Recurring Findings

Transportation: Recurring Significant Internal Control Deficiencies
Federal Program Issue First Year Reported
Department's Assertion Page Number
Formula Grants for Other than Urbanized Areas (Nonurbanized Area Formula Program) During our audit for fiscal year 2012-13, we reported that Caltrans does not have a process in place to ensure subrecipients who expend more than $500,000 in federal awards submit single audit reports as required by OMB Circular A-133 for the Formula Grants program. In fiscal year 2013-14, Caltrans passed Formula Grants funding to 90 subrecipients, including 24 cities, 15 counties, one town, and 50 special districts, and had not yet implemented its corrective action plan from the fiscal year 2012-13 audit. For the Transit Services Cluster, Caltrans passed funding to 61 subrecipients, including nine cities, two counties, and 50 special districts. The State Controller’s Office (SCO) obtains and reviews OMB Circular A-133 reports for all cities, counties, and towns that report more than $500,000 in federal expenditures. The SCO then sends those reports with findings to Caltrans for follow-up. Caltrans only monitors the submission of the OMB Circular A-133 reports obtained from the SCO as well as special districts who expend more than $500,000 in federal awards from Caltrans. For the Formula Grants program, we identified eight 2013 special district OMB Circular A-133 reports that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $15.2 million through to subrecipients that expended less than $500,000 in Formula Grants funds. For the Transit Services Cluster, we identified 26 special district OMB Circular A-133 reports for 2013 that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $4.1 million through to subrecipients that expended less than $500,000 in Transit Services Cluster funds. Since Caltrans did not review these reports, it cannot determine if the Formula Grants program or Transit Services Cluster were audited and whether or not findings were issued that required a management decision from Caltrans. Failure to obtain and review single audit reports of all subrecipients increases the risk that subrecipients may have spent monies for unallowable purposes or failed to comply with other federal regulations. 2012-13
All special districts for which Caltrans knew federal funds were passed through in fiscal year 2012-13 were followed up with and either a single audit report or an exemption was received. Some of this follow-up occurred after KPMG’s cut-off of June 30, 2014, but we are not aware of any deadline by which to follow up with subrecipient entities. There were some special districts included in KPMG’s testing, however, that Caltrans was not aware had received federal pass-through funds. Caltrans will follow up with these entities to ensure they have either submitted a single audit report or are exempt. Caltrans administering programs will work with the Division of Accounting to ensure we have a complete list of subrecipients moving forward. Subsequent to the audit period reviewed by KPMG, Caltrans administering programs met on procedures to ensure they follow up with all entities to which they pass through federal funds, regardless of Caltrans’ expenditures, to ensure the entities either receive a single audit report or certification the entity is exempt. Caltrans shared the procedures with KPMG and received their input. 53
Formula Grants for Other than Urbanized Areas (Nonurbanized Area Formula Program) During our fiscal year 2012-13 audit, we reported that Caltrans did not have adequate controls in place to evidence its review of SF-425 reports and could not provide support for certain key line items within the SF-425 for the Formula Grants for Rural Areas program. In fiscal year 2013-14, Caltrans did not provide evidence of review of the SF-425 for both the Formula Grants for Rural Areas Program and the Transit Services Cluster. In addition, for three of four reports tested for the Formula Grants for Rural Areas Program and all four reports tested for the Transit Services Cluster, support for the Recipient Share of Expenditures, Federal Share of Unliquidated Obligations, and Recipient Share of Unliquidated Obligations line items could not be provided. Failure to retain supporting documentation for amounts reported and lack of adequate review controls increases the risk of errors in information reported to the federal government. 2012-13
Caltrans implemented procedures to retain supporting documentation and evidence of supervisory approvals in response to the previous year’s audit report. However, the issues identified in the current year audit occurred prior to implementation in February 2014 of the improved procedures. Caltrans will continue current procedures to retain supporting documentation and evidence of supervisory approvals. 52
High-Speed Rail Corridors and Intercity Passenger Rail Service - Capital Assistance Grants (High Speed Rail) During our audit for fiscal year 2012-13, we reported that Caltrans did not have adequate controls in place over FFRs (SF-425) submitted for the High Speed Rail program. In fiscal year 2013-14, Caltrans did not accurately report the federal share of expenditure for five of the nine SF-425 reports tested, resulting in a net understatement of $358,747 of federal expenditures. In addition, for all nine reports, Caltrans reported errors in various other line items. Failure to maintain and reconcile reports to supporting documents increases the risk of errors in information reported to the federal government. 2012-13
