Office of Inspector General

Audit Report

IMPROVEMENTS NEEDED IN FTA’S GRANT 

OVERSIGHT PROGRAM

Federal Transit Administration

Report Number: MH-2012-168

Date Issued: August 2, 2012
U.S. Department of

Memorandum

Transportation

Office of the Secretary

of Transportation

Office of Inspector General

Subject: ACTION: Improvements Needed In FTA’s Grant

Oversight Program 

Federal Transit Administration

Report No. MH-2012-168

Date: August 2, 2012

From: Joseph W. Comé

Assistant Inspector General for

Highway and Transit Audits

Reply to 

Attn. of: JA-40

To: Federal Transit Administrator

The Federal Transit Administration (FTA) provides funding to more than 1,200 

State and local grantees to enhance the effectiveness and efficiency of the Nation’s 

transit systems. From fiscal year 2006 through fiscal year 2010, FTA awarded 

over $57 billion in grants. To establish proper stewardship over these Federal 

investments, FTA has an Oversight Program covering 15 review areas, focusing

on grantee compliance in specific areas, including civil rights, as well as broader 

areas, such as management of Federal funds. FTA’s regional offices, as well as its 

contractors play an important oversight role in ensuring that grantees spend funds 

effectively; comply with Federal laws and regulations; and prevent fraud, waste, 

and abuse. 

At FTA’s request, we examined its regional oversight efforts, focusing on FTA’s 

Region III, based in Philadelphia, Pennsylvania. Our objectives were to assess

whether: (1) FTA Headquarters provides its regions and contractors with adequate 

guidance and oversight for key reviews and audits1 to accurately identify and track 

grantee deficiencies, (2) Region III effectively follows up on grantee deficiencies,

and (3) FTA has clear criteria to assess Region III’s use of remedies or sanctions 

to address deficiencies.2

To conduct our work, we reviewed guidance and oversight tools FTA 

Headquarters applied across all regions and documentation related to the fiscal 

 1 Key reviews were Triennial Reviews, State Management Reviews, Financial Management Oversight reviews, 

Procurement System Reviews, and Office of Management and Budget Circular A-133 single audits. 2 49 U.S.C. requires grantees to meet certain conditions to be eligible to receive Federal funds and prescribes remedies 

and sanctions for grantees’ programs that fail to comply with Federal administrative or statutory requirements.
2

year 2011 Department of Transportation (DOT) consolidated financial statement 

audit. 3

BACKGROUND

We selected a random sample of 18 of 60 Region III grantees and reviewed 

Region III’s grantee files, findings from key reviews conducted from fiscal year 

2006 through fiscal year 2010, and A-133 (single) audits for fiscal year 2010. We 

also interviewed FTA Headquarters and Region III staffs. Exhibit A provides more 

detail on our audit scope and methodology. We conducted this audit from

March 2011 through June 2012, in accordance with generally accepted 

Government auditing standards. Exhibits B and C provide more information on 

FTA’s 15 oversight review areas and regional office locations, respectively.

Exhibit D provides a list of the 18 grantees selected.

FTA Headquarters shapes the direction of FTA’s oversight efforts by providing 

agencywide policies, guidance, and tools to its regions and contractors. FTA uses 

contractors to conduct the vast majority of grantee oversight reviews in each 

region, but retains the responsibility to oversee the work performed by its 

contractors. FTA contractors document the results of their reviews in written 

reports and by entering review finding data into FTA’s oversight tracking system 

(OTrak).

4

From fiscal year 2006 through fiscal year 2010, FTA obligated approximately 

$75 million nationally to contractors for review areas in its Oversight Program.

Table 1 shows the amount obligated by review area.

FTA’s internal control process for closing out review findings requires 

regions to monitor grantee compliance with resolving review findings and 

implementing corrective actions that result from key reviews and audits and to 

close out the review findings in OTrak.

 3 U.S. Department of Transportation, “Agency Financial Report Fiscal Year 2011,” November 2, 2011. 4 OTrak is the official record keeping system for FTA’s oversight program. OTrak is designed to assist in planning, 

tracking, and monitoring the follow-up activities for post-grant award reviews on FTA recipients. FTA contractors 

and regional staff are required to use OTrak to enter, track, and close every finding from each of the key reviews and 

audits.
3

Table 1. FTA Oversight Obligations from Fiscal Year 2006 

through Fiscal Year 2010 

Review Area Totals

Triennial Review a 18,082,769

State Management Review a 6,122,092

Procurement System Review a 9,850,133

Financial Oversight a 32,731,993

Civil Rights Oversight b 8,219,834

TOTAL $75,006,821

Source: FTA

a Denotes one of the key reviews for the purposes of this audit. b Civil Rights Oversight encompasses four different review areas—Americans with Disabilities Act, Title VI of the 

Civil Rights Act of 1964, Disadvantaged Business Enterprise, and Equal Employment Opportunity.

In February 2012, FTA announced that it conducted a top-to-bottom review of its 

oversight practices, including a review of FTA’s statutory and regulatory 

requirements and an assessment of its current oversight products and practices to 

determine whether they are relevant and effective in meeting those requirements. 

FTA stated it would be implementing some improvements to its oversight 

procedures in fiscal year 2012 and fiscal year 2013. 

RESULTS IN BRIEF

FTA Headquarters does not provide its regions or contractors with adequate 

guidance or oversight to ensure they consistently identify and accurately track 

deficiencies found during key reviews and audits of FTA grantees. We identified 

three key areas in which Headquarters’ guidance or oversight was not sufficient. 

