Norton Asks FTA to Help Give WMATA a Fresh Start with a New Financial Monitoring Regime That Relieves Agency’s Short-Term Borrowing

WASHINGTON, D.C.—The office of Congresswoman Eleanor Holmes Norton (D-DC), ranking member of the Highways and Transit Subcommittee and one of the "Big Four" leaders who wrote the recently signed surface transportation legislation, today released her letter to Federal Transit Administration (FTA) Acting Administrator Therese McMillan inquiring whether the new year should bring changes in the current form of FTA monitoring of the Washington Metropolitan Area Transit Authority (WMATA) to help relieve the transit agency from dependence on short-term borrowing. Norton asked FTA to look into whether a new infusion of federal funding for WMATA, WMATA's new leadership and its new budget and financial controls could lead FTA to use a form of financial monitoring that does not cause WMATA to seek short-term borrowing for its daily operations in the new year. For the past 21 months, FTA has required WMATA to submit all requested federal reimbursements through paper – rather than the electronic methods typically used – after FTA found serious weaknesses in WMATA's budget and financial controls. In her letter, Norton detailed the material weaknesses FTA found and the extensive changes WMATA has made, but said that she believed WMATA must continue to be under a FTA monitoring regime for now.

Norton wrote, "As one of the four bipartisan House leaders of the recently enacted FAST Act, I was able to get a 25 percent increase in federal transit funding for the District of Columbia, most of which will go to WMATA for state of good repair capital projects. In addition, working with regional Members, we got the full $150 million capital spending restored. WMATA must take full advantage of this unusual increase....[T]his funding…should be used as a springboard, not a back-fill. Now would be a good time to encourage a new start, considering whether changes at WMATA, including new leadership, should lead to some changes in the nature of the monitoring process other than paper procedures that have contributed to short term borrowing for operations. I believe that it is too early to relieve WMATA of strict monitoring, but even with the new funding and the changes…WMATA may lose any headway effect and continue to tread water, with its riders continuing to pay the price."

Norton's full letter is below.

Therese McMillan
Acting Administrator
Federal Transit Administration
1200 New Jersey Avenue, SE
Washington, DC 20590

Dear Acting Administrator McMillan:

I very much appreciate the Federal Transit Administration's (FTA) oversight of the Washington Metropolitan Area Transit Authority (WMATA). The need for oversight over WMATA remains clear. To reinforce your oversight, as the lead Highways and Transit Subcommittee Democrat on the Transportation and Infrastructure Committee, my bill, the Protect Riders of Metrorail Public Transportation (PROMPT) Act, was included in the Fixing America's Surface Transportation (FAST) Act and broadened to include other jurisdictions as well, and just approved by Congress.

I write now concerning the FTA action that placed WMATA on drawdown restrictions for its federal reimbursements after the FTA's regularly scheduled Financial Management Overview (FMO) found a number of material weaknesses in WMATA's budget controls and significant weaknesses in its management of FTA funded assets. FTA's FMO found material weaknesses in WMATA's budget controls, controls over reporting of federal expenditures, and controls over procurement. FTA found significant deficiencies in WMATA audit committee oversight of compliance and internal controls, cash and grant management controls, management and disposition of FTA funded assets, access controls over the financial management system, controls over job order contracts, and implementation of the federal financial reporting process and procedures. FTA also issued advisory comments with regard to improving documented procedures for payroll and human resources, organizational structure, an entity-wide risk assessment, and risk assessment of WMATA's financial management system. I have been pleased to read often of FTA's work to change the safety regime at WMATA.

WMATA has concurred with all of the FTA findings and has steadfastly undertaken corrective actions. To address the FMO, WMATA has done the following: hired Deloitte to conduct an internal controls analysis of the asset management and financial accounting life cycle processes, created and implemented a Standard Operating Procedures document, revised procurement manuals, and restructured management so that the Chief Procurement Officer is elevated to the Executive Leadership Team. FTA has approved WMATA's corrective action plan.

As you know, for the past 21 months, WMATA has been subject to drawdown restrictions requiring every requested reimbursement to be filed and reviewed by the FTA through a paper method, rather than the electronic, automatic method that other transit agencies use. While the FTA has placed similar drawdown restrictions on other large transit agencies with similar financial management issues, the reimbursement process faced by WMATA is lengthy, adding days if not weeks to what would take one day electronically. What concerns me most now is that because of the delay in reimbursements, WMATA has had to go to the marketplace to obtain short-term credit on three occasions simply to sustain its operations, adding costs to a transit system that is already in need of funding.

As I have indicated, I understand and am grateful for FTA's FMO which has led to a new set of budget and financial controls. Through its work with the FTA, WMATA has brought in a new financial team and has worked with apparent success to address every finding and recommendation of the FTA. Further, I understand that the new Chief Financial Officer has been responsive and cooperative to FTA's requests. WMATA submitted its 2014 audit this August and will be submitting its 2015 audit in the near future. On November 30, 2015, WMATA brought on board an entirely new financial team and now a new general manager.

I have not heard complaints from WMATA about its drawdown procedures, which were plainly necessary when they were imposed, and I believe close monitoring of WMATA's financial procedures remains necessary. WMATA's problems are comprehensive – from management and operations to finances. That is why as one of the four bipartisan House leaders of the recently enacted FAST Act, I was able to get a 25 percent increase in federal transit funding for the District of Columbia, most of which will go to WMATA for state of good repair capital projects. In addition, working with regional Members, we got the full $150 million capital spending restored.

WMATA must take full advantage of this unusual increase in funding to build upon as the agency moves forward. I believe that this funding, to the greatest extent possible, should be used as a springboard, not a back-fill. Now would be a good time to encourage a new start considering whether changes at WMATA, including new leadership, should lead to some changes in the nature of the monitoring process other than paper procedures that have contributed to short term borrowing for operations. I believe that it is too early to relieve WMATA of strict monitoring, but even with the new funding and the changes outlined above, WMATA may lose any headway effect and continue to tread water, with its riders continuing to pay the price. Does FTA believe that contributing to WMATA's borrowing is still necessary whatever its progress and should continue until there is no need of monitoring whatsoever? Is there any form of monitoring other than the current paper method that would do the job and might reduce the need for borrowing for current operations? I am pleased that WMATA is not raising fares but instead is contemplating unprecedented relief for riders, to allow WMATA to recover from a 5 percent decrease in ridership over the last five years. This is probably a smart strategy considering the current estrangement of riders, but in the short term, such relief for riders will likely mean further losses.

I am not in a position, as you are, to know whether changes in monitoring are advisable or, if so, what form the process should take. I write only to suggest a fresh look by FTA as to whether or not paper drawdown procedures are the only way FTA can monitor WMATA.

Sincerely,

Eleanor Holmes Norton