In March 2014, Caltrans Division of Rail and Mass Transportation (DRMT) received new guidance from the Federal Railroad Administration (FRA) on the way to correctly complete the SF 425 report. The new guidance was distributed to staff and was implemented on subsequent reports beginning with the April 2014 - June 2014 reporting period. Additionally, DRMT will work with the Division of Accounting to ensure that the proper expenditure reports are used to calculate amounts for the SF-425. A reminder memorandum will be sent to staff with the FRA guidance and the requirement that SF-425s be reviewed and signed by first-line supervisors or managers. Contract managers will be reminded to retain supporting documentation and evidence of review in the project file. 48
Highway Planning and Construction During our audit for fiscal year 2012-13, we reported that Caltrans did not have adequate controls in place to ensure required materials certifications were prepared. The materials certifications are required by federal regulation and provide evidence that proper tests were performed in accordance with the approved Caltrans quality assurance program. In July 2009, Caltrans implemented procedures to obtain materials certifications for projects accepted after this date. We tested 53 projects both prior and subsequent to July 2009 since the regulation has been in place prior to 2009. We found that Caltrans was unable to locate materials certifications for nine projects accepted prior to July 2009 and one project accepted after July 2009. Failure to maintain support for materials certification testing increases the risk that materials do not conform to approved plans and specifications. 2012-13
Caltrans recognizes the importance of preparation and maintenance of required project documentation. Prior to July 2009, the Caltrans Construction Manual instructed resident engineers to prepare a memorandum for project materials acceptance. Form CEM-6302 was created in July 2009 for documentation of project materials acceptance. Caltrans has procedures in place that detail the records to be assembled with a checklist requiring sign-off as to the completeness of the project history file. For this audit, the materials memorandum or certification was not located for 10 projects. Of the 10 projects without a materials memorandum or certificate, all but one project was accepted prior to July 2009. As a result, the Division of Construction is aware that this may continue to be a challenge on projects accepted prior to July 2009. On October 24, 2013, a construction policy directive was issued to remind staff of the importance of project documentation at project completion. Construction is editing the Construction Manual to clarify the list of documents to be maintained in the project history file required for permanent records retention. Staff are informed of changes to the Construction Manual through a construction policy bulletin. Caltrans will continue to inform staff when changes to record retention policies occur through updates to the Construction Manual. 40
Transit Services Cluster During our audit for fiscal year 2012-13, we reported that Caltrans does not have a process in place to ensure subrecipients who expend more than $500,000 in federal awards submit single audit reports as required by OMB Circular A-133 for the Formula Grants program. In fiscal year 2013-14, Caltrans passed Formula Grants funding to 90 subrecipients, including 24 cities, 15 counties, one town, and 50 special districts, and had not yet implemented its corrective action plan from the fiscal year 2012-13 audit. For the Transit Services Cluster, Caltrans passed funding to 61 subrecipients, including nine cities, two counties, and 50 special districts. The State Controller’s Office (SCO) obtains and reviews OMB Circular A-133 reports for all cities, counties, and towns that report more than $500,000 in federal expenditures. The SCO then sends those reports with findings to Caltrans for follow-up. Caltrans only monitors the submission of the OMB Circular A-133 reports obtained from the SCO as well as special districts who expend more than $500,000 in federal awards from Caltrans. For the Formula Grants program, we identified eight 2013 special district OMB Circular A-133 reports that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $15.2 million through to subrecipients that expended less than $500,000 in Formula Grants funds. For the Transit Services Cluster, we identified 26 special district OMB Circular A-133 reports for 2013 that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $4.1 million through to subrecipients that expended less than $500,000 in Transit Services Cluster funds. Since Caltrans did not review these reports, it cannot determine if the Formula Grants program or Transit Services Cluster were audited and whether or not findings were issued that required a management decision from Caltrans. Failure to obtain and review single audit reports of all subrecipients increases the risk that subrecipients may have spent monies for unallowable purposes or failed to comply with other federal regulations. 2012-13