First, FTA’s guidance does not provide consistent standards for data collection and 

reporting across the key review types, which hinders FTA’s ability to identify 

repeat findings, compare findings across review types, conduct trend analysis, and 

evaluate outcomes from the overall Oversight Program. For example, Financial 

Management Oversight reviews and Triennial Reviews name similar findings 

differently, even for the same grantee, which makes it difficult for FTA to identify 

findings that recur across these review types. Second, FTA Headquarters’

oversight of its regions or contractors is not adequate to ensure they accurately 

enter data in OTrak, FTA’s oversight tracking system. Our statistical sample of 

368 Region III key review findings determined that the review contractor did not 

enter data in OTrak in the required “Discussion” and “Recommendation” fields in 

69 instances (nearly 19 percent). Third, FTA does not emphasize the importance 

of quality in its performance measures and assessments. For example, FTA 

established performance measures for the Triennial Review and State 

Management Review programs that focused solely on timeliness, such as closing 

findings within 30 days of their due date, not quality. The guidance and oversight 

deficiencies we identified impede FTA’s ability to fully assess grantees’ 
4

compliance with Federal program requirements and call into question the return on 

investment of its Oversight Program.

FTA’s Region III has not effectively followed up on grantee deficiencies 

identified through key reviews. FTA requires its regional staff to follow up on 

findings for key reviews and to obtain documentation from grantees and maintain 

files to show that those findings have been resolved fully before closing them in 

OTrak. However, we estimated through statistical projection that almost 

24 percent of the key review findings for all Region III grantees lacked sufficient 

documentation that grantees took the prescribed corrective actions to support 

closure.5

FTA does not have clear guidance on how and when regional offices should use 

remedies and sanctions to encourage grantees to address deficiencies.

This lack of support was primarily attributable to Region III’s practices 

of closing findings before they were resolved, poor recordkeeping, or both. 

Closing findings before they are resolved inhibits FTA’s ability to know whether a 

grantee completely addressed a deficiency and distorts FTA’s performance 

measure for the Triennial Review and State Management Review programs, which 

is based on timeliness of finding closure.

6 In addition, 

FTA Headquarters does not systematically track their use across its regions. FTA’s 

existing guidance generally describes actions that regions can take, but does not 

establish clear criteria for when they should be used. For the 5-year period we 

analyzed, Region III reported using sanctions against 1 of the 18 grantees in our 

sample. This one grantee had 26 findings in a single review. Region III did not 

implement sanctions for another grantee that had 33 findings in one Triennial 

Review—the most of any selected grantee in a single review over the same 

period—even though it had similar deficiencies as the sanctioned grantee. We 

could not determine whether Region III should have taken action in the latter 

situation because FTA lacks definitive guidance on when to use remedies or 

sanctions. While we recognize that the number of findings is only an indicator of 

problems, FTA has not instituted a risk-based approach to using remedies and 

sanctions that would emphasize those findings that could place Federal funds at 

risk or lead to safety consequences, if preventive maintenance issues are not 

addressed. In the absence of clear guidance or a tracking process, FTA has an 

insufficient basis to determine whether regions appropriately use remedies and 

sanctions.

We are making a series of recommendations to enhance the overall effectiveness 

of FTA’s regional oversight of transit grants.

 5 Our estimate has 90 percent confidence limits ranging from 19 percent to 29 percent. 6 Remedies include letters to grantees documenting noncompliance and follow-up reviews or contractor support. 

Sanctions include suspending Electronic Clearing House Operation system (ECHO) draw down privileges and 

delaying or denying grant funds. ECHO processes draw down requests from and makes payments to FTA grantees.
5

FTA LACKS ADEQUATE GUIDANCE AND OVERSIGHT TO

IDENTIFY AND TRACK GRANTEE DEFICIENCIES

FTA Headquarters does not provide its regions or contractors with adequate 

guidance or oversight to ensure they consistently identify and track grantee 

deficiencies.

7

FTA Does Not Have Sufficient Guidance To Ensure Consistency and 

Accuracy in Regional or Contractor Oversight Efforts

Specifically, FTA has inconsistent standards for data collection and 

reporting. Further, FTA Headquarters does not adequately oversee its regions or 

contractors to determine whether they are accurately entering data in OTrak. 

Because the guidance and oversight practices apply to all FTA regions, this 

finding is not unique to Region III. Finally, FTA’s performance measures and 

assessments focus on the timeliness, not the quality of regional and contractor 

oversight efforts. The guidance and oversight deficiencies we identified impede 

FTA’s ability to fully assess grantees’ compliance with Federal program 

requirements and call into question the return on investment of its Oversight 

Program.

FTA Headquarters does not provide its regions or contractors with sufficient

guidance to ensure they consistently identify and accurately track deficiencies 

found during key reviews and audits. For example, of the four key reviews we 

assessed, only Triennial Reviews and State Management Reviews have succinct 

and conventional naming guidelines for each finding, which promote consistency 

and enable FTA to analyze findings in OTrak across fiscal years and grantees. For 

the Financial Management Oversight reviews and Procurement System Reviews, 

similar review findings are named differently in each review report and in OTrak. 

To illustrate, one Financial Management Oversight review finding that a 

contractor entered in OTrak had the lengthy title, “The tests of fixed asset 

maintenance procedures, indicates that approximately 58 percent of preventive 

maintenance inspections were either performed late, or were not performed at all.” 

Another Financial Management Oversight review titled a similar finding 

“Preventative Maintenance Not Performed Timely.” In contrast, any Triennial 

Review would title a similar finding, “04—Late Vehicle Preventive Maintenance.”

An FTA official acknowledged the difficulties posed by the lack of 

standardization in the OTrak finding language, stating that it led to problems in 

developing a list of top 10 findings to use in identifying common or systemic 

findings.

Because key reviews do not present similar findings in a standardized way and 

OTrak lacks a data field to identify repeat findings, FTA cannot readily search for 

 7 Examples of reported deficiencies include: improper advance or progress payments, ineligible expenses charged to a 

grant, inactive grants or untimely closeouts, and outstanding annual audit deficiencies.
6

trends or recurring findings across various review types and fiscal years. 

Identifying common or systemic findings is critical in determining a grantee’s 

“risk” level in FTA’s annual grantee oversight assessment process and for 

identifying instances of continued noncompliance with certain Federal program 

requirements.

