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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
×
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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Suggested Citation:"Survey Results." National Academies of Sciences, Engineering, and Medicine. 2012. State DOT Financial Auditing Requirements for Public Transportation Assistance Programs. Washington, DC: The National Academies Press. doi: 10.17226/14653.
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3• identify best practices currently in use to enable state DOTs to enhance and streamline their current financial auditing requirements. The research team created a distribution list tar- geted toward individuals in the transit sections of 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- pendix A). When the survey needed to be redirected to a different office or person within the DOT, the research team communicated with those state DOTs via telephone and email and followed up accordingly. The research team designed and distributed a web-based survey with the goal of capturing all the necessary information to determine state DOTs’ financial auditing requirements in the least burden- some manner possible (Appendix B). The intent was to capture the unique practices of each state DOT while identifying common practices or those that could be replicated by other states looking to develop financial auditing requirements. Because most of the survey questions were open-ended, respondents had the opportunity to consider and describe their specific operations, which helped facilitate identification of state DOTs as candidates for further analysis of best practices. Responses to the survey revealed that most states require periodic reporting by their subrecipients of public transportation funds and that this reporting often includes financial and non-financial data. State DOTs indicated that they review these reports to measure the output associated with the funds pro- vided. The public transportation units of state DOTs usually do not have the expertise or internal staff resources to conduct financial audits of each sub- recipient of state public transportation assistance; consequently, the state DOTs’ internal audit units often are relied on to conduct the audits. All responding state DOTs indicated that they passed through the federal OMB Circular A-133 re- quirement that a single audit be conducted of any en- tity that expends $500,000 or more in federal funds in a given year. A single audit includes both the entity’s financial statements and the federal awards. Neither OMB nor FTA has a specific requirement for subrecipients that receive less than $500,000 per year in federal funds, however; in these cases, state DOTs follow their own procedures for assuring that FTA and state funds are accounted for properly. The survey revealed that most state DOTs re- quire all subrecipients (regardless of funding levels) to conduct financial audits to assure that the transit funding provided by the state has been appropri- ately used for the intended purpose(s). Several state DOTs indicated that they have statutes or adminis- trative policies that describe subrecipient financial auditing requirements. suRveY Results survey Respondents The survey was sent to all 50 state DOTs, plus the DOTs of Puerto Rico and the District of Colum- bia. Two state DOTs (Rhode Island and Delaware) did not respond because they have no subrecipients and the survey did not apply to their organizations. Of the 50 remaining DOTs, 46 responded (92 per- cent) as of March 31, 2011. Table 1 provides a list of the responding agencies. The respondents were asked about their public transportation assistance programs. Figure 1 shows that most respondents (nearly 98 percent) adminis- tered the following FTA formula grant programs: • Transportation for Elderly Persons and Per- sons with Disabilities (Section 5310) • Formula Grants for Other than Urbanized Areas (often called “Non-Urbanized Areas”; Section 5311) • Job Access and Reverse Commute Program (Section 5316) • New Freedom Program (Section 5317) A slightly lower number of respondents (91 per- cent) administered metropolitan and statewide plan- ning grants (Sections 5303, 5304, and 5305), and 85 percent of respondents administered discretion- ary transit capital funds (various programs under Section 5309). The range of responses was not sig- nificant, with one exception: Just over 30 percent of states reported administering an Urbanized Area Formula Program (Section 5307). Seven respondents contributed additional com- ments. These included that the state DOTs also ad- ministered federal United We Ride and Over the Road Bus funds. Three respondents added that they administered American Recovery and Reinvestments Act (ARRA) funds made available through the FTA. Respondents were asked to identify all types of public transit assistance programs for which their states provide funding. Forty of the 46 states (87 per- cent) responded to this question. As shown in Fig- ure 2, nearly all of the respondents contributed funds

