P er fo rm an ce A ud it
G ui de bo ok f or T ra ns it
O pe ra to rs a nd R eg io na l
T ra ns po rt at io n P la nn in g
E nt it ie s
January 1998 ( second edition)
State of California
Business, Transportaton and Housing Agency
California Department of Transportation
Mass Transportation Program
Performance Audit Guidebook
for Transit Operators and
Regional Transportation Planning
Entities
January 1998 ( Second Edition)
NOTICE
THE PREPARATION OF THIS GUIDEBOOK HAS BEEN FINANCED WITH FUNDS
PROVIDED THROUGH THE TRANSPORTATION DEVELOPMENT ACT.
THE CONTENTS OF THIS GUIDEBOOK REFLECT THE VIEWS OF THE AUTHOR WHO
IS RESPONSIBLE FOR THE FACTS AND ACCURACY OF THE DATA PRESENTED
HEREIN. THE CONTENTS DO NOT NECESSARILY REFLECT THE OFFICIAL VIEWS OR
POLICIES OF THE STATE OF CALIFORNIA. THIS GUIDEBOOK DOES NOT
CONSTITUTE A STANDARD, SPECIFICATION OR REGULATION. THE INTENDED
PURPOSE OF THIS GUIDEBOOK IS TO PROVIDE A GENERAL OVERVIEW AND
GUIDANCE IN CONDUCTING PERFORMANCE AUDITS REQUIRED BY THE
TRANSPORTATION DEVELOPMENT ACT.
THE STATE OF CALIFORNIA DOES OT ENDORSE PRODUCTS OR SERVICES. TRADE
OR SERVICE NAME APPEAR HEREIN SOLELY BECAUSE THEY ARE CONSIDERED
ESSENTIAL TO THE OBJECT OF THIS GUIDEBOOK.
ANY REFERENCE TO UMTA
IS TO BE READ AS
FTA ( FEDERAL TRANSIT ADMINISTRATION).
ACKNOWLEDGMENTS
THE DEPARTMENT OF TRANSPORTATION WISHES TO EXPRESS ITS APPRECIATION
TO THE CONSULTING FIRM OF KPMG PEAT MARWICK, MANAGEMENT
CONSULTING, FOR THEIR WORK IN THE DEVELOPMENT OF THIS PERFORMANCE
AUDIT GUIDEBOOK FOR TRANSIT OPERATORS AND REGIONAL TRANSPORTATION
PLANNING ENTITIES.
THE DEPARTMENT WOULD ALSO LIKE TO THANK THE PROJECT ADVISORY
COMMITTEE WHICH ASSISTED THE DEPARTMENT IN DEVELOPING A REQUEST FOR
PROPOSALS, FORMULATING THE PROCESS AND PROVIDING GUIDANCE TO THE
CONSULTANT. THE MEMBERS OF THE PROJECT ADVISORY COMMITTEE
CONSISTED OF REPRESENTATIVES FROM REGIONAL TRANSPORTATION PLANNING
AGENCIES, COUNTY TRANSPORTATION COMMISSIONS, TRANSIT OPERATORS, THE
STATE CONTROLLER’S OFFICE AND OTHER INTERESTED PARTIES IN THE TRANSIT
COMMUNITY.
IN ADDITION, THE DEPARTMENT WOULD LIKE TO EXPRESS ITS APPRECIATION TO
THOSE REGIONAL TRANSPORTATION PLANNING ENTITIES, PUBLIC TRANSIT
OFFICIALS AND TRANSIT OPERATORS WHO PARTICIPATED IN THE CONSULTANT
STATEWIDE SURVEY TO SOLICIT THEIR VIEWS ON PERFORMANCE AUDITS.
FINALLY, THE DEPARTMENT WOULD LIKE TO THANK ALL THOSE WHOSE
EXPERIENCE AND EXPERTISE IN THE AREAS OF PERFORMANCE AUDITS WERE AN
INVALUABLE ASSET IN THE DEVELOPMENT OF THIS GUIDEBOOK.
CALIFORNIA DEPARTMENT OF TRANSPORTATION
Performance Audit Guidebook for Transit Operators
Regional Transportation Planning Entities
T able o f C ontent s
C H A P T E R P A GE
EXECUTIVE SUMMARY
What is the Purpose of the Guidebook? 1
Why Do a Performance Audit? 1
What is a Performance Audit? 1
How is a Performance Auditor Selected? 2
Who Receives the Performance Audit? 2
I. INTRODUCTION
I. 1 What are the Performance Audit Requirements? 3
I. 2 Who Should Use this Guidebook? 6
I. 3 What Information Should be Used in Conjunction
with the Guidebook? 7
I. 4 How is the Guidebook Organized? 8
I. 5 How was the Guidebook Developed? 9
I. 6 Guidebook Limitations 11
II. BACKGROUND ON PERFORMANCE AUDITS
II. 1 What is a Performance Audit? 12
II. 2 What are the Benefits of a Performance Audit? 13
II. 3 How are Performance Audits Different from
Financial Audits? 14
II. 4 What is the Structure of a Performance Audit? 16
II. 5 What are the Field Work Standards for
Performance Audits? 20
II. 6 What are the Reporting Standards for
Performance Audits? 23
T able o f C ontent s ( Continued)
C H A P T E R P A GE
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
III. 1 Review of Compliance Requirements 26
III. 2 Follow- Up of Prior Performance Audit
Recommendations 30
III. 3 Initial Review of Transit Operator Functions 33
III. 4 Verification and Use of Performance Indicators 36
III. 5 Detailed Review of Transit Operator Functions 48
III. 6 Preparation of Draft Audit Report 73
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS - Continued
III. 7 Preparation and Presentation of Final Audit
Report 75
III. 8 Level of Effort for a Performance Audit 75
IV. PERFORMANCE AUDITS OF REGIONAL TRANSPORTATION
PLANNING ENTITIES
IV. 1 Initial Review of RTPE Functions 77
IV. 2 Review of Compliance Requirements 80
IV. 3 Follow- Up of Prior Performance Audit Recommendations 84
IV. 4 Detailed Review of RTPE Functions 87
IV. 5 Preparation of Draft Report 103
IV. 6 Preparation and Presentation of Final Report 104
IV. 7 Level of Effort for a Performance Audit 104
V . MANAGING A PERFORMANCE AUDIT AND PREPARING A
REQUEST FOR PROPOSAL
V. 1 Managing the Performance Audit 106
V. 2 Sample Request for Proposals 108
T able o f C ontent s ( Continued)
A P P ENDICE S
Appendix A COMMONLY USED ACRONYMS
Appendix B GLOSSARY OF COMMONLY USED TERMS
Appendix C MEMBERS OF THE PROJECT ADVISORY COMMITTEE
Appendix D CALIFORNIA DEPARTMENT OF TRANSPORTATION STAFF
ASSISTING ON THE PROJECT
Appendix E TRANSIT OPERATORS and RTPEs RESPONDING
TO THE SURVEY
Appendix F FOLLOW- UP INTERVIEWS REGARDING THE SURVEY
Appendix G INDEX OF KEY TERMS
1
W H A T I S T HE P U RPOSE O F T HE G U IDEBOOK ?
The purpose of the Guidebook is to provide information to agencies or individuals involved in a
triennial performance audit. These agencies and individuals may include agencies contracting for a
performance audit, agencies undergoing an audit, the auditors who conduct performance audits,
and members of the public who are interested in the audit process. The information included in the
Guidebook identifies requirements and guidelines that can be applied, the basic structure of the
audit, specific information on reviewing transit operators and Regional Transportation Planning
Entities and suggestions on how to prepare and present the audit report.
W H Y D O A P E RFORMANCE A UDIT ?
The California Public Utilities Code requires that all transit operators and Regional Transportation
Planning Entities have a triennial performance audit conducted of their activities.
While meeting the legal requirements for conducting a performance audit is important, a
performance audit also provides an opportunity for an independent, objective and comprehensive
review of the economy, efficiency and effectiveness of the entity being audited. The audit has
other benefits, including:
• Provides management with useful information to assess past activities and provides
insight for future planning efforts:
• Provides management with a review and evaluation of an agency's organization and
operations;
• Presents an opportunity to utilize auditor expertise which can supplement staff work;
and
• Assures public accountability for the use of public funds.
W H A T I S A P E RFORMANCE A UDIT ?
A performance audit is a systematic process of evaluating an organization's effectiveness,
efficiency and economy of operation under management control. The objectives of the audit are to
provide a means for evaluating an organization's performance and to enhance the performance by
making recommendations for improvements. The audit measures performance against acceptable
criteria and focuses on management's planning and control system. In addition, the audit evaluates
the adequacy of an organization's systems and the degree of compliance with established policies
and procedures. The evaluation results are reported to the appropriate individuals or agencies
requesting the audit or being audited, along with any recommendations for improvements.
H O W I S A P E RFORMANCE A U DITOR S E LECTED ?
The Regional Transportation Planning Entity is responsible for ensuring that a performance audit is
conducted and must select an auditor to perform the work. An auditor is normally selected through
2
a Request for Proposal process. A sample Request for Proposal and tips for managing a
performance audit are provided in Chapter V of the Guidebook.
W HO R E CEIVES T HE P E RFORMANCE A UDIT ?
The Department of Transportation receives copies of the performance audits of all Regional
Transportation Planning Entities. Additionally, the Department receives certification from each
Regional Transportation Planning Entity that required performance audits have been completed for
all transit operators under the Entity's jurisdiction.
The Regional Transportation Planning Entities should receive and present to their governing boards
not only their own performance audit, but the performance audits of all transit operators under their
jurisdiction. The audit report should also be presented to the officials of each audited entity. In
addition, the reports should be made available to members of the public.
S E CTION I
INTRODUCTION
3
I. INTRODUCTION
The California Public Utilities Code requires that all transit operators and Regional Transportation
Planning Entities ( RTPEs)* have a triennial performance audit of their activities. Operators that
receive funding under Article 4 of the Transportation Development Act ( TDA) are required to have
a performance audit. Those claimants that receive funding under Article 4.5 or Article 8 are not
required to have a performance audit; however, they may find it useful to undergo a performance
audit.
The California Department of Transportation ( Department) has the responsibility to ensure that the
TDA is implemented. To assist the entities that are required to have performance audits conducted
of their activities, the Department has developed the P e rformance A udit G u idebook f o r T ransit
O perators a nd R e gional T ransportation P l anning E ntitie s ( Guidebook). The purpose of this
Guidebook is to assist entities involved in the conduct of triennial performance audits in meeting
the requirements of the TDA and deriving maximum benefit from the audits.
This chapter describes the performance audit requirement for transit operators and RTPEs. It also
discusses who should use this Guidebook, how the Guidebook is organized, how it was
developed, and what its limitations are.
I . 1 W H A T A R E T HE P E RFORMANCE A UDI T R E QUIREMENTS?
