UCI Reconciliation – Billing – Invoicing Yolanda Newton Local Assistance Division May 24, 2017

Agenda Brief Overview of UCI and UCI Administrative UPC’s Funding UCI Reconciliation and VDOT Internal Audit Findings UCI Worksheets Life to Date Project Summary Schedule (Request for federal reimbursement) UCI Year End Financial Summary Tying It All Together

Overview of UCI and Administrative UPC’s As each locality joined the Urban Construction Initiative (formerly First Cities) they assumed locally administered projects through a programmatic agreement Some of these projects were already underway by VDOT A UPC (project number) already existed in VDOT’s financial system When a UCI locality assumed a project, expenditures for prior work performed by VDOT or the Locality was covered with existing allocations Any remaining formula state funds were paid to the locality in quarterly payments Each locality was made aware of the quarterly payments amount and amount of federal funds available for reimbursement Most projects were funded mainly with Urban formula funds Urban formula funds were split 80% federal; 18% state; 2% local match This percentage split made billing and invoicing easy to track When the Urban Construction Initiative first started in 2005, the program was geared towards the use of urban formula funding. As UCI localities assumed their projects, any existing expenditures were covered with existing allocations already on the project and balances of Urban formula state funds were paid to localities in quarterly payments. The amount of state funds each locality received was based on the cost of the project and the amount of urban formula state funds and formula state match allocated to each project. Each locality was made aware of the amount of quarterly payments each fiscal year. Projects were funded mainly with Urban formula funding that had a clear 80% federal; 18% state and 2% local match. The use of federal – state and local funds was to be accounted for on the “project life to date summary” the locality submitted with each invoice.

Overview of UCI and Administrative UPC’s An administrative UPC was established for each UCI UPC The purpose of administrative UPC’s is to capture VDOT oversight charges to be billed to the locality Eligible oversight charges can be found in Chapter 13 of the LAP Manual The locality can request backup documentation to support billing Each year VDOT oversight charges should be reviewed and localities and VDOT should be in agreement with oversight cost on each phase VDOT oversight billings should never be a surprise to the locality After the locality reimburses VDOT for oversight charges, they can in turn bill VDOT for those charges @ 80% if federal funds remain on the project

Funding Urban formula funds were no longer programmed after 2009 Other funds applied to UCI projects had different rules and the 80%-18%-2% percentage split may not apply Localities have to account for the use of quarterly payments on the project life to date summary – federal reimbursement request form. The quarterly payments could be accounted for in the 18% and 2% local match on the form Some federal funds included a soft match in which the non-federal share of a project’s cost could be matched through the use of toll credits Localities did not have to account for state funds received from quarterly payments on the phase in which the soft match credit was applied State funds included Revenue Sharing which requires a 50% local match The various funds types applied to projects make tracking federal–local–state expenditures difficult to track. With urban formula funding no longer being allocated to projects after 2009, different types of funds and funding rules were being used on all projects including UCI. In addition localities were allowed to apply for revenue sharing funds on UCI projects which required a 50% local match. To complicate things further, soft match were applied to some projects. Section 120(j) of Title 23 permitted the non-Federal share of a project's cost to be met through a "soft match" of toll credits. When soft match is applied as the match to federal funds on projects, localities are not required to account for state funds on the “project life to date summary”. The Appropriations Act includes language removing the 2% match requirement for projects initiated under this initiative after July 1, 2005. These projects will be identified as such in the SYIP and on program worksheets. All of this made the once easy 80%federal; 18%state; 2% local funding split more difficult to track. I’ll go over a project life to date summary in a later slide.

