HIGHWAY PLANNING AND CONSTRUCTION RAILROAD STATION IMPROVEMENT PROGRAM. N. C. Department of Transportation Rail Division

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1 APRIL HIGHWAY PLANNING AND CONSTRUCTION RAILROAD STATION IMPROVEMENT PROGRAM State Project/Program: SAFE, ACCOUNTABLE, FLEXIBLE, EFFICIENT TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS (SAFETEA-LU) Federal Authorization: U. S. Department of Transportation 23 U.S.C. 401 et seq., as amended, 23 CFR and 49 CFR State Authorization: N. C. G. S N. C. Department of Transportation Rail Division Agency Contact Person Patrick B. Simmons, Director Rail Division N. C. Department of Transportation 1553 Mail Service Center Raleigh, NC (919) , ext. 263 Fax: (919) pbsimmons@ncdot.gov Address Confirmation Letters To Bertha Davis, CPA, Manager Single Audit Compliance Unit N. C. Department of Transportation 1507 Mail Service Center Raleigh, N.C (919) Fax (919) bdavis@ncdot.gov The auditor should not consider the Supplement to be safe harbor for identifying audit procedures to apply in a particular engagement, but the auditor should be prepared to justify departures from the suggested procedures. The auditor can consider the supplement a safe harbor for identification of compliance requirements to be tested if the auditor performs reasonable procedures to ensure that the requirements in the Supplement are current. The grantor agency may elect to review audit working papers to determine that audit tests are adequate. The Single Audit Compliance Unit of the External Audit Branch reviews all single audits, financial audits, and management letters of all grantees. We are looking at both the presentation (information as to program, pass-through and state funding, NCDOT identification numbers) and the dollar amounts presented versus our records. Any reports not received will be requested. Grants must be properly identified by program name, CFDA number ( ) and WBS number on the Schedule of Expenditures of Federal and State Awards. This information is available from the agreement with NCDOT; program name is in the second/third paragraph while the WBS number is on the upper right hand corner of the first page. Grantor and/or pass-through grantor and program title should also be included. Please do not combine like projects into one dollar amount since we would need to call you for the breakdown; please report award amounts, Federal Pass-through, State share and local share. On NCDOT s confirmation from the Grant Master List (GML), these moneys are shown by CFDA number I. PROGRAM OBJECTIVES B

2 Grants are made under other special purposes for the Railroad Station Improvement Program to provide assistance in the rehabilitation of historic transportation facilities. Federal funds are provided through the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) Enhancement Program funds, which are matched by the state and the municipality receiving the grant. Some Railroad Station Improvement Program projects may be funded with State funds (NC Moving Ahead Rail Reserve funds) in addition to Federal funds. The project expenditures using these State funds should follow the same guidelines as the Federal fund expenditures. II. PROGRAM PROCEDURES The state has determined that federal Enhancement funds may be expended on approved railroad stations and transportation facilities. Applications for funding for improvements to other facilities are received annually and evaluated by the Department of Transportation. The Department of Transportation determines the elements of each project that will be eligible for Enhancement funds, and these elements are identified in the grant agreement. Municipalities procure architectural, engineering and construction services, incur costs, and are reimbursed for ninety percent of eligible costs. All eligible costs are on a reimbursement basis only. III. COMPLIANCE REQUIREMENT The federal granting agency has issued a compliance supplement that should be used in conjunction to this compliance supplement issued by the State Agency. Please refer to OMB Circular A-133 Compliance Supplement (Sect. A of the State Compliance supplement). In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to OMB A-133 Compliance Supplement, Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements. The OMB A-133 Compliance Supplement may be found at OMB has issued an addendum to Circular A-133 on June 30, This addendum supplements the 2010 OMB Circular A-133 Compliance Supplement (Supplement) to provide additional guidance for programs (including clusters of programs) with expenditures of American Recovery and Reinvestment Act of 2009 (Pub. L. No ) (ARRA) awards that the auditor determines are major programs in audits performed under OMB Circular A-133. This addendum is effective for audits of fiscal years beginning after June 30, It should be used in conjunction with other Parts and Appendices of the Compliance Supplement in determining the appropriate audit procedures to support the auditor s opinion on compliance for each major program with expenditures of ARRA awards. This addendum may be found at A. ACTIVITIES ALLOWED OR UNALLOWED Activities are defined in the agreement between NCDOT and the grantee. B. ALLOWABLE COSTS/COST PRINCIPLES 1. Compliance Requirement Costs must be net of all applicable credits, e. g., volume or cash discounts, insurance recoveries, refunds, rebates trade-ins, and scrap sales (Also see N, B