Public Utilities Code Section 99246( a) requires that a Transportation Planning Agency shall
designate entities other than itself, a County Transportation Commission, a Transit Development
Board, or an operator to make a performance audit of its activities and the activities of each
operator to whom it allocates Article 4 funds. It also stipulates that the transportation planning
agency shall consult with the entity to be audited prior to designating the entity to make the
performance audit.
Section 99246( b) of the Public Utilities Code, states that the performance audit shall evaluate the
efficiency, effectiveness and economy of the operation of the entity being audited. It requires that
the audit be conducted in accordance with the efficiency, economy and program results portion of
the Comptroller General's " Standards for Audit of Governmental Organizations, Programs,
Activities and Functions Programs, Activities and Functions." The performance audits must be
conducted on a triennial basis pursuant to a schedule established by the Transportation Planning
Agency, a County Transportation Commission or a Transit Development Board ( hereafter referred
to as Regional Transportation Planning Entities or RTPEs) having jurisdiction over an operator.
* Regional Transportation Planning Entities include Transportation Planning Agencies, County
Transportation Commissions, and Transit Development Boards.
California Department of Transportation
I. INTRODUCTION
4
Public Utilities Code Section 99246( c) stipulates that the performance audit of the RTPE shall be
submitted to the Director of the California Department of Transportation. In addition, it requires
that the RTPE certify in writing to the Director that the performance audits of operators located in
the area under its jurisdiction have been completed.
Public Utilities Code Section 99246( d) states that the performance audit of an operator providing
public transportation services shall include, but not be limited to, a verification of the performance
indicators defined in Section 99247 the Public Utilities Code. These performance indicators
include:
• Operating cost per passenger;
• Operating cost per vehicle service hour;
• Passengers per vehicle service hour;
• Passengers per vehicle service mile; and
• Vehicle service hours per employee.
Section 99246( d) also requires that the performance audit of an operator providing public
transportation services include, but not be limited to, consideration of the needs and types of
passengers being served. In addition, it requires the consideration of the employment of part- time
drivers and the contracting with common carriers of persons operating under a franchise or license
to provide services during peak hours, as defined in subdivision ( a) of Section 99260.2 of the
Public Utilities Code. Finally, Section 99246( d) states that the performance audit may include
performance evaluations both for the entire system or for the system excluding special, new or
expanded services instituted to test public transportation service growth potential.
Public Utilities Code, Section 99248 stipulates that no operator is eligible to receive an allocation
under the TDA for any fiscal year until it transmits reports of its performance audit to the entity
which determines the allocation to the operator and the transportation planning agency. This must
be done for the three- year period ending one year prior to the beginning of the fiscal year of the
proposed allocation. The RTPE is required to make the reporting available to interested parties.
The RTPE is also required prior to September 1st of each fiscal year to provide the Director of the
California Department of Transportation and the State Controller a schedule of performance audits
to be submitted during the fiscal year and a list of all operators or claimants who operated or
commenced operations during the prior fiscal year.
As provided in Public Utilities Code Section 99246, Transportation Planning Agencies have the
authority to designate the auditor for performance audits of themselves. They also have the
authority to designate the auditor for performance audits of transit operators under the Agency's
jurisdiction, after consulting with the respective operators.
California Department of Transportation
I. INTRODUCTION
5
Section 99249 of the Public Utilities Code states that the cost of the performance audit may be
deemed an administrative cost of the transportation planning agency for purpose of Section
99233.1. However, the Legislature encourages the use of funds made available by the federal
government to support such purposes.
California Department of Transportation
I. INTRODUCTION
6
I . 2 W HO S H OULD U S E T HIS G U IDEBOOK ?
The Guidebook is designed to meet the needs of those entities, organizations and individuals who
must familiarize themselves with triennial performance audit requirements, approaches and
methodologies. Specifically, these entities, organizations and individuals may include the
following:
• R e gional T ransp o r tation P l anning E ntitie s - Which include Transportation
Planning Agencies, County Transportation Commissions, and the Metropolitan
Transit Development Board.
• T ransit O p e r at o r s - That receive funding under Article 4 of the TDA are required
to have a triennial performance audit of their activities. Those claimants that receive
funding under Article 4.5 or Article 8 may find it useful to undergo a performance
audit; however, an audit is not required under current law.
• A udit o r s - Who are selected to conduct triennial performance audits of RTPEs,
transit claimants and operators; and
• O th e r I nt e r ested P a rtie s - Who may include public officials and the general
public who are concerned with the use of public funds for transit in California.
While the interests and focus of these groups may vary, this Guidebook provides useful
information and technical assistance to enable each group to both comply with performance audit
requirements and benefit from the audit process and the results of performance audits.
California Department of Transportation
I. INTRODUCTION
7
I . 3 W H A T I NFORM A T ION S H OULD B E U S ED I N C O NJUNCTION W ITH T HE
G U IDEBOOK ?
This Guidebook has been developed to assist entities involved in the conduct of triennial
performance audits required under the TDA. While the Guidebook provides general information
regarding performance audits requirements, suggested approaches and methodologies, there are
additional publications that will provide specific information which will be necessary in
understanding, defining the scope, and in conducting performance audits. These publications
include:
• T r ansportation D evelopment A c t, S t atutes a nd C a lifornia C o de o f
R e gulation s , by the California Department of Transportation, Division of Mass
Transportation. ( Note: this document is updated annually by the Department.) This
document contains the amended statutes and related sections of the California Code
of Regulations as adopted by the Department. Among the items that this document
contains are:
- California Government Code, Title 3, Division 3, Chapter 2, Article 11,
commencing with Section 29530, establishing the Local Transportation
Fund;
- California Public Utilities Code, Division 10, Part 11, Chapter 4,
commencing with Section 99200, detailing the statutes as enacted and
amended by the State Legislature; and
- California Code of Regulations, Title 21, Chapter 3, Subchapter 2,
commencing with Section 6600, containing the text of the administrative
regulations adopted by the Director of Department of Transportation with
the advice and consent of the California Transportation Commission.
• S t andards f o r A u dit o f G o vernmental O rganizations, P rograms,
A c tivities a nd F unction s , 1988 Revision, published by the United States
General Accounting Office and the Comptroller General of the United States, which
is for sale by the Superintendent of Documents, U. S. Government Printing Office,
Washington, D. C. 20402. This document contains the following information:
- Standards for audits of government organizations, programs, activities and
functions;
- General standards for conducting performance audits; and
- Fieldwork and reporting standards for performance audits.
California Department of Transportation
I. INTRODUCTION
8
I . 4 H O W I S T HE G U IDEBOOK O RGANIZED ?
The Guidebook is organized into five major chapters and a series appendices. This first chapter
presents an overview of the Guidebook and an introduction to triennial performance audits of
transit operators and RTPEs. It also describes the legal requirements for conducting performance
audits.
The second chapter defines a performance audit and identifies the major components of an audit
and discusses the flow of a performance audit, as well as the major benefits to be derived from
conducting audits.
The third chapter presents the major components of performance audits of transit operators. It
discusses how transit operator performance indicators are verified and provides guidance on the
review of major functions of transit operators. It also discusses different types of transit operators
and the need to adapt performance audit methodologies to the specific transit operator being
audited. In addition, it describes the compliance and reporting requirements for performance audits
of transit operators, as well as suggested steps for following up on prior performance audit report
recommendations.
The fourth chapter of the Guidebook discusses the conduct of performance audits for RTPEs.
Specifically, it differentiates between the various functions and activities performed by different
types of RTPEs. It also presents guidance on how to review these functions and activities and
present findings and conclusions. In addition, this section discusses how to follow- up on prior
performance audit recommendations regarding RTPEs, as well as how to review compliance
requirements.
The fifth chapter in the Guidebook describes a suggested procurement process that can be used to
secure entities to conduct performance audits of transit operators and RTPEs. It also presents a
sample Request for Proposal that can be adapted by entities seeking to procure performance audit
services.
Finally, the Guidebook provides a series of Appendices that may be useful to better understanding
and utilizing the Guidebook. These Appendices include a listing of commonly used acronyms, a
glossary which defines key audit terms and an index of key terms.
California Department of Transportation
I. INTRODUCTION
9
I . 5 H O W W A S T HE G U IDEBOOK D E VELOPED?
This Guidebook was developed by KPMG Peat Marwick, under contract with the California
Department of Transportation. The Guidebook replaces the " Transit Performance Audit
Guidebook," dated April 1982, previously issued by the California Department of Transportation.
The earlier Guidebook was one of the products of the Transit Performance Measures study project,
funded in part by the California Department of Transportation and an Urban Mass Transportation
Administration ( UMTA) grant.
In developing this revised Guidebook, the following steps were taken to meet the varying needs
and concerns of transit operators and RTPEs throughout the state.
• E stablish a P r oject A dvis o r y C ommitte e - The California Department of
Transportation designated a broadly representative Project Advisory Committee to
work with the KPMG Peat Marwick project team in the development of the revised
Guidebook. The objective of the Project Advisory Committee was to provide
additional assurance that the project team was aware of and understood the interests
and viewpoints of agencies, groups, and individuals concerned with the project.
Also, the Project Advisory Committee assisted in the development of the framework
for the Guidebook and in building consensus on the goals, objectives, and benefits
of performance audits. The members of the Project Advisory Committee are listed
in Appendix C, while the staff providing assistance to the project from the California
Department of Transportation are listed in Appendix D.
• C o nduct a L it e r ature S e arch a nd L egal R evie w - The project team reviewed
publications issued by other state transportation organizations and by the Urban
Mass Transportation Administration pertaining to performance auditing policies and
practices. The project team also reviewed the 1989 publication by the California
Department of Transportation regarding the Transportation Development Act to
ensure that the most recent changes in statute and California Code of Regulations
requirements were reflected in the Guidebook.
• S u rvey o f T ransit O p e r at o r s a nd R TPE s - The project team conducted a
comprehensive survey of all transit operators and RTPEs in the State to solicit their
views on performance audits and the areas where the existing " Transit Performance
Audit Guidebook" could be improved. The transit operators and RTPEs responding
to the survey are listed in Appendix E.
California Department of Transportation
I. INTRODUCTION
10
• F o llow- Up I nt e r views W ith a C ross- Section o f P u blic T ransit
O fficials a nd O p e r at o r s - In order to obtain a better understanding of how public
transit officials perceived the current planning and operations environment in
California, the project team performed follow- up interviews with staff from a cross-section
of transit operators and RTPEs. The follow- up interviews provided
additional insight regarding the important issues or concerns that were raised in the
written survey. The agencies that received follow- up visits are listed in Appendix F.
California Department of Transportation
I. INTRODUCTION
11
I . 6 G U IDEBOOK L IMI T A T ION S
This Guidebook contains sections which reference the Public Utilities Code, the California Code of
Regulations, and other requirements that may be subject to amendment or change. The Guidebook
is useful as a reference document, but the reader should refer to existing statutes or codes to ensure
that recent changes in law or regulation are considered in developing, conducting or reviewing
performance audits.
