State Auditor Says METRO's Financial Systems Fine
Tuesday, December 02, 2008 5:37 PM
A state audit report that examined METRO's finances for 10 months found that the transit agency is engaging in sound financial policies and has adequate processes in place to manage METRO's planned, long-term expansion for rail.
The audit, which began January 2008 and concluded October 2008, included METRO's General Mobility Program, financial reporting, ridership reports and performance audit reports. Under the General Mobility Program, METRO provides about $100 million every year to the region for new roads and infrastructure. The report was released yesterday.
Other major findings include:
- Financial and performance reports for FY2007 were internally consistent and supported by the agency's information systems.
- METRO complied with policies and procedures for travel expenses, General Mobility Program expenditures and long-term expansion.
- METRO consistently implemented recommendations from internal and external audits and reviews.
METRO worked closely with auditors and provided them with all available materials, said Frank J. Wilson, METRO president and CEO.
"We believe the preponderance of the findings were fair and accurate," said Wilson in a news release. "But there were some items that needed clarification, which are noted in our responses contained in the audit."
For example, the report states that "The Federal Transit Administration (FTA) noted that the plans for two federally funded light-rail corridors call for total borrowing that exceeds the Transit Authority's current debt capacity. The FTA determined that the Transit Authority had demonstrated its technical ability and capacity to develop and manage a third federally-funded light-rail corridor, but it noted that the schedule for that corridor project was optimistic when compared to the other two corridor projects."
Management at METRO vigorously disputes that.
In METRO's formal response, the agency pointed out the "FTA's statement incorrectly assumes that METRO borrows $4.6 billion. We and our financial advisors met with FTA on Sept. 11, 2008, to correct this error. The $4.6 billion figure is, in fact, the total debt service (principal and interest) over the 30-year life of the bonds - not the principal amount borrowed."
METRO pointed out that "the net annual cash flow available for debt service on the METRO Solutions Phase 2 projects...is more than sufficient to cover the debt service obligations in every year through the payoff of the bonds." The debt service is not just for the North and Southeast Corridors.
"Including all METRO obligations through 2030 (operating costs, debt service and METRO Solutions capital), METRO will end up with over $2.3 billion in cash reserves in 2030," wrote METRO in its formal response.
METRO said it is unaware of any issues that the FTA has with the agency's ability to build the lines with existing debt capacity.
In fact, the FTA recently praised METRO's light-rail program, calling it "innovative" in its use of public-private partnerships. The FTA also complimented METRO on its streamlined procedures.