3 Special Tests and Provisions.). Expenditures for construction or repair work requiring an estimated expenditure equal to or more than five hundred thousand dollars ($500,000); or a single class of supplies, materials, or equipment estimated in an amount equal to or more than ninety thousand dollars ($90,000) must be contracted for only after a formal low bid process and approval by the Department of Transportation. (N.C.G.S ). Audit Objective - Determine if project is subject to N.C.G.S If so, determine if proper procedures were followed. Suggested Audit Procedure 1. Ascertain whether or not purchases exceeded the above limits for construction and repairs or supplies, material and equipment. 2. Verify that the bid process was followed and low bidder was approved by NCDOT. 2. Compliance Requirement - In-house equipment used by municipalities can be billed at rates only on documented historical cost records. If the municipality does not have historical cost records to support rates, rates must be approved by the Department of Transportation. (NCDOT approves rates using General Managers Association of Chicago, U.S. Corps of Engineers, or Blue Book rental rates.) Audit Objective - Determine if grantee used the appropriate equipment rates. Suggested Audit Procedure Ascertain that municipality has used the equipment rental rate (for in-house equipment) based upon historical cost records or state-approved rates. 3. Compliance Requirement - Local units of government including cities, counties, and airport authorities chartered by the General Assembly are eligible for grants. These local units of government should be eligible for sales tax refunds under N.C.G.S (b) or (c). If they are not qualified, then these local units of government should take the steps necessary to become eligible. Sales tax paid which may be requested from the NC Department of Revenue as a refund is an ineligible charge. Audit Objective - Determine that the authority is eligible for the refund and that NCDOT did not reimburse any sales taxes eligible for refund. Suggested Audit Procedure - Review financial records including contractors' sales tax affidavits and ascertain that no sales taxes were billed to the project. C. CASH MANAGEMENT The Department of Transportation pays on a reimbursement basis. No testing is required. D. DAVIS-BACON ACT B

4 If a project is a transportation facility and is eligible for transportation enhancement funds based solely on function, then Davis-Bacon does not apply unless the project is physically located within the existing right-of-way of a Federal-aid highway. No testing is required. F. EQUIPMENT AND REAL PROPERTY MANAGEMENT Compliance Requirement NCDOT has adopted the policies and procedures for equipment and real property contained in OMB Circular A-110 or 49 CFR Part This information can be found at and respectively. G. MATCHING, LEVEL OF EFFORT, EARMARKING Matching Compliance Requirement - The State (including federal and state funds) reimbursement cannot exceed the amount stated in the program agreement, program award letter and approved project budget. The remaining share must come from other public sources, not other federal highway administration dollars. Level of Effort No testing is required at the local level. Earmarking No testing is required at the local level. I. PROCUREMENT AND SUSPENSION AND DEBARMENT 1. Procurement Compliance Requirement - American Recovery and Reinvestment Act Reporting (ARRA). In addition to those statutes listed in the A-102 Common Rule and OMB Circular A-110, Section 1605 of ARRA prohibits the use of ARRA funds for a project for the construction, alteration, maintenance, or repair of a public building or work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. ARRA provides for waiver of these requirements under specified circumstances. An award term is required in all awards for construction, alteration, maintenance, or repair of a public building or public work (2 CFR section ). Further information about this requirement, including applicable definitions, is found in 2 CFR part 176, Subpart B located at Audit Objective Determine whether an award using ARRA funding includes a Buy- American award term and, if so, whether the recipient is complying with the Buy-American provisions of ARRA or if any waivers have been granted. Suggested Audit Procedure Select a sample of ARRA-funded procurements, if any, for activities subject to Section 1605 of ARRA and test whether the non-federal entities requested and received any exceptions to Buy-American requirements; and test the sample of procurements to ascertain if entities are otherwise in compliance with the ARRA requirements. B