4table 1 State agencies that responded to the survey. 1. Alabama DOT 2. Alaska DOT 3. Arizona DOT 4. Arkansas DOT 5. Caltrans 6. Colorado DOT 7. Connecticut DOT 8. District of Columbia DOT 9. Florida DOT 10. Georgia DOT 11. Hawaii DOT 12. Idaho Transportation Department 13. Illinois DOT 14. Indiana DOT 15. Kentucky Transportation Cabinet 16. Louisiana Department of Transportation and Development 17. Maine DOT 18. Maryland Transit Administration 19. Massachusetts DOT 20. Michigan DOT 21. Minnesota DOT 22. Mississippi DOT 23. Missouri DOT 24. Montana DOT 25. Nebraska Department of Roads 26. Nevada DOT 27. New Hampshire DOT 28. New Jersey Transit 29. New Mexico DOT 30. New York State DOT 31. North Carolina DOT 32. North Dakota DOT 33. Ohio DOT 34. Oklahoma DOT 35. Oregon DOT 36. Pennsylvania DOT 37. South Dakota DOT 38. Tennessee DOT 39. Texas DOT 40. Utah DOT 41. Vermont Agency of Transportation 42. Virginia Department of Rail and Public Transportation 43. Washington DOT 44. West Virginia DOT 45. Wisconsin DOT 46. Wyoming DOT Figure 1 FTA program funds administered by responding state DOTs.

5for operating and capital expenses for rural and small urban areas. Many state DOTs also contrib- uted funds for the elderly and persons with dis- abilities. Only 48 percent of respondents contrib- uted state funds to large urban areas (populations greater than 200,000). As a gauge of the size of the program, respon- dents were asked how much state funding was used for public transit. Responses to this open-ended question were grouped to show the ranges of fund- ing. Figure 3 shows that 6 of 40 respondents (15 per- cent) indicated their state DOTs provided none or very little state funding, while 27 of 40 respondents (nearly 70 percent) indicated that their agencies pro- vided more than $1 million for public transportation programs in FY 2009. According to AASHTO’s 2010 Survey of State Funding for Public Transportation, four states (Ala- bama, Hawaii, Nevada, and Utah) provided no state funding for public transportation in 2008; three states (Idaho, Montana, and South Dakota) provided less than $1 million in state funding; and five states (New York, California, Pennsylvania, Massachu- setts, and New Jersey) provided more than $1 bil- lion in state funding for public transportation.1 This information was used to identify candidate state DOTs for more study based on the size of the state’s public transportation program. Respondents were asked if their states had an in- ternal audit function for the DOT, including public transportation programs. Some 89 percent of respon- dents confirmed having an internal audit function for the DOT (see Figure 4). State DOTs that responded “yes” to this question in the survey were asked a follow-up question: “To whom (what position) does this person report?” This question was asked to de- termine if the audit function is performed within the public transportation unit of the state DOT. The majority of the respondents to this question stated Figure 2 Percentages of respondents reporting state funding of public transit assistance programs. 1 Survey of State Funding for Public Transportation: Final Report, 2010. AASHTO, July 30, 2010. Available at: http:// ntl.bts.gov/lib/34000/34800/34820/Final_2010__FY_2008_ data__ssfp.pdf (accessed December 19, 2011).

6that the internal auditor reported to a position outside of the transit section, such as to the DOT secretary or the chief financial officer. Financial Auditing Requirements of state Dots When asked if the state DOT required all sub- recipients to have an independent financial audit con- ducted annually, nearly 59 percent of respondents indicated “yes,” as shown in Figure 5. The majority of the respondents who answered “no” to this ques- tion stated that subrecipients whose federal funding fell below the OMB Circular A-133 threshold of $500,000 were not required to have an independent financial audit conducted annually. One state reported that it required non-profit subrecipients to complete a sworn statement of expenditures per state law. In that state, more than 95 percent of the subrecipients had submitted annual independent financial audits. Twenty-three state DOTs (50 percent of all re- spondents) indicated that their states had financial audit requirements for subrecipients other than the federal OMB Circular A-133 single audit require- ment. Of that group, 12 respondents identified admin- istrative procedures found in grant agreement terms and auditing or accounting policies as the basis for the non-federal audit requirements. Several state DOTs reported having state administrative codes or uniform accounting and auditing practices that required audits. Figure 3 State funding for transit (FY 2009). Figure 4 Percentage of responding state DOTs with and without an internal audit function. Figure 5 Percentage of respondents that require all subrecipients to have an annual independent financial audit.