UCI Reconciliation Central Office – Local Assistance Review of UCI Projects UCI and Administrative UPC’s were not properly used Resulted in several over–reimbursement of federal funds to localities Required VDOT to repay federal funds to FHWA Required Localities to repay VDOT federal funds Discovered project life to date summaries were not completed correctly Did not properly account for use of federal, state and local funds VDOT district signed off on incorrect “Life to Date Summaries/Invoices” Appeared to internal auditors that state and local funds were not properly applied to projects Local Assistance performing a review of all UCI UPC’s and their associated Administrative UPC to ensure proper use Working with districts to review project activities Local Assistance has been working with several districts to resolve issues Local Assistance Division performs yearly reviews of all urban project including UCI projects. During this review, it was discovered UCI UPC’s and their associated Administrative UPC were not being used properly and UCI worksheets were not being kept up to date as funding changed and invoices were processed. It was also discovered that VDOT oversight charges were being made to the UCI UPC and not the Administrative UPC which skewed the amount of federal funds available for reimbursement and localities. In addition localities were not being billed for VDOT oversight charges. Local Assistance is in the process of working with districts to reconcile all UCI and their associated Administrative UPC’s. In addition it was discovered the “project life to date summary” was not being completed correctly by some localities and VDOT was signing off and approving the invoices. As mentioned in previous slides this is partly due to funding and funding rules changing over time and those changes not being communicated to localities. An example is the forms used for reimbursement requests and tracking of funds were not updated timely. Also, with changes in VDOT personnel over the years, most of the original staff trained for UCI are no longer working with those projects.

VDOT Internal Audit In 2016 UCI projects underwent an audit by VDOT’s Assurance and Compliance Office (ACO) ACO’s Findings: Basically the same as items already discovered by Local Assistance Division Localities did not properly account for the use of federal state and local funds Localities and VDOT personnel signed off on summaries that were completed incorrectly Localities were not signing off on the “project life to date summaries” In Addition Due to how VDOT’s financial systems tracks expenditures and bills FHWA, it appeared localities were not properly using state funds paid in quarterly payments Some VDOT offices were processing invoices under state activities instead of federal activities causing VDOT not to bill FHWA thus being not collecting federal funds already paid to localities Although Local Assistance Division was aware of some issues with UCI projects, we did not have the opportunity to review all projects before the ACO audit occurred. We had already resolved several over reimbursements and were in the process of resolving several others we found. ACO audited projects across the state and we have already resolved several projects with adverse findings. There were eight projects total with adverse findings with two already resolved. If there are issues with a project in your locality, we will work with our District offices and they will contact the locality. As bad as this may sound overall the program is working like it should and nothing has happened that can’t be resolved. This leads to the steps we are taking to make things easier for everyone involved (localities, VDOT district and Central Office Divisions).

UCI Worksheet for Urban Formula Only Urban Construction Initiative (UCI) Project Funding Worksheet Date 11/1/2005 Project Number:   UPC: AAAAA Locality: City of Hampton Project Narrative Scope: Metropolis Boulevard From: MP 0.0 To: MP 0.01 Locality Project Manager Contact info: Department Project Coordinator Contact Info: VDOT Contact Name and Number Project Estimates Preliminary Engineering Right of Way and Utilities Construction Total Estimated Cost Estimated Locality Project Expenses $20,000 $100,000 $350,000 $470,000 Estimated VDOT Project Expenses $1,000 $2,000 $5,000 Estimated Total Project Costs $21,000 $102,000 $352,000 $475,000 Project Cost and Reimbursement Phase Estimated Project Costs Funds type (Choose from drop down box) Local % Participation for Funds Type Local Share Amount Maximum Reimbursement (Estimated Cost - Local Share) Estimated Reimbursement to Locality (Max. Reimbursement - Est. VDOT Expenses) $0 UCI Urban 20% $4,200 $16,800 Total PE $15,800 Right of Way & Utilities $20,400 $81,600 0% Total RW $79,600 $319,062 $63,812 $255,250 $32,938 Local Funds Total CN $253,250 $68,012 $353,650 $348,650 Total Maximum Reimbursement by VDOT to Locality (Less Local Share) Expenditures Prior to UCI Acceptance Estimated Total Reimbursement by VDOT to Locality (Less Local Share and VDOT Expenses) Project Financing Urban Formula Federal Quarterly Payments Aggregate Allocations (A+B+C+D+E+F) $442,062 Program and project Specific Funding Requirements ● The total expenditures before UCI participation is $887,488 prior to UCI particiption is ● The total expenditures as of 5/1/2017 is $ 34,300 ● This is a limited funds project. The locality shall be responsible for any additional funding in excess of ● The total project balance is $ 319,350 as of 5/12/2017 This is an example of a UCI worksheet funded with urban formula funding. In this example, the locality has received the state match to the urban formula funding in quarterly payments. Explain estimates and phase costs and how funds are distributed for each phase. Explain how total expenditures represent the amount of invoices reimbursed to the locality.