Should the user have any questions regarding the content or use of the Guidebook, or require
additional information, the user should contact:
California Department of Transportation
Mass Transportation Program
P. O. Box 942874 M. S. 39
Sacramento, California 94274- 0001
( 916) 654- 8811
Attn: TDA Program Manager
C H A P T ER I I
BACKGROUND ON PERFORMANCE AUDITS
12
II. BACKGROUND ON PERFORMANCE AUDITS
This chapter presents general background information regarding the purpose, definition and utility of
a performance audit. Specifically, it describes what the benefits of a performance audit can be and
how a performance audit is different from a financial audit. It also discusses the performance audit
process and outlines standards for conducting a performance audit.
I I .1 W H A T I S A P E RFORMANCE A UDIT ?
The " Standards for Audit of Governmental Organization, Programs, Activities and Functions" defines
performance auditing as follows:
• A systemic process of evaluating an organization's effectiveness, efficiency, and
economy of operation under management's control and reporting to appropriate persons
the results of the evaluation along with recommendations for improvements. Its
objectives are to provide a means for evaluating an organization's performance and to
enhance performance by making recommendations for improvements. Performance
auditing requires measuring the degree of correspondence between actual performance
and acceptable criteria and focuses on management's planning and control system.
Both the adequacy of the system and the degree of compliance with established policies
and procedures are evaluated.
The Comptroller General of the United States heads the General Accounting Office ( GAO), which
conducts reviews of government programs and activities for the federal government. In 1972, the
Comptroller General issued " Standards for Audit of Government Organizations, Programs, Activities
and Functions," often referred to as the " yellow book." These standards are to be followed by
auditors and organizations when required by law, regulation, agreement or contract, or policy.
In 1988, the Comptroller General published an updated version of the " Standards for Audit of
Governmental Organization, Programs, Activities and Functions." This version replaces the 1972
publication of the Comptroller General.
Section 99246( b) of the Public Utilities Code requires that the performance audit of transportation
planning entities and operations shall evaluate the efficiency, effectiveness and economy of the
operation of the entity being audited and shall be conducted in accordance with the efficiency,
economy, and program results portions of the Comptroller General's " Standard for Audit of
Governmental Organizations, Programs, Activities, and Functions."
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
13
I I .2 W H A T A R E T HE B E NEFITS O F A P E RFORMANCE A UDIT ?
The triennial transportation performance audits are intended to provide an independent, objective and
comprehensive review of the economy, efficiency and effectiveness of a transit operator or a RTPE.
These audits also provide management of a transit operator or a RTPE with information to assess the
contributions of their programs and activities in the past three years, as well as present helpful insights
to management for use in future planning efforts.
The results of performance audits also provide a means of assuring legislative and governing bodies
and the public that the resources of a transit operator or RTPE are being economically and efficiently
utilized. In this way, the performance audit report can provide accountability for the use of public
funds and for the actions of management, as well as document recent achievements. The performance
audit report results can also be used by management of a transit operator or an RTPE to validate
current goals and objectives, or emphasize the need for change in certain areas.
An indirect benefit of performance audits is the special skills or expertise that auditors may bring to an
audit engagement. The performance auditor may have specific expertise that can supplement the
capabilities of the transit operator's or the RTPEs' staff and provide additional insight into the
operation of current programs and activities, as well as useful suggestions for improvement.
Finally, the management of transit operators and RTPEs are often preoccupied with addressing
current issues or providing services on a day- to- day basis. The pressing demands of operating an
organization on a daily basis can deter managers from taking a more broad- based look at their overall
goals and objectives, as well as the impact of specific programs and activities. The triennial
transportation performance audit affords management the opportunity to periodically have an
independent and objective evaluation of their organization and operations that otherwise might not be
feasible given the daily demands of managing transportation programs and activities.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
14
I I .3 H O W A R E P E RFORMANCE A U DITS D IFFERENT F R OM F I NANCIAL
A UDITS ?
The objective of performance auditing is to systematically evaluate an organization's effectiveness,
efficiency, and economy of operation under management's control. The audit report communicates to
appropriate persons the results of the evaluation along with recommendations for improvements.
In contrast, the objective of financial auditing is to express an opinion by the independent auditor on
the fairness with which an entity's financial statements present financial position, results of
operations, and changes in financial position in conformity with generally accepted accounting
principles. The auditor's report is the medium through which an opinion is expressed or, if
circumstances require, disclaimed.
Exhibit II. 1 on the next page, summarizes the major differences between financial auditing and
performance auditing.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
15
Exhibit II. 1 COMPARISON OF FINANCIAL AND PERFORMANCE AUDITING
    FINANCIAL AUDIT   PERFORMANCE
AUDIT
Responsibility To attest to the fairness of
financial statements.
To provide an independent view
on the extent to which
transportation operators and
RTPEs are economically
efficiently, and effectively
carrying out their
responsibilities
Information For third parties For management, oversight
bodies, and the public.
Direction of audit Retrospective Retrospective and prospective
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
16
I I .4 W H A T I S T HE S T R U CTURE O F A P E RFORMANCE A UDIT?
The Comptroller General's " Standards for Audit of Governmental Organizations, Programs,
Activities, and Functions" sets forth the field work and reporting standards for performance audits.
The major steps involved in a performance audit are shown in Exhibit II. 2. Each of these steps is
briefly described in the sections that follow.
P r eliminary R evie w
An audit needs to be properly planned to ensure that it will be successful. The auditor's responsibility
in planning the audit includes defining the audit objective and planning how the objectives can be
attained while establishing a balance between audit scope, time frames and resources.
The information needed by the auditor to plan the audit varies with the objectives, as set forth in the
audit agreement, and the activities of the entity to be audited. A preliminary review of the entity may
be made to gather information on the overall activities of the entity and to help identify specific audit
areas. It is a process for quickly gathering information, without detailed verification, on the entity's
organization, programs, activities and functions. The preliminary review also should include the
collection of copies of prior audit reports and other internal and external studies that have been
conducted regarding the entity being audited.
The preliminary review provides information about the key systems and procedures used for
managing finances and operations and for evaluating and reporting performance. It also provides
information about the size and scope of the entity's activities, as well as areas in which there may be
internal control weaknesses, uneconomical or inefficient operations, lack of effective goal
achievement, or lack of compliance with laws and regulations. Tests to determine the significance of
such matters are generally conducted in the detailed review phase of the performance audit.
The Comptroller General's " Standards for Audit of Governmental Organizations, Programs,
Activities, and Functions" states that due professional care should be used in conducting the audit and
in preparing related reports. Due professional care includes follow- up on known findings and
recommendation from previous audits that could have an effect on the current audit objectives to
determine whether prompt and appropriate corrective actions have been taken by entity officials or
other appropriate organizations.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
17
Exhibit II. 2 OVERVIEW OF THE PERFORMANCE AUDIT REVIEW
Preliminary
Review
·   Background Review
·   Indentify Functions
·   Verify Performance
Indications
·   Test Compliance
Detailed Review
·   Review Functions
·   Gather
Documenation
·   Develop Findings
Report
Preparation
·   Draft Report
·   Forwared Report to
Management
Finalization and
Presentation
·   Meet and Discuss
Report With
Management
·   Make Necessary
·   Change in Report
·   Present Final
Report
Follow- up
Review
·   Review Status of
Report
·   Recommendations
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
18
The verification, analysis and review of the operators' performance indicators and testing of
compliance with TDA requirements should be performed during the preliminary review phase of the
performance audit. The steps necessary to audit the performance indicators and compliance areas will
provide the auditor with an understanding of the entity's management systems and procedures. It
will also provide information about the entity's activities, possible internal control weaknesses,
reporting procedures, economy and efficiency of operations, and the extent to which the entity is
achieving its goals.
D e tailed R evie w
The purpose of the detailed review phase is to perform the work necessary to meet the audit
objectives as set forth in the audit agreement and as established as the result of the preliminary
review.
The detailed review phase of the performance audit builds on the results of the preliminary review and
consists of gathering sufficient, competent, and relevant evidence to afford a reasonable basis for the
auditors' judgments and conclusions regarding the organization, program, activity, or function under
audit.
The evidence may be categorized as physical, documentary, testimonial, and analytical. Physical
evidence is obtained by direct inspection or observation of activities of people, property, or events.
Documentary evidence consists of information such as letters, written policies and procedures,
contracts, accounting records, and management information on performance. Testimonial evidence is
obtained from others through statements received in response to inquiries or through interviews.
Analytical evidence includes computations, comparisons, reasoning, and analysis of information.
R ep o r t P r eparatio n
The Comptroller General's " Standards for Audit of Governmental Organizations, Programs,
Activities, and Functions" states that written audit reports are to be prepared communicating the
results of each performance audit. Written reports are necessary to ( a) communicate the results of
audits to officials at all levels of government, ( b) make the results less susceptible to
misunderstanding, ( c) make the results available for public inspection, and ( d) facilitate follow- up to
determine whether appropriate corrective actions have been taken.
The performance audit standards provide that reports are to be issued promptly so as to make the
information available for timely use by management, public officials and the general public.
Appropriate contents for an audit report are described more thoroughly in Section II. 6, titled " What
Are the Reporting Standards for Performance Audits?," which begins on page 23.
Once the draft report is prepared, a copy should be provided to the management of the entity being
audited for its review and comment.
F i nalization a nd P r esentatio n
After management has had an opportunity to review and comment on the draft audit report, the auditor
should meet with management to discuss their comments on the report. Based on the results of this
meeting, the auditor should make any necessary changes in the audit report and prepare the final
report.
The performance audit report should document the results of the audit. It also should contain the
views of responsible officials of the organization, program, activity, or function audited concerning
the auditors' findings, conclusions, and recommendations, and what corrective action is planned.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
19
These views of responsible officials normally should be obtained in writing for significant findings,
conclusions, and recommendations affecting the audited entity. If in the auditors' opinion the
comments are not valid, the auditors may choose to state their reasons for rejecting them.
Conversely, the auditors should modify their report if they find the comments valid.
Upon the completion of the preparation of the report, including receipt and analysis of the views of
the audited entity, the report should be presented to the officials of the audited entity, and in the case
of reports on audits of operators, to the responsible RTPE, which provides the allocation of TDA
funds.
F o llow- Up R evie w
Management of the audited entity is primarily responsible for directing action and follow- up on
recommendations. As a follow- up to the previous performance audit, the auditor's report should
disclose the status of known but uncorrected significant or material findings and recommendations
from prior performance audits that affect the current audit objective.
Public Utilities Code, Section 99244, stipulates that an RTPE should annually identify, analyze and
recommend potential productivity improvements which could lower the operating costs of those
operators which operate at least 50 percent of their service miles within the RTPEs jurisdiction. This
provides an excellent opportunity for RTPEs to follow- up on the actions taken by operators in
response to recommendations that are made in prior performance audit reports. RTPEs may want to
apply similar scrutiny to the actions which they have taken in response to the performance audit
reports of their own activities.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
20
I I .5 W H A T A R E T HE F I ELD W ORK S T A N DARDS F O R P E RFORMANCE
A UDITS ?
