Finance & Administration Committee

Action Item III-I

October 14, 2010

Approval of Metro Capital Budget

Reprogramming Policies

TITLE:

Approval of Capital Budget Reprogramming Policies

PURPOSE:

To adopt new reprogramming policies. The current reprogramming policies were adopted prior to the implementation of Metro Matters. The proposed new capital budget reprogramming policies were developed to conform to the reporting and transparency requirements in the recently adopted Capital Funding Agreement.

DESCRIPTION:

Reprogramming policies allow budgeted funds to be moved, with General Manager or Board approval to meet unexpected needs. Appropriate policies can help Metro respond to safety, service, and other issues to help create a safety culture, deliver quality service, and use every resource wisely. A revision of the capital budget reprogramming policies is necessary to conform to the transparency and reporting requirements of the Capital Funding Agreement (CFA). The proposed policies reflect the new, more narrow definition of a capital project, allow the Board to retain its policy role, and provide some flexibility to the General Manager to respond to unforeseen circumstances with full transparency to the Board and the jurisdictions. The current policy allows the reprogramming of up to $200,000 between broadly defined projects. However, current procurement policy allows General Manager approval of contract amendments of up to $1 million or ten percent of a contract, whichever is higher. The proposed reprogramming policy would allow the reprogramming of up to $5 million between more narrowly defined projects and categories of projects. The reprogramming of over 50 percent of an annual project budget would require Board approval. Metro`s capital budget is expenditure based, and reflects the amount anticipated to be expended for each project. The $5 million threshold is appropriate to deal with cash flow situations, such as when project expenditures exceed what is anticipated in a fiscal year. It would also allow for administrative flexibility to deal

Washington Metropolitan Area Transit Authority

Board Action/Information Summary

Action InformationMEAD Number:

100845

Resolution: Yes No

with force account and other labor costs. Under the proposed policy, all reprogramming actions would be reported to the Board through the Finance and Administration Committee monthly reports. Per the Capital Funding Agreement, all reprogramming actions over $1 million will be reported to the jurisdictions.

FUNDING IMPACT:

Reprogramming policies govern the movement of funds within the adopted budgets.

RECOMMENDATION:

Approval of new capital budget reprogramming policies.

Washington Metropolitan Area Transit Authority

Approval of New Capital Budget R i P li iReprogramming Policies

Finance and Administration Committee

October 14, 2010

Purpose

• The General Manager had wide latitude to move funds amongThe General Manager had wide latitude to move funds among broadly defined Metro Matters projects

• For improved transparency and accountability, the Capital Funding p p y y, p gAgreement (CFA) uses more narrowly defined projects

• Revised capital budget reprogramming policy conforms to CFA, p g p g g p y ,and provides more oversight to the Board

Metro Oversight and Responsibilities

Capital Funding Agreement Oversight Metro Responsibility

Annual review of six year program

In October of each year, a current six year plan will be provided to the Board and the

GM to provide annual update of Metro priorities

provided to the Board and the Jurisdictions

Goal to implement projects and increase spending to budgeted 

Quarterly reports that provide actuals and forecasted spending

Proposed policy would allow the movement of $5 million 

levels cumulatively between projects and categories

Jurisdictional billing to be adjusted to forecasted 

Beginning in FY2011 quarter three, billing to be adjusted 

Quarterly updates to jurisdictions and Boardj

expenditures, g j

based on quarterly expenditure forecasts

j

Jurisdictions to be notified of reprogramming of funds over $1

Proposed policy requires all reprogramming actions to be

Monthly notification to Finance and Administration Committeereprogramming of funds over $1 

million reprogramming actions to be reported

and Administration Committee

Capital Budget Reprogramming Policy

METRO MATTERSC tCategory

Project

P oject Element

Program FY05 FY06 FY07 FY08 FY09 FY10 TotalFY05-10 Program Costs

Project Element

Description ID Actual Actual Actual Actual Forecast Forecast All Years

Infrastructure Renewel Program (IRP):Rolling Stock: Bus

Bus Enhancements CE_BENH 282 0 0 0 0 0 282Bus Procurement CE_BPUR 20,011 0 0 15,713 1,349 539 37,611Advanced Tech Diesel Replacement CE DIES 0 25 023 15 810 67 0 6 40 905Advanced Tech. Diesel Replacement CE_DIES 0 25,023 15,810 67 0 6 40,905Hybrid/Electr Bus Proc. CE_HYBR 615 25,484 0 849 79,340 107,030 213,318

