MOL ae MARYLAND DEPARTMENT Boye tert ‘OF TRANSPORTATION lew Tuy 1, 2019 WMATA Board of Directors 5005 Street NW Washington DC 20001, ‘Mr. Paul Wiedefeld General Manager and CEO ‘Washington Metropolitan Area Transit Authority 6005" Sureet NW ‘Washington DC 20001, Deat WMATA Board Members and Me, Wiedefeld Pursuant to Chapter 351/352 ofthe Acts ofthe Maryland General Assembly of 2018, ‘Trarsportation Article 10-205,(f(2)(1) and due tothe continued lack of a Capital Funding ‘Agreement (CFA) with Washington Metropolitan Area Transit Authority (WMATA), atthe direction of Governor Hogan, this letter isto inform you that the Maryland Department of ‘Transportation (MDOT) has not certified the reports received by WMATA and consequently, the State of Maryland will be withholding $55,590,425 in capital funds due to be dispersed on July 1,2019. The WMATA operating funds from the State of Maryland will not be impacted. ‘Thisis the latest unfortunate, but necessary, step the State of Maryland believes it must take in response to an ongoing pattem of fiscal obfuscation and a lack of cooperation from WMATA. ‘Thisaction is in accordance with Maryland law and follows the clear directcn from the Maryland General Assembly’s findings and recommendations ofthe Department of Legislative Services Office of Legislative Auaits. Background In February 2016, a legislative audit of MDOT conducted over the period of 2011-2015 found that “there [was] a lack of assurance that Maryland’s portion of WMATA’ allocated operating deficit and capital project costs was accurate and supported.” The audit made the following recommendations to which MDOT concurred: serpent Carer Hanae HONS DRG | GBB7IELaE | Hrvend ly TY AO6S9722 | mec marvndonWMATA Board of Directors Mr. Paul Wiedefeld Page Two We recommend that MDOT establish a comprehensive process to verify that WMATA's annual operating and capital grant subsidies are properly calculated. Specifically, MDOT should: @ determine the critical components of WMATA's grant subsidy allocation calculations and obtain applicable supporting documentation for these critical components 3. perform a documented review of the annual grant subsidy allocation calculations for propriety, and ensure the calculations are consistent with supporting documentation and formula requirements established by WMATA's Board of Directors; © conduct annual audits of WMATA's operating and capital grant subsidy calculations, and recover any payments made that were not in accordance ith the grant agreements. In response to these findings, the MDOT Office of Auaits attempted to conductan a WMATA’s operating and capital subsidies fr fiseal years (FY) 2016 and 2017. WMATA was unwilling to comply with these audits and refused to provide data requested for the purposes of auditing its FY17 capital program. As a result, MDOT withheld $1,189,264 of ‘the FY18 fourth quarter capital payment. Additionally, the MDOT Office of Aucits uncovered ‘miscalculation in WMATA’ operating funding formula, which resulted in a $1,256,224 reduction in payment to the operating subsidy. ‘The withheld funds were to be paid to WMATA once they complied with the audit requests for FYI. To date, WMATA has yet to comply with the requests for data, and the audit remains unresolved, Fiseal Year 2019 Throughout FY19, the MDOT Office of Audits again atempted to complete a compliance audit of WMATA’s operating subsidy and capital program. To date, this audit has not reached a conclusion. WMATA has refused to offer details ofthe methodology they used to calculate the ‘operating subsidy and has not provided requested information onthe capital programWMATA Board of Directors Mr. Paul Wiedefeld Page Three During this time, WMATA has remained steadfast in resisting MDOT's attemgt to implement ‘meaningful financial oversight, Recent examples include ‘+ Fuilure to share with MDOT or WMATA Board members the actual projects inthe Capital Improvement Program and their timing; ‘+ Anoffer to provide MDOT with “re-created” data for the FY16 and FYI7 capital program because WMATA could not provide the original data; and ‘+ Assolicitation by WMATA to receive FY20 capital grant funding without having a Capital Funding Agreement in WMATA has continued to point to its annual independent financial audit as suficient, ignoring MDOT's atempt to perform a compliance audit as required by the Maryland General Assembly and its auditors. The WMATA’s independent audit, however, doesnot speak to how WMATA provides for “effectiveness of the entity's internal contol,” nor does it allow MDOT to “performn 1 documented review [to] ensure the calculations are consistent with supporting documentation.” ‘Accepting WMATA’s audit would be in defiance of the Maryland General Assembly's recommendations, to which MDOT concurred in 2016. Following Governor Hogan's commitment to provide dedicated funding to remedy a bona fide MetroRail safety emergency, WMATA’s board, under the leadership of Jack Evans, has requested significant increases in capital funding. The State of Maryland has inereasd its subsidy to WMATA fom $467 million in FY17 o a proposed $741 million in FY20, yet WMATA has failed 1o demonstrate how past allocations were spent and how ational funds will be spent in the future. The continued stonewalling by WMATA on compliance audits prevents the State ftom seeing what is occurring with he funds Maryland taxpayers provide, If ‘Marylanders are going to continue to fund WMATA at these exceptional levels, then Marylanders are owed a very detailed account of how WMATA has been spending and will spend in the future, WMATA’s books cannat continue to be a financial black hole, absorbing. very dollar it ean but providing no information or data that Marylanders expec from public institutions. AA year ago, MDOT believed that taking step to require accountability would send a signal to WMATA thatthe expenditure of Maryland taxpayer funds requires fiscal oversight. Our efforts seem to have yielded the opposite effect. WMATA continues to seek additional money from Maryland without acknowledging any need for accountability or transparency. ‘Throughout FY19, WMATA recognized that it didnot have a Capital Funding Agreement (CFA) in place for either the Capital Improvement Program or the Dedicated Fund. A CFA isa basic and necessary safeguard to hold the recipient of any grant funding responsible and accountable, ‘Remarkably, WMATA has declared that no CFA is needed for ether fund,