The Comptroller General has established various fieldwork standards for conducting performance
audits. Exhibit II. 3, on the next page, summarizes these major standards. Each of these fieldwork
standards are briefly described below.
W o r k S h ould b e A d equately P l anne d
This standard places responsibility on the auditor or audit organization to thoroughly plan an audit.
This includes defining the audit objectives and planning how the objectives can be attained while
establishing a balance between audit scope, time frames, and staff- days to be spent to ensure optimum
use of audit resources. Chapter III and Chapter IV each contain a suggested level of effort that may
be needed to complete a typical performance audit of a transit operator and an RTPE, respectively.
S t aff S h ould b e P r op e r ly S u p e r vise d
This standard places responsibility on the auditor or auditing organization for seeing that staff who are
involved in accomplishing the objectives of the audit receive appropriate guidance and supervision to
ensure that the audit work is properly conducted and that the audit objectives are accomplished.
A n A ssessment S h ould b e M ade o f C o mpliance w i th A p plicable R e quirements o f
S t atutes a nd R egulation s
The audit should include an assessment of compliance with applicable requirements of statutes and
regulations. The level of the compliance assessment conducted will vary depending upon the scope
and objectives of the performance audit. However, the audit should be designed so that the audit will
provide reasonable assurance of detecting abuse or illegal acts that could significantly affect the audit
objectives.
A n A ssessment S h ould b e M ade o f A p plicable I nt e r nal C ontrols
The auditor should make an assessment of applicable internal controls when necessary to satisfy the
audit objectives. In audits having as objectives the assessment of the adequacy of particular internal
controls, the auditor should design steps and procedures to assess the effectiveness of the prescribed
control procedures or actual control practices, and may recommend changes where appropriate to
strengthen controls.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
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Exhibit II. 3 SUMMARY OF PERFORMANCE AUDIT FIELD WORK STANDARDS
  STANDARDS*   DESCRIPTION/ RATIONAL
1. Work should be adequately planned. Defines audit objectives, audit scope, time
frames, and resources.
2. Staff should be properly supervised. Staff receive appropriate guidance and
supervision to ensure audit objectives are
achieved.
3. An assessment should be made of applicable
internal controls.
Audit steps and procedures should be employed,
when appropriate, to ensure adherence by the
audited entity to applicable statutes and
regulations.
4. An assessment should be made of applicable
internal controls..
Audit steps and procedures should be used to
assess the effectiveness of internal control
procedures and practices.
5. Sufficient, competent and relevant evidence
should be obtained.
Auditor judgments and conclusions should be
supported by objective information and
documented evidence.
* Source: Comptroller General’s Office, “ Government Auditing Standards, “ 1998
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
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S u fficient, Competent, and Relevant Evidence Should be Obtaine d
The auditor should obtain sufficient, complete and relevant evidence to afford a reasonable basis for
the auditors' judgments and conclusions regarding the organization, program, activity, or function
under audit. A record of the auditors' work is to be retained in the form of working papers. Working
papers may include tapes, films, and discs. When computer- processed data are an important or
integral part of the audit and the data's reliability is crucial to accomplishing the audit objectives,
auditors need to satisfy themselves that the data are relevant and reliable.
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
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I I .6 W H A T A R E T HE R E PORTING S T A N DARDS F O R P E RFORMANCE A UDITS ?
The Comptroller General's Office has identified specific reporting standards for performance audits.
Exhibit II. 4, on the next page, summarizes these reporting standards. Each of these standards are
described separately in the following sections.
W ritten A u dit R ep o r ts S h ould b e P r epare d
Written reports are necessary to ( a) communicate the results of audits to officials at all levels of
government, ( b) make the results less susceptible to misunderstanding, ( c) make the results available
for public inspection, and ( d) facilitate follow- up to determine whether appropriate corrective actions
have been taken.
R ep o r ts S h ould b e I s sued P r omptl y
Performance audit reports should be issued promptly so as to make the information available for
timely use by management and public officials, and by other interested parties. To be of maximum
use, the report must be timely. The value of a carefully prepared report to decision- makers may be
reduced if it arrives too late. Therefore, the auditor should plan for the timely issuance of the audit
report and conduct the audit with this goal in mind.
T he R ep o r t S h ould I n clude a S t atement o f t he A u dit O bjectives a nd a D es c r iption o f
t he A u dit S c ope a nd M ethodolog y
Knowledge of the objectives of the audit, and the audit scope and methodology for achieving the
objectives, is needed by readers to understand the purpose of the audit, judge the merits of the audit
work and what is reported, and understand any significant limitations.
Performance audit standards require the following specific topics to be included in the audit report:
• A full discussion of the audit findings, and where applicable, the auditor's conclusions;
• The cause of problem areas noted in the audit;
• Recommendations for actions to correct the problem areas and to improve operations,
when called for by the audit objectives;
• A statement that the audit was made in accordance with generally accepted government
auditing standards and disclose when applicable standards were not followed;
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
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Exhibit II. 4 SUMMARY OF PERFORMANCE AUDIT FIELD WORK STANDARDS
  STANDARDS*   DESCRIPTION/ RATIONAL
1. Written audit reports should be prepared. Written reports communicate results for a wide
audience, help avoid misunderstandings, and
facilitate follow- up.
2. Reports should be issued promptly. Make audit information available for timely use
by management and other interested officials or
parties..
3. Reports should include a statement of the audit
objectives and a description of the audit scope
and methodology.
Statement of audit objectives and a description of
scope and methodology assists in understanding
purpose and results of the audit.
4. Reports should be complete, accurate, objective
and convincing.
Thorough, clear and concise reports effectively
communicate audit results.
5. Written audit reports should be submitted to the
appropriate officials..
Written reports should be submitted to the
organizations or officials requiring or arranging
for the audits, management, and other interested
parties, as appropriate.
* Source: Comptroller General’s Office, “ Government Auditing Standards, “ 1998
California Department of Transportation
II. BACKGROUND ON PERFORMANCE AUDITS
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• Significant internal controls that were assessed, the scope of the auditor's assessment
work, and any significant weaknesses found during the audit;
• Notation of all significant instances of noncompliance and abuse and all indications or
instances of illegal acts that could result in criminal prosecution that were found during
or in connection with the audit;
• Pertinent views of responsible officials of the organization, program, activity, or
function audited concerning the auditors' findings, conclusions, and recommendations,
and what corrective action is planned;
• A description of any significant noteworthy accomplishments, particularly when
management improvements in one area may be applicable elsewhere;
• A listing of any significant issues needing further study and consideration; and
• A statement about any pertinent information that was omitted because it is deemed
privileged or confidential. The nature of such information should be described, and the
basis under which it is withheld should be stated.
T he R e p o r t S h ould b e C o mplete, A c curate, O bjective, a nd C onvincin g
The report should be complete, accurate and convincing but also should be written to be as clear and
concise as the subject matter permits. This will ensure that the results of the audit can be understood
by the management of the entity receiving the performance audit, as well as by other concerned or
interested parties.
W ritten A u dit R ep o r ts S h ould b e S u bmitted b y t he A u dit O rganization t o t he
A p propriate O fficial s
The performance auditor should submit written audit reports to the chief executive of the RTPE and to
the chief executive of a transit operator that is being audited. Copies of the reports should also be sent
to other officials who may be responsible for taking action on audit findings and recommendation and
to others authorized to receive such reports, such as members of RTPE governing boards. Unless
restricted by statute or regulation, copies should be made available for public inspection. RTPEs are
required to send a copy of their performance audit reports to the Director of the California Department
of Transportation.
C H A P T ER I I I
PERFORMANCE AUDITS OF TRANSIT OPERATORS
California Department of Transportation
III. Performance Audits of Transit Operators
26
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
This chapter describes the major work steps or elements of conducting performance audits of transit
operators. Specifically, it discusses seven elements, including:
• Review of compliance requirements;
• Follow- up review of prior performance audit recommendations;
• Initial review of transit operator functions;
• Verification and use of performance indicators;
• Detailed review of transit operator functions;
• Preparation of the draft audit report; and
• Preparation and presentation of the final audit report.
The elements described in this chapter of the report are presented as guidelines. By utilizing these
elements, the auditor conducting a performance audit of a transit operator will ensure that the audit
meets the requirements of the Public Utilities Code and the California Code of Regulations. In
addition, these elements are consistent with the " Standards for Audit of Governmental Organizations,
Programs, Activities and Functions," published by the Comptroller General.
Although these elements are distinct and serve a variety of purposes, an auditor should not wait to
complete one before starting another. Doing so could result in repetitive interviews and an audit
which is more burdensome and time consuming than necessary.
Exhibit III. 1, presented on the next page, provides an overview of the major elements in a
performance audit of transit operators. Each of these elements is discussed separately in the sections
presented below. In addition, this chapter provides information regarding the potential level of effort
that may be needed to conduct a transit operator performance audit.
I I I. 1 R E VIE W O F C O MPLIANCE R EQUIREMENT S
Section 99245 of the Public Utilities Code requires an annual certified fiscal audit of each claimant of
Transportation Development Act ( TDA) funds, and specifies that the report on the fiscal audit shall
include a certification that the funds allocated to the claimant pursuant to the TDA were expended in
conformance with applicable laws and rules and regulations. Though the compliance verification
requirement is not a responsibility of the performance auditor, several specific requirements are made
by the TDA and accompanying regulations which concern issues treated in performance audits.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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Exhibit III. 1 MAJOR ELEMENTS IN A PERFORMANCE AUDIT OF TRANSIT OPERATORS
III. 1
Review of
Compliance
Requirements
III. 2
Follow- Up
Review of Prior
Performance
Audit
Recommendations
III. 3
Initial Review of
Transit Operator
Functions
III. 4
Verficiation and
Use of
Performance
Audit Indicators
III. 5
Detailed Review
of Transit
Operator
Functions
III. 6
Preparation of
Draft Audit
Report.
III. 7
Preparation and
Presentation of
Final Audit
Report
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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This Guidebook includes a summary of certain key compliance issues which are closely related to
performance audit issues. Exhibit III. 2, presented on the next pages, describes selected compliance
requirements and references the relevant section of code or regulation.
S u ggested A u dit S t ep s
This section identifies three major steps that the performance auditor may utilize to review
compliance requirements in the performance audit. These include: discussing compliance
requirements with the transit operator, documenting evidence of compliance; and reporting the results
of the compliance review.
• Discuss Compliance Requirements with the Operator - Most compliance
requirements are the direct responsibility of the operator. However, some requirements
may not be familiar to the operator, since the operator's compliance may be overseen by
the RTPE. The auditor will need to investigate evidence of compliance, but these
discussions should enable the auditor to gain a better understanding of the operator's
systems and procedures.