FTA Headquarters Does Not Provide Adequate Oversight of Data

Entered into OTrak

FTA Headquarters does not provide adequate oversight of its regions and 

contractors to determine whether they are accurately entering data into OTrak, 

after completing reviews or follow-up activities. Despite the importance of having 

accurate information in OTrak, we found errors in data for both single audits and 

key reviews. For example, for fiscal year 2010, Region III incorrectly entered 4 of 

16 (25 percent) of the single audit findings in OTrak. Three of the findings entered 

did not relate to FTA programs and one was from a Triennial Review, not a single 

audit. In addition, our statistical sample of 368 Region III key review findings 

found that the review contractor did not enter data in the required “Discussion” 

field in 46 instances (12.5 percent) and did not enter data in the 

“Recommendations” field in 23 instances (6.25 percent). FTA’s checks on data 

accuracy were insufficient to identify the omissions we found. According to FTA

officials, Headquarters program managers performed limited quality assurance 

checks on all data elements from 10 percent of the reports issued in a fiscal year

and did not select the reports using a statistical sample, but judgmentally selected 

the reports. FTA subsequently reported that, in December 2011, it began 

identifying and reconciling reviews in OTrak with incomplete data and that this 

process was ongoing as of July 2012.

These vulnerabilities are not unique to Region III. For example, in a fiscal year 

2011 review, DOT’s financial statement auditor found that FTA Regions VI (Fort 

Worth, Texas) and X (Seattle, Washington) were not complying with FTA’s 

standard operating procedures for OTrak data entry. For example, in Region VI, 

the auditor reviewed all open findings from prior oversight reviews 

(approximately 270 findings) and found that OTrak did not contain clearly 

documented data on the status of the prior year’s findings or entries on whether 

follow up actions were conducted. The financial statement auditor also found that 

both regions have not complied consistently with FTA’s April 2010 guidance 

requiring regions to enter all single audit information into OTrak. Based on these 

findings, FTA concurred with the financial statement auditor’s recommendation 

that FTA management perform oversight ensuring its regional offices comply with 

FTA’s procedures to document in OTrak review and audit findings.

While FTA agreed to address the OTrak issues that the financial statement auditor

identified, OTrak will not function effectively as a “system of record” for 
7

monitoring review findings until it contains complete and accurate data. As a 

result, FTA’s ability to accurately assess a grantee’s overall compliance and 

determine how it allocates oversight resources within regions for the next fiscal 

year is impeded. Without using a statistical sample, FTA does not have a

representative assessment of the results of contractor omissions or the ability to 

make projections for the Oversight Program’s overall quality of data.

FTA’s Performance Measures and Assessments Focus on 

Timeliness, Not the Quality of Regional and Contractor Oversight

FTA’s performance measures and assessments for its Triennial Reviews and State 

Management Reviews focus on completing reviews and closing findings in a 

timely manner. The measures do not relate to the quality of the oversight efforts of 

the regions and contractors. Only two reviews—Triennial and State Management 

Reviews—have performance measures, which FTA uses to assess the performance 

of regions and contractors.

8

Additional FTA contractor performance assessment efforts are informal and do not 

occur regularly. FTA Headquarters has not systematically collected contractor 

performance information from the regions, even though regional staff interact with 

the contractors on a regular basis. FTA’s Region III staff stated that they raised 

concerns to FTA Headquarters about the quality of some FTA contractors’ 

performance, including their concern that some contractors misunderstood FTA 

requirements. An FTA official stated that FTA evaluates contractors’ technical 

abilities during the contract solicitation phase. In addition, FTA Headquarters 

officials stated that program managers do not evaluate contractors’ technical 

capabilities as part of their performance assessment and that the availability of 

travel funds determines whether these managers perform random site visits to 

evaluate contractors’ performance. According to FTA, it is developing a contractor 

assessment form to more systematically collect the contractor performance 

information from its regions.

FTA Headquarters is responsible for reviewing 

contractor performance and taking appropriate action to resolve outstanding 

issues. Yet, FTA’s assessment of contractors’ performance on the Triennial and 

State Management Reviews is limited, focusing primarily on contractors’

completion of their reports within 30 days of the exit conference with a grantee.

In a June 2009 report, the Government Accountability Office (GAO) made 

recommendations to improve FTA’s performance measures for the Triennial 

 8 FTA’s two performance measures to assess timeliness of steps in Triennial Review and State Management Review 

programs are: (1) 80 percent of Triennial Review and State Management Review findings are to be closed within 30 

days of their due date (“Close Findings Timely”) and (2) 95 percent of the final Triennial Review and 100 percent of 

the final State Management Review reports are to be issued within 30 days of the completion of the review (“Issue 

Reports Timely”).
8

Review program consistent with our findings.

9

The weaknesses in the guidance and oversight practices that we found, which

apply to all FTA regions and contractors, point to overall limitations in FTA’s 

ability to fully assess grantee compliance with Federal program requirements. The 

limitations also impede FTA’s ability to assess the results of its Oversight 

Program, which cost $60.4 million for the key reviews alone from fiscal year 2006 

through fiscal year 2010.

The report included 

recommendations for developing performance measures to assess the outcomes of 

the Triennial Review program, such as the development of a method for 

evaluating improvements in grantee performance in meeting more Federal 

requirements over time and the quality of the Triennial Reviews through improved 

contractor oversight, testing, or inspection. As of March 22, 2012, FTA had not 

addressed these recommendations. In our opinion, these recommendations would 

also apply to the State Management Review program because it uses measures 

similar to those GAO identified. Additionally, the recommendations could be 

expanded to other FTA key review programs and its overall Oversight Program, 

which currently lack performance measures.

FTA REGION III HAS NOT EFFECTIVELY FOLLOWED UP ON 

GRANTEE DEFICIENCIES

FTA Region III has not effectively followed up on grantee deficiencies identified 

through key reviews, a central responsibility of each FTA regional office. Region 

III staff sometimes closed findings before they were resolved or did not maintain 

documentation supporting the closure in the grantee files, contrary to FTA 

guidance. These practices inhibit FTA’s ability to determine whether grantees 

sufficiently addressed identified deficiencies. Further, Region III’s practices could 

distort FTA’s performance measure for the Triennial Review and State 

Management Review programs, which is based on timeliness of finding closure.

