If history repeats itself it will be several more months before the verdict is in on whether the Federal Transit Administration is effectively overseeing major public transportation infrastructure construction in the western United States, including Honolulu’s $6.6 billion commuter rail project.

Since August, auditors from the Department of Transportation Office of Inspector General have been examining several projects in the FTA’s three western regions to determine whether the agency — which is a division of the transportation department — has been adequately assessing project financial risks and properly enforcing requirements for periodic financial and other reporting.

The audit is focusing on projects collecting federal Capital Investment Grant money including seven receiving funding from the FTA’s Section 5309 New Starts Program under terms of full funding grant agreements, or FFGAs. Besides Honolulu, those projects include two in Los Angeles and others in San Francisco, San Jose, Denver and Portland with a combined total cost of $16.8 billion and receiving slightly over $7 billion from the FTA.

Honolulu's rail project is part of a large-scale audit by the U.S. Department of Transportation's Office of Inspector General.
Honolulu’s rail project is part of a large-scale audit by the U.S. Department of Transportation’s Office of Inspector General. Cory Lum/CIvil Beat

Dan Grabauskas, HART’s executive director, said it makes sense that the OIG would select the region HART is in considering all the federal dollars that are flowing into Honolulu, San Francisco and Los Angeles. He also made clear that the audit is not in response to the current challenges facing Honolulu’s rail project.

“It’s not an audit of HART,” Grabauskas said. “It’s an audit of FTA oversight of HART and other agencies.”

Joseph W. Comé, the DOT’s deputy principal assistant inspector general for auditing and evaluation, explained the audits in testimony to a congressional committee last summer, saying the objective is to identify opportunities for the FTA to “further target its oversight activities and better use the tools it has … to control cost increases and schedule overruns” on projects it’s funding.

Those tools, said Comé, were the FTA’s project management and financial management oversight contractors, who work for and report directly to the FTA. He said it was important for the FTA to “encourage” recipients of federal funding (such as Honolulu) to “promptly address concerns identified by the PMOC.”

“As the FTA continues its oversight of these projects, it will be critical to fully analyze the results of the PMOC reports, take action where appropriate, and exercise its own oversight role in addition to the (PMOC) work,” Comé testified.

“Federal investment in designing and constructing these major transportation projects call for rigorous oversight to help ensure the projects are carried out efficiently and economically and do not compromise safety,” he said.

Under the Honolulu FFGA, the city is the official sponsor and actual recipient of $1.55 million in federal funding with HART being delegated responsibility for managing the project.

A keystone of the FTA oversight process and “centerpiece of sound capital investment planning,” Comé told Congress, is the continual updating of project financial plans which permit the FTA to “assess the reasonableness of financing assumptions” by project sponsors.

Comé emphasized that performance audits such as the one currently being conducted in the western regions are distinctly different than OIG investigations which focus on criminal and civil matters where there are allegations of fraud.

FFGA Projects Included In Western Region OIG Audit:

Sponsor Project Budgeted Project Cost FFGA Funding
Honolulu 20-Mile Commuter Rail $5,121,690,000 $1,550,000,000
Los Angeles Westside Purple Line Extension $2,821,960,000 $1,250,000,000
San Jose Berryessa Extension $2,330,020,000 $900,000,000
Denver Eagle Commuter Rail $2,043,140,000 $1,030,450,000
San Francisco Central Subway $1,578,300,000 $942,200,000
Portland Portland-Milwaukie Light Rail $1,490,350,000 $745,180,000
Los Angeles Downtown Rail Transit Line $1,402,930,000 $669,900,000

The audit underway is the second FTA regional oversight examination conducted during the past three years. Following a 16-month study of FTA’s Region III headquartered in Philadelphia, an OIG report issued in August 2012 found several shortcomings, among them that the FTA was not providing its PMOCs “with adequate guidance or oversight” to ensure the PMOC’s consistently identified and accurately tracked deficiencies found when they reviewed projects receiving federal funding.

The OIG also found “a clear lack of guidance” by the FTA’s Washington headquarters spelling “out how and when regional offices should use remedies and sanctions” to force project sponsors to correct deficiencies.

One of those remedies could be the withholding of federal funds, which the FTA has threatened to do with HART if the Honolulu City Council doesn’t approve implementing a five-year extension of the GET surcharge.

Councilman Joey Manahan believes any additional oversight of the project is good. That’s why he said the City Council is taking its time to approve any extension of the GET surcharge to help pay for more than $1 billion in shortfalls.

But he also says that he’d like to see a local audit of the GET money that’s been collected by the state and doled out to the city so far. Manahan said he would want such an audit to look at how the money is being collected and used. That includes a probe of the state’s 10 percent administrative fee that it skims off the GET surcharge collections.

“We haven’t had an audit of the local sources of funding, mainly the general excise tax, either from the city or the state,” Manahan said. “If they (the DOT) have a system of auditing how the New Starts money is being spent we should also have an audit of how the local source of funding, the general excise tax, is being spent or collected or used.”

The Honolulu City Auditor’s Office is currently performing an audit of the rail project that will look into several key areas, including contract awards, a detailed accounting of revenues and expenditures and the likelihood for additional cost overruns. The audit is expected to be completed before the City Council takes a final vote on the rail tax extension.

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