5 2. Solicitation of Bids Compliance Requirement - N.C.G.S requires the solicitation of bids on construction or repair work requiring expenditure of public money in an amount equal to or more than five hundred thousand dollars ($500,000) or purchases in an amount equal to or more than ninety thousand dollars ($90,000). N.C.G.S states that all contracts for construction or repair work or for the purchase of apparatus, supplies, materials, or equipment, involving the expenditure of public money in the amount of thirty thousand dollars ($30,000) or more, but less than the limits prescribed in G.S , shall be made after informal bids have been secured. Bid tabulation and governing agency resolution recommending award is required for contract award to the lowest responsible bidder. Audit Objective Determine if bids, formal or informal, were required and if required were received. Suggested Audit Procedure - Verify that municipality has properly solicited bids and that the contract was awarded to the lowest qualified. J. PROGRAM INCOME NCDOT does not pass this requirement down to the local level. No testing is required. K. REAL PROPERTY ACQUISITION/RELOCATION ASSISTANCE NCDOT does not pass this requirement down to the local level. No testing is required. L. REPORTING Compliance Requirement - American Recovery and Reinvestment Act Reporting (ARRA). The NC Department of Transportation (NCDOT) is responsible for reporting project ARRA data to the Federal awarding agency. The subrecipient is responsible for reporting project ARRA data to NCDOT. Appropriate documents to meet the reporting requirements are provided to the subrecipient independent of the contract. In all cases (including months where no project work was performed), Project Status Reports are due to NCDOT by the 5 th of each month and Employment Data Reports are due to NCDOT by the 7 th of each month until the completion of the project. Audit Objective Determine that monthly Project Status Reports and Employment Data Reports were submitted timely and are accurately prepared. Suggested Audit Procedure - Ascertain that the grantee has accurately prepared the two ARRA data reports and documentation supports the reports. M. SUBRECIPIENT MONITORING Subrecipient monitoring is performed through on-site inspection, progress and financial reports. A NCDOT engineer is assigned to review work in progress and approve invoices before they are sent in requesting reimbursement. Compliance Requirement - American Recovery and Reinvestment Act: A pass through entity is responsible for identifying to the first-tier subrecipients the requirement to register in B

6 the Central Contractor Registration (CRC), including obtaining a Dun and Bradstreet Data Universal Numbering System (DUNS) number, and maintain the currency of that information (Section 1512(h), ARRA, and 2 CFR (c)). Audit Objective Determine whether the pass-through entity determined that subrecipients have current CCR registrations prior to making subawards and performed periodic checks to ensure that subrecipients are updating information as necessary. Suggested Audit Procedure Test the pass-through entity s subaward review and approval documents to determine whether, before award, the pass-through entity checked CCR to determine whether subrecipients were registered. N. SPECIAL TESTS AND PROVISIONS Special Tests and Provisions for Awards with ARRA Funding: 1. Compliance Requirement As provided in 2 CFR section , recipients of ARRA funds must maintain records that identify adequately the source and application of ARRA awards. Audit Objective Determine whether accounting records for ARRA funds provide for the separate identification and accounting required for ARRA awards and activity. Suggested Audit Procedure Ascertain if expenditures of ARRA awards are accounted for separately from expenditures of non-arra awards. 2. Compliance Requirement Recipients of ARRA funds must identify the ARRA awards in their Schedule of Expenditures of Federal Awards (SEFA). Audit Objective Determine whether the entity met the requirements for reporting expenditures of ARRA awards on the SEFA and that reported amounts are supported by the accounting records and fairly presented in accordance with ARRA and program requirements. Suggested Audit Procedure Verify that the SEFA properly identifies and reports expenditures of ARRA awards and that reported expenditures are supported by accounting records. 3. Compliance Requirement If ARRA funds are passed from an entity to a subrecipient, the entity must: (1) separately identify to each subrecipient, and document at the time of the subaward and disbursement of funds, the Federal award number, CFDA number, and the amount of ARRA funds; and (2) require their subrecipients to provide similar identification (as noted in Compliance Requirement number 2 above) in their SEFA and reporting of data. Audit Objective If subawards of ARRA funds were made, determine whether the entity met the requirements for separately identifying to each subrecipient, and documenting at the time of the subaward and disbursement of funds, the Federal award number, CFDA number, and the amount of ARRA funds; and required their subrecipients to provide appropriate identification in their SEFA and reporting data. Suggested Audit Procedure Verify that the entity separately identified to each subrecipient, and documented at the time of the subaward and disbursement of funds, the B

7 Federal award number, CFDA number, and the amount of ARRA funds; and required their subrecipients to provide appropriate identification in their SEFA and reporting data. B