Life to Date Project Summary Federal Reimbursement Request Form DRAFT Life to Date Project Summary Schedule - Request to VDOT for Federal Reimbursement This invoice represents a cost to the City of $15,000 in which the locality can request 80% reimbursement of federal funds. $12,000 represents 80% of the cost to the City. City Name Hampton Invoice Number 121314 Project ID/UPC# AAAAA/UPC 60104 Invoice Date 11/28/2005 Project Description Metropolis Boulevard Invoice Amount   $ 12,000.00 Federal Project ID# 5401538 Billing Period 10/1-10/31/2005 Request Number 80% Invoice Amount Adjustment Date Adjustment Amount Project to Date Request for Reimbursement Project to Date Collected Balance Outstanding Comments 1 1234 7/31/2004 $ 10,000.00 $ - $ 10,000.00 $ 10,000.00 $ - 2 5678 8/30/2004 $ 5,300.00 $ 15,300.00 $ 15,300.00 3 91011 10/30/2004 $ 7,000.00 9/22/2004 $ (1,800.00) $ 20,500.00 $ 20,500.00 4 11/28/2004 $ 12,000.00 $ 32,500.00 $ 12,000.00 Amount not yet reimbursed to locality Funding Summary Invoice Total Funding Summary Project Life to Date Total Phase Total Federal Dollars Requested State Dollars Applied Local Match Applied Total Project Expenditures Summary of all invoices submitted indicating how federal-state-local dollars were applied to the project Pre. Eng $ 10,000.00 $ 2,250.00 $ 250.00 $ 12,500.00 Right of Way $ 5,300.00 $ 1,192.50 $ 132.50 $ 6,625.00 Construction $ 2,700.00 $ 300.00 $ 15,000.00 $ 19,000.00 $ 4,275.00 $ 475.00 $ 23,750.00 Total $ 34,300.00 $ 7,717.50 $ 857.50 $ 42,875.00 80% 18% 2% Total Cost *This scenario assumes all reimbursements requested of VDOT are eligible federally participating expenses and the Federal participation rate is equal to 80% on all phases of work and a 2% local match is required on this project Certification I certify that the above invoiced amounts are correctly calculated, the items being requested for payment have been used or installed on the project, and the costs are allowable per state and federal regulations. Documentation to support the invoiced amounts is attached. Finance Director or Designee Signature Director of Finance This is a sample of a “Project Life to Date Summary – Federal Reimbursement Request Form” for the same project that we just reviewed the worksheet. This form assumes the city received invoices totaling $15,000 and is requesting VDOT 80% of eligible cost. As mentioned earlier, this is the form that should be used to show how state and local funds are applied to the project and to request reimbursement of federal funds. This is based on a project funded with urban formula funds applied as 80%-18%-2%. Talk about grey and highlighted areas.

