Comprehensive Annual Financial Report - Metro Transit

The independent audit of the financial statements of Metro was part of a broader, federally mandated“Single Audit” designed to meet the special needs of the federal grantor agencies. The standardsgoverning Single Audit engagements require the independent auditor to report not only on the fairpresentation of the financial statements, but also on the government’s internal controls andcompliance with legal requirements, with special emphasis on internal controls and legal requirementsinvolving the administration of federal awards. These federally mandated reports are available in theAgency’s separately issued Single Audit Report in conformity with the provisions of the United StatesOffice of Management and Budget Circular A-133. Under this provision, the Federal TransitAdministration (FTA) is the cognizant agency for Metro.Basic Financial Statements. These statements include net assets as of June 30, 2011, and June30, 2010; statements of revenues, expenses, and changes in net assets; and statements of cashflows for the years ended June 30, 2011, and June 30, 2010.U.S. GAAP requires that management provide a narrative introductory overview and analysis toaccompany the basic financial statements. This letter of transmittal is designed to complement theMD&A and should be read in conjunction with it. Metro’s MD&A can be found immediately afterthe report of the independent auditors.Financial PoliciesBanking and Investment. Agency policies direct the investment of all operating, self-insurancerestricted, capital and debt service funds of all entities of the Bi-State Development Agency notexpressly controlled by Revenue Bond Trustees. The preservation of funds is the firstconsideration in determining the investment of Agency cash. Thereafter, the highest yieldconsistent with safety is required, provided the maturities are short enough to maintain operationalliquidity. Banks and other financial institutions are selected for investments only on a competitivebasis. The number of demand-deposit, non-interest bearing accounts is kept to the minimum foroperational efficiency and safety. It is the Board of Commissioners (the Board) intent to have themajority of the available funds invested in local institutions, provided the institutions meet theminimum credit standings set out below and yields are competitive.Financial Reporting Policy. It is the practice of the Agency to prepare quarterly financial resultsof each operating company and to distribute these results to the Board. The reports shall include:Balance Sheets and Operating Statements in Budget comparison format; Cash Receipts andDisbursement Schedules; Cash Flows Statement; Active Capital Expenditure Report in Budgetcomparison format; Aged Receivables Report; Personnel Status Report; and a summary ofnoteworthy deviations in the above reports.Budget Process. The annual budget serves as the foundation for Metro’s financial planning andcontrol. All enterprises are required to submit expenditure requests in preparation for a new fiscalyear budget. These requests are used as a starting point for budget development. The preparationand approval of the annual budget is both an internal and external process. The proposed budget isinitially presented to the Board for approval. It is subsequently reviewed by the Public TransportationCommission in St. Louis County, the Ways and Means Committee of the Board of Aldermen in St.Louis City, and the St. Clair County Transit District in Illinois. For the Gateway Arch, the National ParkService must also approve the annual budget.iv