UMTA Project &night and lpus Transit Issues For Release a On Delivery Expected at 930 a.m., PDT Wednesday, August 8. 1990 Statement of John W. Hill, Jr., AssmIate Directm Resources. Camunity, and Ecam6c Development Division Before the Subcommittee on Housing and urban Affairs Comittee on Banklng. HortsMg, ad Urban Affairs United States Senate In San Jose, California .. wr. chairman andMembers of the Subcommittse: I am pleased to be here today to dimcuss our work aasessing local transit authorities' managenent of the Department of Transportation's (DOT) Urban Has0 Tramporbtion Administration (UMTA) grants and how well TJl!TA is overseeing active grants totaling about $33 billion nationwide as of Member 31, 1989. These grants have bsen awarded to about 700 stste and local grantees to help fund over 4,400 mass transit projects. Ikring the 19808, UHTA limited its oversight of grantmsbyallwing grantees to certify that they would properly manage the grants in accordance with grant conditions and federal requirements. In summary, our prior and current work to date as well as that of DOT's Office of Inspector General (OIG) has shown that federal mass transit grant progrsms are at high-&k for mismanagement because: -- Grantees, in sane cases, were not using grant funds for project purposes or according to federal requiresents even though grantees certified that they would properly manage federal funds. Our work at two grantees and an analysis of a limited number (25) of DOT OIG audit reports indicated that UMTA grantees qUeStiOnably used over $100 million of grant funds, 1 -- UMTAgs oversight mechanisms say not be effective in detecting grantees noncompliance with grant conditions or federal requirements. Our prior reports and curreut vmk indicate that this occurred bscause UIcTA’s avsrsight tcsls were not effectively or thoroughly used. DOT has recognized that UMTA has a saterial weakness with the oversight of its grant programa. Our testimony will also include a discussion of lJMTA grasts in California, San Prancisco Say Area sass transit projectr, and traffic congestion. mrther, we will offsr issues for Subcommittee consideration during its deliberations of UMTA~s reauthorization. Now I would like to provide a brief background on U14TAms grant programs and its management and oversight cf federal mass transit grants. OUNQ Under the Urban Mars Transportation Act of 1964, as amendsd, UMTA is authorized to provide assistance for developing and i opsrating mass transportation syrtems through grauts to state and local entities--generally transit authurities--the grantees. UmA provides grants primarily through two program--the Section 3 Discretionary Grant program and the Section 9 Forsula Grant 2 program.l Funds from both programs are wed to construct new transit projects, such as light rail ~ystess: refurbish existing rail systems; or purchase bums. In adcUtion, forsula graut funds are used to support the operation of sass transit systsms. over half of the discretionary grafts are earmarked by the Congress for specific mass trausit projecta: tha remainder are selected aud awarded by OIEIA'o Mmiuistrutor. Formula grants, as the name suggests, are apportion&I asmg urban areas by a statutory formula based on population data and transit service and ridership statistics. Dependins qoll the type of grant, grantees contribute matching funds that usually rauge from 20 to 50 percent of the net project coat. U’MTAcurrently wersmes over $33 billion in active grants nationwide. During fimcal ymarm 1986 through 1990, UMTA funding will prwids as estirated $13.6 billion in section 3 and 9 grauts, or about $2.7 billion snnually (sea fig. UMTA, as the agency that reviews Mb approvrs msss transit grants, is responsible for msuring that grantees are complying with the various reguirsments stipulated in the Urban Ha88 Transportation Act and in uniform grant mgulations that apply governmentwide. The -uniform grant regulations include, among lIn addition, uI(TA administers several smaller grant programm for efforts such as~sstransit phnning, designing anddevslopiug sass transit for the handicapped and elderly, and supporting mass transit research. 