UCI Worksheet Urban Construction Initiative (UCI) Project Funding Worksheet Date 11/1/2005 Project Number:   UPC: AAAAA Locality: City of Hampton Project Narrative Scope: Metropolis Boulevard From: MP 0.0 To: MP 0.01 Locality Project Manager Contact info: Department Project Coordinator Contact Info: VDOT Contact Name and Number Project Estimates Preliminary Engineering Right of Way and Utilities Construction Total Estimated Cost Estimated Locality Project Expenses $20,000 $100,000 $350,000 $470,000 Estimated VDOT Project Expenses $1,000 $2,000 $5,000 Estimated Total Project Costs $21,000 $102,000 $352,000 $475,000 Project Cost and Reimbursement Phase Estimated Project Costs Funds type (Choose from drop down box) Local % Participation for Funds Type Local Share Amount Maximum Reimbursement (Estimated Cost - Local Share) Reimbursement Requested to Date Available for Reimbursment Estimated Reimbursement to Locality (Max. Reimbursement - Est. VDOT Expenses) $0 UCI Urban 20% $4,200 $16,800 $10,000 $6,800 Total PE $15,800 Right of Way & Utilities $20,400 $81,600 $53,000 $28,600 0% Total RW $79,600 $8,750 $1,750 $7,000 $310,312 Revenue Sharing 50% $310,313 $32,938 Local Funds Total CN $312,063 $317,313 $315,313 $316,263 $415,713 $63,000 $352,713 $410,713 Total Maximum Reimbursement by VDOT to Locality (Less Local Share) Expenditures Prior to UCI Acceptance Estimated Total Reimbursement by VDOT to Locality (Less Local Share and VDOT Expenses) Project Financing Urban Formula Federal Local Match Quarterly Payments Aggregate Allocations (A+B+C+D+E+F) $131,750 $155,156 Program and project Specific Funding Requirements ● The total expenditures before UCI participation is $887,488 prior to UCI particiption is ● The total expenditures as of 5/1/2017 is $ 63,000 ● This is a limited funds project. The locality shall be responsible for any additional funding in excess of ● The total project balance is $ 352,713 as of 5/12/2017 This is an example of a UCI Worksheet for the project AAAAA in City of Hampton. This project is funded with Urban Formula Funds in which 80% is eligible for reimbursement to the locality and Revenue Sharing Funds eligible for 50% reimbursement. There are enough Urban funds on the PE and RW phases to request 80% federal reimbursement. When the city requests reimbursement for the CN phase, there is a limited amount of federal dollars to be reimbursed and the locality will have to switch to bill VDOT at 50% for revenue sharing funds on the construction phase. As mentioned previously when using only federal funds eligible for 80% federal reimbursement, funds were easier to track. What we found during project reviews is some localities continued bill at 80% or even 100% federal funds regardless of the type of funds on the project. So to help everyone - Localities and VDOT better understand the amount available for reimbursement, the two areas highlighted in yellow have been added to this project (reimbursement requested to date and amount available for reimbursement). The reimbursement requested to date field should reflect all funds requested for each fund type by phase. The amount available for reimbursement is the amount of all invoices already paid for each phase and fund type. These fields will require update with each reimbursement request. Explain all areas of the worksheet.

