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Former Hampton Roads Transit CFO Henry Li responds to critical peer review of agency finances, procedures and reporting

Former Hampton Roads Transit CFO Henry Li responds to critical peer review of agency finances, procedures and reporting

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Published by Dave Forster
This text is copied and pasted from Li's email, sent May 2, 2013, to HRT commissioners and others.
This text is copied and pasted from Li's email, sent May 2, 2013, to HRT commissioners and others.

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Published by: Dave Forster on May 03, 2013
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05/03/2013

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Chair West, Vice Chair Wright, Immediate Past Chair Woodbury, Members of theCommission, Mr. Harrell,Recently I was surprised to discover a peer review presentation which listed some issuesHRT had already addressed or are addressing in a very negative way. I was also surprisedthat the presentation totally ignored the extraordinary efforts and achievements theHRT staffs have done under the Commission's leadership since 2010. As an immediatepast CFO and Commission Treasurer & Secretary, I feel compelled to share a brief history with you below how HRT has significantly strengthened its financial andoperational management over the last couples of years, and I believe, as a governingbody, you should be proud of your leadership and acknowledge staff's achievements.1. In 2010, It was discovered that there were a cost overrun by $100M and constructiondelay by one and half year of the light rail project, serious financial oversight flaws,excessive violations of federal procurement rules, and serious internal controldeficiencies. Later 2010, two federal criminal inquiries were launched, one State DOTInspector General investigation was conducted, and two comprehensive FTAaudits/reviews (financial management oversight - FMO review and procurement review)were conducted. Under the strong leadership of Chairman Wood then, a series of corrective actions were launched.3. By March 2011, 70 significant deficiencies were cited by FTA, and FTA posted strictdeadlines for the corrections, or it might suspend its annual federal assistance toHRT which accounts for 34% of HRT's operating budget and 70% of capital budget.4. By April 2011, after almost a year long national search, I was hired as the CFO andBoard Treasurer to lead agency wide effort and work with other executive teammembers such as Jim Price, Sibyl Pappas to address all 70 significant deficiencies citedby FTA, establish best practice processes and policies and procedures, and review andcorrect over 20,000 light rail related transactions traced back to 2006, among othertasks.5. By middle of 2012, all 20,000 light rail related transactions were reviewed and/orcorrected and the total cost was reduced from $338M to $316M, and over 80 bestpractices policies or procedures were preliminarily developed. HRT's financial house wasin order and public confidence was restored. All 170 corrective actions aiming toaddress 70 significant deficiencies were developed and successfully implemented withover 5,500 pages of supporting documents. FTA reviewed all supporting documentsthoroughly, closed all these findings and issued close out letters to HRT in September2012. FTA auditors and officials highly appraised the massive efforts and extraordinarysuccesses of HRT.
This significant success was a result of Commission's strongleadership under past Chair Wood and Woodbury and current Chair West, as well asthe entire HRT team's endless and relentless efforts
. As an opposite, FTA suspendedover $182M ederal funding for Miami Dade Transit due to its failure to addressing FTA
 
FMO findings (see attachments).6. Throughout 2012, the issue of lacking dedicated funding was repeatedly raised to theCommission and regional key stakeholders. In September 2012, with the team workbetween Ray Amoruso, myself and the entire team, the first HRT long term transit andfinancial plan was developed and in-depth analyses were done to show how serious HRTwas lacking the future funding and to recommend seeking dedicated funding in stateand local level and revising GOPASS 365 program.7. In May 2012, I was asked to take more responsibilities as the Chief Financial &Administrative Officer/Board Treasurer & Secretary. The Board chair and the immediatepast chair sincerely asked me to help Mr. Harrell with my in-depth transit expertise toensure HRT's further success. I pledged my commitment to Chair West.8. In February 6, 2013, Mr. Harrell further added two more functions (Legal Services andRisk Management) under my leadership.9. In February 14, 2013, I accepted a position with another transit agency and submittedthe resignation to Mr. Harrell after successfully and honorably helping him for nearly ayear.10. In March 19, 2013, one day after I left HRT, peer review team was invited to conducta three-day review including document reviews, interviews and presentation writing.Without spending any time reviewing documents before site-visit (which is an industrynorm) and without interviewing some key stakeholders (such as HRT CFOAdviser/previous Controller, internal auditor - Mr. Taylor, other executive members andmyself), a peer review presentation was released in March 22, 2013.11.
The presentation completely ignored the all successes HRT has achieved in lastcouple of years. Instead, based on HRT's Internal Auditor's investigation report andMr. Harrell's explanation as shown in the Commission's Meeting Minutes, the peerreview team presented a list of issues which HRT has either already addressed a whileago (for a majority of the issues listed) or in the process of being addressed (for asmall portion of them). Also it presented these issues either already addressed orbeing addressed in a way which appeared much more serious than it actually were ornot accurately.
 
While the facts finally have been verified and clarified by internal auditor's investigationreport, a a citizen who cares about HRT deeply, I would like to advise Commission thatthree significant challenges are still ahead of HRT:1. HRT needs a dedicated funding source and current funding structure is not sustainable.If this continues, six jurisdiction counties likely will leave HRT one by one to either joinother nearby transit entities such as Williamsburg Transit or operate their own transit

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