Region III has not consistently followed FTA’s established guidance for following 

up on grantee deficiencies. According to FTA Order 5400.1, “Oversight Reviews,”

all regions are to obtain documentation from grantees to show that key review

findings were fully resolved before closing them. However, FTA Region III did 

not follow this guidance consistently. For example, one grantee was instructed to 

submit documentation that all of its procurement staff either had received or was 

scheduled to receive the necessary training on FTA procurement requirements. 

Even though the grantee advised that it had not yet selected a training program to 

initiate the training, Region III officials closed the recommendation. Region III 

 9 GAO Report Number GAO-09-603, “Public Transportation: FTA’s Triennial Review Program Has Improved, But 

Assessments of Grantees’ Performance Could Be Enhanced,” June 30, 2009.
9

staff requested that another grantee develop and maintain an inventory of real 

property purchased with Federal funds. In response, that grantee submitted a draft 

inventory that it acknowledged was incomplete, but Region III closed the finding

anyway—noting that the grantee needed to take additional follow-up steps on the 

finding.

Based on our analysis of the 368 key review findings that the 18 grantees in our 

sample had from fiscal year 2006 through fiscal year 2010, we estimated through 

statistical projections that almost 24 percent (199 of 842) of the key review 

findings for all Region III grantees lacked documentation or sufficient support to 

justify closure.10

In Region III, review contractors identified a significant number of grantees in our 

sample that had repeat findings in subsequent reviews, indicating that the 

corrective actions were ineffective or that FTA did not properly close the findings 

the first time. The recurring findings related to various policy, financial

management, and maintenance issues. We determined that 10 of the 14 grantees in 

our sample that had multiple reviews in fiscal year 2006 through fiscal year 2010

had identical findings. For example, two grantees had two or more reviews that 

identified “Late Vehicle Preventive Maintenance” as a finding. A third grantee had 

deficient documentation for FTA’s ECHO system transactions in its 2006 

Triennial Review, which the review contractor labeled as a high impact finding. 

We reviewed the documentation submitted to close this finding and determined 

that it was insufficient to address the recommendation. The contractor reported the 

same deficiency in the grantee’s 2009 Triennial Review, demonstrating that the 

issues had not been satisfactorily resolved. Closing findings before they are 

resolved provides little assurance that the grantees are being held accountable for 

taking the necessary actions to resolve deficiencies and, therefore, allowed to 

continue with patterns of noncompliance with Federal requirements.

This lack of support primarily was attributable to Region III’s 

practices of closing findings before they were resolved, poor recordkeeping, or 

both. 

Region III staff stated that FTA Headquarters pressured them to close findings by 

their due date, which could have led staff to close findings before they were 

resolved. FTA Headquarters confirmed that FTA holds regional administrators 

responsible for closing findings within 30 days after their due date and 

periodically reports each region’s progress in meeting this measure. Despite the 

agencywide focus on timeliness, FTA Headquarters stressed that it expects the 

regions to obtain evidence from the grantees showing that the findings have been 

 10 Our estimate is based on our analysis of 368 findings wherein we found that Region III’s grantee files did not 

contain any documentation showing that these grantees took the prescribed corrective actions before 42 findings 

were closed, and did not contain sufficient support to justify closing an additional 34 findings. Our estimate has 

90 percent confidence limits ranging from 19 percent to 29 percent.
10

fully resolved before closing them. However, FTA Headquarters does not have a 

process to verify that the regions actually obtained the necessary documentation to 

support closure. As a result, FTA runs the risk that regions will prematurely close 

findings in an effort to meet the performance measure. GAO’s work has raised 

similar concerns. In June 2009, GAO reported that inaccuracies in data for past 

Triennial Reviews raised questions about whether “close findings timely” was a 

reliable performance measure. 

FTA DOES NOT HAVE CLEAR GUIDANCE FOR USING AND 

TRACKING REMEDIES AND SANCTIONS

FTA does not have clear guidance that spells out how and when regional offices 

should use remedies and sanctions. Our review found that Region III rarely used 

remedies and sanctions. FTA’s guidance, which is under review by the agency,

generally describes actions that can be taken by regions, but does not establish 

clear criteria regarding when regions should use remedies or sanctions for certain 

types of review findings. In addition, FTA Headquarters does not systematically 

track the use of remedies and sanctions. In the absence of clear guidance or a 

central process for tracking their use, FTA is impeded in its ability to assess 

whether regions’ use of these measures was successful in encouraging grantees to 

address deficiencies identified in key reviews.

FTA’s Guidance for Identifying When Regions Should Use Remedies 

or Sanctions Lacks Specificity

FTA has not given its regional offices clear guidance defining when staff should 

use remedies and sanctions. Instead, FTA Order 5400.1, issued in 1994 and 

applicable to all regions, outlines a general process for using remedies and 

sanctions for noncompliant grantees. The process identifies three levels of 

noncompliance, encompassing eight phases—six for remedies and two for 

sanctions, as shown in table 2. Although the Order provides examples to help 

regional staff determine which noncompliance level to place a grantee in, it does 

not clearly link types of findings to particular remedies and sanctions—such as 

indicating that certain recurring findings or certain types of findings would 

warrant a particular remedy or sanction. 
11

Table 2. FTA Order 5400.1’s Process for Remedies and Sanctions

Level I Noncompliance – Remedies

First time or one-time violation of Federal administrative requirements, such as delinquent or 

incomplete quarterly progress reports, failure to request required FTA concurrence, inadequate 

financial reporting, or failure to keep complete property records.

Phase 1 – Notify the grantee of the noncompliance finding, the required remedial action, and 

provide technical assistance.

Phase 2 – Determine acceptability of the resolution plan, monitor grantee progress, and 

validate corrective action.

Phase 3 – Grantee failure to take corrective action within 1 year moves the noncompliance or 

deficiency issue to Level II.