All special districts for which Caltrans knew federal funds were passed through in fiscal year 2012-13 were followed up with and either a single audit report or an exemption was received. Some of this follow-up occurred after KPMG’s cut-off of June 30, 2014, but we are not aware of any deadline by which to follow up with subrecipient entities. There were some special districts included in KPMG’s testing, however, that Caltrans was not aware had received federal pass-through funds. Caltrans will follow up with these entities to ensure they have either submitted a single audit report or are exempt. Caltrans administering programs will work with the Division of Accounting to ensure we have a complete list of subrecipients moving forward. Subsequent to the audit period reviewed by KPMG, Caltrans administering programs met on procedures to ensure they follow up with all entities to which they pass through federal funds, regardless of Caltrans’ expenditures, to ensure the entities either receive a single audit report or certification the entity is exempt. Caltrans shared the procedures with KPMG and received their input. 53
Transit Services Cluster During our audit for fiscal year 2012-13, we reported that Caltrans does not have a process in place to ensure subrecipients who expend more than $500,000 in federal awards submit single audit reports as required by OMB Circular A-133 for the Formula Grants program. In fiscal year 2013-14, Caltrans passed Formula Grants funding to 90 subrecipients, including 24 cities, 15 counties, one town, and 50 special districts, and had not yet implemented its corrective action plan from the fiscal year 2012-13 audit. For the Transit Services Cluster, Caltrans passed funding to 61 subrecipients, including nine cities, two counties, and 50 special districts. The State Controller’s Office (SCO) obtains and reviews OMB Circular A-133 reports for all cities, counties, and towns that report more than $500,000 in federal expenditures. The SCO then sends those reports with findings to Caltrans for follow-up. Caltrans only monitors the submission of the OMB Circular A-133 reports obtained from the SCO as well as special districts who expend more than $500,000 in federal awards from Caltrans. For the Formula Grants program, we identified eight 2013 special district OMB Circular A-133 reports that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $15.2 million through to subrecipients that expended less than $500,000 in Formula Grants funds. For the Transit Services Cluster, we identified 26 special district OMB Circular A-133 reports for 2013 that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $4.1 million through to subrecipients that expended less than $500,000 in Transit Services Cluster funds. Since Caltrans did not review these reports, it cannot determine if the Formula Grants program or Transit Services Cluster were audited and whether or not findings were issued that required a management decision from Caltrans. Failure to obtain and review single audit reports of all subrecipients increases the risk that subrecipients may have spent monies for unallowable purposes or failed to comply with other federal regulations. 2012-13
All special districts for which Caltrans knew federal funds were passed through in fiscal year 2012-13 were followed up with and either a single audit report or an exemption was received. Some of this follow-up occurred after KPMG’s cut-off of June 30, 2014, but we are not aware of any deadline by which to follow up with subrecipient entities. There were some special districts included in KPMG’s testing, however, that Caltrans was not aware had received federal pass-through funds. Caltrans will follow up with these entities to ensure they have either submitted a single audit report or are exempt. Caltrans administering programs will work with the Division of Accounting to ensure we have a complete list of subrecipients moving forward. Subsequent to the audit period reviewed by KPMG, Caltrans administering programs met on procedures to ensure they follow up with all entities to which they pass through federal funds, regardless of Caltrans’ expenditures, to ensure the entities either receive a single audit report or certification the entity is exempt. Caltrans shared the procedures with KPMG and received their input. 53
Transit Services Cluster During our audit for fiscal year 2012-13, we reported that Caltrans does not have a process in place to ensure subrecipients who expend more than $500,000 in federal awards submit single audit reports as required by OMB Circular A-133 for the Formula Grants program. In fiscal year 2013-14, Caltrans passed Formula Grants funding to 90 subrecipients, including 24 cities, 15 counties, one town, and 50 special districts, and had not yet implemented its corrective action plan from the fiscal year 2012-13 audit. For the Transit Services Cluster, Caltrans passed funding to 61 subrecipients, including nine cities, two counties, and 50 special districts. The State Controller’s Office (SCO) obtains and reviews OMB Circular A-133 reports for all cities, counties, and towns that report more than $500,000 in federal expenditures. The SCO then sends those reports with findings to Caltrans for follow-up. Caltrans only monitors the submission of the OMB Circular A-133 reports obtained from the SCO as well as special districts who expend more than $500,000 in federal awards from Caltrans. For the Formula Grants program, we identified eight 2013 special district OMB Circular A-133 reports that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $15.2 million through to subrecipients that expended less than $500,000 in Formula Grants funds. For the Transit Services Cluster, we identified 26 special district OMB Circular A-133 reports for 2013 that were not reviewed by Caltrans because they expended less than $500,000 in federal awards received from Caltrans. In fiscal year 2013-14, Caltrans passed $4.1 million through to subrecipients that expended less than $500,000 in Transit Services Cluster funds. Since Caltrans did not review these reports, it cannot determine if the Formula Grants program or Transit Services Cluster were audited and whether or not findings were issued that required a management decision from Caltrans. Failure to obtain and review single audit reports of all subrecipients increases the risk that subrecipients may have spent monies for unallowable purposes or failed to comply with other federal regulations. 2012-13
