STATE MAINTENANCE ASSISTANCE FOR URBAN AND SMALL URBAN PROGRAM. N. C. Department of Transportation Public Transportation Division (PTD)

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1 APRIL 2012 STATE MAINTENANCE ASSISTANCE FOR URBAN AND SMALL URBAN PROGRAM State Authorization: N.C.G.S. Article 2B of Chapter 136 Public Transportation Division (PTD) Agency Contact Person Program Wayne Rogers, Assistant Director Public Transportation Division 1550 Mail Service Center Raleigh, N.C (919) Address Confirmation Letters To Bertha Davis, CPA, Manager Single Audit Compliance Unit 1507 Mail Service Center Raleigh, N.C (919) Fax (919) The auditor should not consider the Supplement to be safe harbor for identifying audit procedures to apply in a particular engagement, but the auditor should be prepared to justify departures from the suggested procedures. The auditor can consider the supplement a safe harbor for identification of compliance requirements to be tested if the auditor performs reasonable procedures to ensure that the requirements in the Supplement are current. The grantor agency may elect to review audit working papers to determine that audit tests are adequate. The Single Audit Compliance Unit of the External Audit Branch reviews all single audits, financial audits, and management letters of all grantees. We are looking at both the presentation (information as to program, pass-through and state funding, NCDOT identification numbers) and the dollar amounts presented versus our records. Any reports not received will be requested. Grants must be properly identified by program name, (State Maintenance Assistance Program or SMAP), DOT number ( DOT-9 ) and WBS number on the Schedule of Expenditures of Federal and State Awards. (Specifically, financial assistance must be properly identified by program name and the WBS number noted on the warrant.) This Public Transportation program disburses funds on an annual basis and the WBS number and program name are in the comments section of the warrant. Grantor and/or pass-through grantor and program title should also be included. Please do not combine like projects into one-dollar amount since we would need to call you for the breakdown; please report award amount, Federal Pass-through, State share and local share. On NCDOT s confirmation from the Grant Master List (GML), these moneys are shown as DOT number DOT-9. C-4 DOT-9 1

2 I. PROGRAM OBJECTIVES The objective of the State Maintenance Assistance Program (SMAP) is to assist urban, regional and small urban areas in funding the nonfederal share of net operating costs associated with existing and new public transportation services operated by fixed route and demand-response urban, small urban and regional transit systems. II. PROGRAM PROCEDURES The program is administered by the State. Recipients are urban and small urban areas, as defined by the U.S. Census Bureau and regional transit systems that operate fixed route and demand-response transit systems. Funds are allocated annually based on a formula approved by the North Carolina Board of Transportation. Funds may be used for operating related items eligible for funding as part of the Federal Transit Administration s Section 5307 program: 1. Eligible uses of the funds are limited to a system s operating costs only. 2. Operating expenses means operating expenses as defined in Federal Fiscal Year 1997 for the Section 5307 program. 3. Preventive maintenance and ADA (American with Disabilities Act) complementary paratransit service costs, which are now defined for federal grants as capital eligible expenses, are still considered operating expenses for the SMAP funds. 4. The allocation cannot be used to match federal capital funds or as local match for other state funds. 5. SMAP funds cannot exceed the amount of local funds (excluding farebox and other operating revenues) 6. The allocation must be expended in the state fiscal year of allocation (period ending June 30). Requests for funds must describe how the annual allocation will be spent and the anticipated amount to be spent. A certified statement signed by the mayor of the urban or small urban area and a letter signed by the city manager indicating a proposal of how the funds are to be expended and; indicating if the previous year s allocation was spent by the deadline and the amount of any unspent funds must be submitted prior to the Department disbursing the allocated funds. For transit authorities, the authority chairman signs the certified statement and letter. A system SMAP eligibility calculations form and a FY 2011 Actual Revenues and Expenditures form, signed by the financial officer, are required to be submitted as well. C-4 DOT-9 2

