Finance & Administration Committee

Information Item IV-A

March 12, 2015

Financial Status Update and

FMO Progress Report

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Washington Metropolitan Area Transit Authority

Board Action/Information Summary

TITLE:

Financial Status Update and FMO Progress Report

PRESENTATION SUMMARY:

Update the Committee on (a) the status of WMATA's Corrective Action Plan (CAP) responses to the Federal Transit Administration's (FTA) Financial Management Oversight (FMO) report and (b) WMATA's overall financial status.

PURPOSE:

Staff will provide a progress report on the status of all FMO CAP items, fulfillment of the FMO report's recommendations, and identification of next steps. Staff will also provide a broader update on WMATA's financial status, including cashflow and credit availability, grantreimbursements and applications, and the FY2014 external audit.

DESCRIPTION:

Key Highlights:

WMATA committed to 65 CAP items in response to FTA’s FMO findings andadvisory comments. To date, documentation has been submitted for 62 of the 65CAPs.Two Material Weakness CAP submissions, originally due September 8, 2014, havebeen extended to June 30, 2015, and the final Advisory Comment CAP has acommitted due date of June 30, 2015.Overall, WMATA's financial picture has substantially improved since the FMO report was issued last year. Financial institutions have demonstrated confidence inWMATA's financial capacity; WMATA has a favorable cash position and isperforming according to budget; federal grant reimbursements have increased; and all federal grant applications through Federal Fiscal Year 2014 have either been awarded or are in process and expected to be awarded shortly.

Background and History:

The FMO report of June 10, 2014, identified nine separate findings, including threematerial weaknesses and six significant deficiencies. An additional five advisorycomments were also identified. A total of 45 recommendations from FTA for addressingthe findings and comments were included in the FMO report.

Discussion:

Action Information MEAD Number:201369

Resolution:Yes No

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The FMO Dashboard contains the status as of March 4, 2015 of the 65 CAP items byfinding level, the status of FMO-related training in key areas, a chart illustrating thequality and acceptance level of recent drawdown packages, and a summary of thenumber of FTA recommendations fulfilled based upon CAP submissions.

Overall, WMATA's financial picture has substantially improved since the FMO report wasissued last year:

The existing $75 million credit line with Wells Fargo was renewed on February 26. WMATA has credit lines of $302.5 million with three banks to support cash flow requirements. WMATA has substantial cash on hand and is continuing to make timely payments to vendors and contractors. WMATA’s credit ratings are also steady at Aa3 with Moody’s and AA- with S&P, reflecting market confidence in WMATA’s long-term financial stability and capacity to repay debt.WMATA has drawn down $72 million in FTA grant reimbursements since January 1 and $142 million since the imposition of the manual draw requirement as part of the FMO report.WMATA is now up-to-date on all federal formula and PRIIA grant applications. One FTA formula grant application with a federal value of $273.6 million was awarded by FTA on February 13. WMATA has now received a total of three grant awards since the beginning of January with a total federal value of $584.9 million. The FFY2014 PRllA grant application, with a federal value of $148.5 million, is currently with the Department of Labor (DOL) for review and certification. Staffanticipates that this pending grant application will be awarded during March 2015. The award of these additional grants will facilitate increased federal grant reimbursements over the coming months.WMATA’s external financial audit for FY14 has been delayed as staff works with the new auditors but is on track for completion in April. All creditors have been notified and none have raised an objection.Finally, WMATA is favorable to budget on operating expenses and expects to cover the FY2014 deficit ($23 million) without requiring additional jurisdictionalsupport.

In addition, at the request of Congress, the Government Accountability Office iscommencing a review of WMATA’s response to the Financial Management Oversightreport and NTSB recommendations, which WMATA looks forward to presenting as soonas possible.

FUNDING IMPACT:

TIMELINE:

No funding impact; information item onlyProject Manager: Thomas J. Webster

ProjectDepartment/Office: OMBS/CFO

Previous Actions July 2014 through February 2015 - Monthly presentations to FA Committee on FMO status of FTA submissions and CAP items.

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RECOMMENDATION:

No recommendation; information item only.

Anticipated actions afterpresentation

March 2015 and forward - complete remaining three CAP items and long-term compliance monitoring.

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Financial Status Update andFMO Progress Report

Finance & Administration CommitteeMarch 12, 2015

Washington Metropolitan Area Transit Authority

Purpose

• Update on WMATA financial status• Monthly Board progress report on FMO

Corrective Action Plans (CAPs), FTA feedback and follow-ups

Financial Update

• $75 million credit line with Wells Fargo renewed on February 26– WMATA has credit lines of $302.5 million with

three banks to support cash flow requirements

• Sufficient cash on hand

• Credit ratings steady at Aa3 with Moody’s and AA- with S&P

Financial Update (cont.)

• $72 million in FTA grant reimbursements since January 1; $142 million since start of manual draw requirement

• Current on all federal formula and PRIIA grant applications through FFY14

• FY2014 external financial audit on track for April completion

• Operating expenses favorable to budget– Projecting to cover FY2014 deficit ($23 million)

without additional jurisdictional support

FMO Dashboard as of 02/28/2015

FMO Dashboard – CAPs Status by Finding

FMO Dashboard – Reimbursement Request Success Rates

FMO Dashboard – Compliance Training

475

300

200

448

267

171

0 100 200 300 400 500

Procurement

Grants Management

Asset Management

No. Trained Staff Training Estimate

FMO Dashboard – Completion of FMO Recommendations

FMO Summary Timeline

Final FMO Report

received from FTA

June 10, 2014

June 30 –Sept. 30

62 CAP items

submitted to FTA

30-, 60- & 90-day CAP follow-ups received from FTA

Oct. 1 –Oct. 22

Extension dates

submitted to FTA for

two 90-Day CAP Items

Oct. 31

Nov. 5

90-day CAP follow-ups submitted

to FTA

30-, 60- & 90-day CAP follow-ups received from FTA

Dec. 10 -Dec. 22

Dec. 23 –Jan. 30

30-day & 90-day

CAP follow-ups submitted

to FTA

Oct. 15

30- & 60-day CAP

follow-ups submitted

to FTA

Additional 90-day CAP follow-ups received from FTA

Feb. 25

• FTA follow-up response received February 25:– WMATA’s FTA Funded Asset response and Grants

Close-Out Policy revision deemed adequate– Four follow-up items related to FMS Access Controls

due March 20

• WMATA’s Office of Internal Compliance has FMO CAP reviews scheduled during FY2015 for:– Budget Controls– Cash & Grants Management– Procurement & Job Order Contracts – Federal Financial Reporting– FTA Funded Assets

Update

• Achieve progress milestones; submit FMO responses due March 20; conduct monthly FTA Region III reviews

• WMATA’s Office of Internal Compliance will continue follow-up reviews of FMO CAPs as part of overall compliance efforts

Next Steps