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· identify best practices currently in use to enable to conduct financial audits to assure that the transit state DOTs to enhance and streamline their funding provided by the state has been appropri- current financial auditing requirements. ately used for the intended purpose(s). Several state DOTs indicated that they have statutes or adminis- The research team created a distribution list tar- trative policies that describe subrecipient financial geted toward individuals in the transit sections of auditing requirements. state DOTs (and the DOTs of two territories) with knowledge of auditing of subrecipients and who might be willing to participate in the survey (Ap- Survey Results pendix A). When the survey needed to be redirected to a different office or person within the DOT, the Survey Respondents research team communicated with those state DOTs The survey was sent to all 50 state DOTs, plus via telephone and email and followed up accordingly. the DOTs of Puerto Rico and the District of Colum- The research team designed and distributed bia. Two state DOTs (Rhode Island and Delaware) a web-based survey with the goal of capturing all did not respond because they have no subrecipients the necessary information to determine state DOTs' and the survey did not apply to their organizations. financial auditing requirements in the least burden- Of the 50 remaining DOTs, 46 responded (92 per- some manner possible (Appendix B). The intent was cent) as of March 31, 2011. Table 1 provides a list to capture the unique practices of each state DOT of the responding agencies. while identifying common practices or those that The respondents were asked about their public could be replicated by other states looking to develop transportation assistance programs. Figure 1 shows financial auditing requirements. Because most of the that most respondents (nearly 98 percent) adminis- survey questions were open-ended, respondents had tered the following FTA formula grant programs: the opportunity to consider and describe their specific · Transportation for Elderly Persons and Per- operations, which helped facilitate identification of sons with Disabilities (Section 5310) state DOTs as candidates for further analysis of best · Formula Grants for Other than Urbanized practices. Areas (often called "Non-Urbanized Areas"; Responses to the survey revealed that most states Section 5311) require periodic reporting by their subrecipients of · Job Access and Reverse Commute Program public transportation funds and that this reporting (Section 5316) often includes financial and non-financial data. State · New Freedom Program (Section 5317) DOTs indicated that they review these reports to measure the output associated with the funds pro- A slightly lower number of respondents (91 per- vided. The public transportation units of state DOTs cent) administered metropolitan and statewide plan- usually do not have the expertise or internal staff ning grants (Sections 5303, 5304, and 5305), and resources to conduct financial audits of each sub- 85 percent of respondents administered discretion- recipient of state public transportation assistance; ary transit capital funds (various programs under consequently, the state DOTs' internal audit units Section 5309). The range of responses was not sig- often are relied on to conduct the audits. nificant, with one exception: Just over 30 percent All responding state DOTs indicated that they of states reported administering an Urbanized Area passed through the federal OMB Circular A-133 re- Formula Program (Section 5307). quirement that a single audit be conducted of any en- Seven respondents contributed additional com- tity that expends $500,000 or more in federal funds ments. These included that the state DOTs also ad- in a given year. A single audit includes both the ministered federal United We Ride and Over the entity's financial statements and the federal awards. Road Bus funds. Three respondents added that they Neither OMB nor FTA has a specific requirement administered American Recovery and Reinvestments for subrecipients that receive less than $500,000 per Act (ARRA) funds made available through the FTA. year in federal funds, however; in these cases, state Respondents were asked to identify all types of DOTs follow their own procedures for assuring that public transit assistance programs for which their FTA and state funds are accounted for properly. states provide funding. Forty of the 46 states (87 per The survey revealed that most state DOTs re- cent) responded to this question. As shown in Fig quire all subrecipients (regardless of funding levels) ure 2, nearly all of the respondents contributed funds 3
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Table 1 State agencies that responded to the survey. 1.Alabama DOT 24. Montana DOT 2.Alaska DOT 25. Nebraska Department of Roads 3.Arizona DOT 26. Nevada DOT 4.Arkansas DOT 27. New Hampshire DOT 5.Caltrans 28. New Jersey Transit 6.Colorado DOT 29. New Mexico DOT 7.Connecticut DOT 30. New York State DOT 8. District of Columbia DOT 31. North Carolina DOT 9.Florida DOT 32. North Dakota DOT 10. Georgia DOT 33. Ohio DOT 11. Hawaii DOT 34. Oklahoma DOT 12. Idaho Transportation Department 35. Oregon DOT 13. Illinois DOT 36. Pennsylvania DOT 14. Indiana DOT 37. South Dakota DOT 15. Kentucky Transportation Cabinet 38. Tennessee DOT 16. Louisiana Department of Transportation 39. Texas DOT and Development 40. Utah DOT 17. Maine DOT 41. Vermont Agency of Transportation 18. Maryland Transit Administration 42. Virginia Department of Rail and 19. Massachusetts DOT Public Transportation 20. Michigan DOT 43. Washington DOT 21. Minnesota DOT 44. West Virginia DOT 22. Mississippi DOT 45. Wisconsin DOT 23. Missouri DOT 46. Wyoming DOT Figure 1 FTA program funds administered by responding state DOTs. 4
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Figure 2 Percentages of respondents reporting state funding of public transit assistance programs. for operating and capital expenses for rural and (New York, California, Pennsylvania, Massachu- small urban areas. Many state DOTs also contrib- setts, and New Jersey) provided more than $1 bil- uted funds for the elderly and persons with dis- lion in state funding for public transportation.1 This abilities. Only 48 percent of respondents contrib- information was used to identify candidate state uted state funds to large urban areas (populations DOTs for more study based on the size of the state's greater than 200,000). public transportation program. As a gauge of the size of the program, respon- Respondents were asked if their states had an in- dents were asked how much state funding was used ternal audit function for the DOT, including public for public transit. Responses to this open-ended transportation programs. Some 89 percent of respon- question were grouped to show the ranges of fund- dents confirmed having an internal audit function for ing. Figure 3 shows that 6 of 40 respondents (15 per- the DOT (see Figure 4). State DOTs that responded cent) indicated their state DOTs provided none or "yes" to this question in the survey were asked a very little state funding, while 27 of 40 respondents follow-up question: "To whom (what position) does (nearly 70 percent) indicated that their agencies pro- this person report?" This question was asked to de- vided more than $1 million for public transportation termine if the audit function is performed within the programs in FY 2009. public transportation unit of the state DOT. The According to AASHTO's 2010 Survey of State majority of the respondents to this question stated Funding for Public Transportation, four states (Ala- bama, Hawaii, Nevada, and Utah) provided no state 1Survey of State Funding for Public Transportation: Final funding for public transportation in 2008; three Report, 2010. AASHTO, July 30, 2010. Available at: http:// states (Idaho, Montana, and South Dakota) provided ntl.bts.gov/lib/34000/34800/34820/Final_2010__FY_2008_ less than $1 million in state funding; and five states data__ssfp.pdf (accessed December 19, 2011). 5