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March 2012 NAtional Cooperative Highway Research Program Senior Program Officer: Gwen Chisholm-Smith Research Results Digest 368 State DOT Financial Auditing Requirements for Public Transportation C o n t e n t s Assistance Programs Summary, 1 This digest summarizes key findings from NCHRP Project 20-65(33), Background, 2 "Determination of State DOT Financial Auditing Requirements for Their Survey Results, 3 Public Transportation Assistance Programs," conducted by The DMP Survey Respondents, 3 Financial Auditing Requirements of Group. It documents various policies and procedures used by state State DOTs, 6 Who Conducts and Pays for departments of transportation (DOTs) for conducting grantee financial Financial Audits, 7 audits, presenting best practices currently in use to enable state DOTs to Roles of State DOTs in Subrecipient Financial Audits, 8 enhance and streamline their current financial auditing requirements. The Financial Audit Reporting Submission Deadlines and digest was prepared from the project final report authored by Maxine Consequences, 8 Marshall, John F. Potts, and Karon J. Cofield, Ph.D. Subrecipient Financial Audit Manuals or Guidelines, 10 State DOT Best Practices, 10 Federal Requirements (OMB Circular A-133), 10 State Requirements, 10 Summary ing a detailed review and assessment of the financial audit, or that the staff conducted The Kentucky Transportation The goal of this research effort was to Cabinet, 12 financial audits of subrecipients. Source of Financial Audit determine what state departments of trans- Fifty-six percent of respondents indi- Requirement, 12 portation (DOTs) require with respect to Procedures for Obtaining and cated that they do not have audit manuals Reviewing Subrecipient Financial financial audit requirements for subrecipi- with guidelines that auditing firms must fol- Audits, 12 Internal Systems Used to Track ents. A web-based survey was developed low for subrecipient financial audits. Several Financial Audit Findings, 13 to obtain general information. The survey state DOTs indicated that they rely on other The Oregon DOT, 13 became the basis for further research, in- sources, such as contractors' state licens- Sources of Financial Audit Requirement, 14 cluding a review of documents available ing board standards, state internal audits, or Procedures for Obtaining and Reviewing Subrecipient Financial in the DOTs' state management plans and federal Office of Management and Budget Audits, 14 on DOT and state audit division websites. (OMB) circulars, or on standards as deter- The Ohio DOT, 15 Forty-five state DOTs and the District of mined by the secretary or commissioner of Source of Financial Audit Requirement, 15 Columbia DOT responded to the survey. the DOT. Procedures for Obtaining and (For purposes of analyzing responses to Seven state DOTs indicated that they Reviewing Subrecipient Financial Audits, 16 specific questions in the survey, the phrase have their own guidelines that audit firms Role of State DOT Auditor, 16 "state DOTs" includes all respondents to are required to follow. Three of these (New The New York State DOT, 17 the question including, when applicable, Sources of Financial Audit York, West Virginia, and Michigan) cited Requirement, 17 the District of Columbia DOT.) state statutes that contain subrecipient audit Procedures for Obtaining and Reviewing Subrecipient Financial Of the state DOTs that responded to the requirements. The remaining state DOTs Audits, 18 survey, 45 percent indicated that they per- identified administrative policies, usually Role of the Internal Auditor, 18 form a limited review of subrecipient finan- issued by the state's chief financial officer, The Michigan DOT, 19 cial audits; 10 percent responded that they as the source of financial audit guidelines. Appendix A, 20 rely on other departments within their agen- One state DOT (Alaska) identified an audit Appendix B, 21 cies to perform this function; and 20 percent manual, available on the state's Department Appendix C, 25 described a more involved role in conduct- of Administration (DOA) website, which