State DOT Financial Auditing Requirements for Public Transportation Assistance Programs (2012)

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13 prescribed that, for subrecipients receiving less than $500,000 in federal funds passed through from KYTC, the agency must determine if the amount of federal funds received from all federal sources met the threshold. KYTC agencies were directed by the Office of Audit to send a letter to each subrecipient request- ing that it agree to provide a copy of its OMB Circu- lar A-133 audit to KYTC or certify to KYTC that its federal expenditures did not exceed $500,000. The 2008 guidance contained a sample form to be returned to the appropriate KYTC agency by September 15th each year. The guidance specified the following timeline for completion of tasks regarding the review of audit reports: Date: Task: June 30 End of fiscal year. September 1 Request audit or certification from subrecipient. March 30 Audit must be completed and received by KYTC. April 15 Follow-up for missing audits. Upon receipt Forward audit to Internal Audit Branch (IAB). Upon receipt Review IAB’s desk review com- ments memorandum. After IAB review Request corrective action plan, if necessary. 90 days later Ensure corrective action plan was implemented. The timeline included a note that, if a subrecipient’s fiscal year ended on December 31, all task dates would be moved forward by 6 months. Following a desk review of the OMB Cir cular A-133 audit, the Manager of IAB was to send a mem- orandum to the head of the appropriate agency. (A copy of the memo appears in the 2008 document referenced below.) The memo states that the audit has been reviewed for compliance with Generally Accepted Government Auditing Standards (GAGAS) and notes the amount of federal funds KYTC passed through to the subrecipient. The mem o randum describes if there were any reportable findings or instances of non-compliance. The memorandum also identifies the certified public accounting (CPA) firm that conducted the subrecipient audit and whether the CPA firm received an unqualified opinion during its most recent quality control review. internal systems used to track Financial Audit Findings The 2008 training also established a tracking system to ensure OMB Circular A-133 compliance. The tracking system was a second spreadsheet with the following column headings: 1. Subrecipient Name 2. Date of Audit Request Letter 3. Date Audit or Certification Received 4. Date Audit Sent to IAB for Review 5. Date Memo Received from IAB 6. Date Request Sent to Subrecipient for Cor- rective Action Plan* 7. Date of Corrective Action Plan Implementa- tion Verification* 8. Notification to Chief Audit Executive Regard- ing Noncompliance* *If applicable The 2008 training concluded by advising KYTC agencies, including the OTD, of the following re- sponsibilities for assuring compliance with OMB Circular A-133 requirements: • Disclose to subrecipients the source of federal funds in contracts and agreements, including – CFDA title and number, – Award name and number, – Award year, and – Name of awarding federal agency. • Cite applicable federal laws and regulations in contracts and any supplemental agreements. • Monitor subrecipients through site visits, re- ports, and correspondence. • Comply with OMB Circular A-133 audit re- quirements for subrecipients spending more than $500,000 in total federal awards. • Document, document, document. the oRegon Dot The Governor of Oregon has designated the Or- egon DOT as the agency responsible for administer- ing state and FTA public transportation programs. Within the Oregon DOT, the Public Transit Divi- sion (PTD) is responsible for administering approx- imately $60 million annually in FTA funding and nearly $10 million in state funding for public tran- sit. PTD’s management team consists of the division administrator, who reports to the operations deputy

14 director of the Oregon DOT. The PTD division ad- ministrator is supported by a staff of 14 full-time employees. PTD provides grant management and oversight of projects and activities supported with state and federal public transportation funds. In a typical fiscal year, PTD administers funds under the following programs: • Formula Grants for Non-Urbanized Areas (Section 5311)—33 subrecipients • Transportation for Elderly Persons and Per- sons with Disabilities (Section 5310)—67 subrecipients PTD also administers funds related to the Job Ac- cess and Reverse Commute Program (Section 5316) and the New Freedom Program (Section 5317). sources of Financial Audit Requirement Oregon state law (ORS 297.405) requires all municipal corporations to have their accounts and fiscal affairs audited annually in accordance with Generally Accepted Auditing Standards (GAAS) as promulgated by the American Institute of Certified Public Accountants (AICPA).3 The accounts to be audited and examined may include financial state- ments or they may consist solely of books, records, and other financial data. Fiscal affairs are all activi- ties of a municipal corporation relating to the col- lection, receipt, custody, handling, expenditure, or disbursement of public funds. Oregon law (ORS 297.435) requires every local government (including Mass Transit Districts) ex- empt from an annual audit or review (expenditures of $150,000 or less in state funding) to file financial statements with the secretary of state of the Audits Division. The Oregon Administrative Rules provide minimum standards for review of Oregon munici- pal corporations.4 The standards include general re- quirements, a standard agreement between the CPA and the municipality, and the required information that must be examined. In addition to these state requirements, the Oregon DOT’s State Management Plan for Public Trans- portation Programs describes specific requirements associated with FTA funds. This document describes the responsibilities of the subrecipient, as follows: The division requires that subrecipients receiv- ing Federal funds in excess of $500,000 submit the audit conducted in accordance with Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, And Non-profit Institutions, and the manage- ment letter and any other reports that accompany the annual audit. If a subrecipient has a subcon- tractor responsible for the financial manage- ment of federal funds, and the subrecipient itself is subject to this requirement, the subrecipient shall arrange for the division to be sent a copy of the subcontractor’s annual audit. Subrecipients receiving less than $500,000 in Federal funds must submit to PTD a copy of any annual audit covering the funds expended under current grant agreements with ODOT; and the annual audit of any subcontractor receiving fed- eral funds as a result of grant agreements. An audit is not required, however, if one is conducted, the subrecipient will submit a copy to PTD. Private for profit organizations who are subrecip- ients shall be subject to the audit requirements of the Public Transit Division.5 Procedures for obtaining and Reviewing subrecipient Financial Audits Audit reports filed by municipal corporations must be submitted within 180 days following the end of the fiscal year. All municipal governments are asked to submit their audit reports electronically, preferably in PDF format. Since 2004, all audit reports are maintained on the secretary of state’s website, where they can be searched and reviewed. The Local Government Audit Report Search page is accessible at http://egov.sos.state.or.us/muni/ public.do. Subrecipients that expend less than $150,000 must file annual financial statements with the sec- retary of state within 90 days of the end of the 3 Division 10 Minimum Standards for Audits of Oregon Mu- nicipal Corporations. Available at: http://arcweb.sos.state. or.us/pages/rules/oars_100/oar_162/162_010.html (accessed December 19, 2011). 4 Division 40 Minimum Standards for Review of Oregon Muni- cipal Corporations. Available at: http://arcweb.sos.state.or.us/ pages/rules/oars_100/oar_162/162_040.html (accessed Decem- ber 19, 2011). 5 Oregon DOT, State Management Plan for Public Transpor- tation Programs, 2009. Available at: http://www.oregon.gov/ ODOT/PT/PROGRAMS/SHARED/MGMT_PLAN/2009_ PTD_Mgmt_Plan.pdf (accessed December 19, 2011).