Technical

Summary of Changes

Basic Requirement

Areas To Be Examined

References

Questions For The Review

1. What are the grantee's procedures for grant administration and management?

2. Are Milestone/Progress Reports (MPR) and Financial Status Reports (FSR) submitted on time?

3. Do MPRs contain narrative information including:

   1. a discussion of budget or schedule changes

   2. status of milestones

   3. reasons why milestones were not met

   4. a list of outstanding claims exceeding $100,000 and all claims settled in the subject quarter

   5. a list of all change order amounts exceeding $100,000 pending or settled during the quarter

   6. a discussion of unforeseen events that have affected project schedule, cost, or purpose

   7. progress and schedule of force account activities

   8. an annual transit enhancement report (4th quarter only) for designated recipients in urbanized areas of 200,000 or more.

4. What is the schedule for closing out all open grants? Are projects on schedule? Are any open grants inactive? Should these or any other grants be closed? Should any grant funds be deobligated?

5. Is the grantee's work force used in the execution of capital grant projects? If yes:

   1. If the force account work equals $10,000,000 or more, was a force account plan and justification submitted to FTA?

   2. Is a plan on file for force account work of $100,000 or more but less than $10,000,000?

6. During the review period, did the grantee use FTA capital assistance to finance the lease of any transit facilities or equipment costing $100,000 or more annually or $250,000 over the life of the lease?

   If yes, did the grantee make a written comparison of the cost of leasing the asset with the cost of purchasing or constructing it? Is the written comparison on file?

   If no, did the grantee obtain FTA approval for an alternative form of cost-effectiveness evaluation?

   Were any such leases terminated or substantially modified before the end of period used in the cost-effectiveness evaluation?

7. Does the grantee have a Project Management Plan for major capital projects (fixed guideway or New Starts projects that exceed $100 million)? If yes, is the plan followed?

8. How does the grantee ensure adequate technical oversight of other capital projects (those not monitored by Project Oversight Management (PMO) consultants or that do not exceed $100 million) including inspection and acceptance of rolling stock?

9. How does the grantee monitor subrecipients, third-party contractors, and/or lessees to ensure compliance with FTA requirements?

Summary of Changes

Question 3
Revised question and added to Explanation new requirements for designated recipients related to certification and reporting for enhancement expenditures.

Basic Requirement

The grantee must be able to implement the Urbanized Area Formula Grant Program of Projects in accordance with the grant application, Master Agreement, and all applicable laws and regulations, using sound management practices.

Areas To Be Examined

1. Grant Administration
—Procedures for managing grants and submitting timely and complete quarterly reports.
2. Review of Open Grants—Grant implementation and closeout, including deobligation of federal funds, if warranted.

3. Force Account Activitiess—Force account plan and justification for grant activities performed by the grantee’s workforce.

4. Capital Leasing—Cost-effectiveness evaluation for leased capital assets.

5. Project Management

   1. Project Management Plans for New Starts and major capital projects

   2. Procedures for technical oversight of capital projects

   3. Capacity to monitor subrecipients, contractors, and lessees

References

1. 1. 49 USC Chapter 53 as amended by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), Section 5327. "Project Management Oversight."
2. 49 CFR Part 18, the Common Rule, "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments."
3. 49 CFR Part 639, "Capital Leases."
4. FTA Master Agreement
5. FTA Circular 5010.1C, "Grant Management Guidelines."

QUESTIONS FOR THE REVIEW

1. What are the grantee’s procedures for grant administration and management?
2. Are Milestone/Progress Reports (MPR) and Financial Status Reports (FSR) submitted on time?

3. Do MPRs contain narrative information including:

   1. A discussion of budget or schedule changes
   2. Status of milestones

   3. Reasons why milestones were not met

   4. A list of outstanding claims exceeding $100,000 and all claims settled in the subject quarter

   5. A list of all change order amounts exceeding $100,000 pending or settled during the quarter

   6. A discussion of unforeseen events that have affected project schedule, cost, or purpose

   7. Progress and schedule of force account activities

   8. An annual transit enhancements report (4th quarter only) for designated recipients in urbanized areas of 200,000 or more.

   Explanation

   The grantee is responsible for administration and management of the grant in compliance with the grant agreement and other incorporated documents, including statutes, regulations, the Master Agreement, and FTA circulars. The grantee must have a mechanism to ensure continuous administration and management of the grant projects. There should be clear lines of authority and responsibility for grant administration and for preparing required reports to FTA.

