Finding Text
Criteria:
Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for
reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to
lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative
leave of operations or contractor personnel due to reductions of service.
In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective
internal control over the federal award that provides reasonable assurance that the non-federal entity is
managing the federal award in compliance with federal statutes, regulations, and the terms and conditions
of the federal award.
Moreover, Title 2 CFR 200.403 (a) and (b) state that except where otherwise authorized by statute, costs
must meet the following general criteria in order to be allowable under Federal awards: (a) be necessary
and reasonable for the performance of the Federal award and be allocable thereto under 2 CFR part 200,
subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the
Federal award as to types or amount of cost items. Condition:
As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for
$8,510 relating to legislative consulting services which was not an allowable activity under the grant
agreement. As a result of further review of the general ledger account in which the above item was
recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987.
We did not identify any indirect costs that were associated with these unallowable costs.
Total questioned cost identified through the audit procedures performed was approximately $590,403.
Total expenditures for the Federal Transit Cluster were approximately $243,258,597.
Cause:
Historically, grants received by METRO have generally been specific to specified projects, which allowed
METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs
incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the
current year METRO received this grant which allows them to seek reimbursement for certain prior year
costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under
this grant and the ability to seek reimbursement for prior year costs, management identified costs which
were included in general ledger accounts not typically subject to detailed allowability assessments in
accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance
on the knowledge of grants department personnel to understand the nature of general ledger accounts and
transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of
expenditures submitted for reimbursement.
Effect:
Certain of the costs incurred and submitted for reimbursement by METRO were unallowable.
Auditor’s Recommendation:
METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of
grant costs. In particular, management should focus on the processes and controls associated with grants
for which predefined projects are not established in advance of incurring grant related expenditures.