• Investigate Evidence of Compliance - Based upon discussions with the operator
and the RTPE, the auditor should determine whether objective evidence of compliance is
necessary. Such evidence may consist of documents, calculated measures, or other data.
If such evidence is judged necessary, the auditor should investigate and gather the best
evidence available, taking care to meet the standards for performance audit fieldwork
described in " Standards for Audit of Governmental Organizations, Programs, Activities,
and Functions."
• Disclose Results of the Compliance Review - The performance auditor will need
to prepare a written report on the tests that were made of compliance by the transit
operator with applicable laws and regulations. In addition, the auditor must report the
results of these tests.
If the auditor finds an indication of non- compliance with any of the requirements
summarized in this section, the auditor should:
- Make a corresponding finding in the performance audit report;
- Draw conclusions; and
- Make appropriate recommendations.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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Exhibit III. 2 OPERATOR COMPLIANCE REQUIREMENT
  OPERATOR COMPLIANCE REQUIREMENTS   REFERENCE
1. The transit operator submitted annual reports to the RTPE based
upon the Uniform System of Accounts and Records established by
the State Controller.
Public Utilities Code,
Section 99243
2. The operator has submitted annual fiscal and compliance audits to its
RTPE and to the state controller with 180 days following the end of
the fiscal year, or has received the appropriate 90 day extension
allowed by law.
Public Utilities Code,
Section 99245
3. The CHP has, within the 13 months prior to each TDA claim
submitted by an operator certified the operator’s compliance with
Vehicle Code Section 1808.1 following CHP inspection of the
operator’s terminal.
Public Utilities Code,
Section 99251
4. The operator’s claim for TDA funds is submitted in compliance with
rules and regulations adopted by the RTPE for such claims.
Public Utilities Code,
Section 99261
5. The operator does not routinely staff with two or more persons
public transportation vehicles designed to be operated by one
person.
Public Utilities Code,
Section 99264
6. The operator’s operating budget has not increased by more that 15%
over the preceding year, nor is there a substantial increase or
decrease in the scope of operations or capital budget provisions for
major new fixed facilities unless the operator has reasonably
supported and substantiated the change( s).
Public Utilities Code,
Section 99266
7. Operator funding provided through the Transportation Development
Act makes up more the 50% of operating, maintenance, capital and
debt service requirements after federal grants are deducted, if
applicable.
Public Utilities Code,
Section 99268
8. If the operator serves an urbanized area, it has maintained a ratio of
fare revenue to operating cost at least equal to one- fifth ( 20 percent),
unless it is in a county with a population of less than 500,000, in
which case it must maintain a ratio of fare revenues to operating cost
at least three- twentieths ( 15 percent), if so determined by the RTPE.
Public Utilities Code,
Sections 99268.2,
99268.3, & 99268.12
9. If the operator serves a rural area, it has maintained a ratio of fare
revenues to operating costs at least equal to one- tenth ( 10 percent).
Public Utilities Code,
Section 99268,2,
99268.4, & 99268.5
10. The current cost of operator’s retirement system is fully funded
with respect to the officers and employees of its public transportation
system, or the operator is implementing a plan approved by the
RTPE which will fully fund the retirement system with 40 years.
Public Utilities Code,
Section 99271
11. If the operator receives state transit assistance funds, the operator is
not precluded by contract from employee part- time drivers or from
contracting with common carriers.
Public Utilities Code,
Section 99314.5 ( c)
12. If the operator receives state transit assistance funds, the operator
makes full use of funds if available to it under the Urban Mass
Transportation Act of 1964 before TDA claims are granted.
California Code of
Regulations,
Section 6754 ( a) ( 3)
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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I I I. 2 F O LLOW- UP R E VIE W O F P R IOR P E RFORMANCE A UDI T
R E COMMEND A T ION S
The " Standards for Audit of Governmental Organizations, Programs, Activities and Functions" state
that due professional care by auditors includes follow- up on known findings and recommendations
from previous audits that could have an effect on the current audit objectives to determine whether
prompt and appropriate corrective actions have been taken by transit operator officials or other
appropriate organizations.
To ensure that the performance audit is effective and valuable, a performance auditor needs to review
and evaluate the operator's implementation of prior performance audit recommendations. The
objective assessment of improvements provides assurance to the public that the operator has made
efforts to improve its efficiency and effectiveness, and strengthens the integrity of the performance
audit process.
S u ggested A u dit S t ep s
This section identifies four major audit steps that the performance auditor may utilize to follow- up on
prior performance auditor recommendations regarding a transit operator. These steps include:
obtaining and reviewing key documents; discussing prior audit report recommendations with transit
operator management and staff and RTPE representatives; documenting evidence of the
implementation of action on prior audit recommendations; and reporting on the results of the follow-up
review. Exhibit III. 3 on the next page, depicts the follow- up process on prior audit report
recommendations.
• Obtain and Review Key Documents - The auditor will need to obtain and review
( a) the prior performance audit ( preferably the two most recent audits), ( b) any advice or
reports issued by the RTPE's productivity committee ( if one has been established per
Public Utilities Code Section 99244), ( c) any recommendations made in management
letters which may have accompanied the operator's fiscal audits, and ( d) any other
performance evaluation documents and data held by the operator or RTPE.
• Discuss Implementation of Recommendations with Operator and RTPE -
The auditor should discuss the implementation status of each recommendation in the prior
performance audit report with management and representatives of the transit operator, as
well as with representatives from the RTPE, if appropriate. In most cases, the auditor
will need to investigate evidence of recommendation implementation, but these
discussions may provide a time- saving basis for those investigations. To exercise due
professional care, the auditors may use a process that enables them to track the status of
management's actions on significant or material findings and recommendations from
prior audits. Such a process could include determining whether the following actions
have occurred:
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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Exhibit III. 3 FOLLOW- UP ON PRIOR TRANSIT OPERATOR PERFORMANCE AUDIT
RECOMMENDATIONS
Obtain and
Review Key
Documents
Discuss
Recommendation
Implementation
with Transit
Operator and
RTPE
Document
Evidence of
Implementation of
Recommendations
Disclose Results
of Follow- Up
Review
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
32
- Implementation of Recommendations. If implementation has been completed,
the discussion may concern ( a) the effectiveness and benefits from the
recommendation and ( b) difficulties and costs of implementing the recommendation.
- Implementation In- Progress. If implementation is underway, the discussion
may address ( a) the initiation date, ( b) the current status, ( c) the date implementation is
expected to be complete, and ( d) the difficulties and costs of implementation.
- Implementation Not Begun. If the operator has not initiated any efforts to
implement the performance improvement recommendation, the auditor may want to
investigate and determine whether ( a) circumstances have changed, and the
recommendation is no longer applicable or feasible, ( b) the recommendation was
unreasonable and inappropriate at the outset, or ( c) the operator has negligently or
intentionally rejected a valid recommendation. Each of these determinations may result
in a finding in the auditor's report, and appropriate conclusions may need to be drawn
and recommendations made.
• Document Evidence of Implementation of Recommendations - Based upon
discussions with the operator and the RTPE, the auditor should obtain the best evidence
verifying the implementation status of each recommendation in the prior performance
audit report. Such evidence, which may consist of documents, observed practices, or
other data, should meet the standards for performance audit fieldwork evidence described
in " Standards for Audit of Governmental Organizations, Programs, Activities and
Functions."
• Disclose Results of Follow- up Review - The management of the audited agency
has the primary responsibility for directing action and following- up on prior audit report
recommendations. The auditor's report should disclose the status of known but
uncorrected significant or material findings and recommendations from prior audits that
affect the current audit objective.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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I I I. 3 I N ITIAL R E VIE W O F T R ANSIT O PER A T OR F UNCTION S
The initial review of transit operator functions should provide the auditor with an understanding of
the operator's characteristics, including a familiarity with the modes of service provided, types of
service offered, and size of the operator. It also should provide a better understanding of the
functions performed by the operator. Each of these items is briefly discussed in the following
sections.
O p e r at o r C h aract e r istic s
A performance audit should take into consideration the geographic and socio- economic environment
in which an operator must conduct its activities. A performance audit should also recognize the
different modes of service and types of service provided by an operator. This is important because
there may be varying objectives, operating practices, and levels of service associated with different
modes or types of service. Thus, it is important that the auditor be aware of these characteristics
when reviewing and assessing the economy, efficiency and effectiveness of an operator's functions.
Each of the following sections describes one characteristic that may be a helpful distinction in
analyzing operator performance: mode of service, type of service, and number of peak vehicles
operated ( size).
M ode o f S e r vic e
The mode of service is simply the form of service and type of vehicle used to provide transportation.
These modes include:
• Bus ( transit/ coach, van, diesel, gasoline, etc.);
• Trolley Bus ( a bus powered by an external source, such as overhead electric lines);
• Light Rail ( e. g., the San Diego Trolley);
• Heavy Rail ( e. g., BART);
• Ferry; and
• Cable Car.
The performance auditor will probably want to verify and calculate performance indicators separately
for each mode of service, in order to ensure the consistency and usefulness of the indicators.
Functional reviews of operators may need to be conducted distinctly for functions which are
identified uniquely to each mode, such as service planning; scheduling, dispatch and operations; and
maintenance. Other functional areas are not identified uniquely to each mode of service, for example:
general management and organization; personnel management and training; and administration. For
these functional areas, the performance auditor may conduct a single functional review for the entire
operator's organization.
T ype o f S e r vic e
There are two general types of transportation service which may be offered:
• Fixed- Route; and
• Demand- Responsive.
Fixed- route services follow a predetermined and scheduled route on a regular basis. Rail, trolley,
and cable car service is always fixed- route, since the right of way is permanent. Bus or van service
may be either fixed- route or demand- responsive. Ferry service is usually fixed- route since dock
space is limited.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
34
The performance auditor may verify and calculate performance indicators separately for each type of
service within modes. The primary effect of this guideline is that performance indicators for bus
service should be separated for fixed- route and demand- responsive service. Again, as the auditor
conducts the functional review, interpretation will be necessary in evaluating the different responses
received for fixed- route and demand- responsive systems.
S i ze o f O p e r at o r
There are various measures that can be used to differentiate among the sizes of transit operators. One
of the convenient measures that is used is the number of peak vehicles operated. Within this
measurement scale, three categories of operators that have been used are:
• Small Operator - 1 to 20 Vehicles;
• Medium Operator - 21 to 100 Vehicles; and
• Large Operator - 101 or More Vehicles.
Vehicles used for all modes and all types of service should be combined in order to classify the
operator's size. Only peak vehicles should be counted for purposes of assigning an operator to a
size category. Aging or unused vehicles which may be retained by operators for emergency use
should not be counted.