Level II Noncompliance – Remedies

Grantees who have posed a “history” of unsatisfactory performance through Level I, or grantees 

identified as “high risk” for violating FTA written policies, such as known non-competitive 

procurements or sole source procurements, or failure to adequately resolve compliance findings.

Phase 4 – Notify the grantee of the “high risk” determination, the special conditions that 

apply and the reasons for imposing them, required corrective actions, and time allowed for 

completing them, and the method of requesting reconsideration.

Phase 5 – Review grantee progress for compliance on no less than a monthly basis, and 

provide oversight resources to define more specific recommendations.

Phase 6 – A letter detailing the nature of the outstanding issues, providing a formal warning, 

and the intent to impose sanctions if corrective actions are not taken.

Level III Noncompliance – Sanctions

FTA has worked with the grantee for more than 2 years to achieve compliance. The grantee has 

shown little willingness or ability to take corrective actions.

Phase 7 – Place restrictions on future grant approvals involving the area of noncompliance 

and restricts receipt of funds in existing grants until corrective measures are taken, remove 

grantee's access to ECHO payments or prohibit fund drawdowns, and disallow all or part the 

activity not in compliance.

Phase 8 – Suspend in whole or part or terminate the current grant award for cause, or

withhold further grant awards until full compliance.

Source: FTA Order 5400.1

For the 5-year period we analyzed, Region III reported using a sanction for 1 of 

the 18 grantees in our sample, and reported using no remedies during this period. 

The grantee for which the Region acknowledged implementing a sanction—the 

City of Winchester, Virginia—had 26 findings in its first Triennial Review. The 
12

grantee was required to submit manual payment requests with supporting 

documentation, in order to receive payments, until the numerous findings were 

satisfactorily addressed. FTA grantees normally draw down funds from ECHO 

without providing documentation. In contrast, Region III did not implement 

sanctions against another grantee, the Borough of Pottstown, Pennsylvania, which

had 33 findings in one Triennial Review—the most of any selected grantee in a 

single review over the 5-year period we analyzed. This grantee had a drawdownrelated deficiency. For the remaining 15 grantees in our sample that had a 

Triennial Review from 2006 through 2010,11

In October 2011, FTA informed us that it was no longer using the remedies and 

sanctions process outlined in FTA Order 5400.1, pending an internal evaluation, 

even though the Order is technically still in effect. FTA expects to develop new 

standard operating procedures for the use of remedies and sanctions and revise the 

Order to incorporate these procedures in fiscal year 2013. However until the Order 

is revised, FTA Headquarters cannot systematically assess whether regions are 

appropriately using remedies and sanctions to resolve grantee deficiencies.

another grantee had a lower number 

of findings than the City of Winchester, but its findings from two Triennial 

Reviews were for insufficient documentation supporting its ECHO drawdowns. 

We could not determine whether Region III should have taken action in the latter 

two cases because FTA does not provide clear guidance as to when regions should 

use remedies and sanctions. While the guidance for using remedies and sanctions 

would not necessarily need to identify a specific number of findings that would 

trigger a remedy or sanction, a risk-based approach could place greater emphasis 

on using remedies or sanctions for those findings that might put Federal funds at 

greater risk of inefficient or inappropriate expenditure or lead to safety 

consequences, such as those stemming from preventive maintenance issues, if they 

are not timely corrected.

FTA Headquarters Does Not Systematically Track the Use of 

Remedies and Sanctions

FTA Headquarters does not systematically track regional use of remedies and 

sanctions. We identified instances where Region III had actually used remedies 

but neither Region III nor FTA Headquarters had tracked them. Region III 

provided us with information indicating that it used sanctions in only one instance 

and did not use any remedies during the 5-year period covered in our review.

However, in applying FTA’s guidance, we found remedies that Region III did not 

identify, indicating that FTA’s definition of what constitutes a remedy may not 

have been clear to the Region. For example, as a result of the Maryland 

Department of Transportation Maryland Transit Administration’s fiscal year 2006 

combined State Management Review and Triennial Review, Region III requested 

 11 One selected grantee did not have a Triennial Review performed during the period we audited.
13

a follow-up Triennial Review for fiscal year 2007. These reviews typically are 

conducted every 3 years, not annually, so the fiscal year 2007 Triennial Review 

would be considered a follow-up review and, therefore, a remedy. We also 

identified five more potential remedies where a Financial Management Oversight 

review was performed in the same or following year of a Triennial Review or 

State Management Review. However, neither Region III nor FTA Headquarters 

tracked these actions as a remedy. 

FTA Headquarters provided examples of other regions’ use of sanctions, but FTA 

officials stated FTA does not systematically track their use and that the regions do 

not notify FTA Headquarters of all sanctions. FTA acknowledged that its regions 

notify Headquarters only when they use certain significant sanctions, such as

suspending ECHO privileges or denying a grant. We reviewed the documentation 

FTA provided but could not determine whether these examples represented a 

consistent application of sanctions due to the lack of a tracking process. Because 

FTA Headquarters does not have processes for systematically tracking remedies 

and sanctions, it does not have a sufficient basis to assess whether regions 

appropriately and consistently use these measures to resolve grantee deficiencies 

and ensure compliance with Federal requirements.

CONCLUSION

FTA awards billions of dollars in grant funds each year to more than 

1,200 grantees across its 10 regions. However, insufficient guidance and oversight 

from FTA Headquarters, as well as the number of specific deficiencies in Region 

III, demonstrate that a more robust Oversight Program is needed to ensure that

Federal funds are used efficiently and effectively. According to FTA, it recognizes 

these vulnerabilities and is conducting a comprehensive review of its Oversight 

Program. These efforts could go far in providing FTA additional insight into how 

its Headquarters, regional staff, and review contractors, are operating and identify 

opportunities to improve the consistency and results of its numerous oversight 

reviews, including the effectiveness of follow-up actions. Keeping those efforts on 

track is critical to improve its oversight of transit grantees and ensure appropriate 

stewardship of Federal funds.
14

RECOMMENDATIONS

We recommend that the Federal Transit Administrator:

1. Develop guidance with uniform review data collection and reporting 

procedures that, at a minimum, will enable FTA to identify common or 

systemic findings and compare findings across reviews for a particular grantee, 

conduct trend analysis, and evaluate outcomes from the overall Oversight 

Program.