   The Milestone/Progress Report (MPR) is the primary written communication between the grantee and the FTA, with regular progress reported up to four times a year. Public transportation providers in small urbanized areas (i.e., populations less than 200,000) are required to submit these reports annually. Public transportation providers in large urbanized areas (i.e., populations of 200,000 or more) are required to submit these reports 30 days after the end of each quarter. Quarters are based on the federal fiscal year, beginning October 1. These reports should be provided electronically using the TEAM system.

   The Common Rule (49 CFR Part 18) and FTA C 5010.1C detail the information that, at a minimum, must be included in these reports. For each milestone, the report should include the original estimated, revised, and actual completion dates; the dates of expected or actual requests for bid, delivery, etc.; and a narrative description of project status. Completion and acceptance of equipment and construction projects should be discussed, with a breakout of costs incurred and those costs required to complete the project. MPRs are required for all grants covered by the circular (including capital, planning, and formula program grants). If a grant includes only operating assistance, the reporting requirement is limited to the estimated and actual date when funding has been expended.

   The designated recipient in an urbanized area with a population of at least 200,000 must submit a certification that it 1) will expend not less than one percent of the amount the recipient receives each fiscal year under Section 5307 for transit enhancements, and 2) will submit with its 4th quarter MPR an annual report listing projects carried out in the preceding fiscal year with those funds. Effective with SAFETEA-LU only the designated recipient is responsible to certify and report (not each grantee that applies for a grant that contains a transit enhancement project subject to the one percent requirement). The report must include: a) name of grantee(s) expending the enhancement funds, b) UZA name and number, c) FTA project number(s), d) transit enhancement category or categories for which enhancement funds were obligated, e) brief description of enhancement by Federal fiscal year of funding and progress towards project implementation, f) activity line item codes from the approved budget(s), and g) amount awarded by FTA for the enhancement. .

   Quarterly Financial Status Reports (FSRs) should accompany the MPRs. The FSR is a specific form (SF-269) used to monitor project funds. These reports also should be submitted electronically. The content of the FSR is addressed in the Financial Capacity section of the triennial review.

   Reason for the Question

   49 CFR Part 18.40
   FTA C 5010.1C, Ch. I, 3 and 5a

   Sources of Information

   TThe grantee’s procedures for grant administration and reporting should be discussed during the site visit. Most larger grantees will have written procedures that can be reviewed. Those grantees that do not have written procedures should be able to describe how the staff performs these responsibilities.

   The MPRs and FSRs should be available through TEAM. The reviewer should determine if the reports are filed on time and if the MPR includes all required information.

   Determination

   A reviewer typically will make a finding about the grantee’s procedures for grant administration and management only in concert with findings related to submission of reports, inactive grants, untimely grant closeouts, or delays in project implementation (see Question 4 below). Together, these issues may indicate that the grantee is deficient with respect to requirements for technical capacity.

   When the grantee has submitted the MPR and FSR on time with the appropriate information, the grantee is not deficient. If the grantee’s reports are consistently late, the grantee is deficient. A grantee is deficient if it submits the reports on time but does not include sufficient detail about schedule delays or omits other required information.

   Suggested Corrective Action

   If the grantee does not have procedures in place to manage the grant program, as indicated by late or incomplete reports or other grant implementation problems, the grantee must implement management procedures to correct the deficiencies.

   If MPRs or FSRs have not been submitted, the corrective action is to submit the delinquent report(s). If the reports have been late, the reports due following the issuance of the triennial review report must be on time. If reports are consistently late, the grantee may be asked to demonstrate to FTA that it has implemented improvements to its grants management and reporting procedures.

   Where narrative information is lacking in the MPR, the corrective action is to include such information in future reports. The grantee must submit the next Milestone/Progress Report with all of the appropriate narrative information.

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4. What is the schedule for closing out all open grants? Are projects on schedule? Are any open grants inactive? Should these or any other grants be closed? Should any grant funds be deobligated?

   Explanation

   These questions help the reviewer determine if the grantee has taken the appropriate steps to carry out projects on schedule, spend obligated funds, and close grants. FTA requires that closeout documents be submitted after all funds have been expended or within 90 days after project activities are completed. It is not necessary to wait for the single audit before closing out a grant.