Subtotal 20,908 50,507 15,810 16,629 80,688 107,574 292,116

Rolling Stock: Rail2000/3000 Series RailCar Rehab CE_23ML 2,622 402 344 1,778 5,411 10,000 20,5574000 Series Rail Car Rehab CE_4KML 0 0 0 0 0 0 07000 Series Railcar Procurement CE_7RPU 0 0 0 0 0 4,000 4,0009000 Series Railcar Procurement CE_9RPU 0 0 0 0 0 0 0Rail Car Enhancements CE_RCEH 0 0 0 0 0 41 41

Subtotal 2,622 402 344 1,778 5,411 14,041 24,597

Capital Budget Reprogramming Policy

CAPITAL FUNDING AGREEMENTC tCategory

Sub-Category

P oject

Annual WorkPlan Year:

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Project

Budget Forecast Forecast Forecast Forecast ForecastA Vehicles/ Vehicle Parts

Replacement of Rail CarsCIP 057 1000 Series Rail Car Replacement $79.253 $20.465 $12.029 $135.633 $350.478 $120.199CIP 060 4000 Series Rail Car Replacement 0.000 0.000 0.000 22.899 0.728 186.220

Subtotal $79.253 $20.465 $12.029 $158.531 $351.206 $306.419

Replacement of BusesCIP 006 Bus Replacement $74.227 $71.966 $56.307 $59.170 $80.347 $100.878

Subtotal $74.227 $71.966 $56.307 $59.170 $80.347 $100.878

Rehabilitation of Rail CarsCIP 064 1000 Series Rail Car HVAC Rehabilitation $4.247 $1.111 $0.000 $0.000 $0.000 $0.000CIP 058 2000/3000 Series Rail Car Mid Life Rehabilitation 3 256 0 248 0 000 0 000 0 000 0 000CIP 058 2000/3000 Series Rail Car Mid-Life Rehabilitation 3.256 0.248 0.000 0.000 0.000 0.000CIP 067 Rail Car Safety & Reliability Enhancements 12.082 2.499 1.502 1.653 1.699 1.755CIP 063 Rail Rehabilitation Program 12.439 12.522 12.703 12.892 12.981 14.164CIP 142 Rail Lifecycle Overhaul 20.000 20.800 20.864 20.932 20.831 20.831CIP 125 Rail Preventive Maintenance 20.861 0.000 0.000 0.000 0.000 0.000

Subtotal $72.886 $37.179 $35.070 $35.476 $35.511 $36.750

JCC Input

• Want to ensure that projects are not cancelled (a majority of funds transferred out)transferred out)• Proposed policy revised to require reprogramming actions of greater

than 50 percent of a project budget to be approved by the BoardS f l h ll i b i h ld i• Some felt that all reprogramming between categories should require Board approval• Cash flow needs could require movement between projects in

d ffdifferent categories• Reporting provisions and revision to require Board approval of

reprogrammings impacting greater than 50 percent of an annual project budget should help ensure that policy decisions are approved by the Board

• Provide “real world” examples• Examples included in this presentation

Examples

• Example 1 - illustrative: p• Line rehab project (in Rail System Infrastructure category) is

moving more slowly than anticipated because of issues with track rightsrights

• Approximately $2 million will be expended in FY2012, rather than FY2011

• Test Track Commissioning Facility (in Maintenance Facilities g y (category) can be accelerated

• Approximately $2 million, on top of FY2011 adopted budget of $5.2 million, can be expended this year

• General Manager would have the authority to approve the reprogramming

J i di ti ld i d ti• Jurisdictions would receive advance notice

• Reprogramming would be reported in the monthly Finance and Administration materials