3 III. COMPLIANCE REQUIREMENTS 1. ACTIVITIES ALLOWED OR UNALLOWED Compliance Requirement - Funds must be expended in a manner consistent with the use of federal transit operating funds as specified in Federal Transit Administration (FTA) Circular D, Section 5307 Formula Grant Application, and D, Project Management Guidelines for Grantees ( 1. Services/expenditures must conform to Federal Transit Administration (FTA) Circulars D and D. 2. Planning and capital costs are not eligible. However, preventive maintenance and complementary paratransit service costs as defined by FTA Section 5307 are considered as operating costs for the SMAP program. 3. A broad range of services is eligible. Systems are encouraged to be innovative and to develop partnerships with businesses, agencies and other potential service supporters and funding providers. Audit Objective - Determine that the State s project guidelines/requirements, including the FTA definition of operating expenditures, were followed and that the project costs associated with these transactions and activities are allowable. 1. Test expenditures and related records for compliance with the program requirements. 2. Compare the total reported project cost with the financial needs to determine the allowability and acceptability of the claimed expenses with the appropriate transaction or activity. 3. Determine total amounts of eligible project costs for existing and new service. Determine that these shares are in accordance with that stipulated in the program guidance. 4. Determine whether maintenance assistance funds were correctly associated with the appropriate transaction or activity and percentage. 2. ALLOWABLE COSTS/COSTS PRINCIPLES Compliance Requirement - Eligible uses of the funds are limited to a system s operating expenses only as defined in Federal Fiscal Year 1997 for the Section 5307 program. The costs must be reasonable, necessary and conform to any limitation or exclusion set forth by laws, agreements or circulars. Preventive maintenance and ADA (American with Disabilities Act) complementary paratransit service costs, which are now defined for federal grants as capital eligible expenses, are still considered operating expenses for the SMAP funds. Supporting documentation must be adequate and accurate. C-4 DOT-9 3

4 Audit Objective Determine that the allowable costs are accurately and adequately documented. - Test transactions for accuracy, allowability and adequate documentation. 3. CASH MANAGEMENT Compliance Requirement- The allocation is disbursed in one payment made the third quarter of the state fiscal year.. However, the allocation will not be released to the grantee until actual operating cost and revenue figures for the previous year are received by PTD in the FY 2012 Actual Revenues and Expenditures form. The payment is calculated using the North Carolina Board of Transportation approved formula with data from the second year preceding the allocation year after receipt by NCDOT of the required documentation. The required documentation is a letter from the City Manager, a certified statement and a signed system SMAP eligibility calculation form. The letter from the City Manager (Chairman for transit authorities) should: a. Note that the FY2011 allocation will be spent by June 30, 2012, and per the program guidelines. b. Note that either all of the FY2011 allocation was spent by the June 30, 2011 deadline or else note the amount that was not spent by the deadline. The certified statement is a fully executed and certified State Maintenance Assistance for Urban, Small Urban and Regional Transit Systems Certified Statement. The certified statement must be signed by the Mayor (Chairman for transit authorities). Forms are available from NCDOT-PTD. Audit Objective - Determine that the information contained in the City Manager s letter, certified State Maintenance Assistance for Urban, Small Urban and Regional Transit Systems Certified Statement and the system SMAP eligibility calculation form is accurately and adequately documented. Test the transactions supporting the letter and statement for accuracy, adequacy and timeliness. Verify that the letter from the City Manager requesting FY2012 funds states that either all FY2011 funds were spent or not spent by the deadline of June 30, MATCHING, LEVEL OF EFFORT, EARMARKING Compliance Requirement - An amount at least equal to the level of local government assistance provided in state FY must be expended on eligible operating costs to receive the full amount of the state maintenance assistance program allocation. The nonfederal share of the operating costs must include all or a portion of the annual allocation. The amount of SMAP funds used by the transit system cannot exceed the amount of local assistance. Eligible uses of the funds are limited to a Systems Operating costs only. C-4 DOT-9 4

5 Audit Objective - Determine whether the appropriate amount and percentage of contributions was provided. 1. Review financial records and determine the sources, amounts and acceptability of the nonfederal share, federal share, state share and local share. 2. Review financial records and determine the amount that can be claimed as the State share or State s matching share. Level of Effort No testing is required at the local level. 8. PERIOD OF AVAILABILITY OF STATE FUNDS Compliance Requirement - Funds are to be applied to program expenditures for the fiscal year of the allocation. Any portion of the allocation that is not expended by the deadline will be deducted from the next year's allocation. Audit Objective - Determine if funds were expended in the correct fiscal year. 1. Ascertain that the funds were used in the correct fiscal year. 2. Verify that, if all of the previous year s allocation was not spent, an amount equal to the unspent allocation amount was deducted from the disbursement of the amount of FY2011 allocation that the system would have been eligible to receive. 12. REPORTING Compliance Requirement The Annual Operating Statistics Report must be submitted for systems receiving federal or state administrative, operating or capital funds. Audit Objective Determine that reports were submitted both accurately and timely (deadline determined annually NCDOT and communicated via to transit system directors/managers) and are adequately supported. - Trace operating statistics reflected in the Annual Report to underlying accounting and trip data records. C-4 DOT-9 5