   Grants that have been inactive for a substantial length of time (more than six months) also should be closed out unless the grantee has a good explanation, and activity is likely to resume soon. Grant inactivity may be a result of delays in project implementation. Determine the reasons for the delay. If project delays are the result of inadequate actions by the grantee or failure in performance by a contractor, there may be deficiencies in the grantee’s technical capacity. When delays are due to poor performance by contractors, examine how the grantee managed the delay and tried to obtain performance by the contractor. It should be noted that delays are not unusual in major construction projects, especially when land acquisition, zoning changes, environmental studies, weather, and other factors not under the complete control of the grantee must be considered. If a grant has been delayed for a substantial period of time and the grantee does not have a reasonable explanation, FTA may determine that the grant should be closed and the funds deobligated. Occasionally, a project may be delayed indefinitely because of factors beyond the grantee’s control (e.g., political issues). If there is no realistic chance of a project’s going forward, FTA will deobligate the grant funds and make them available for other projects that are ready to proceed.

   Reason for the Question

   49 CFR Part 18.40
   FTA C 5010.1C, Chapter I, 15.

   Sources of Information

   TEAM will show both the initial grant implementation schedule and amendments. Milestone/Progress Reports will provide information on what projects remain open within a grant. The TEAM system shows grant activity for previous quarters and unobligated balances in grants. With the regional staff, identify any grants that are potential candidates for closeout. Additional information, including a current schedule for the closeout of all open grants and reasons for any delays, should be obtained from the grantee.

   Determination

   The grantee is not deficient if projects are on schedule and grants are closed out on time or if delays are reasonable and are documented in progress reports. In some instances, major problems may have arisen during the triennial review period that the grantee has corrected. If the appropriate corrective action has been taken, the grantee is not deficient.

   If a grantee has inactive grants, determine if the grants should be closed or are temporarily delayed. If there are open grants that should be closed, the grantee is deficient. Often, grants can be closed between the desk review and the site visit.

   Where continuing problems, delays, or overruns are evident the grantee is deficient. This is especially true if the organizational structure of the grantee contributes to the problem (i.e., clear lines of authority and delegation of responsibility are lacking).

   Suggested Corrective Action

   When the grantee is found to be deficient because of delays in project implementation, the grantee should develop a closeout schedule for all open grants. If the problem is due to organizational structure or the effectiveness of grant or project administration, the corrective action is for the grantee to devise and implement necessary administrative procedures.

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5. Is the grantee’s work force used in the execution of capital grant projects? If yes:

   1. If the force account work equals $10,000,000 or more, was a force account plan and justification submitted to FTA?
   2. Is a plan on file for force account work of $100,000 or more but less than $10,000,000?

   Explanation

   Work performed by the grantee’s work force, other than grant administration, that is included in an approved grant is “force account” work. Force account work typically is found in rail systems, where the grantee’s workforce is used to rehabilitate rolling stock or perform track and signal work. Reimbursement of force account work is subject to a grantee’s providing the force account plan and justification, including documentation equivalent to a sole source justification, stating the basis for a determination that no private sector contractor has the expertise to perform the work. Reimbursement of such expenses is subject to FTA’s prior review of the grantee's force account plan and justification when the total estimated cost of force account work under the grant equals $10,000,000 or more. Justification may be on the basis of cost, exclusive expertise, safety and efficiency of operations, or union agreement. Force account reimbursement for projects below this threshold must be supported by a force account plan and justification, which are to be retained in the grantee’s files. No plan or justification is required if the force account work is less than $100,000.

   Reason for the Question

   FTA Master Agreement, Section 15.j
   FTA C 5010.1C, Chapter I, 9e.

   Sources of Information

   Individual grant files at the regional office should contain force account plans for work that equals $10,000,000 or more. Justification for work below this threshold but equal to or exceeding $100,000 should be available from the grantee.

   Determination

   IIf the grantee does not have a force account plan included in a grant, but seeks FTA funds for force account costs on projects that exceed the above-referenced threshold, the grantee is deficient. The grantee is also deficient if force account costs, between $100,000 and $10,000,000, are not supported by the proper force account plan and justifications.

   Suggested Corrective Action

   The grantee must develop a force account plan and justification as detailed in FTA Circular 5010.1C for use of its own workforce on capital improvement projects. The force account plan and justification should be submitted to FTA to demonstrate compliance.