3 Other things, federal purchasing and contracting standards for recipients of federal funds. In lieu of nor8 direct oversight to ensure COmplia~~8, UNTA relies on grantees' C8rtifyiXIg that they- -the grantees--will comply with all applicable federal requirements. To suppl-t self-certification and oversee grantees' co?Bpliance, tINTA rmgional offfcms have a number of monitoring tools including grantee financial and prograss reports, site visits, annual audits, and triennial reviaws (SW fig. 2). Th8 UNTA work that we have UnderVay fOCusas on determining th8 eXt8Ilt Of QrZUlt888' noncompliance and the reasons for IJIWA’a oversight w8akn8sses. Reviews have started or will soon start in UNTA Regions II (New York City), III (Philadelphia), V (Chicago), and IX (San Francisco). I would now like to discuss our preliminary‘assessment of grantees' management of grant funds. Our work at 2 grantees and analysis of 25 OIG audit reports identified grantees' quastionabla Um of Ovmr $100 million in grant funds. This work &owed that grantees had not always complied with grant conditions and f8deral rmquir-ts evan though they certified that they had internal management control syrters in place to ensure such compliance (se8 fig. 3). 4 Pollowing are a few 8xamples of these findings: --The OIG reported that on8UNTAgrantee hadban isproperly charging indirect, sartricms, handling, andmterial costs to ULZTA projects since 1974. Thisresultsdinanesti~ted $17.9 rillion in ovmrchaqes toUl@fAgramtseventhoughthe OIG had repeatedly brought this probla to the attention of the grantee and UmA. NeitherUMT&northegrant~has, as yet, corrected the problem. -- ~ccorciing to another OIC report, a grantee had includad land acquisition and construction claims of $6.3 million that wars not in thegrantagre-tand its procsdures for obtaining a $29.5 million grant wers questiona& The transit agency reimbursed UNTA $6.3 million for the ..- questionably used funds. -- We and the OIG detersbed that another grantss may have used UI4TA-funded inmntory on non-grant projects. The grantee COnSegUwtly lay have spent about $4 million for unnecessary purchases. UMTA is negotiating vith the grantee to recoverunallouablecosts. -- An 0rG suwey of grant cl ose-ollat practioes in on8 tmTA region disclosed that grantees had not taken sufficient action to close out grants at projact completion. Timely 5 grant close-outs are particularly important because unused funds that should be returned to UHTA are not available for other approved projects. We found indicutionu that grantee delays in initiating grant closeouts say bs a problem in two other UNTA regions. UNTA has also indicated that grantee close-outs may be a problem nationwide. I would now like to focu8 on WXTA1s oversight of faderal mass transit grantees. In 1985, we reported that UHTA nseded better assurances that grantees complied with federal requirssests.2 We also supported UHTA's use of triennial reviews that were mandated by ths Surface Transportation Assistance Act of 1982. Although at the time of our work, UNTA could not provide us infOmtiOn on the focus of the reviews or how they vould be conducted, we believed that triennial reviews, if properly implemsnt8d, would afford U?lTA an opportunity to supplemmt their existing oversight mechanisms for ensuring gra&888' cospliance with federal rsquiraents. Novever, the triennial reviews do not appear to have bees properly ispl8sented. Needy Better -That Grw8 WV Wim (GAO/RCBD-85-26, ?rb. 19, 1985). 6 In March 1989, we reported on UHTA~m oversight of the Southeastern Pennsylvania Transportation Authority's (SEPTA) procurement activities.3 Major procurement problems had been identified in a 1987 UHTA-funded indspendent procureaent review. Our review was directed tovard determining why U?STA'r own oversight tools had failed to detect these problems. Our report disclosed that lJHTAQs triennial revfev of SEPTA did not include a detailed procurement assessment, yet indicated that SEPTA had complied with procurement requirements. Further, single annual audits performed by public accounting firms did not include an evaluation of SEPTA’m compliance with federal procurement requirements. We concluded that UH!TA*s nonitoring procedures were inadequate to detect the weaknesses in SEPTA~S procurement system and made several recomendations to the Secretary of Transportation to better focus UHTA'8 monitoring tools to detect procurement deficiencies. In addition, UMTA requires grantee8 to submit quarterly financial and progress reports. Hovever , at one UMTA region we found that report8 submitted by 80~ grantee8 either did not contain enough information