Washington Metropolitan Area Transit Authority

Finding 2025-002: Lack of Internal Controls Over Key Compliance Requirement Significant Deficiency Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2025 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance) requires compliance with provisions of procurement, suspension, and debarment. Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.985 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. 2 CFR § 200.303, also states non-Federal entities must establish and maintain effective internal control over federal awards to ensure compliance with applicable statutes, regulations, and the terms and conditions of the award. Condition: During the audit of the Transit Security Grants Program, we identified a deficiency in the design of internal controls related to the suspension and debarment compliance requirement, particularly concerning certain external government entities. Specifically, the Authority had not established documented procedures, oversight mechanisms, or review processes sufficient to ensure compliance on funded special agreements, including these Memorandums of Understanding, negotiated independent of the procurement process. This design gap limited the entity’s ability to potentially prevent or detect noncompliance effectively. Cause: The Authority had not sufficiently developed or implemented internal control procedures to verify suspension and debarment status for funded memorandums of understanding with external governments involved in the grant. These contracts were negotiated without the participation of the Office of Procurement and Materials of the Authority and therefore were not subject to the procurement process, which includes such controls. Effect or Potential Effect: The internal controls insufficiency creates a reasonable possibility that material noncompliance with the suspension and debarment requirement could occur and not be prevented or detected and corrected in a timely manner. As a result, this represents a significant deficiency in internal control over compliance. Although no federal funds were disbursed to an excluded party, the lack of timely verification represents noncompliance with federal requirements and increases the risk of future violations. Context: Of the three items tested, two lacked documented procedures, and sufficient oversight and review processes to potentially prevent or detect noncompliance. Additionally, one other government entity was identified that may fall under the same compliance gap. Question Costs: None Repeat Finding: Yes. This repeat finding designation results from the concurrent identification of the control deficiency in both fiscal years during the fiscal year 2025 Single Audit and the fiscal year 2024 Schedule of Expenditures of Federal Awards restatement procedures. This deficiency existed in both reporting periods, and the findings for fiscal year 2024 and fiscal year 2025 were evaluated and communicated to management in 2026. Recommendation: We recommend the Authority design and implement internal control procedures to ensure compliance with the suspension and debarment requirements for federal grants. This may include developing written policies, assigning responsibilities, and establishing monitoring and reviewing processes. View of Responsible Officials: Management agrees with the finding: The Authority acknowledges that controls established in the procurement process are not consistently followed for funded special agreements if they are negotiated without participation of the Procurement and Materials. While Procurement and Materials has controls in place to verify whether entities, including government entities, are suspended or debarred prior to awarding any contract, it does not perform these checks for funded special contracts for which they do not participate in the process. The condition identified pertains specifically to funded transactions executed by the Metro Transit Police Department through Memorandums of Understanding in accordance with the Compact and Policy Instructions (PI) 9.6 Delegation of Authority - Special Agreements, which did not go through the standard procurement process. The Authority will revise PI 9.6 to provide clarity on roles, responsibilities, and compliance steps. including a documented process requiring verification of suspension and debarment status through SAM.gov or other appropriate mechanism for all funded transactions under delegated authority. This requirement will be communicated to all departments and integrated into standard operating practices. Additionally, targeted training sessions will be provided to staff on the revised PI 9.6 and SAM.gov verification procedures to ensure consistent application across the Authority.

Finding 2025-003: Preparation of the Schedule of Expenditures of Federal Awards Material weakness/other matter noncompliance Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2025 Criteria: The Uniform Guidance (2 CFR 200.510b) requires that the auditee (typically a non-federal entity receiving federal funds) must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by its financial statements which must include the total Federal Awards expended as determined in accordance with 2 CFR 200.502. Condition: The SEFA for the year ended June 30, 2025, included $2,385,715 in expenditures that were incurred in the year ended June 30, 2024, overstating the total expenditures reported for the federal awards for ALN 97.075 Rail and Transit Security Grant Program. Cause: The existing internal control procedures for processing funding source reclassifications are not structured to fully support the SEFA reporting cutoff deadline. While a process is in place, it does not fully incorporate all necessary stakeholders early enough in the cycle to ensure timely communication, coordinated review, and approval of reclassifications leading to expenditures being included in the incorrect reporting cycle Effect: Not in compliance with the Uniform Guidance (2 CFR 200.510b). There could be impacts on future funding. Questioned costs: None. Context: As a result of the inclusion of fiscal year ended 2024 expenditures, total federal awards for ALN 97.075, Rail and Transit Security Grant Program, were overstated by $2,385,715. Repeat Finding: Yes. This repeat finding designation results from the identification of the $2,385,715 timing difference, which affected SEFA reporting for both fiscal year 2024 and fiscal year 2025. Findings for both fiscal years were evaluated and communicated to management in 2026. Recommendation: We recommend that the Authority review the schedule of expenditures of federal awards prior to issuance. Views of responsible officials and planned corrective actions: Management agrees with the finding and acknowledges that internal control procedures should be strengthened to ensure adherence to the SEFA reporting cutoff deadline. To address this issue, the Authority will implement a verification checklist as required supporting documentation for all funding source reclassification journal entries, ensuring that all relevant departments have reviewed and approved the entries prior to being posted. The Authority will also establish a cutoff date for Program Offices to submit current-year reclassification requests, allowing adequate time for eligibility review and fiscal year-end reporting. In addition, Accounting Policies and Procedures Manual will be updated to include guidelines limiting reclassifications of expenditures incurred in prior fiscal years. The Authority will communicate policy updates incorporate these changes to ensure consistent application across departments.