2. Establish more robust methods for assessing contractor performance by:

a. Using a statistically valid quality assurance process for reviewing the data 

in contractors’ reports and OTrak to determine whether contractors meet 

quality level acceptance requirements.

b. Completing the development of a contractor assessment form for the 

systematic collection of contractor performance information from regional 

staff, which, at a minimum, addresses contractor technical expertise, and 

use the information collected when procuring future oversight reviewers.

3. Develop performance measures to assess the effectiveness of the outcomes of 

its overall Oversight Program, in addition to the timeliness of program outputs 

currently measured.

4. Develop policies and procedures, including oversight mechanisms, to verify 

that regions do not close findings before they receive documentation showing 

that a finding has been resolved fully.

5. Revise and finalize policies and procedures for using remedies and sanctions,

including application of a risk-based approach for their use.

6. Require FTA Headquarters staff to track and oversee each region’s use of 

remedies and sanctions.

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

We provided FTA with our draft report on June 6, 2012. FTA provided technical 

comments on July 18, 2012, and its formal response on July 20, 2012. FTA’s 

formal response is included in its entirety as an appendix to this report, and we 

incorporated FTA’s technical comments where appropriate. FTA fully concurred 

with all six of our recommendations and provided appropriate planned actions 

and target dates for their completion. 
15

FTA’s actions, both those taken and planned, are responsive to our 

recommendations and we consider all six recommendations resolved but open 

pending completion of all planned actions.

ACTIONS REQUIRED

In accordance with follow-up provisions in Department of Transportation Order 

8000.1C, we request that FTA provide our office documentation demonstrating 

completion of its planned actions within 30 days after they are completed. 

Accordingly, all six recommendations will remain open pending receipt of this 

documentation.

We appreciate the courtesies and cooperation of the Federal Transit 

Administration’s representatives during this audit. If you have any questions 

concerning this report, please call me at (202) 366-5630 or Wendy M. Harris, 

Program Director, at (202) 366-2794.

#

cc: Angela Dluger, FTA Audit Liaison (TBP-30)

Martin Gertel, DOT Audit Liaison (M-1)
16

Exhibit A. Scope and Methodology

EXHIBIT A. SCOPE AND METHODOLOGY

We conducted our work from March 2011 through June 2012 in accordance with 

generally accepted Government auditing standards as prescribed by the 

Comptroller General of the United States. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

To assess whether FTA Headquarters provided its regions and contractors with 

adequate guidance and oversight for key reviews and audits to ensure grantee 

deficiencies are consistently identified and accurately tracked, we obtained and 

reviewed key documentation from FTA including FTA’s formal guidelines (such 

as FTA Circular 5010.1D, Grant Management Requirements, and FTA Order 

5400.1, Oversight Reviews), internal FTA guidance provided to the regional 

offices from FTA Headquarters, and internal FTA correspondence that apply to all 

of FTA’s regions. We also reviewed documentation related to the fiscal year 2011 

DOT consolidated financial statement audit, which included assessments of 

oversight in FTA Regions VI and X, and relevant GAO reports. In addition, we

interviewed FTA Region III and Headquarters staffs to gain a better understanding 

of their roles and responsibilities, their use of FTA documents that guide their 

activities, and the extent to which FTA Headquarters oversees regional and 

contractor oversight efforts.

To assess whether Region III effectively followed up on grantee deficiencies, we 

worked with the OIG statisticians to select a probability proportional to size 

sample of 20 out of 60 Region III grantees stratified by size (based on the amount 

of total obligations, as of April 12, 2011) and region-assigned oversight level, 

weighted by the number of key review and audit findings conducted from fiscal 

year 2006 through fiscal year 2010. Due to our sample design, 2 grantees were 

selected twice, which reduced the number of unique grantees selected from 20 to 

18. For each selected grantee, we reviewed documentation from OTrak, the Single 

Audit Clearinghouse (if applicable), and the grantee’s file from Region III

regarding regional efforts to follow up on each of the 368 findings that the selected 

grantee had from reviews conducted from fiscal year 2006 through fiscal year 

2010 and findings from 16 single audits in fiscal year 2010. We also determined 

whether any of the findings for these grantees were repeat findings during this 

time period. For closed findings, we determined whether the support the grantee 

provided was sufficient for FTA to close the finding. We also interviewed FTA 

Region III staff to enhance our understanding of the Region’s follow-up efforts. 

The sampling allowed us to estimate the percentage of Region III’s key review 
17

Exhibit A. Scope and Methodology

findings that did not have support for closure, with 90 percent confidence and +/-

5 percent precision for the 842 findings in our universe.

To assess whether FTA has clear criteria to assess Region III’s use of remedies or 

sanctions to address deficiencies, we identified FTA guidance for using remedies 

or sanctions, such as FTA Order 5400.1. We also interviewed FTA Region III staff 

and collected supporting documentation to determine whether the Region used any 

remedies or sanctions in response to the deficiencies identified, and interviewed 

FTA Headquarters staff members to get a better understanding of FTA’s remedies

and sanctions policies. 
18

Exhibit B. FTA’s 15 Oversight Review Areas

EXHIBIT B. FTA’S 15 OVERSIGHT REVIEW AREAS

Review Area Responsible 

FTA Office * Description

1.Grant Oversight 

Assessment

Office of 

Program 

Management 

(TPM)

FTA completes Grantee Oversight Assessment 

Questionnaires, which serve as baseline information 

for each grantee’s capacity and determine the risk 

the grantee’s program may represent for the 

Federal program. Based on this information, FTA 

makes decisions about which grantees receive 

oversight reviews during the coming year. Regional 

staff uses the information to develop oversight plans 

and to allocate oversight resources within the region 

for the upcoming fiscal year.