Selection of performance indicators ( other than the five required by the TDA) should be based upon
results of the functional review, not necessarily upon operator size. As with the above
classifications, the auditor may need to interpret functional review results in light of the operator's
size. Size should not drive the functional review, however. The primary purpose for classifying
operators by size is for recommendation development and format.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
35
F u nctions P e r f o r med b y t he O p e r at o r
The performance auditor may find it useful to review existing documents to obtain a general
familiarity with the functions performed by an operator. Such documents may include annual
reports, short range transit plans, service descriptions within the regional transportation plan, prior
performance audits, etc. The performance auditor also should discuss the operator's functions with
the operator. Most operator functions relate to:
• General management and organization;
• Service planning;
• Scheduling, dispatch and operations;
• Personnel management and training;
• Administration;
• Marketing and public information; or
• Maintenance.
At the initial review stage, the auditor should focus on:
• Resource commitment and level of management direction and control within a function;
• Observations or indicators of the efficiency and effectiveness of activities performed; and
• Whether the function is performed by the operator or by a contractor.
As the auditor identifies functions and notes the extent to which each function is performed, specific
attention should be given to the operator's choice of those functions to be performed and those not
performed. The auditor may need to consider not just the efficiency and effectiveness of the
functions ( which the functional review concerns), but the appropriateness of performing ( or
neglecting to perform) the function in the first place. Thus, the function identification may lead to
suggestions for organizational strategy and/ or restructuring.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
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I I I. 4 V ERIFIC A T ION A N D U S E O F P E RFORMANCE I NDIC A T OR S
Performance indicators are frequently used to quantify and review the efficiency and effectiveness
of a transit operator's activities. Such indicators can provide insight on current operations, as well
as on the operator's performance over a period of time. Through the review of performance
indicators, an auditor also can gain a better understanding of the performance and interrelationship
of the major functions of a transit operator. For example, Exhibit III. 4 presents an illustration of
the relationship between the performance indicator of " operating cost per vehicle service hour" and
the major functions typically conducted by a transit operator.
Exhibit III. 4 shows that the performance indicator " operating cost per vehicle service hour" is
affected by at least four of the seven major operator functions. In this case, an operator's
" operating cost per vehicle service hour" is affected by how efficiently and effectively an operator
performs the following functions: ( a) general management and organization; ( b) scheduling,
dispatch and operations; ( c) personnel management and training; and ( d) maintenance. The exhibit
also shows that a single performance indicator should be considered in different ways so that an
auditor can fully understand and appreciate how a transit operator conducts its business activities.
This section describes how an auditor can develop, use and interpret performance indicators.
Specifically, it discusses the following activities:
• Assess internal controls;
• Test data collection methods;
• Calculate performance indicators; and
• Evaluate performance indicators.
It should be noted that there are many factors that can influence a transit operator's performance
indicators. These include geography, type of services provided, age and type of vehicles, and
other locally specific conditions. Therefore, caution should be exercised in making comparisons
between transit operators, since there may be significant differences between operators.
A ssess I nt e r nal C ontrol s
An auditor usually collects a variety of information from a transit operator to calculate performance
indicators. To ensure that the information gathered is reliable and valid, an auditor must assess
internal controls in place over collection of performance- related information. Specifically, a transit
operator's internal controls are intended to do the following:
• Provide reasonable assurance that program goals and objectives are met;
• Ensure that resources are adequately safeguarded and efficiently used;
• Ensure that reliable data are obtained, maintained and fairly disclosed in reports; and
• Ensure that laws and regulations are complied with by the transit operator.
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Exhibit III. 4 ILLUSTRATION OF RELATIONSHIP BETWEEN A PERFORMANCE
INDICATOR AND MAJOR TRANSIT OPERATOR FUNCTIONS
Scheduling, Dispatch,
Service Planning and Operations
General Management and
Organization
Maintenance Marketing and Public
IInformation
Administration
Personnel Management
and Training
Operating Cost
Per Service
House
Operating
Cost
Preventive and Routine Maintenacne Costs
Personal
Utilization
Direction and
Control
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The United States General Accounting Office ( GAO), in September 1990, published a document
entitled " Assessing Internal Controls in Performance Audits." In this document, the GAO outlined
the key steps that an auditor should use in assessing internal controls. These include:
• Determine the significance and the sensitivity of the program subject matter;
• Assess susceptibility of misuse of resources, failure to attain objectives and
noncompliance with laws and regulations;
• Identify and understand relevant internal controls;
• Determine what is already known about control effectiveness;
• Assess adequacy of control design;
• Determine through testing, if controls are effective; and
• Report on internal control assessment and discuss needed corrective actions.
The assessment of internal controls will require that an auditor take some additional time to ensure
that performance data used to calculate performance indicators is accurate. However, such an
assessment will enable the auditor to rely on information provided by the transit operator and
reduce the need for first- hand data collection or audit test work.
T est D a ta C o llection M ethod s
The auditor needs to gather the following data to report on specific performance measures that must
be verified and presented in a performance audit. These include:
• Operating Cost;
• Passenger Count;
• Vehicle Service Hours;
• Vehicle Service Miles;
• Employee Hours; and
• Fare Revenue.
This section of the Guidebook discusses audit steps which are appropriate to verify the
performance data, calculate TDA- required performance indicators, and compute the farebox
recovery ratio. Each of these data elements should be gathered separately for each type and each
mode of service provided by an operator. A definition of each of the major terms used in this
Chapter is presented in Appendix B.
S u ggested A u dit S t ep s
• Operating Cost
- Verify Use of Uniform System of Accounts. Verify that the operator keeps
records of transit costs according to the Uniform System of Accounts and Records
developed by the State Controller and the California Department of Transportation.
Compliance with this requirement may be determined by reviewing a compliance
audit report prepared by an independent auditor engaged by the operator in
accordance with California Code of Regulations Section 6667, the annual
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independent financial audit should attest to the use of the Uniform System of
Accounts and Records.
- Add Costs For All Account Classes and Deduct Non- Operating Costs.
Obtain total fiscal year expense amounts from operator records for each cost object
class as presented in the Chart of Accounts for the Uniform System of Accounts and
Records. Verify that the total of expenses in all object classes equals the total
expenses presented in audited financial reports for the operator. To compute
operating costs, deduct all of the following expenses ( as appropriate): ( a) costs in the
depreciation and amortization class; ( b) subsidies for commuter rail operated under
the jurisdiction of the Interstate Commerce Commission; ( c) direct costs of providing
charter service; ( d) vehicle lease costs; and ( e) premiums for liability and casualty
insurance and payments of liability claims.
• Passenger Count
- Obtain Operator- Reported Passenger Counts. Obtain copies of reports that
provide a listing of passenger counts for the reporting period being audited.
- Review Passenger Data- Gathering Methodology. Obtain descriptions of
passenger count data- gathering methodology ( driver log, electronic fareboxes,
periodic sample, etc.). Determine whether the data collection methodology is
susceptible to material error.
To ensure the accuracy of passenger data, the auditor should observe, and verify the passenger
data collection process. If the auditor determines there is a significant deviation from operator-provided
passenger data, the auditor should recalculate and report performance indicators based
upon data extrapolated from a representative sample. If the error in operator data collection appears
systematic ( consistent in direction and magnitude), the extrapolation may simply be an adjustment
of the operator's data. For example, if the sample shows that the operator consistently
underestimates the number of riders by 20 percent, the auditor could adjust reported data upward
by 20 percent. In such a case, the auditor should note the discrepancy and adjustment, and should
recommend a change in procedures or practices to prevent the recurrence of the underestimation.
• Vehicle Service Hours
- Obtain Operator- Reported Vehicle S ervice Hours. Obtain copies of
reports that provide a listing of vehicle service hours for the reporting period being
audited.
- Verify Vehicle S ervice Hour Definition Used. Verify that vehicle service
hours are compiled consistently in accordance with the definition included in the
glossary to this Guidebook.
- Review Vehicle Service Hour Data- Gathering Methodology. The auditor
should discuss with the operator the methods used to calculate vehicle service hours
reported. For fixed route service, the operator should account for vehicle hours
pertaining to ( a) scheduled service; ( b) changes in service schedules; and ( c)
confirmation that service was provided according to the established schedule, and
that notations were made of service disruptions and cancellations.
If fixed- route service hour data is unavailable, or has been gathered inconsistently
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with the definition included in the Glossary in Appendix B of this Guidebook, the
auditor may need to reconstruct vehicle service hour data from operator records
( schedules including changes, and cancellation/ dispatch logs).
Demand responsive service hours may be obtained from driver or dispatcher logs, since scheduled
hours include " deadhead" travel time, i. e., travel time before the first passenger pick- up and after
the last passenger drop- off. If demand- responsive service hour data is unavailable, or has been
gathered inconsistently with the definition in the glossary of this Guidebook, the auditor should
review a sample of driver logs to estimate a daily number of service hours per vehicle ( the estimate
should be separate for weekdays and weekend days). The auditor can then estimate the number of
vehicle service hours by multiplying that number of daily service hours per vehicle by the number
of vehicles operated each day ( from dispatcher records).
• Vehicle Service Miles
- Obtain Operator- Reported Vehicle S ervice Miles. Obtain copies of reports
that provide a listing of vehicle service miles for the reporting period being audited.
- Verify Vehicle S ervice Mile Definition Used. Verify that vehicle service
miles are compiled consistently with the definition included in the glossary to this
Guidebook.
- Review Vehicle Service Mile Data- Gathering Methodology. The auditor
should discuss with the operator the methods used to count vehicle service miles
reported. Fixed route systems may maintain mileage records for each segment of a
route. If vehicle service miles are obtained from such records, the operator must
account for vehicle service miles pertaining to ( a) scheduled service; ( b) changes in
service schedules; and ( c) confirmation that service was provided according to the
established schedule, and that notations were made of service disruptions and
cancellations. If such records are not maintained, or if the operator provides
demand- responsive service, a mileage log should be used to record vehicle service
miles ( note that service miles do not include " deadhead" miles).
If the auditor suspects material errors in vehicle service mile data- gathering, the auditor should
review a sample of calculated mileage for a route or a sample of driver logs to the total mileage
actually travelled by the vehicle serving the route or making the demand responsive trips. Such
total mileage for a sample of dates should be obtainable from vehicle maintenance records.
• Employees
- Obtain From the Operator a Count of Employee Hours. Obtain a count of
the number of employee hours worked which were related to the operator's public
transportation service.
- Verify Employee Hours and Full- Time- Equivalency Definitions Used.
Verify that employee hours are compiled consistently with the definition included in
the glossary to this Guidebook. It is important to note that the definition of a full-time-
equivalent ( FTE) employee under the TDA is based on a 2,000 person hours of
work, while the definition used by UMTA is based on a 2,080 person hours of
work. If the operator uses a different standard for FTE computation, their standard
should be noted.
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- Review Employee Hour Data- Gathering Methodology. The operator's
payroll records are an ideal base source. Those records should be supplemented by
information from cost allocation models if the operator receives services from other
organizations. Alternatively, if accurate cumulative hour counts are not available
from payroll sources, the weekly hours of each current employee may be summed,
and adjusted for hires and separations over the course of the triennium. Auditors
should avoid using a simple headcount of employees.
