After more than two years of what some called onerous restrictions, Metro is finally out of the financial “penalty box” with federal regulators, the Federal Transit Administration said Thursday.
In a letter sent to Metro General Manager Paul J. Wiedefeld, FTA Regional Administrator Terry Garcia Crews said the transit system had made “significant progress in improving its financial controls” and would be allowed to spend federal money without waiting months for reimbursements to tap more than $400 million in federal grants.
“It is imperative that [Metro] continue to monitor and build on the internal controls and procedures that have improved through this process,” Crews wrote.
The restrictions, put in place in 2014, were an attempt to tighten the reins on Metro’s financial staff after outside consultants found that the staff had practiced poor bookkeeping and awarded millions of dollars in no-bid contracts.
After those issues came to light, the FTA mandated that Metro switch to a practice known as “restricted drawdown” for spending federal grant funds: Rather than automatically receiving electronic reimbursements from the federal government that would be subject to later audits, Metro would need to spend its own money first and then file paper requests for reimbursements, which would be scrutinized by FTA staff before Metro was repaid — often months later. The practice often meant that Metro would need to borrow money from outside lenders, at extra cost, to cover short-term spending needs.
The requirements were lauded by federal lawmakers who said Metro was wasting taxpayer dollars.
But the new process was also highly time-consuming for Metro’s budget staff, and it was costly to pay interest on millions of dollars in short-term loans. At times, there were concerns within the agency about coming up against maximum borrowing caps and incurring a cash-flow problem.
Now, the FTA says Metro has improved enough that the agency’s financial staff will be allowed to discontinue the practice for all federal grants awarded after June 2015. The decision can be seen as a vote of confidence in Wiedefeld, who came into Metro’s top job a little over one year ago and promised financial accountability.
“Today’s action by FTA to remove financial restrictions on Metro demonstrates the significant progress we have made toward getting our financial house in order and ensuring full compliance with federal requirements,” Wiedefeld said in a statement.
Del. Eleanor Holmes Norton (D-D.C.), the District’s nonvoting member of Congress, said Thursday that she was relieved to see that the “burdensome restrictions” are now being lifted — a move she has requested for months.
“FTA’s diligent financial monitoring of [the Washington Metropolitan Area Transit Authority] was essential to get the agency into acceptable financial standing with sound budget and financial controls. This exercise has been a costly lesson for WMATA,” Norton said.
Of late, she said, the practice has been doing more harm than good.
“Because the resulting costs will ultimately fall to the public,” Norton added, “the last thing financially ailing WMATA needs is the long time it has taken FTA to do its review.”
Rep. Don Beyer (D-Va.) called the announcement a “milestone” for Metro.
“It demonstrates to regional, state, and Federal stakeholders that WMATA is getting its fiscal house in order,” Beyer said in a statement. “This will assure those stakeholders that financial controls are in place and that investments in the system will be properly managed going forward.”
“Numerous challenges still confront WMATA,” Beyer added, “but this is a big step in the right direction.”
Michael Goldman, chairman of the finance committee on Metro’s board of directors, said he was also pleased at the announcement — for what it says about Metro’s improved financial standing at the FTA and also because of concerns about what would happen if the reimbursement restrictions continued through January.
Under a new presidential administration, Goldman said, it would probably have taken many more months before newly minted agency officials would have gotten around to addressing the issue.
“If this were to carry over into the new administration, there’s no telling what kind of timeline there would’ve been,” Goldman said. “It’s nice to have that uncertainty lifted.”
Even so, the FTA warned in its letter that the agency will continue to scrutinize Metro and watch for backsliding into old practices. Goldman said he is hopeful that a relapse won’t occur.
“I think this has been a wake-up call over the last two years,” Goldman said. “I think that, going forward, we have a good deal of confidence in these individuals and in these systems.”