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6. During the review period, did the grantee use FTA capital assistance to finance the lease of any transit facilities or equipment costing $100,000 or more annually or $250,000 over the life of the lease?

   If yes, did the grantee make a written comparison of the cost of leasing the asset with the cost of purchasing or constructing it? Is the written comparison on file?

   If no, did the grantee obtain FTA approval for an alternative form of cost-effectiveness evaluation?

   Were any such leases terminated or substantially modified before the end of period used in the cost-effectiveness evaluation?

   Explanation

   Transit facilities and equipment that are eligible for capital assistance, including associated capital maintenance items, may be acquired by lease, purchase, or construction. When a grantee leases capital assets, the leasing costs are eligible for capital assistance if the lease is more cost effective than purchase or construction. The grantee must make a written comparison of the cost of leasing the asset with the cost of purchasing or constructing it, following the method provided in 49 CFR 639.23 through 639.27. Costs used in the comparison must be reasonable, based on realistic current market conditions, and based on the expected useful service life of the asset. Before entering into the lease or before receiving a capital grant for the asset, the grantee certifies to FTA that it has performed this comparison. The written comparison is not submitted with the grant. The grantee should keep the comparison on file to provide at the triennial review. Only leases with annual costs of $100,000 or more or $250,000 over the life of the lease should be examined during the review.

   A lease entered into before grant approval (a pre-existing lease) may qualify for capital assistance later if recipients conduct a cost comparison effective as of the date the lease was entered into and certify the cost-effectiveness to FTA.

   If a grantee is unable to perform the required cost-effectiveness comparison, it may ask FTA to approve an alternative form of cost-effectiveness evaluation. This documentation also should be kept on file.

   If a grantee terminates a lease or modifies the terms of the lease before the end of the period used in the evaluation, the grantee must reimburse any federal funds paid for the portion of the lease term remaining and/or pay any penalties due.

   Reason for the Question

   49 CFR Part 639

   Sources of Information

   The Annual Certifications and Assurances include the grantee’s assurance that obtaining the capital asset by lease is more cost effective than purchase or construction. The regional office should have copies of any correspondence documenting FTA approval of an alternative cost-effectiveness evaluation. The written cost comparison or approved alternative cost comparison should be available in the grantee’s files.

   Determination

   TThe grantee is not deficient if it has used FTA capital funds to lease transit facilities or equipment and performed the required cost comparison. If the grantee did not perform the cost-effectiveness comparison, but obtained FTA approval for an alternative type of evaluation, it is not deficient. The grantee is deficient if it used FTA capital assistance to lease transit facilities or equipment costing $100,000 or more per year or $250,000 or more over the life of the lease and did not perform and does not have on file the cost comparison or other approved documentation. The grantee is not deficient if a lease was terminated early or modified, but the FTA share was reimbursed or the grantee paid any penalties. If the grantee used FTA funds to pay any penalties or if a lease was terminated or modified and the FTA share was not reimbursed, the grantee is deficient.

   Suggested Corrective Action

   Consult the regional office for deficiencies related to capital leasing. The grantee may be required to conduct a cost-effectiveness comparison if one is not on file, but FTA will determine if corrective action is possible or if federal participation in the project must be withdrawn. If the grantee has terminated or modified a lease, FTA may require reimbursement of federal funds or payment of penalties.

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7. Does the grantee have a Project Management Plan for major capital projects (fixed guideway or New Starts projects that exceed $100 million)? If yes, is the plan followed?

8. How does the grantee ensure adequate technical oversight of other capital projects (those not monitored by Project Oversight Management (PMO) consultants or that do not exceed $100 million) including inspection and acceptance of rolling stock?

   Explanation

   Grantees are required to have a formal Project Management Plan for all major capital projects. The plan must provide for a detailed project management strategy to control the project budget, schedule, and quality. The plan must address change orders, document control, and materials testing policies and procedures.

   A major capital project is defined as a project that: involves the construction, extension, rehabilitation, or modernization of a fixed guideway or New Starts project with a total project cost in excess of $100 million; or the Administrator determines it to be a major capital project based on criteria in 49 CFR Part 633.