7Figure 6 Respondents’ use of contractors to conduct subrecipients’ financial audits. Who Conducts and Pays for Financial Audits A majority of respondents indicated that they did not use contractors to conduct financial audits (Figure 6). However, some state DOTs reported di- rect hiring of contractors to conduct OMB Circular A-133 audits (17.8 percent) or other financial audits (13.3 percent). By far, most state DOTs allowed the subrecipi- ents to hire independent auditors to conduct their financial audits. Only two state DOTs reported in- volvement in selection or approval of the certified public accounting (CPA) firms used by subrecipi- ents, other than providing the general procurement oversight of subrecipient third-party contracts, such as when the amount of the contract exceeded a $25,000 threshold. Most of the state DOTs indicated that they paid for all or a portion of the cost of subrecipients’ fi- nancial audits (Figure 7). When asked to describe how the state funds the audits, 22 of 29 state DOTs (76 percent) indicated that a subrecipient’s financial audit was an eligible operating expense. Associated comments from respondents included the following statements: • An operating assistance subsidy may be used to offset costs. • Through a cost allocation plan, they would be reimbursed for a portion of the cost. • FTA funds pay for this and subrecipients can be eligible for reimbursement if a line item expense is submitted in their 5311 budget plan. • Subrecipients may request at least partial re- imbursement for cost but most do not. • A proportionate amount of the audit can be charged to FTA grants. • The state provides financial assistance as a percentage of annual operating expenses.

8Roles of state Dots in subrecipient Financial Audits When asked what other role(s) they assumed in subrecipient financial audits, transit staff from responding state DOTs described roles that could be grouped into the following three categories: 1. State DOTs that perform a limited review of subrecipient financial audits (45 percent) 2. State DOTs that rely on other departments within the agency to perform this function (10 percent) 3. State DOTs that conduct a detailed review and assessment of the financial audits of sub- recipients, or that conduct the financial audits of subrecipients (20 percent) Financial Audit Reporting submission Deadlines and Consequences Of the 37 state DOTs that responded to this question, 80 percent indicated that they require all subrecipients to submit the complete audit reports to the state. Twenty percent do not require submis- sion. Of those states that do not require all subrecip- ients to submit a completed audit report, the com- mon threshold is the federal (OMB Circular A-133) requirement. Submission deadlines are critical elements of audit procedures (see Figure 8). Some audit reports are submitted during the grant application process. Time frames vary for deadlines, but only two state DOTs reported not having specific deadlines or time frames. Information about deadlines supplied by re- spondents can be summarized as follows: • State DOTs that require submission within 9 months of the end of the subrecipient’s fis- cal year, consistent with OMB Circular A-133 requirements (34 percent); • State DOTs that have other deadlines, rang- ing from within 6 months from the end of the subrecipient’s fiscal year to a specific date, such as June 30th (30 percent); and • State DOTs that require submission within 30 days of the receipt of the audit report by the subrecipient (26 percent). Two-thirds of the respondents indicated that their states imposed consequences for late submission of financial audits (Figure 9). These consequences generally consisted of some type of delay, withhold- ing, or detaining of current funding or jeopardized future funding. Examples of consequences listed by respondents included the following: • A subrecipient may be placed in lower cate- gory to receive funding. • A subrecipient may be removed from the “good standing” list, with the result being withholding of future funding or removal from eligibility to receive future funds. • A subrecipient’s contract may be suspended. • Payments for the current project may be suspended. Figure 7 State DOTs reporting that they provide payment for subrecipients’ financial audits.

9Figure 8 Submission deadlines for annual (OMB Circular A-133 or other) financial audits. Figure 9 State DOTs reporting consequences for late submission of subrecipients’ financial audits.

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TRB’s National Cooperative Highway Research Program (NCHRP) Research Results Digest 368: State DOT Financial Auditing Requirements for Public Transportation Assistance Programs identifies various financial policies and procedures used by states for conducting grantee financial audits.

The report documents policies, procedures, and practices used by some state departments of transportation designed to enhance and streamline their current financial auditing requirements.

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