Examples

• Example 2 - illustrative: p

• Bicycle & Pedestrian Facilities: Capacity Improvements (original FY2011 budget of $0.976 million) is delayed because of

f t i t imanufacturer inventory issues

• Only half of the budget will be expended in the current fiscal year

f d d f d h d d• New safety need is identified with a FY2011 estimated expenditure of $0.5 million

• Board approval of the reprogramming from Bicycle and PedestrianBoard approval of the reprogramming, from Bicycle and Pedestrian Facilities to the new safety need, is required

• The proposed FY2012 Annual Work Plan would be adjusted to accommodate the delayed Bicycle & Pedestrian Facilities project

Examples

• Example 3 – actual example: p p

• Replacement of Southeastern Bus Garage (CIP086) provides $5.732M in FY2011

• Contract award is less than anticipated

• Funds are needed for the System-wide Infrastructure Rehabilitation ( ) h b l d fproject (CIP138) to rehabilitate and repair 21 garages, 29 surface

parking lots with approximately 58,000 park-and-ride and 3,400 metered Kiss & Ride spaces in system

• Board approval is required to reprogram funds from the Southeastern Bus Garage to the System-wide Infrastructure Rehabilitation projectp j

Staff Recommendation

Element Existing Policy  (Metro Matters and #2000‐43)

Recommended Policy (Capital Funding Agreement)) ( p g g )

Creation of a new capital project

Requires Board approval Requires Board approval

Definition of  Broadly defined  More specific  (CIP 1000 Series Replacements)“Project” 

y(Rolling Stock: Bus)

p ( p )

Movement of funds between projects

Board approval required to move over $200,000 between projects

GM authority to reprogram budget between projects within the six‐year CIP / Board approval required to move budget over $5 million;projects required to move budget over $5 million; movement of over 50 percent of a project budget requires Board approval

Movement of funds between

Funds could not move between categories (IRP, Bus Expansion, etc.)

Board approval required to move budget over $5 million

categories( , p , )

Addition of headcount

Board approval required Board approval required

Emergenc GM a thorit o er $200 000 ith Board Immediate Board notification req iredEmergency reprogramming

GM authority over $200,000 with Board notification

Immediate Board notification required

Reporting Reprogramming of less than $200,000 All reprogramming actions

Other Metro Reprogramming Policy

Element Existing Policy(Resolution #99‐63)

Recommended Policy

Reimbursable Projects GM approval GM approvalReimbursable Projects GM approval• Under $200,000• No additional positions

GM approval• Under $500,000 • Permit positions if those positions are fully funded

Insurance Settlements None Insurance payments applied to the Capital Budget

Recommendation

• Board approval of reprogramming policy for

it l b d t i b blcapital budget, reimbursable projects, and emergency situationssituations

Appendix

Capital Funding Agreement Project CategoriesCategories

• Vehicles and Vehicle Parts• Rail System Infrastructure Rehabilitation• Maintenance Facilities• Systems and Technology• Track and Structures• Passenger Facilities• Maintenance Equipment• Other Facilities• Program Management and Support• Safety and Security

Goals

• Capital budget reprogramming policy should be updated p g p g g p y pto reflect the new Capital Funding Agreement and current procurement policy

• Reimbursable projects reprogramming policies should be updated

• Operating budget reprogramming policy should be updated with the implementation of the Financial Systems Integration projectIntegration project

• Timeframe: Spring 2011, as commitment control and other initiatives are implemented

Government Finance Officer Association Best Practice: 12 1Best Practice: 12.1

• The budget should be adjusted during the budget period g j g g pshould unforeseen events require changes to the original budget plan

o The budget is a plan based on a set of assumptions that may not always match actual experiences during the execution phase

• Procedures should be in place to determine when deviations• Procedures should be in place to determine when deviations from the budget plan merit adjustments to the budget

• Budget adjustments whether to programs or to revenues• Budget adjustments, whether to programs or to revenues and expenditures, should be made as appropriate. Final changes to the budget should be reported