Dallas Area Rapid TransitLocal Government

Reference Number: 2021-001 Federal Agency: U.S. Department of Transportation Assistance Listing Number: 20.325 Program Name: Consolidated Rail Infrastructure and Safety Improvement Program Federal Award Number: 69A36520401300CRSTX Category of Finding: Subrecipient Monitoring Classification of Finding: Material Weakness in Internal Controls and Material Noncompliance with Grant Requirements Criteria In accordance with Title 2 U.S. Code of Federal Regulations (CFR) 200.331, all pass-through entities must: ? 200.331(a) ? Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the passthrough entity must provide the best information available to describe the Federal award and subaward. ? 200.331(b) ? Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. ? 200.331(f) ? Verify that every subrecipient is audited as required by Subpart F?Audit Requirements of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in ? 200.501 Audit requirements. In addition to the requirements above, the grant agreement contains Flow Down Provisions requiring in each of the Grantee?s subawards or contracts: ? The Grantee must include applicable federal statutory and regulatory requirements in the subaward or contract and ensure compliance with these requirements, including applicable limitations on use of federal funds. ? The Grantee must include any other applicable requirements of this Agreement in the subaward or contract and ensure compliance with these requirements. Condition DART partnered with another transportation authority in the application of the CRISI grant to fund a joint venture project. DART was ultimately the recipient of the award from the federal agency. Management utilized the existing Interlocal Agreement with the transportation authority to govern the management and execution of the award, however the Interlocal Agreement did not include the federal award provisions described in 2 CFR 200.331(a) or grant-specific information required for subawards to subrecipients. Management could not provide evidence that the financial statements and single audits of the transportation authority were reviewed. Cause Due to the nature of the grant application, grant award, and relationship with the entity, management did not identify the transportation authority as a subrecipient. DART performed certain monitoring procedures over the subrecipient, however the procedures did not fully meet the requirements of 2 CFR 200.331. Effect The subrecipient of the federal award was not provided the federal award information and flow down provisions required to comply with the grant agreement and federal award requirements. Monitoring activities, as defined in 2 CFR 200.331(b) and 2 CFR 200.331(f), were not performed, increasing the risk that non-compliance could occur at the subrecipient level. Questioned Costs None reported. Context $3,908,323 of the $4,084,952 in expenditures incurred in fiscal year 2021 under this federal program were payments to a subrecipient. Recommendation We recommend that DART modify and/or strengthen its policies and procedures to ensure that subrecipients are properly identified under each federal program and all required award information is clearly communicated to subrecipients at the time of subaward. Subrecipients should be monitored in accordance with management?s policy, including documented review of their single audit reports. Management?s Response Views of Responsible Officials Concur. The grant in question is related to a capital project for the implementation of positive train control (PTC) project for the commuter rail service between downtown Dallas and downtown Fort Worth. DART and Trinity Metro jointly provide this service using an adopted name of Trinity Railway Express (?TRE?). DART and Trinity Metro have also executed an interlocal agreement (ILA) to manage the TRE commuter rail service and related capital projects. Since the PTC project and related grant involved multiple entities, DART was designated as an awardee. Given the unique nature of the TRE service and the PTC project, DART relied on the existing ILA to manage the working relationship between DART and Trinity Metro for the PTC project. Corrective Action Plan DART has informed Trinity Metro (TM) that TM is considered a subrecipient for the purpose of this grant and provided a Subrecipient Monitoring Guide. Starting from the first quarter of the fiscal year 2022, all subrecipient monitoring and reporting procedures will be followed. Also, the federal grants provision will be added to the Interlocal Agreement between Trinity Metro and Dallas Area Rapid Transit. The amendment of the ILA will include recipient and subrecipient terms and conditions as a result of receipt of federal grant funding. DART will initiate the amendment and forward to Trinity Metro within the next 45 days.