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If an operator contracts with a private vendor for transportation service, it should include contractor
employee hours in the employee hour count.
• Fare Revenue
- Obtain Operator- Reported Fare Revenue. Obtain the amount of total fiscal
year fare revenues. For calculation of the farebox recovery ratio, the auditor will
also need to obtain any fare revenue supplement made up from local funds.
- Review Fare Data- Gathering Methodology. Obtain descriptions of fare
data- gathering methodology ( driver log, daily cash count by vehicle or for the
system, electronic fareboxes, etc.). Determine whether the data collection
methodology is susceptible to material error. If operator's methodology is
susceptible to error, the auditor should recommend procedures and practices to
ensure fare data accuracy.
The integrity of the revenue data collection process should be tested by ( a) dividing total fare
revenue by passenger count to obtain an average fare per passenger, ( b) sampling fare collection
data at its source ( see methodology above), and ( c) comparing the two figures. Deviations may be
an indicator of poor internal controls and a vulnerability to misappropriation of fare revenues.
Note also that fare revenues and operating costs attributable to service extensions can be calculated
separately as provided by Public Utilities Code Section 99268.8.
• Other Performance Data. A wide variety of other performance data may be
collected at the discretion of the auditor, or as requested by the RTPE. The particular
data elements should be chosen during or after the functional review, as that review
may indicate areas of concern and needs for improvement that may be important.
- Verify Definition Used f or Performance Data Item. Ensure that data
gathered by the operator is consistent with definitions provided within the glossary
of this Guidebook, and is also internally consistent. It is important that the
definitions used to gather data are current so that the basis for data is consistent with
prescribed standards.
- Review Data- Gathering Methodology. The auditor should discuss the
methods used to gather performance data with the operator. If the auditor in his or
her professional opinion believes that the method of gathering data is vulnerable to
material error, the auditor should estimate the data by drawing sample data and
extrapolating results using commonly accepted statistical techniques. If such a step
is necessary, the auditor may recommend that the operator improve data collection
methods, and may suggest potential improved methods.
- Obtain Data From the Operator. If, after reviewing or testing data collection
methodologies, the auditor is satisfied that the operator's data collection methods are
not susceptible to material error, the auditor should then request from the operator
performance data for the triennial period being audited.
C a lculate P e r f o r mance I ndicat o r s
Using the data described above, the auditor must calculate at a minimum the following performance
indicators for each fiscal year during the performance audit triennium.
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S u ggested A u dit S t ep s
• Calculate and Verify TDA- Required Performance Indicators. Each
performance indicator calculation consists of simple division. The five indicators
which Section 99246( d) of the Public Utilities Code requires that the performance
auditor verify are:
- Operating Cost per Passenger;
- Operating Cost per Vehicle Service Hour;
- Passengers per Vehicle Service Hour;
- Passengers per Vehicle Service Mile; and
- Vehicle Service Hours per Employee.
• Calculate and Verify the Farebox Recovery Ratio. Though the farebox
recovery ratio is not a required performance indicator under Section 99246( d) of the
Public Utilities Code, Sections 99268 et seq. require that the farebox recovery ratio be
calculated so that an operator's eligibility for funding can be determined. The RTPE is
responsible for calculating this ratio annually, but the auditor should verify the ratio.
The farebox recovery ratio calculation and verification is similar to that for TDA
performance indicators, so it will be treated similarly here. Again, calculation consists
of simple division to determine fare revenue as a percentage of operating cost.
The five TDA- required performance indicators are a basic legal minimum. Other performance
indicators are often useful in analyzing operator performance, though the most useful indicators
may not be the same for every operator.
• Calculate Other Performance Indicators. If, during preliminary interviews, the
operator indicates a concern regarding efficiency, effectiveness or general performance,
the auditor should gather data to evaluate the operator's performance in the area of
concern, and should calculate and analyze relevant performance indicators. Also,
during the functional review, an auditor may identify concerns over performance which
suggest the need to calculate and review additional performance indicators.
Generally, an auditor should choose to select and calculate relevant additional performance
indicators beyond the five which are required by the TDA if and when: ( a) the direction and/ or
strength of a trend is uncertain and additional information would be helpful; ( b) the auditor believes
that the operator and/ or RTPE does not perceive a trend; ( c) a change will be made ( or has been
made during the triennium) in service quality, technology, operating methods or management
practices and a performance indicator will allow effective evaluation of that change's impact ( it is
also useful to have a baseline against which to measure the effect of prospective changes); ( d)
significant aspects of performance within a functional area are not captured by the five summary
TDA measures, and additional indicators will assist in the analysis of the operator's performance
by providing a more complete, more accurate, or more balanced picture; and ( e) the RTPE requests
calculation of an indicator.
A variety of performance indicators can be used to analyze particular aspects of a transit operator's
performance. Exhibit III. 5, on the next page, suggests various performance indicators that may be
useful in reviewing a transit operator's activities.
E valuate P e r f o r mance I ndicat o r s
Calculation and review of performance indicators may assist in guiding and focusing the auditor's
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analysis of functional areas. This section describes methods for evaluating indicators, and
potential types of conclusions which an auditor may reach as the auditor evaluates indicators.
• Discuss Indicators with Operator - Since operators frequently will have
calculated the indicators themselves, this step helps validate the auditor's work, as well
as the operator's calculation methods. More importantly, the operator can assist the
auditor in understanding the reasons for indicator trends and magnitudes. Having this
discussion after indicators are calculated, but before they are thoroughly evaluated, can
save both the auditor's and the operator's time and effort. Should the auditor's
calculation of an indicator differ substantially from that of the operator, the discussion
must focus on the definitions and data gathering methodology used by each.
• Trend Analysis - The easiest and probably the most useful analysis an auditor can
make is to compare performance indicators to those calculated in prior years for the
same operator. The comparison may be made both within the triennium, and to the
prior triennium. Though operator characteristics may change over time, internal
comparisons are the best way to ensure that the indicators compared measure a similar
geographic area, population, service quality, etc. The analysis of indicator trends by
the auditor also identifies improvements and declines in performance and highlights
areas for further audit investigation.
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Exhibit III. 5 SUMMARY OF SELECTED POTENTIAL PERFORMANCES INDICATORS
  GENERAL
MANAGEMENT AND
ORGANIZATION
  SCHEDULING
DISPATCH AND
OPERATIONS
  MARKETING AND
PUBLIC
INFORMATION
·   Actual expenditures/ budgeted
expenditures
·   Administrative cost/ operating
costs
·   Operating cost/ revenue vehicle.
mile
·   Operating cost/ revenue vehicle
hour
·   Operating cost/ unlinked
passenger trip
·   Trips on- mile/ total trips
·   Complaints / month
·   Missed trips / total trips
·   Marketing cost/ total
administrative costs
·   Marketing cost/ revenue
service hours
·   Prepaid cost/ revenue service
hours
  SERVICE PLANNING   PERSONNEL
MANAGEMENT AND
TRAINING
  MAINTENANCE
·   Revenue vehicle service miles/
total revenue vehicle miles
·   Revenue vehicle service hours/
total revenue vehicle hours
·   Passengers/ revenue vehicle
miles
·   Passengers/ revenue vehicle
hours
·   Scheduled overtime hours/ total
scheduled hours
·   Scheduled hours/ total operator
pay hours
·   Farebox revenue/ operating
cost
·   Revenue vehicle mile/ employee
pay hours
·   Revenue vehicle hours/ employee
pay hours
·   Accidents/ vehicle miles
·   Accidents/ vehicle service hours
·   Lost days due to industrial
accidents
  ADMINISTRATION
·   Administrative cost/ revenue.
vehicle hours
·   Insurance expense ( premiums and
settled claim cost)/ revenue vehicle
hours
·   Sick leave days/ employee days
·   Turnover in staff/ total number of
employees
·   Mechanic pay hours/ revenue
vehicle miles
·   Mechanic pay hours/ revenue
vehicle hours
·   Spare vehicles ( the number of
revenue vehicle exceeding the
number required to provide
peak service) / total vehicles
·   Maintenance cost/ revenue
vehicle mile
·   Maintenance cost/ revenue
vehicle hour
·   Roadway/ mechanical failures/
revenue vehicle hours
·   Number of missed trips ( all
causes) / total number of trips
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• Analyses of Performance Among Operators - It may be difficult to compare
performance indicators between operators for a variety of reasons. The climate and geography in
locales may vary, resulting in different fuel, oil, and vehicle maintenance costs. Population socio-economics
may also vary, and result in differing propensities to use public transportation, abilities
to afford fares, and abilities to afford transit alternatives. Population density and other
demographics may also vary, resulting in different alternatives to public transportation ( e. g., in an
urban area, commuting van pools may be viable.) Labor costs and the availability of labor also
may vary. A comparison of operating indicators may also overlook differences in the efficiency
and technology of capital equipment ( vehicles, terminal, maintenance facilities, information
systems, scheduling and dispatch, etc.). While analyses of performance among operators may
provide some relevant data, extreme caution should be used in making and analyzing such
comparisons. It may be useful to discuss planned comparisons with the operator and the RTPE.
• Statutory and Regulatory Requirements - The TDA establishes an efficiency-related
performance standard concerning the farebox recovery ratio in Public Utilities
Code Sections 99268, et seq. Generally, the ratio must be equal to the operator's fiscal
year 1978- 79 farebox recovery ratio, or equal to at least 20 percent for operators
serving urbanized areas and equal to at least 10 percent for operators serving rural
areas.
• Potential Conclusions Concerning Indicator Variation - After calculating
indicators, analyzing trends, making any comparisons, and applying legal standards,
the auditor may reach the following or other conclusions.
- Unusual Events. Indicators may fluctuate due to events which are unlikely to
recur predictably, such as an earthquake ( which forces much greater reliance on
public transit), or an extended drivers' strike.
- Community Demographic or Socio- Economic Changes. Changes within a
community may lead to increased or reduced demand for transit, or demand for a
different type of transit or different routing structures. Any or all of these may affect
performance indicators.
- Data Definition / Collection Changes. Indicators may vary between triennial
audits or between operators because an operator had previously collected incorrect
data, used erroneous data collection methods, or changed indicator definitions or
data collection methods for operational or technical reasons.
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- Changes In S ervice Quality. Changes in aspects of service other than the
quantity provided may cause significant changes in performance as measured by the
TDA indicators. For example, a choice to change from demand- responsive to fixed
route service, or to provide late- night service could affect indicators.
- Changes in Technology. Changes in performance indicators may be caused by
improvements in the efficiency of vehicles, the terminal, maintenance facilities,
information systems, etc.
- Changes in Management and Operating Practices. Past and prospective
changes in performance indicators may be attributable to ( or gained through)
changes in management, operations, organization, or some other discretionary
factor. Such a conclusion is of primary interest during the functional review,
especially if the conclusion is that future improvements are possible.
