APRIL 2011 20.205 HIGHWAY PLANNING AND CONSTRUCTION State Project/Program: ENHANCEMENT PROGRAMS: SAFE, ACCOUNTABLE, FLEXIBLE, EFFICIENT TRANSPORTATION EQUITY ACT: A LEGACY FOR USERS (SAFETEA-LU) U. S. Department of Transportation Federal Authorization: State Authorization: 23 U.S.C and SAFETEA-LU, 23 CFR and 49 CFR N. C. Department of Transportation Agency Contact Person - Program Jimmy Travis, PE, Manager Local Programs Management Office Transportation Program Management Office N.C. Department of Transportation 1595 Mail Service Center Raleigh, NC 27699-1595 (919) 212-3270 Fax (919) 212-5711 jtravis@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. 27699-1507 (919) 715-2327 Fax (919) 715-2710 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 (20.205-2), 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 amount, 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 20.205-2. If the grantee is a non-governmental entity subject to N.C.G.S. 143C-6-23 Use of State Funds by Non-State Entities, and North Carolina Administrative Code Chapter 9, B-4 20.205-2 1
Subchapter 03M Uniform Administration of State Grants the reporting requirements may be different. I. PROGRAM OBJECTIVES 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 department and/or the public agency receiving the grant. One part of SAFETEA-LU provides federal funds for transportation enhancements, activities which can creatively integrate transportation into our communities and the natural environment. Transportation Enhancement activities must have a direct relationship to the surface transportation system, but not necessarily to a currently planned highway project. II. PROGRAM PROCEDURES The program is administered by the State. Enhancement projects may be funded up to 80% with federal transportation enhancement dollars and are paid on a reimbursement basis. The remaining share must come from other public sources. In some cases, state funds are to provide part of the match. All or part of the match may be required of the public agency sponsoring the project. NCDOT oversees the implementation of the project and the recipient usually is responsible for architectural and engineering and construction services. A legal agreement between the NCDOT and the sponsor specifies the terms of the project and defines the responsibilities. THE DECISION FOR ALLOCATION OF ENHANCEMENT FUNDS IS CURRENTLY COORDINATED BY THE STATE TRANSPORTATION IMPROVEMENT PROGRAM, PROGRAM DEVELOPMENT BRANCH. III. COMPLIANCE REQUIREMENTS 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 www.whitehouse.gov/omb/circulars. OMB has issued an addendum to Circular A-133 on June 30, 2009. 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. 111-5) (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, 2008. 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 http://www.whitehouse.gov/omb/assets/a133_compliance/arra_addendum_1.pdf. A. ACTIVITIES ALLOWED OR UNALLOWED Examples of Transportation Enhancement Activities: (1) pedestrian and bicycle facilities (including safety and educational activities for pedestrians and bicyclists), (2) acquisition of B-4 20.205-2 2
scenic easements and scenic or historic sites, (3) scenic or historic highway programs (including tourist and welcome center facilities), (4) landscaping and other scenic beautification, (5) historic preservation, (6) rehabilitating and operating historic transportation buildings, structures or facilities (including historic railroad facilities and canals), (7) preserving abandoned railway corridors (including the conversion and use as pedestrian or bicycle trails), (8) controlling and removing outdoor advertising, (9) archaeological planning and research, (10) environmental mitigation to address water pollution due to highway runoff or reduce vehicle-caused wildlife mortality while maintaining habitat connectivity, (11) and establishment of transportation museums. B. ALLOWABLE COSTS/COST PRINCIPLES 1. Compliance Requirement Enhancement Program is a cost reimbursement program. Funds must be expended as specified in the project application, the project award letter, the project agreements, and specifications which incorporates the agency s application (scope of services) by reference. See Compliance Requirement I. Procurement, Suspension and Debarment for state thresholds. 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 NCDOT. (NCDOT approves rates using GMAC, U.S. Corps of Engineers or Blue Book rental.) 3. Compliance Requirement - Agency in house work must be pre-approved by NCDOT after receipt of agency letter documenting cost savings or effectiveness of administration versus contract labor. 4. Compliance Requirement - Local units of government including cities and counties, chartered by the General Assembly are eligible for grants. These local units of government should be eligible for sales tax refunds under GS 105-164.14 (b) or (c); if they cannot qualify, 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 grant is funded on the reimbursement basis; therefore, no testing is required at the local level. D. DAVIS-BACON ACT B-4 20.205-2 3
Compliance Requirement - The applicability of Davis-Bacon to a transportation enhancement project is dependent on the relationship or linkage of the project to a Federal-aid highway. If the project is not linked to a particular Federal-aid highway and is eligible based solely on function (i.e., a transportation facility, such as an independent bike path, the restoration of a railroad station, etc.), then the Davis-Bacon requirements do not apply. However, the Davis- Bacon requirements apply to projects greater than $2,000 that are physically located within the existing right-of-way of a Federal-aid highway, regardless of the transportation enhancement characteristics 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 18.32. This information can be found at http://www.whitehouse.gov/omb/circulars/a110/a110.html and http://www.gpoaccess.gov/cfr/index.html 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 project agreement, project award letter and approved project budget. The remaining share must come from other public sources, not other federal highway administration dollars. Recipients may use the value of right of way in lieu of cash match. The project agreement must identify the source of match funds, if value of right of way or in-kind services will be used. Level of Effort No testing is required at the local level. Earmarking No testing is required at the local level. I. PROCUREMENT, SUSPENSION & DEBARMENT Solicitation of Bids Compliance Requirement - N.C.G.S. 143-129 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. 143-131 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. 143-129, 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. Municipalities may also be required to comply with 23 CFR 635 for procurement, for those projects within the public highway right of way. 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 responsible, responsive bidder. B-4 20.205-2 4
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 176.140). Further information about this requirement, including applicable definitions, is found in 2 CFR part 176, Subpart B located at http://edocket.access.gpo.gov/2009/pdf/e9-9073.pdf. All TE projects (and FHWA-funded projects) must comply with Buy America (23 CFR 635.410). 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. J. PROGRAM INCOME Compliance Requirement - Income generated by the project (such as admission fees) should be used for the maintenance and/or operation of the project. L. REPORTING The auditor should look to OMB A-133 Compliance Supplement, Part 3-L for local government reporting. Non-governmentals Reports made by non-state entities Compliance Requirement North Carolina General Statute 143C-6-23 Use of State Funds by Non-State Entities, and North Carolina Administrative Code Chapter 9, Subchapter 03M Uniform Administration of State Grants addresses reporting requirements for nongovernmental entities. These regulations along with reporting forms may be accessed at: https://www.ncgrants.gov/ncgrants/regulations.jsp https://www.ncgrants.gov/ncgrants/publicreportsregulations.jsp Audit Objective Determine applicable reporting requirements. Suggested Audit Procedure 1. Determine if the organization is subject to G.S. 143C-6-23. 2. Determine what type of filing/report should be made with the NCDOT. B-4 20.205-2 5
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 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 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 176.50(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 Compliance Requirement - For most federally participating highway projects, the SHA or municipality must abide by Equal Employment Opportunity, Prohibited Interests, Title VI - Civil Rights Act of 1964, Davis-Bacon Wage Scale, and MBE/DBE Policies and Guidelines. Audit Objective - Obtain an understanding of the recipient s program and ascertain if the program incorporates the above policies. Suggested Audit Procedure Review contracts for compliance with stated policies. Special Tests and Provisions for Awards with ARRA Funding: 1. Compliance Requirement As provided in 2 CFR section 176.210, 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. B-4 20.205-2 6
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 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-4 20.205-2 7