2023-101 Santa Clara Valley Transportation Authority

Audit Recommendations Disclosure

When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor’s assessment of auditee’s response based on our review of the supporting documentation.

Recommendation 2

To make VTA’s term lengths more consistent with those of its peer transit agency boards and to help increase the overall experience and stability of board membership, the Legislature should amend state law to increase the length of VTA directors’ terms to four years.

60-Day Agency Response

VTA will define and implement a cost threshold for when a cost-benefit analysis must be completed.

In addition, VTA will continue to follow Caltrans’ Value Analysis process and prepare value analysis studies for projects that are $25 million and higher.

Implementing the recommendation(s) is in process and on schedule.

Recommendation 4

To help ensure that it develops reliable cost estimates for its capital projects, VTA should, by December 2024, develop procedures that document the methodology for developing its capital project cost estimates, including costs other than those directly related to the design and construction of the project.

60-Day Agency Response

a) VTA will document our methodology for developing our capital project cost estimates including costs for all phases of the project.

b) VTA includes anticipated operating and maintenance costs in our Capital Project Request Forms required for every project and will document the procedures in estimating these costs.

The two component parts for implementing this recommendation are in process and on schedule.

Recommendation 5

To help ensure that it develops reliable cost estimates for its capital projects, VTA should, by December 2024, develop procedures that estimate the anticipated operation and maintenance costs for capital projects in development.

60-Day Agency Response

VTA agrees.

a) VTA will document our methodology for developing our capital project cost estimates including costs for all phases of the project.

b) VTA includes anticipated operating and maintenance costs in our Capital Project Request Forms required for every project and will document the procedures in estimating these costs.

Implementation efforts are underway and on schedule.

Recommendation 6

To help ensure that the board can monitor project costs and schedules, VTA should develop procedures by December 2024 to monitor project costs and schedules against preconstruction estimates and present this information as part of its semiannual report to both the Capital Program Committee and the board. This report should provide status updates on the agency’s existing capital projects and identify deviations from projects’ preconstruction estimates.

60-Day Agency Response

VTA currently monitors project costs and schedule and is currently enhancing its project status reporting to the Capital Program Committee and board. The project budget and schedule at the time of contract award will be monitored and reported, and procedures documenting this process will be developed.

Implementation efforts are underway and on schedule. Enhanced capital project reports are scheduled to be presented at the next VTA Capital Program Committee meeting.

Recommendation 7

To ensure that VTA receives stakeholder input on the Strategic Capital Investment Plan (SCIP), the agency should ensure that it presents all subsequent updates to the SCIP to the appropriate advisory committees, solicits their input, and presents that input to the board.

Recommendation 8

To ensure that it more effectively safeguards against a breach of fiduciary duty, VTA should complete the following by December 2024:

• Establish a policy requiring relevant staff, including the secretary’s office, to report to the FPPC those directors who do not submit their Form 700s in a timely manner.
• Establish a process for verifying whether directors have completed their biennial ethics training and following up to remind those who have not done so to complete the training.

Recommendation 9

To help ensure financial viability, VTA should determine by June 2025 the extent to which it can rely on revenue sources that are less uncertain than sales tax revenue. In reaching this determination, VTA should consider taking action to increase its farebox recovery ratio by, for example, raising fares or cutting expenses. VTA should then pursue any additional revenue sources it identifies to the extent possible.

60-Day Agency Response

VTA is in the process of finalizing a comprehensive Long Range Financial Plan that will review the viability of all VTA revenues and their sustainability, inclusive of operating cost efficiencies to improve financial metrics such as farebox recovery.

Effort to implement this recommendation are underway and on schedule.

Recommendation 10

To improve VTA’s forecasts of future financial scenarios, VTA should begin forecasting multiple expense scenarios for its transit fund by December 2024 and use those scenarios to create a projection of expenses to present to the board. Further, it should incorporate into these projections any anticipated increases in operational costs because of capital projects.

60-Day Agency Response

VTA is nearly complete in developing a more robust modeling tool to assist in long range financial planning.

The Long-Range Financial Plan will enable VTA to understand the external economic factors and the risk they pose to our major revenue sources, like sales tax. We will be able to run scenarios based on various internal cost assumptions, revenue trends and external economic factors and how they all impact VTA’s fiscal position.

This plan will also address total cost of ownership for capital projects and include assumptions for operating costs related to those projects.

Implementation efforts for this recommendation are underway and on schedule.

Recommendation 11

To ensure that VTA is consistent in its budget monitoring and oversight, VTA should adopt documented procedures by December 2024 that include, at a minimum, the following:

• A process that VTA will use to examine variances between budgeted and actual amounts of revenues and expenses.
• The use of quarterly variance reports by both the board and VTA staff, and expectations for appropriate actions to be taken when significant deviations are identified.
• Assignments that show which staff will be responsible for performing and reviewing variance analyses, and ensure continuity of these reviews when there is turnover in key management positions.

60-Day Agency Response

Although VTA has been following this practice and presenting variance reports to internal stakeholders, finance committees, and the VTA board, we have not had documented procedures guiding the process of quarterly variance reviews with internal divisions.

We are working on finalizing a procedure for the budget office that will document the aforementioned process, use of the reports, and staff responsible for this recommendation.

Implementation efforts for this recommendation are underway and on schedule.

Recommendation 12

To ensure that it is informed about VTA’s performance against key financial indicators, the board should require VTA staff to regularly report on specified financial metrics—including its farebox recovery ratio, trips per revenue hour, and operating cost per revenue hour—beginning in December 2024 or sooner.

60-Day Agency Response

VTA is in the process of identifying the various metrics to share and the cadence of reporting. Certain operational metrics, which have financial implications, are presently shared with committees and will be incorporated in full Board reports. It is anticipated that this will be an iterative process as VTA and the Board refine the reporting needs.

Implementation efforts for this recommendation are underway and on schedule.

Recommendation 13

To ensure that VTA has a current strategic plan that incorporates best practices, VTA should create a comprehensive strategic plan by December 2025 that includes goals, measurable objectives, strategies, and performance measures to track progress. It should also adopt procedures to ensure monitoring of progress on the strategic plan and regular reporting to the board.

60-Day Agency Response

VTA will prepare a comprehensive strategic plan. VTA staff is developing a work plan and schedule for the development of the five-year strategic plan for Board approval by the end of 2024. The strategic plan will be completed according to the schedule adopted by the Board.

Implementation efforts for this recommendation are underway and on schedule.

Recommendation 14

To help ensure that the CEO is guiding VTA to achieve its goals, the board should formally adopt by June 2025 the new evaluation process for its CEO and amend VTA’s Administrative Code to document the process. The evaluation process should include performance expectations for its CEO based on the agency’s objectives, including the goals in VTA’s most current strategic plan. All subsequent updates to the evaluation process and its goals and metrics should be formally approved by the board.

60-Day Agency Response

Development of a revised evaluation process for the GM/CEO that includes expectations, goals, and performance metrics is underway and any subsequent updates to the evaluation process will be formally approved by the board. In addition, the VTA Administrative Code will be updated accordingly to reflect the revised process.

Implementation efforts for this recommendation are underway and on schedule.