All special districts for which Caltrans knew federal funds were passed through in fiscal year 2012-13 were followed up with and either a single audit report or an exemption was received. Some of this follow-up occurred after KPMG’s cut-off of June 30, 2014, but we are not aware of any deadline by which to follow up with subrecipient entities. There were some special districts included in KPMG’s testing, however, that Caltrans was not aware had received federal pass-through funds. Caltrans will follow up with these entities to ensure they have either submitted a single audit report or are exempt. Caltrans administering programs will work with the Division of Accounting to ensure we have a complete list of subrecipients moving forward. Subsequent to the audit period reviewed by KPMG, Caltrans administering programs met on procedures to ensure they follow up with all entities to which they pass through federal funds, regardless of Caltrans’ expenditures, to ensure the entities either receive a single audit report or certification the entity is exempt. Caltrans shared the procedures with KPMG and received their input. 53
Transit Services Cluster During our fiscal year 2012-13 audit, we reported that Caltrans did not have adequate controls in place to evidence its review of SF-425 reports and could not provide support for certain key line items within the SF-425 for the Formula Grants for Rural Areas program. In fiscal year 2013-14, Caltrans did not provide evidence of review of the SF-425 for both the Formula Grants for Rural Areas Program and the Transit Services Cluster. In addition, for three of four reports tested for the Formula Grants for Rural Areas Program and all four reports tested for the Transit Services Cluster, support for the Recipient Share of Expenditures, Federal Share of Unliquidated Obligations, and Recipient Share of Unliquidated Obligations line items could not be provided. Failure to retain supporting documentation for amounts reported and lack of adequate review controls increases the risk of errors in information reported to the federal government. 2012-13
Caltrans implemented procedures to retain supporting documentation and evidence of supervisory approvals in response to the previous year’s audit report. However, the issues identified in the current year audit occurred prior to implementation in February 2014 of the improved procedures. Caltrans will continue current procedures to retain supporting documentation and evidence of supervisory approvals. 52
Transit Services Cluster During our fiscal year 2012-13 audit, we reported that Caltrans did not have adequate controls in place to evidence its review of SF-425 reports and could not provide support for certain key line items within the SF-425 for the Formula Grants for Rural Areas program. In fiscal year 2013-14, Caltrans did not provide evidence of review of the SF-425 for both the Formula Grants for Rural Areas Program and the Transit Services Cluster. In addition, for three of four reports tested for the Formula Grants for Rural Areas Program and all four reports tested for the Transit Services Cluster, support for the Recipient Share of Expenditures, Federal Share of Unliquidated Obligations, and Recipient Share of Unliquidated Obligations line items could not be provided. Failure to retain supporting documentation for amounts reported and lack of adequate review controls increases the risk of errors in information reported to the federal government. 2012-13
Caltrans implemented procedures to retain supporting documentation and evidence of supervisory approvals in response to the previous year’s audit report. However, the issues identified in the current year audit occurred prior to implementation in February 2014 of the improved procedures. Caltrans will continue current procedures to retain supporting documentation and evidence of supervisory approvals. 52
Transit Services Cluster During our fiscal year 2012-13 audit, we reported that Caltrans did not have adequate controls in place to evidence its review of SF-425 reports and could not provide support for certain key line items within the SF-425 for the Formula Grants for Rural Areas program. In fiscal year 2013-14, Caltrans did not provide evidence of review of the SF-425 for both the Formula Grants for Rural Areas Program and the Transit Services Cluster. In addition, for three of four reports tested for the Formula Grants for Rural Areas Program and all four reports tested for the Transit Services Cluster, support for the Recipient Share of Expenditures, Federal Share of Unliquidated Obligations, and Recipient Share of Unliquidated Obligations line items could not be provided. Failure to retain supporting documentation for amounts reported and lack of adequate review controls increases the risk of errors in information reported to the federal government. 2012-13
Caltrans implemented procedures to retain supporting documentation and evidence of supervisory approvals in response to the previous year’s audit report. However, the issues identified in the current year audit occurred prior to implementation in February 2014 of the improved procedures. Caltrans will continue current procedures to retain supporting documentation and evidence of supervisory approvals. 52
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