information. The A-133 annual audit also is a source of information regarding the proper implementation of a cost allocation plan. The FSR also has a section where grantees indicate whether they are charging indirect costs to the grant.
Determination
If a grantee has implemented a cost allocation plan correctly and obtained any necessary approvals, it is not deficient. If the PMO staff, annual audit, or triennial review identifies problems with the administration of the cost allocation plan, the grantee may be deficient. If the grantee has not taken action with regard to an audit finding or if the grantee has not obtained FTA or cognizant agency approval for an implemented or changed cost allocation plan, it is deficient.
Suggested Corrective Action
The grantee will need to change the administration of its program to correct any deficiencies. It will need to obtain cognizant agency approval of the cost allocation plan.
Back to Questions
- Is the grantee using FTA capital funds to support
ADA paratransit operating costs? If yes, is the grantee classifying no
more than 10 percent of its annual formula apportionment of Section
5307 funds as operating expenses for ADA paratransit operating costs?
Explanation
TEA-21 expanded the definition of an eligible capital project to include the operating cost of
ADA complementary paratransit service, under certain limitations. The 80/20 federal/local funding ratio
is applicable for such projects as long as the grantee is in compliance with ADA requirements.
Capital projects can include the provision of non-fixed route paratransit transportation services in
accordance with Section 223 of the ADA Act of 1990 for amounts not to exceed 10 percent of a grantee’s annual formula apportionment in Section 5307. Costs associated with non-ADA paratransit are not eligible for this funding option. For urbanized areas with more than one grantee, the MPO is responsible for working with operators to allocate the 10 percent of the area’s apportionment that may be used for ADA paratransit purposes.
Note: grantees are not limited to 10 percent of their apportionment
if the choose to use another mechanism (e.g., capital cost of
contracting) to pay for their ADA services. Grantees may use a
combination of funding mechanisms (e.g., ADA operating, preventive
maintenance, and/or capital cost of contracting) provided that the do
not double count their costs.
Reason for the Question
49 USC 5307(A)(1)
FTA Circular 9030.1C, Ch. III 4 (d)
Sources of Information
Information on paratransit expenditures should be included in the current budget, or in grant applications.
Determination
If the expenditures from grant funds for paratransit operating costs are within 10 percent of the total annual apportionment in Section 5307, the grantee is not deficient. If the grantee is classifying more than 10 percent of these funds as paratransit service expenditures, it is deficient.
Suggested Corrective Action
The grantee should be directed to revise its classification of expenditures for the use of
Section 5307 funds and advise the FTA of the actions it has taken.
Back to Questions
Part C. Audits
- Have annual single audits been conducted?
Explanation
Non-federal entities that expend $500,000 or more in federal awards in a year are required to have annual audits in accordance with OMB Circular A-133. In the case of independent transit authorities, the audit will cover all aspects of that authority. Where the transit provider is a municipal department or part of a larger governmental organization, the audit may cover the entire organization, including the federal funds used for transit. In either case, the audit(s) should be reviewed to determine if the grantee is in compliance with the OMB Circular and if any unresolved audit issues exist.
Depending upon the results their single audit, grantees are required to take one of the following actions:
- If the single audit contained FTA program findings, a copy of the entire audit report must be submitted to the Regional Office. If the grantee received funding from more than one DOT agency and FTA is the grantee’s point-of-contact for all DBE program issues, then the grantee must submit the entire audit report if it contains any findings related to any DOT program.
- If the annual single audit report contains no FTA program findings or other US DOT program findings, a copy of only the Federal Clearinghouse transmittal sheet must be submitted to the Regional Office.
Reason for the Question
49 CFR Part 18.26
Dear Colleague Letter, C-05-04, June 17, 2004
Single Audit Act Amendment of 1996
Sources of Information
Beginning in FY2004, audit reports or copies of the clearinghouse transmittal sheets should be available at the regional office during the desk review. If the reports are not available at the desk review, they and any management letters should be requested and reviewed prior to the site visit. Audit reports are to be issued within the earlier of 30 days after receipt of the auditor’s reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant agency.
The Federal Audit Clearinghouse can be accessed at
http://harvester.census.gov/sac/. This site provides links to single
audit reference information and allows the user to retrieve single
audit data.
Determination
If the grantee has had audits conducted in accordance with OMB C A-133 and submitted these reports or the clearinghouse transmittal sheets as required, it is not deficient. If the grantee has not been conducting annual single audits in accordance with OMB C A-133, it is deficient. If the grantee has not submitted its audit reports or clearinghouse transmittal sheets to the regional office as required, it is deficient.
Suggested Corrective Action
The grantee needs to conduct annual single audits in accordance with OMB C A-133.
Back to Questions
- Are there any unresolved compliance
issues in the single audits conducted in the past three years? If yes,
what is the status of these issues?
Explanation
Audit findings related to the FTA program not only could impact financial areas of the grantee, but can serve as information for other sections of the triennial review. Resolution to audit findings should be discussed in this section.
Reason for the Question
49 CFR Part 18.26
Sources of Information
A-133 audit reports and management letters should be reviewed for this information.
Determination
I If there are no outstanding issues from the annual audit, the grantee is not deficient. If the grantee has not taken appropriate action to resolve audit issues promptly, it is deficient.
Suggested Corrective Action
The grantee needs to resolve outstanding audit issues.
Back to Questions
- Have any Government Accountability Office
(GAO) or Office of Inspector General (OIG) audit reports completed
during the triennial review period had findings related to the FTA
program requirements? If yes, have these findings been resolved?
Explanation
The GAO and OIG periodically conduct independent audits. Audits may be of a grantee, but often are programmatic audits addressing a national issue (e.g., spare ratios, extended warranties, etc.) where the grantee may have had a specific part of its operation audited. The audit findings, for which agreement has been reached with the OIG or the GAO, should be noted and investigated to determine if proper follow-up actions have been taken to resolve the findings. Audit findings should be resolved within one year.
Reason for the Question
Input into triennial review
Sources of Information
GAO and OIG audits may be available at the desk review. If the documents are not available in the regional offices, copies should be provided prior to the site visit. All audits should be reviewed, and findings should be discussed at the site visit.
Determination
If there are no open GAO or OIG audit findings, the grantee is not deficient. If the grantee has not taken appropriate action to resolve audit issues promptly, it is deficient.
Suggested Corrective Action
The grantee needs to resolve outstanding audit issues.
Back to Questions
- Have any internal, state, or local governmental audit reports had findings related to FTA program requirements?
Explanation
IIn addition to the external audits, some transit organizations and other forms of local or state government have internal auditors. A listing of internal audit reports should be reviewed at the site visit. The internal audit function and specific findings of reports should be discussed with the internal auditor at the site visit. Also, internal audit reports of interest should be reviewed. Likewise, state or local government audits, if applicable, should be reviewed.
Reason for the Question
Input into triennial review
Sources of Information
State, local, and internal audit information will be obtained during the site visit.
Determination
If the grantee has no unresolved findings from internal, state, or local audits, it is not deficient. If the grantee has not taken appropriate action to resolve audit issues promptly, it is deficient.
Suggested Corrective Action
The grantee needs to resolve open audit issues.
Back to Questions
