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The Kentucky Transportation of the audit report. If a finding is found, Cabinet by Internal Audits or OTD, a letter or follow-up asking for an explanation on The Governor of Kentucky has designated the the findings will be made. KYTC as the agency responsible for administering FTA programs for the state. Within KYTC, the Of- fice of Transportation Delivery (OTD) is responsible Procedures for Obtaining and Reviewing for the administration of all FTA programs awarded Subrecipient Financial Audits directly to the state. OTD also administers a little Within KYTC, the Office of Audit has devel- less than $1 million in state funds, used as an "up to oped procedures that define the structure and re- 10 percent (10%)" match for capital purchases made sponsibilities of the office.2 Within the Office of using FTA funds. No other state funds are dedicated Audit, the Internal Audit Branch (IAB) is respon- to public transportation. OTD's executive director sible for monitoring subrecipient compliance with reports directly to the Kentucky secretary of trans- OMB Circular A-133. portation and is supported by a staff of 16 full-time In 2007 and 2008, the state auditor raised con- employees, 9 of whom are dedicated 100 percent to cerns about KYTC's documentation of payments to FTA grants. In FY 2010, OTD awarded FTA pro- subrecipients and contractors for federal highway gram funds to subrecipients as follows: planning and construction funds. Subsequently, the · Formula Grants for Non-Urbanized Areas FHWA called for improvements in subrecipient (Section 5311)--24 subrecipients oversight by KYTC, noting that subrecipients lacked · Transportation for Elderly Persons and Per- an understanding of federal-aid requirements. sons with Disabilities (Section 5310)--13 In 2008, the IAB provided training for KYTC subrecipients departments to address these concerns. The training · Urbanized Area Formula Program (Section was based, in large part, on procedures already de- 5307)--two small urban subrecipients veloped and in use by the OTD for oversight of its subrecipients. The training described the basic require- OTD also administers funds related to the Job ments of OMB Circular A-133, as well as KYTC's Access and Reverse Commute Program (Section responsibilities, and required all departments within 5316) and New Freedom Program (Section 5317). KYTC to annually create a spreadsheet of all sub recipients and disbursements. The spreadsheet was Source of Financial Audit Requirement to contain the following column headings: The KYTC/OTD requires all subrecipients to 1. Subrecipient Name submit copies of annual audits or financial statements, 2. Contract Number regardless of the amount of funding. The following 3. Catalog of Federal Domestic Assistance requirement, while referencing the OMB Circular (CFDA) Number A-133 audit requirement, applies to all subrecipients. 4. Project Description 5. Award Date According to the KY State Management Plan, dated June 16, 2011, KYTC/OTD subrecipients 6. Award Amount shall comply with the Federal Single Audit Act 7.Accts./Memo Amendments of 1996 and OMB Circular A-133. These procedures were intended to allow KYTC Each (sub) recipient must submit two to actively and routinely identify those subrecipi- copies to KYTC/OTD by March 31st ents who met the OMB Circular A-133 audit thresh- of each year or thirty days after the old of expending more than $500,000 received in completion of the OMB Circular A-133 federal funds during a fiscal year. The procedures Audit. KYTC/OTD will log each audit received and submit the audit report to Division of Internal Audits to perform a 2Commonwealth of Kentucky Transportation Cabinet. Audits desk review in accordance with gener- Guidance Manual. September 2007. Available at: http:// ally accepted auditing practices. OTD transportation.ky.gov/organizational-resources/policy%20 will conduct a financial and grant review manuals%20library/audits.pdf (accessed December 19, 2011). 12