to be used a8 a monitoring tool or UMTA did not use them for this purpose. The acting UlfTA rqional manager told us that these reports did not contain the information needed to detect grantee problems. Based upon this work and that of the OIC, DOT identified UHTA@s oversight Of grantee8 as I material internal Control weakness in its 1989 report to the President reguired by the Federal Hanagersm Financial Integrity Act of 1982, a8 mended. One reason UMTA cited for its overright problem8 is its ever- growing workload and shrinking staff. The report atates that "In order to improve project OVerSight, additional 8taffing is needed." To correct this management control veakness, the report states that TJMTA will requira additional resources in both FY 1991 and 1997-a In its description of the problem, the report states that "The number of grants as well as the dollar amount of UMfA”s grant program has increased. Currently, [WA grants knagement staff are carrying] double the case load of the early 1980ms.s In it8 1991 budget, WXTA requested an additional 10 staff for grantee Oversight. Since ve are in California, I thought it would be useful to discuss UMTA grants for California ma88 tramit projects and projects that are being planned and con8tructed in the San Francisco Bay area. 8 As of December 31, 1989, UM!TA va8 Overseeing about $3.6 billion in active grants to California grantees. This represents about 11 percent of the active mA grants nationwide (see fig. 41. San Francisco and San JOSe metropolitan area8 grantees receive about $1.3 billion, or abut 36 percent of the active grants in California. Although the Bay area grantee* receive significant UMlYA funding, UMTA fund8 do not represent the tajOr 8Ource Of MS3 transit funding. For example, the Hetropolitan Traruportation Commission, the San Francisco Bay regional tra.mBportation planning agency, has adopted a rail extension program that cells for five projects to be built at an estimated total cost of $7.35 billion #rough the year 2000. Of thf8 -OIllIt, the CmiSSfOn rxpect8 -.- federal funding of $691 aillion, provided federsl fund8 are available, or less than 30 percent of the total co8t. Hare than 60 percent of the total cost will be funded from local sources, including new half-percent sales taxerr approved in Al-a, Contra COSta, and San Mateo counties. The extent of Federal participation in Bay area transportation projects varies considerably. The Bay Area Rapid Transit SyStoP'S San ~axICiSC0 airport ti-fOn i8 l Stiraf& t0 cost $590 million, vith WA funding $442 million, or 75 percent. In contrast, the Guadalupe Corridor project received $257 million 9 in federal funds, or 47 percent of the estimated total project cost of $550 million. Other planned Bay Area Rapid Transit System extensions, estimated to cost $1.03 billion, are not expected to receive federal funds. Mr. Chairman, I vould now like to focus on an issue that is important to California and the subject of your other panels- traffic congestion. Traffic congestion is a fact of life for most metropolitan drivers in the United States--especially in the Los Angeles and San Francisco Bay areas-- where congestion is approaching gridlock proportions. In November 1989, we reported that Los Angeles and ..a San Francisco/Oakland ranked first and second, respectively, in daily vehicle miles of metropolitan travel.' Traffic congestion facing metropolitan areas cannot be solved by any single solution, such as expanded mass transit nystems. Absent other actions, such as dramatic increases in the price of automobile CaEnuting, people using mass transit instead of their automobiles will be replaced in the long run by new automobile users. 4Trafiic comreg$tiQn . tGAo/Fmm-90-1, Nov. 30, 1989). 10 In a December 1989 report on traffic congestion5, we evaluated three congestion reduction strategies: construction and reconstruction, transportation systems management, and advanced technologies. The report noted that, according to the Federal Highway Adsinistration, effective congestion mduction requires the balanced use of a variety of strategies and techniques rather than relying on any one in particular. !Fh6 report recm rdad that DOT d6V6lOp an integrated fedaral COngeStioWraduCtfOn strat6gy ahd use appropriate evaluation mechanisms to d&amine tha effectiveness of cong6stion reduction programs. California has approved several measures intended to plan for congestion relief. For example, California now requires urban counties to adopt congestion management plans to show how congestion will be reduced. These plans are rsguired to be .. consistent with regional and statewide transportation plans, Developing effective strategies to relieve traffic congestion requires the cooperation of federal , state and local govarments. We are pleased to participate in th6 Subcommittee98 hearings in California to obtain regional views as a forsrunnar of the national debate on WEfTA’s reauthorization. In this context, I would like to briefly talk about W14TAgsr6authorization issu60. 