Life to Date Project Summary Federal Reimbursement Request Form DRAFT Life to Date Project Summary Schedule - Request to VDOT for Federal Reimbursement This scenario assumes the same $15,000 invoice but only $7,000 federal funds remain on the project and the city has to switch to 50% revenue sharing funds after the $7,000 is used. The cost to the city has increased and now can only request $10.125 reimbursement. Note - Revenue Sharing funds are not paid in quarterly payments so they have to be accounted for in the reimbursement request @ 50%. City Name Hampton Invoice Number 121314 Project ID/UPC# AAAAA/UPC 60104 Invoice Date 11/28/2005 Project Description Metropolis Boulevard Invoice Amount   $ 10,125.00 Federal Project ID# 5401538 Billing Period 10/1-10/31/2005 Request Number Adjustment Date Adjustment Amount Project to Date Request for Reimbursement Project to Date Collected Balance Outstanding Comments 1 1234 7/31/2004 $ 10,000.00 $ - $ 10,000.00 $ 10,000.00 $ - 2 5678 8/30/2004 $ 5,300.00 $ 15,300.00 $ 15,300.00 3 91011 10/30/2004 $ 7,000.00 9/22/2004 $ (1,800.00) $ 20,500.00 $ 20,500.00 4 11/28/2004 $ 10,125.00 $ 30,625.00 $ 10,125.00 Funding Summary Invoice Total Funding Summary Project Life to Date Total Phase Total Federal Dollars Requested State Dollars Applied Local Match Applied Total Project Expenditures Summary of all invoices submitted indicating how federal-state-local dollars were applied to the project Pre. Eng $ 10,000.00 $ 2,250.00 $ 250.00 $ 12,500.00 Right of Way $ 5,300.00 $ 1,192.50 $ 132.50 $ 6,625.00 Construction (RevSh) $ - $ 3,125.00 $ 3,125.00 $ 6,250.00 $ 3,125.00 $ 3,125.00 $ 6,250.00 Construction (Federal) $ 1,575.00 $ 175.00 $ 8,750.00 $ 19,000.00 $ 4,275.00 $ 475.00 $ 23,750.00 Total $ 4,700.00 $ 3,300.00 $ 15,000.00 $ 34,300.00 $ 10,842.50 $ 3,982.50 $ 49,125.00 *This scenario assumes all reimbursements requested of VDOT are eligible federally participating expenses and the Federal participation rate is equal to 80% on all phases of work and a 2% local match is required on this project Certification I certify that the above invoiced amounts are correctly calculated, the items being requested for payment have been used or installed on the project, and the costs are allowable per state and federal regulations. Documentation to support the invoiced amounts is attached. Finance Director or Designee Signature Director of Finance This scenario assumes the same $15,000 invoice but only $7,000 federal funds remain on the project so the city has to switch to 50% revenue sharing funds after the $7,000 is used. The cost to the city has increased and now can only request $10,125 reimbursement. Note - Revenue Sharing funds are not paid in quarterly payments so they have to be accounted for in the reimbursement request @ 50%. Explain grey and highlighted areas of the invoice.

Year End Financial Summary DRAFT Annual Project Financial Status Report   Locality Hampton For Fiscal Year Ended 6/30/2017 Project ID Project Status Estimated/Actual Completion Date Estimated/Actual Project Cost Expenditures to Date Federal Funding Applied State Funding Applied Local Match Applied AAAAA Open 12/31/2022 $ 475,000.00 $ 49,125.00 $ 34,300.00 $ 10,842.50 $ 3,982.50 Total Summary: Allocations through FY17 $ 475,000.00 Plus Interest earned $ 9,500.00 Less: State Allocations Applied Through FY17 $ (10,842.50) Balance Remaining $ 473,657.50 VDOT Fiscal Division This is a sample year end financial summary. This is a way for Localities and VDOT to see at a glance the financial status of the project and it basically summarizes all invoices paid throughout the fiscal year for each project. Projects may be combined on the financial summary but for the purposes of this presentation, I’ve included the project we have reviewed over the last few slides. Localities may deposit Quarterly payments in an interest bearing account if they are not immediately needed for project expenses. Any interest accrued belongs to the locality but must be used for transportation improvement purposes and has to be accounted for in the same manner as the quarterly payments. Quarterly Payments, including the interest earnings thereon, will be used by the Locality directly to pay capital expenditures.

Tying It All Together Local Assistance will continue to respond to ACO audit and work to resolve issues on project identified While we have resolved several projects there are a few more to resolve While this may sound bad OVERALL – THE PROGRAM IS WORKING LIKE IT SHOULD An updated worksheet will be provided to VDOT Project Coordinators ALL PROJECTS DO NOT HAVE NEGATIVE FINDINGS!! To make sure we are all in agreement, an updated worksheet is necessary Try not to make this all doom and gloom. The UCI project is a good program!!

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