Finding 2024-001: Preparation of the Schedule of Expenditures of Federal Awards Material weakness/other matter noncompliance Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2024 Criteria: The Uniform Guidance (2 CFR 200.510b) requires that the auditee (typically a non-federal entity receiving federal funds) must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by its financial statements which must include the total Federal Awards expended as determined in accordance with 2 CFR 200.502. Condition: The SEFA for the year ended June 30, 2024 excluded $2,385,715 in expenditures incurred from the total expenditures reported for the federal awards for ALN 97.075 Rail and Transit Security Grant Program. Cause: The existing internal control procedures for processing funding source reclassifications are not structured to fully support the SEFA reporting cutoff deadline. While a process is in place, it does not fully incorporate all necessary stakeholders early enough in the cycle to ensure timely communication, coordinated review, and approval of reclassifications leading to eligible expenditures being omitted. Effect: Not in compliance with the Uniform Guidance (2 CFR 200.510b). There could be impacts on future funding. Context: As a result of the omission of eligible expenditures, total federal awards for ALN 97.075, Rail and Transit Security Grant Program, were understated by $2,385,715 due to the exclusion of expenditures. This understatement caused the major program determination to be improperly calculated and resulted in a missed major program. Question Costs: None Repeat Finding: No Recommendation: We recommend that the Organization review the schedule of expenditures of federal awards prior to issuance. Views of responsible officials and planned corrective actions: Management agrees with the finding and acknowledges that internal control procedures should be strengthened to ensure adherence to the SEFA reporting cutoff deadline. To address this issue, Management will implement a verification checklist as required supporting documentation for all funding source reclassification journal entries and vouchers, ensuring that all relevant departments have reviewed and approved the entries prior to being posted. The Authority will also establish a cutoff date for Program Offices to submit current year reclassification requests, allowing adequate time for eligibility review and fiscal yearend reporting. In addition, Accounting Policies and Procedures Manual will be updated to include guidelines limiting reclassifications of expenditures incurred in prior fiscal years. The Authority will communicate policy updates incorporate these changes to ensure consistent application across departments.

Finding 2024-002: Lack of Internal Controls Over Key Compliance Requirement Significant Deficiency Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2024 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance) requires compliance with provisions of procurement, suspension, and debarment. Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. When a nonfederal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.985 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. 2 CFR § 200.303, also states non-Federal entities must establish and maintain effective internal control over federal awards to ensure compliance with applicable statutes, regulations, and the terms and conditions of the award. Condition: During the audit of the Transit Security Grants Program, we identified a deficiency in the design of internal controls related to the suspension and debarment compliance requirement, particularly concerning certain external government entities. Specifically, the Authority had not established documented procedures, oversight mechanisms, or review processes sufficient to ensure compliance on funded special agreements, including these Memorandums of Understanding, negotiated independent of the procurement process. This design gap limited the entity’s ability to potentially prevent or detect noncompliance effectively. Cause: The Authority had not sufficiently developed or implemented internal control procedures to verify suspension and debarment status for funded memorandums of understanding with external governments involved in the grant. These contracts were negotiated without the participation of the Office of Procurement and Materials of the Authority and therefore were not subject to the procurement process, which includes such controls Effect or Potential Effect: The internal controls insufficiency creates a reasonable possibility that material noncompliance with the suspension and debarment requirement could occur and not be prevented or detected and corrected in a timely manner. As a result, this represents a significant deficiency in internal control over compliance. Although no federal funds were disbursed to an excluded party, the lack of timely verification represents noncompliance with federal requirements and increases the risk of future violations. Context: Of the five items tested during the FY24 restatement test work completed in 2026, two lacked documented procedures, and sufficient oversight and review processes to potentially prevent or detect noncompliance. Additionally, two other government entities were identified that may fall under the same compliance gap. Question Costs: None Repeat Finding: No Recommendation: We recommend the Authority design and implement internal control procedures to ensure compliance with the suspension and debarment requirements for federal grants. This may include developing written policies, assigning responsibilities, and establishing monitoring and reviewing processes. View of Responsible Officials: Management agrees with the finding: As this deficiency was identified concurrently with the FY25 audit cycle, management will implement corrective actions based on recommendations prospectively to prevent future occurrences starting from the FY26 reporting year. The Authority acknowledges that controls established in the procurement process are not consistently followed for funded special agreements if they are negotiated without participation of the Procurement and Materials. While Procurement and Materials has controls in place to verify whether entities, including government entities, are suspended or debarred prior to awarding any contract, it does not perform these checks for funded special contracts for which they do not participate in the process. The condition identified pertains specifically to funded transactions executed by the Metro Transit Police Department through Memorandums of Understanding in accordance with the Compact and Policy Instructions (PI) 9.6 Delegation of Authority - Special Agreements, which did not go through the standard procurement process. The Authority will revise PI 9.6 to provide clarity on roles, responsibilities, and compliance steps. including a documented process requiring verification of suspension and debarment status through SAM.gov or other appropriate mechanism for all funded transactions under delegated authority. This requirement will be communicated to all departments and integrated into standard operating practices. Additionally, targeted training sessions will be provided to staff on the revised PI 9.6 and SAM.gov verification procedures to ensure consistent application across the Authority.

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