5naffic C-n. Feder&Lgtforts to T*pme &Q- (GAO/PEKD-90-2, Dee: 5, 1989). 11 Mr. Chairman, as you know, lagielation authorizing the f6dsral highway and m6es transit pr~gmme Will 6Xpir6 n6xt y6ar. The nation's surface transportation problems h6V6 fundam6nt6Zly changed since the programs were initially authorimd in 1964. With this in mind, the debate has begun on how to etructurr rmw federal surfacs transportation prograSS. In February 1990, DOT iSSU6d its etat6m6nt of national transportation policy, Movinsr. This l tat6m6nt eat8 th6 framework for developing new surface tr6nsportation progrs~~, In June 1990, the California Departmnt of Transportation issued its report BPQressm TrTChallanaes. The report details Californians recommndatione for a new national 'f transportation program. It was d6V6lOpsd through consultation with state, regional, and local officials and private busineer representatives from California and throughout the nation. With respect to urban mass transit programs, we are in the process of identifying and analyzing l svsral reauthorization iSSU6S. In analyzing these issues , WI vi11 obtain input from federal agencies, state and 10cal governments, and the privatr sector. The iSeU6e w6 have identifbd to dat6 includr th6 following: 12 -- What are the appropriate federal, state, and local govsrnment roles in planning, ov6rs6eing, and evaluating mass transit projects? -- Should mass transit op6rating assistance b6 r6duc6d or elininated and local e6tching rrrquirurnts incroa66d or decreased? -- Can intermodal r6gional traneport6tion planning approach68 be adopted to promote the ue6 of a combination of highway and Sass transit systen option6 to 8OlV6 traneportation problems in urban amas? I%YUShould state and local government planning efforts be fundsd to provide incentives for ensuring regional and intereodal planning? -- TO facilitate implenenting regional (Lnd intrreodal planning, should federal funding rsguir6m6ntS b6 Ch6ng6d to allow flexible use of highway and MSS transit funde? should highway trust funds b6 usad interchangeably by state and local governmnte for combined transit and highway project8 in Order to t6ilOr tr6m3pOrtatiOn OptionS to their specific n66ds3 AS the Congress proceade With r6authorization, it met take into consideration today'8 climat6 of fiscal constraint. This will be the climate under which th6 Subcommittee will b6 13 deliberating r6aUthOriZing mass transit programs IWCt year. Further, becausa of the massive f6deral budget d6fiCit, f6deral funds for mass transit programe will rerain scarce compared vith the n66d for mass transit SySt6mS for urban and suburban communities. Therefore, scarce f6deral lc~ss transit r6sourca must be spent in the most 6fficient and economical manner pOSSibl6. - - - - - This concluder my testimony, I will be glad to anewmr any qu6stions at this time. 14 Pfgurc 1 GAO Section 3 and Section 9 Appropriations-Fy 86-90 1.2 DalIart? In Billions 1.1 -1--*1...-1--1.-3151. 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1966 1907 1908 1989 Fiscal Years .: - Section 3-Capital - - - Section g-Capital - Section 9-Opefating Figure 2 GAO UMTA Oversight UMTA has several oversight mechanisms - l Grantee reports f Site visits * Preaward, triennial, and procurement system reviews l Independent annual audits Figure 3 GAO Preliminary Results- Types of Grantee Mismanagemc l Untimely grant closeout l Improper charges (land acquisi labor, material, etc.) l Improper contracting 9 Unnecessary purchases Figure 4 GAO Active UMTA Mass Transit Granl Total $33.2 Billion Nationwide California $3.6 Billion
UMTA Project Oversight and Mass Transit Issues
Published by the Government Accountability Office on 1990-08-08.
Below is a raw (and likely hideous) rendition of the original report. (PDF)