APRIL 2011 20.500 FEDERAL TRANSIT CAPITAL IMPROVEMENT GRANTS State Project/Program: FEDERAL TRANSIT ADMINISTRATION (FTA) CAPITAL PROGRAM U. S. Department of Transportation Federal Authorization: Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (U.S.C. Section 5309) State Authorization: N. C. Department of Transportation Public Transportation Division Agency Contact Person Program Miriam S. Perry, Director Public Transportation Division N. C. Department of Transportation 1550 Mail Service Center Raleigh, NC 27699-1550 (919) 733-4713 Ext. 243 Fax (919) 733-1391 mperry@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 (FTA-Capital Program), CFDA number ( 20.500 ), 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, program title and CFDA Number (20.500) 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 the NCDOT s confirmation from the Grant Master List (GML), these moneys are shown as part of CFDA Number 20.500. I. PROGRAM OBJECTIVES B-4 20.500 1
The objective of the Section 5309 Program of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), is to finance capital projects in one of three categories: (1) bus and bus-related facilities (2) modernization of fixed guideway systems and (3) construction of new fixed guideway systems and extensions (new starts) that will benefit the country s transit systems. II. PROGRAM PROCEDURES The Section 5309 program is a discretionary grant program. Funds are appropriated by Congress annually for specific transportation projects. By statute, FTA must announce the formula apportionments on October 1 or within 10 days of enactment of the DOT Appropriations Act, whichever is later. Grants are awarded to public agencies and agencies on approval of applications for specific programs of projects submitted to FTA. Progress is monitored through on-site inspections, quarterly progress and financial reports. SAFETEA-LU requires FTA to perform reviews and evaluations of the Section 5309 grants activities at least every 3 years. These reviews are conducted with specific reference to compliance with statutory and administrative requirements and consistency of actual program activities with (1) the approved program of projects and (2) the planning process required under 49 USC 5303. Section 5309 grantees can be subrecipients of the North Carolina Department of Transportation (NCDOT) or direct recipients of the Federal Transit Administration. Subrecipients of NCDOT will have an executed grant agreement with NCDOT. Direct recipients of FTA should use the Federal cluster for Capital Program and Urbanized Area Formula Program. Starting in FY2002, no new grants funded with pass-through Section 5309 funds were or will be initiated. However, the NCDOT continues to provide a match to direct recipients of new Section 5309 grants through the Public Transportation Grant Program, Urban Bus/Facilities Program (Public Transportation Section 5309-Capital Program Grant Agreement) or the Regional New Starts and Capital Program based upon the availability of funds. 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/index.html. 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. B-4 20.500 2
A. ACTIVITIES ALLOWED OR UNALLOWED Compliance Requirement Funds must be expended as specified in the grant award letter and the grant agreement, which incorporates the grantee s application and the Federal Transit Administration s Master Agreement with NCDOT by reference. C. CASH MANAGEMENT Compliance Requirement - Project agreements specify that this is a cost reimbursement program. The request for reimbursement is due within 30 days following the end of the quarter. If the subrecipient receives payment of federal and state funds from NCDOT in advance of incurring the cost, the funds must be paid to the vendor within three (3) days of receipt from the department. If the funds are held longer than three (3) days, NCDOT relies on the Federal Compliance Supplement, Part 3, Section C. Cash Management, for guidance. F. EQUIPMENT AND REAL PROPERTY MANAGEMENT Compliance Requirement - Property (realty and related transit equipment) acquired with Section 5309 funds must be disposed of consistent with federal requirements outlined in FTA Circulars 5010.1D (dated November 1, 2008, Page IV-24) and 9300.1B. Disposition of equipment before the end of its useful life is subject to prior FTA concurrence in the method of disposition. Unless otherwise determined in writing by FTA, the fair market value for rolling stock removed from service before the end of its useful life is the FTA share of the unamortized value of the remaining service life, based on straight line depreciation of the original purchase price, based upon the date the equipment was removed from revenue service rather than the date of disposal. Transfer of the Federal interest from a capital asset purchased under a grant to one not acquired with Federal assistance is not permitted, except when equipment that is damaged or destroyed is replaced (either with insurance proceeds or otherwise). Transfer of excess equipment by a recipient to another FTA recipient for use in mass transportation operations requires FTA approval (49 CFR section 18.32). G. MATCHING, LEVEL OF EFFORT, EARMARKING 1. Matching Compliance Requirement The grantee must pay at least the local share percentage specified in the grant contract. Local funds must be applied to the uses for which they were committed. 2. Level of Effort - NCDOT does not pass this requirement down to the local level. No testing is required. 3. Earmarking - NCDOT does not pass this requirement down to the local level. No testing is required. H. PERIOD OF AVAILABILITY OF FEDERAL FUNDS Compliance Requirement - Program funds appropriated by Congress have to be obligated by the year of the appropriation plus two additional years. NCDOT subrecipients should complete the project scope within the period of performance identified in the state-local agreement, B-4 20.500 3
unless written authorization from NCDOT has been received extending the period of performance for the project I. PROCUREMENT AND SUSPENSION AND DEBARMENT 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. 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 NCDOT is monitoring at the local level. No testing is required. L. REPORTING 1. Compliance Requirement - Financial, project status, and milestone activity reports must be submitted quarterly as specified in FTA Circular 5010.1D and the project agreement. The milestone and narrative reports are due by the 15 th day following the end of the quarter. Also, refer to any supplemental information distributed by NCDOT as it relates to this program. Audit Objective - Determine reports were correctly submitted. Suggested Audit Procedure 1. Trace amounts reflected in Quarterly Financial Reports to underlying accounting records. 2. Verify certification by checking property management records including disposition actions. 2. Compliance Requirement - Grantees must submit quarterly DBE Report of Awards and Commitments documenting actual utilization (CFR Parts 23 and 26, and the U.S. DOT DBE Final Rule, Federal Register dated February 2, 1999 - Participation by Disadvantaged Business Enterprises in Department of Transportation Programs). Additional required reports include Project Progress Reports and reports of significant events (FTA Circular 5010.1D). Based on the level of FTA funding, exclusive of transit B-4 20.500 4
vehicle purchases, recipients are required to implement a DBE program. To monitor the progress of the DBE program, recipients are required to submit quarterly reports based on a record keeping system (49 CFR section 23.49, 23.11). Audit Objective - Determine DBE reports are supported by adequate documentation. Suggested Audit Procedure 1. Review grantee s DBE contract expenditures (as opposed to contract awards) as outlined in 49 CFR Part 26. 2. Review the reports and trace the information to underlying data to determine completeness and accuracy. 3. Determine that for all participation amounts reported, the firms have been certified and that the certification is current. Participation by noncertified firms is not allowed. 3. 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 NCDOT passes this grant to its subrecipients who can then pass the funds down further to another subrecipient. If this situation occurs, NCDOT relies on the Federal Compliance Supplement, Part 3, Section M. Subrecipient Monitoring, for guidance. If the subrecipient does not pass this money down to another subrecipient, no testing is required at the local level. 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. B-4 20.500 5
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 TEST AND PROVISIONS 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. 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 20.500 6