Reference Number: 2021-002 Federal Agency: U.S. Department of Transportation Assistance Listing Number: 20.325 Program Name: Consolidated Rail Infrastructure and Safety Improvement Program Federal Award Number: 69A36520401300CRSTX Category of Finding: Reporting Classification of Finding: Material Weakness in Internal Controls and Material Noncompliance with Grant Requirements Criteria According to the grant agreement, the Grantee will comply with the provisions of the Federal Funding Transparency and Accountability Act of 2006 (Pub. L. 109-282) and 2 C.F.R Part 170. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the ?Transparency Act? that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Under 2 CFR 200.303(a), the non-federal entity must 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. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The subaward information was not reported in FSRS in accordance with the Transparency Act. The two quarterly Federal Financial Reports (FFRs) and two quarterly progress reports selected for testing did not have documented evidence of supervisory review prior to submission to the federal awarding agency. Effective internal controls over preparation of financial and progress reports could not be corroborated or did not occur. Cause Due to the nature of the grant application, grant award, and relationship with the subrecipient entity, management did not identify the entity as a subrecipient, and therefore did not report the required subaward information under the Transparency Act. Management indicated that review of the FFRs was performed by the Grant Manager through Microsoft Teams. Evidence of the review was not maintained and therefore could not be provided. The progress reports were prepared using information provided by both DART and the subrecipient. However, the information was collected and submitted to the federal agency without independent review. Effect DART did not comply with the provisions of the Transparency Act with respect to reporting of subawards equal to or greater than $30,000. This decreases transparency of federal expenditures with respect to the program. Questioned Costs None noted. Context Approximately 95% of the expenditures incurred in fiscal year 2021 under this federal program were related to payments under a subaward. We sampled two out of four quarterly FFRs and two out of four quarterly progress reports. Evidence of review could not be provided for the reports selected. The sample was not a statistically valid sample. Recommendation We recommend that DART modify and/or strengthen its policies and procedures to ensure that subrecipients are properly identified under each federal program. DART?s policies should include the requirements of the Transparency Act to ensure the required information is reported accurately and timely to the FSRS. We also recommend that procedures for reporting financial and performance information to federal awarding agencies require preparation and review by independent individuals and that evidence of the review is documented and maintained. Management?s Response Views of Responsible Officials Concur. Corrective Action Plan DART will implement procedures to ensure that financial and performance reports to federal awarding agencies are accurate and timely. The procedures will also ensure that such reports are reviewed by a supervisor prior to submission and proof of review is documented and maintained in compliance with the requirements of the Transparency Act.

Reference Number: 2021-003 Federal Agency: U.S. Department of Transportation Assistance Listing Number: 20.325 Program Name: Consolidated Rail Infrastructure and Safety Improvement Program Federal Award Number: 69A36520401300CRSTX Category of Finding: Cash Management Classification of Finding: Significant Deficiency in Internal Controls Criteria Under Uniform Guidance and the grant agreement, reimbursement may be requested for actual expenses incurred and paid. Condition One (1) of two (2) reimbursement requests selected for testing was initiated and reimbursed to DART prior to the invoice being paid by DART. The reimbursement, which related to a payment to a subrecipient, was received by DART on September 28, 2021. The payment was made to the subrecipient on December 15, 2021. Cause Management misinterpreted the cash management requirement and requested reimbursement from the federal agency because the subrecipient provided evidence of payment of the vendor invoice. However, at the time of the reimbursement request, the subrecipient had not been paid by DART. Effect Federal funds were received in advance, which is not allowable under the grant agreement terms. Questioned Costs None noted. Context A nonstatistical sample of 2 out of 6 reimbursement requests were selected for testing. The dollar amount of the reimbursement that was received in advance represents 6% of the expenditures incurred under this federal program in fiscal year 2021. The sample was not a statistically valid sample. Recommendation We recommend that management modify or improve its policies over cash management to ensure that all expenditures under federal awards have been incurred and paid by DART prior to the request for reimbursement. Management?s Response Views of Responsible Officials Concur. Corrective Action Plan DART is working on changing the process to ensure compliance so that the subrecipient is reimbursed promptly. This will include changing the process to incorporate ACH transfer of funds.

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