2.Triennial Review TPM Evaluates Urbanized Area Formula Program 

grantees’ grant management performance and 

compliance with current FTA requirements. The 

reviews must be conducted for each formula grant 

recipient at least once every 3 years. When 

appropriate, corrective actions are recommended to 

resolve a grantee’s program management 

deficiencies. FTA monitors the grantee’s actions 

until compliance with identified program 

requirements is achieved. If needed, FTA can 

invoke sanctions to ensure that the grantee acts to 

correct any noted program deficiencies.

3.State Management 

Review

TPM Assesses a State’s implementation and 

management of the Elderly Individuals and 

Individuals with Disabilities and the Non-Urbanized 

Area Formula Programs to ensure the programs 

meet FTA requirements and program objectives. 

The review follows a format similar to the Triennial 

Review and is conducted every 3 years.

4.Financial 

Management 

Reviews

TPM FTA has several types of Financial Management 

reviews including: (1) a Full Scope Systems review 

that determines whether the grantee has in place 

proper financial controls and checks and balances 

to manage and track Federal funds and (2) a followup to a Full Scope review primarily to ensure that 

recommendations resulting from full scope reviews 

are implemented and working properly.

5.Procurement System 

Review

TPM Ensures that Federal procurement requirements 

and standards for grants are met.

6.Americans with 

Disabilities Act

Office of Civil 

Rights (TCR)

Assesses civil rights compliance, which is required 

by recipients and subrecipients of Federal 
19

Exhibit B. FTA’s 15 Oversight Review Areas

Review Area Responsible 

FTA Office * Description

7.Title VI of the Civil 

Rights Act of 1964

assistance. FTA retains the right to review grantee 

compliance status at any time during the life of the 

project. 8.Disadvantaged 

Business Enterprise

9.Equal Employment 

Opportunity 

10. State Safety 

Oversight Program

TPM Monitors and evaluates compliance with FTA’s 

State Safety Oversight Rule as part of FTA’s 

triennial audits of rail transit agencies. These audits 

provide in-depth reviews of each State’s program, 

and provide a forum to recommend improvements 

to the effectiveness of the State’s oversight 

program.

11. Planning 

Certification 

Review 

Office of 

Planning and 

Environment 

(TPE)

Provides guidance and assistance to and evaluates

grantees considering projects seeking New Starts 

and Small Starts program funding. *

12. Safety and 

Security Industry

Guidance

TPM Monitors and evaluates a rail transit agency’s 

compliance with FTA’s State Safety Oversight Rule 

and assesses grantee activities to enhance the 

personal security of passengers and employees and 

to support core emergency response capabilities.

13. Drug and Alcohol 

Audit

TPM In-depth reviews of grantee and State programs, 

including a detailed examination of records and 

interviews with grantee personnel, contractors, and 

service agents, such as collection sites, medical 

review officers, substance abuse professionals, and 

third-party administrators.

14. Research, 

Demonstration, 

and Cooperative 

Agreements

Office of 

Research and 

Innovation (TRI)

Reviews grant recipient’s compliance with the 

requirements of the cooperative agreements for 

research projects.*

15. Oversight 

Guidance

TPM Specialized reviews of a grantee that needs 

additional oversight or is designated as high-risk.

Source: Unless otherwise noted, FTA Circular 5010.1D, Grant Management Requirements, dated 

November 1, 2008

* Administration and Management of Oversight Programs Standard Operating Procedures Manual, October

2008.
20

Exhibit C. FTA’s Regional Structure

EXHIBIT C. FTA’S REGIONAL STRUCTURE

STATES COVERED BY FTA REGION III

Delaware 

Maryland

Pennsylvania

Virginia

West Virginia

District of Columbia, including the D.C. 

Metropolitan Office
21

Exhibit D. 18 Selected Region III Grantees

EXHIBIT D. 18 SELECTED REGION III GRANTEES

GRANTEE LOCATION

TOTAL OBLIGATIONS

(as of April 12, 2011)

Washington Metropolitan Area Transit Authority Washington, DC $ 1,838,993,779

Port Authority of Allegheny County Pittsburgh, PA $ 1,144,118,869

Maryland Department of Transportation -

Maryland Transit Administration

Baltimore, MD $ 892,961,813

Delaware River Port Authority Camden, NJ $ 175,454,834

Virginia Department of Rail and Public 

Transportation

Richmond, VA $ 137,848,617

Delaware Department of Transportation Dover, DE $ 80,870,310

City of Richmond Richmond, VA $ 42,871,564

Lehigh and Northampton Transportation 

Authority

Allentown, PA $ 28,845,440

Town of Blacksburg Blacksburg, VA $ 18,531,854

Williamsburg Area Transit Authority Williamsburg, VA $ 16,000,854

City of Charlottesville Charlottesville, VA $ 10,709,221

Southwestern Pennsylvania Commission Pittsburgh, PA $ 9,303,679

City of Philadelphia Philadelphia, PA $ 6,926,171

Beaver County Transit Authority Rochester, PA $ 6,371,620

Borough of Pottstown Pottstown, PA $ 4,646,001

Tri-State Transit Authority Huntington, WV $ 3,360,663

City of Winchester Winchester, VA $ 2,138,970

Hazleton Public Transit Hazleton, PA $ 1,541,904
22

Exhibit E. Major Contributors to This Report

EXHIBIT E. MAJOR CONTRIBUTORS TO THIS REPORT

Wendy M. Harris Program Director

Name Title

George Lavanco Project Manager

Tiffany Mostert Senior Analyst

Michael Dzandza Auditor

Rosa Scalice Auditor

Joseph Tschurilow Auditor

Petra Swartzlander Statistician

Megha P. Joshipura Statistician

Harriet Lambert Writer-Editor
23

Appendix. Agency Comments 

APPENDIX. AGENCY COMMENTS

Memorandum

U.S. Department

of Transportation

Federal Transit

Administration

Subject: INFORMATION: Management Response to the Office Date:

of Inspector General Draft Report on FTA’s Grant 

Oversight 

July 20, 2012

From: Peter M. Rogoff

Administrator

Reply to

Attn. of: Angela Dluger

(202) 366-5303

To: Calvin L. Scovel III

Inspector General

The Federal Transit Administration (FTA), responsible for investing billions 

each year in safe and effective public transportation across the Nation, works 

hard to ensure that each dollar invested is done so wisely and effectively. A 

critical part of FTA’s work involves providing effective oversight for all aspects 

of recipients’ programmatic and financial management where Federal funds are 

involved. As Administrator, I believe it is important to periodically take a hard, 

objective look at the systems, processes, and practices in place to ensure they are 

functioning as intended and to identify areas for further improvement. For this 

reason, in 2011, I directed FTA senior management to perform a nation-wide, 

top-to-bottom review of our Oversight Program. As a result, FTA is making 

critical improvements to its oversight processes, including more specific 

standardization of processes across regions, enhanced performance measures, 

and a more risk-based approach that will provide greater visibility into and more 

forward-looking feedback to recipients. To ensure that no stone is left unturned, 

I also requested the Office of Inspector General (OIG) to conduct this review to 

dig deeply into the operation of a single region. We appreciate the OIG’s efforts 

and will carefully consider the results of this draft report as we continue to 

strengthen FTA’s Oversight Program.

FTA Review Will Result in Targeted, Risk-based and Forward Looking 

Oversight

FTA established a working group chaired by the Deputy Administrator to see 

how well our Oversight Program’s established processes were working and to 

ensure that the processes in place will serve FTA well in the future. We were 

particularly interested in determining whether changes were needed to ensure 
24

Appendix. Agency Comments 

FTA oversight processes are risk-based, forward-looking and targeted to 

recipients’ particular oversight review needs. 

As a result of the review, FTA introduced a revised State Management Review 

for Fiscal Year 2012. The changes incorporate greater risk-based analysis by 

strengthening questions in high risk areas such as procurement, program 

management, and financial management, and streamlining questions in other 

review areas. At the conclusion of the review cycle, we will seek feedback from 

the State Departments of Transportation and their sub-recipients about the 

changes and will make additional improvements in Fiscal Year 2013 based on 

what we learn. 

More improvements to FTA’s oversight processes are underway that will better 

focus oversight and enhance consistency. We are revising our oversight 

assessment and review processes to provide more consistent and useful 

information focused on high impact areas and to anticipate where recipients may 

need technical assistance as they implement new programs. To improve internal 

processes, FTA is developing Oversight Program Standard Operating Procedures 

(SOPs) to provide more consistent practices across regions and implementing 

new and better performance measures that will further emphasize quality 

outcomes. FTA is also enhancing our oversight data tracking system (OTrak). 

Finally, FTA is preparing to introduce a transformed Triennial Review process 

for Fiscal Year 2013. 

RECOMMENDATIONS AND RESPONSE

Recommendation 1: Develop guidance with uniform review data collection and 

reporting procedures that, at a minimum, will enable FTA to identify common or 

systemic findings and compare findings across reviews for a particular grantee, 

conduct trend analysis, and evaluate outcomes from the overall Oversight 

Program.

FTA Response: Concur. FTA is developing Oversight Program SOPs, 

including one specifically related to data collection and reporting. These SOPs 

will clarify existing procedures and strengthen direction to FTA staff and 

contractors as to the data to be entered into the system, the parties responsible for 

data entry and monitoring, and the timelines for data entry and updates. To the 

extent possible, this will include tracking types of findings across review 

programs for a particular recipient. FTA expects to implement the SOPs by 

September 30, 2013.

Recommendation 2: Establish more robust methods for assessing contractor 

performance. 

FTA Response: Concur. In February 2012, FTA initiated work on a SOP for 

Performance Evaluation of Oversight Contractors. The SOP will include 
25

Appendix. Agency Comments 

performance monitoring, documentation, and timeliness requirements for the 

FTA Regional Offices and the Headquarters-based Oversight Program 

Contracting Officer’s Representatives. Under the SOP, FTA will make more 

systematic use of the Contractor Performance Assessment Reporting System. 

FTA expects to complete implementation of this process by September 30, 2012. 

Recommendation 3: Develop performance measures to assess the effectiveness 

of the outcomes of its overall Oversight Program, in addition to the timeliness of 

program outputs currently measured. 

FTA Response: Concur. During Fiscal Year 2013, FTA will implement 

performance measures that assess the effectiveness of the Oversight Program 

outcomes qualitatively, as well as quantitatively. FTA will use its fiscal year-end 

reports, which already include findings and deficiencies by region, when 

considering various performance measures. FTA expects to implement these by 

September 30, 2013.

Recommendation 4: Develop policies and procedures, including oversight 

mechanisms, to verify that regions do not close findings before they receive 

documentation showing that a finding has been resolved fully. 

FTA Response: Concur. FTA is developing a set of Oversight Program SOPs 

which will clarify the requirements for closing findings. FTA will also consider 

how best to leverage Headquarters resources to perform a random sample-based 

verification of closed findings and supporting documentation. FTA expects to 

implement the procedures and review by September 30, 2013.

Recommendation 5: Revise and finalize policies and procedures for using 

remedies and sanctions, including application of a risk-based approach for their 

use. 

FTA Response: Concur. FTA expects to complete the revision of its oversight 

procedures by September 30, 2013, which will include guidelines for the use of 

remedies and sanctions. FTA is preparing a more rigorous risk-based approach 

which will yield results not only in terms of the quality and depth of the 

evaluations themselves, but in the identification of appropriate remedial actions 

and sanctions. While the required follow-up actions will be based on the specific 

findings of each individual case, we expect that the general nature of the remedy, 

urgency of response, and expectations of the recipients for compliance will be 

applied more consistently under the clarified procedures.

Recommendation 6: Require FTA Headquarters staff to track and oversee each 

region’s use of remedies and sanctions. 

FTA Response: Concur. FTA expects to revise its oversight procedures by 

September 30, 2013, which will include a process for documenting the use of 

remedies and sanctions. This will allow us to track actual remedies and 

sanctions.