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funds annually. According to agency policy, all tran- systems with the highest perceived risks are referred sit subrecipients under the Section 5311 program that to the Office of External Audits for a more detailed received federal funds from the Ohio DOT will have site audit. either a desk inspection or a site audit performed. The Ohio DOT Office of External Audits tracks In 2006, at the request of the Office of Transit, all expenditures of federal funds associated with the the Division of Finance & Forecasting, Office of Section 5311 program. The Ohio DOT auditor rec- Audits created an oversight audit program for the onciles federal expenditures for each subrecipient Ohio DOT's Section 5311 rural subrecipients (see to the entity financial reports or other source docu- Appendix C). According to the program document mentation. For entities not subject to OMB Circular informally known as the Section 5311 Financial A-133 requirements, the auditor seeks positive con- Audit Model, firmation, usually through desk inspection, that fed- eral expenditures have been identified and recorded [t]he audit shall be conducted in accordance with the provisions contained in Federal Regulations accurately. A desk inspection employs limited-scope and Generally Accepted Government Auditing audit procedures that include reconciliation and Standards (GAGAS) and will cover the entire confirmation of federal funds expended by the tran- financial operation of the entity. The agreed- sit system, ensuring the subrecipient accurately re- upon procedures to be performed may include corded and classified all federal (and state) funds various combinations of those described in this in its accounting system, and ensuring that ARRA document. The specific procedures performed funds are separately identified. Desk inspections are for each sub-recipient will be determined based conducted primarily by e-mail and telephone cor- upon an assessment of perceived risks.9 respondence. If there are major compliance issues, the transit system may be subject to additional over- Procedures for Obtaining and Reviewing sight by the Ohio DOT through a corrective action Subrecipient Financial Audits plan, compliance audit, or increased monitoring. If the Ohio DOT auditors have financial findings, the The Ohio DOT Office of Transit has conducted Ohio DOT will recover funds. compliance reviews of its subrecipients for many years. These reviews have included some cursory over sight of financial processes, including fare col- Role of State DOT Auditor lection, budget reports, and basic internal controls. The Section 5311 Financial Audit Model out- Two isolated cases of management fraud were lines the agreed-upon procedures of an audit to be found to have been perpetrated through the use of performed by the Office of External Audits. The credit cards, reimbursement for travel expenses, and specific procedures performed for each subrecipient other similar schemes. In both cases, the managers are determined based on risk assessments. The risks were charged with theft and found guilty. As a result are identified based on information gathered from of problems found with the compliance reviews and many sources, which may include the legal cases, the Office of Transit requested assis- tance from the Ohio DOT Office of External Audits · compliance reviews conducted by the Office (OEA) to perform comprehensive financial audits of Transit, for identified transit systems. · site visits, Each year, the Office of Transit completes a risk · audit results, and assessment of each transit system based on its com- · ongoing external investigations. pliance review, noting findings and any ongoing is- The timeliness and accuracy of submitted sues with annual budget submissions and quarterly invoices, reports, and other documents and the sub- invoice submissions. Subrecipients undergoing ex- recipients' general responsiveness to Office of Tran- ternal investigations for potential violations receive sit staff also are factors in risk assessment. a high score on the risk assessment. Those transit Once an agency has been selected, the Office of External Audits prepares an agreement letter and sub- 9Ohio Department of Transportation, Division of Finance & mits it to the Office of Transit for signature. On ap- Forecasting, Office of Audits. Rural Transit--FTA Section proval by the Office of Transit, the Office of External 5311 Program, Oversight Audit Program. Audits contacts the agency, schedules a site visit, and 16