   In nearly all cases where a grantee has a major capital project, FTA will assign a Project Management Oversight (PMO) contractor to monitor the work. If a PMO contractor is assigned, the triennial review site visit may be scheduled concurrently with the PMO quarterly review meetings. The PMO contractor can provide the triennial review team with a thorough summary of the grantee’s project management program. Problems in project implementation typically are discussed at these meetings. The triennial reviewer should contact the PMO project manager prior to the site visit to determine if there are any particular concerns. The triennial review team may find it unnecessary to spend a great deal of time reviewing the grantee’s project management strategy if the PMO contractors are monitoring this function. Any major issues raised in the PMO’s quarterly reports to the regional office should be addressed during the site visit.

   Grantees with smaller capital projects, including rolling stock procurements, should have a mechanism for technical oversight of the project. Regular meetings between the project manager and contractor(s) should be held to review project status. Many grantees that do not have the technical expertise to manage large projects hire an architectural/engineering (A/E) consultant to serve as project manager. The transit system’s own maintenance and operations directors typically oversee the inspection and acceptance of rolling stock, sometimes with consultant support.

   Reason for the Question

   49 CFR 633
   FTA C 5010.1C, Chapter I, 9c.

   Sources of Information

   IIf a PMO is assigned, quarterly reports should be on file in the regional office. For smaller projects, the grantee should report on its project management and technical oversight in the Milestone/Progress Reports. Ask the grantee during the site visit to describe its quality control procedures, including its procedures for acceptance and inspection of rolling stock. If the grantee contracts for such services, review the scope of services of these contracts along with progress reports from the contractors. These items will be addressed in more detail during the Buy America portion of the review.

   Determination

   The grantee is not deficient if the required oversight procedures are in place and such procedures are followed. The grantee is deficient if there is evidence that rolling stock procurements or other capital projects have proceeded without proper quality control responsibilities. The grantee also is deficient in cases where procedures are in place but have not been properly implemented or if PMO contractors have identified problems with major projects that the grantee has not resolved.

   Suggested Corrective Action

   If the grantee has not followed the required project management procedures, the corrective action is to implement such procedures for existing or future procurements and construction activities.

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9. How does the grantee monitor subrecipients, third-party contractors, and/or lessees to ensure compliance with FTA requirements?

   Explanation

   Grantees can be involved in a variety of relationships with other parties where FTA funds, equipment, or facilities are used in providing public transit. In any circumstances where other entities play a role, the grantee is responsible for ensuring compliance with FTA requirements. These entities can include other governmental agencies, consultants, contractors, subcontractors, and lessees working under approved third-party contracts or interagency agreements. The grantee must have the capacity to fulfill its oversight responsibilities. There must be staff with knowledge of FTA requirements and mechanisms in place for monitoring. The mechanism can be as simple as a letter of agreement, contract, or lease supplemented by periodic meetings, inspections, or required reports.

   Many of these FTA requirements are addressed in other areas of the triennial review, but for this area, you should establish that the grantee staff has sufficient knowledge of FTA compliance requirements. For example, if the grantee leases FTA funded vehicles to a subrecipient, the grantee must inspect the vehicles and the vehicle records periodically in order to ensure compliance with maintenance, charter, and school bus requirements. The grantee should have procedures in place to ensure that all FTA funded property is used in transit service. Transit service must be provided in compliance with ADA regulations. Procedures should be in place to collect National Transit Database information and provide for drug and alcohol testing, if required. The grantee should demonstrate an awareness of these responsibilities in any case where FTA funds are passed through to a contractor or another operating entity.

   Reason for the Question

   49 CFR Part 18.40
   FTA C 5010.1C, Chapter I, 3.

   Sources of Information

   Discuss this issue with the grantee at the site visit. Large grantees may have written procedures for oversight of subrecipients, contractors, or lessees. Smaller grantees may have informal oversight mechanisms, such as periodic meetings.

   Determination

   If the grantee is adequately staffed and demonstrates an awareness of its responsibilities, and oversight occurs, it is not deficient. Corrective action may be required if the grantee is not staffed to ensure compliance by subrecipients or contractors. A finding in this area typically will result in conjunction with a finding in another area of the triennial review.

   For example, a grantee may be found deficient in maintenance if FTA funded equipment is leased to a service provider and the grantee takes no responsibility for ensuring that preventive maintenance occurs as required.

   Suggested Corrective Action

   The grantee must develop procedures and assign staff to monitor other entities with responsibility for meeting FTA requirements.

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