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I I I. 5 D E T A I LED R E VIE W O F T R ANSIT O PER A T OR F UNCTION S
This section offers guidance for reviewing the various functions of transit operators. Since the
functions of each operator vary, not all parts of this section will apply to all operators. Transit
operator functions can be divided into the following areas:
• General Management and Organization;
• Service Planning;
• Scheduling, Dispatch and Operations;
• Personnel Management and Training;
• Administration;
• Marketing and Public Information; and
• Maintenance.
Exhibit III. 6 on the next page summarizes these major functional areas. Each of these areas will be
briefly described, and sub- functions within the areas will be noted. This section also suggests key
questions to guide the auditor in the review of each functional area. The purpose of these
questions is to focus the auditor's evaluation; careful consideration should be given to responses,
which will vary between operators of different sizes, operators using different modes, etc.
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Exhibit III. 6 OVERVIEW OF POTENTIAL TRANSIT OPERATOR FUNCTIONS
General Management
and Organization
Service Planning Scheduling, Dispatch
and Operations
·   Administrative
Oversight
·   Organizational
Structure and Reporting
·   Recent Program
Changes and
Innovations
·   Areas of Interest to
Management and Board
·   Strategic Planning
·   Short Range Planning
·   Evaluation of Routes
Planning for Special
Transportation Needs
·   Public Participation
·   Surveys of Riders/ Non-
Riders
  ·   Assignment of Drivers
·   Vacation, Absences,
Sick Leave
·   Assignment of
Passengers to Demand
·   Part time and Cover
Drivers
·   Assignment of Vehicles
to Routes
Personnel
Management and
Training
Administration
Marketing and
Public
Information
Maintenance
·   Recruitment
·   Motivation
·   Training and Safety
·   Discipline
·   Benefits
·   Budgeting and MIS
Financial and Grants
Management
·   Risk Management
·   Contract Management
·   Facility Management
·   Accounts Payable
·   Procurement
·   Revenue Collection
and Cash Management
·   Payroll
·   Marketing and
Public Information
·   Communications
with Other
Governmental
Agencies
·   Preventive
Maintenance
·   Sufficiency of
facility
·   Vehicle Condition
·   Repair
Conditioning
·   Parts Management
·   Communication
with Dispatch
·   Contracting Out
·   Providing
Maintenance to
Other Organization
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G en e r al M anagement a nd O rganizatio n
This functional area encompasses the overall administration of all functions within an operator.
Sub- functions include:
• Administrative Oversight;
• Organizational Structure and Reporting;
• Recent Program Changes and Innovations;
• Areas of Interest to Management and the Board; and
• Communications With Other Government Agencies.
Suggested areas for review in each of the sub- functions within the General Management and
Organization functions are shown on the following page in Exhibit III. 7. The questions included
in the exhibit are not exhaustive, and the auditor should consider the significance and relevance of
responses in relation to the specific operator being reviewed.
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Exhibit III. 7 GENERAL MANAGEMENT AND ORGANIZATION FUNCTIONAL REVIEW
  ADMINISTRATIVE OVERSIGHT   ORGANIZATIONAL
STRUCTURE AND
REPORTING
·   Does Operator management regularly
receive, review, and act appropriately
upon performance and financial
information?
·   Does the operator’s management
regularly meet with and provide clear
and written or oral direction to
subordinates?
·   Has the operator’s management taken
prudent and decisive action to address
major problems or issues faced by the
operator?
·   Given the operator’s size, and
functions performed, is the
operator’s internal organization
structure appropriate, effective, and
efficient?
·   Is managerial authority wee defined
throughout the operator’s
organization?
·   Are the lines of reporting, clearly
defined, communicated, complied
with, and appropriate for the
operator?
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Exhibit III. 7 GENERAL MANAGEMENT AND ORGANIZATION FUNCTIONAL REVIEW
( continued)
  RECENT PROGRAMS CHANGES
AND INNOVATIONS
  AREAS OF INTEREST TO
MANAGEMENT AND THE BOARD
·   Has the operator instituted any new or
substantially expanded programs or service
( especially a new mode or type of service)?
·   Is distinct data gathered regarding the new
or changed services or programs to allow
their evaluation?
·   Has the operator set goals and objectives
which are specific to the new or changed
services or programs?
·   Has the operator reviewed and evaluated
the results and achievements of the new or
changed services or programs?
·   Has the actual results been compared with
planned results and the variances analyzed?
·   Has the operator instituted any major
organizational or other programmatic
changes which do not directly affect
services?
 
·   Has the operator’s management or
governing board expressed interest in a
particular functional area? ( If so, this
should be in an area of review during the
audit.)
  AREAS OF INTEREST TO
MANAGEMENT AND THE BOARD
·   Does the operator have an effective and
positive relationship with its RTPE? ( and
UMTA, if applicable?)
·   Has responsibility for acting as
intergovernmental liaison been clearly
assigned within the operator’s
organization?
·   Has the operator provided information and
cooperation requested by peer agencies or
by the RTPE and / or UMTA?
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S e r vice P l annin g
This functional area concerns the operator's preparation to serve future transit needs, including
short and long term demand. The sub- functions making up this area include:
• Strategic Planning;
• Short Range Planning;
• Evaluation of Existing Fixed Routes;
• Planning for and Serving Special Transportation Needs;
• Public Participation / Hearings; and
• Surveys of Riders and Non- Riders.
The service planning sub- functions are further delineated in Exhibit III. 8. The questions included
in the exhibit are not exhaustive, and the auditor should consider the significance and relevance of
responses in relation to the specific operator being reviewed.
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Exhibit III. 8 SERVICE PLANNING FUNCTIONAL REVIEW
  STRATEGIC
PLANNING
  SHORT RANGE
PLANNING
  EVALUATION OF
EXISTING FIXED
ROUTES
·   Has the operator set ( and
revised, if appropriate)
clear and reasonable goals
and objectives?
·   Do the goals conform to the
RTPE goals and
objectives?
·   Has the operator developed
a plan of actions and
milestones for achieving its
goals and objectives?
·   Does the operator regularly
review and evaluate its
progress and evaluate its
progress toward
established goals and
objectives?
·   Has the operator
·   Does the operator actively
work to identify residential,
retail, office and industrial
development centers which
may require transportation?
·   Does the operator analyze
and project future service
needs based upon existing
utilization?
·   Does the operator plan for
financial needs and
projects?
·   Does the operator
communicate regularly with
planning and zoning
agencies?
·   Does the operator regularly
review ridership on
existing routes?
·   Has the operator
established a “ rule of
thumb” policy for
minimum ridership levels?
( Are conscious exceptions
made to such a policy? Are
any criteria used to make
such exceptions?)
·   Can the operator obtain
information on the purpose
of trips made, by route?
·   Is there a policy concerning
a start- up period for new
routes before ridership is
considered stable and an
evaluation is made?
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
55
Exhibit III. 8 SERVICE PLANNING FUNCTIONAL REVIEW
  PLANNING FOR AND
SERVING
SPECIALTRANSPORT
ATION NEEDS
  PUBLIC
PARTICIPATION/
HEARINGS
  SURVEYS OF RIDERS
AND NON- RIDERS
·   Does the service provided
meet federal and state
requirements to serve people
with disabilities?
·   Does the operator offer
special fares to the elderly,
handicapped, children, or
others?
·   What percentage of revenue
vehicles are handicapped -
accessible?
·   Is demand responsive
service offered to
supplement fixed route
service?
·   Are special routes or
schedules offered to patrons
with special needs?
·   Are the operator’s
governing board meetings
open to the public and
publicized?
·   Does the operator conduct
public hearings before
adopting route changes,
service hour changes, fare
increases, and other
important changes of public
concern?
·   Are hearings held at
accessible and convenient
locations?
·   Is there any citizens’
advisory board or similar
body?
·   Does the operator survey
riders regarding
-   frequency of usage
-   transportation alternatives
-   original destination
-   satisfaction with stops,
-   vehicle conditions, drivers,
-   service frequencies, hours,
-   schedule of trip.
-   purpose of trip?
·   Does the operator survey the
general public regarding
-   frequency of usage
-   transportation alternatives
-   original destination
-   satisfaction with stops,
-   vehicle conditions, drivers,
-   service frequencies, hours,
-   schedule of trip.
·   Are surveys administered in
writing or by interviews?
·   Are surveys of riders
administered by drivers
and/ or on buses?
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
56
S c heduling, D i spatch a nd O p e r ation s
This functional area concerns the short term scheduling of routes, drivers, and vehicles, the daily
coordination and assurance that each route or each demand- response service customer is served,
and the specific function of providing transportation service. Depending on the type( s) of service
offered by an operator, the sub- functions in this area may include:
• Assignment of Drivers to Routes;
• Vacation, Absences, and Sick Leave;
• Assignment of Passengers to Demand Responsive Routes;
• Part- Time and Cover Drivers; and
• Assignment of Vehicles to Routes.
The sub- functions in the Scheduling, Dispatch and Operations functions are displayed in Exhibit
III. 9. The questions included in the exhibit are not exhaustive, and the auditor should consider the
significance and relevance of responses in relation to the specific operator being reviewed.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
57
Exhibit III. 9 SCHEDULING, DISPATCH AND OPERATIONS FUNCTIONAL REVIEW
  ASSIGNMENT TO
DRIVERS TO
ROUTES
  VACATION,
ABSENCE AND
SICK LEAVE
  ASSIGNMENT OF
PASSENGERS TO
DEMAND
RESPONSIVE
ROUTES
·   Are drivers allowed to
choose route assignments
( based on seniority or other
hierarchy)?
·   Are drivers rotated between
routes periodically?
 
·   Are recruits experienced ?
 
·   Do drivers work a single
defined geographic zone on
a given shift
·  
·   What effect do labor
agreements have on route
assignments?
·   Are part- time drivers
eligible for vacation?
 
·   Is vacation scheduled in
advanced ( are cover
drivers scheduled for the
routes) ?
 
·   Is there a clear and
communicated policy on
absences and sick leave
which
  - requires notice prior to
when the employee was
scheduled to report to
work
  - promotes/ rewards
employees who are
infrequently absent due to
illness
 
 
·   Is there an effective system
for accepting advance
reservations, and which
allows the rejection of
reservation for a time slot
after that slot is filled?
·   Is there a system for
making reservations ( and
routing) for repetitive
customers ( e. g.: a kidney
dialysis patient)?
·   Is there a system for
geographically sorting
passengers transportation
requests for any given time
slot, in order to minimize
deadhead travel as
passengers are assigned to
routes? ( Can requests be
sorted visually on a map?)
·   Has a policy been adopted
concerning how long a
driver should wait for a no-show
passenger ( if at all)?
·   Is there a policy restricting
persons eligible for demand
responsive transportation?
 
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
58
Exhibit III. 9 SCHEDULING, DISPATCH AND OPERATIONS FUNCTIONAL REVIEW
( continued)
  PART TIME AND COVER
DRIVERS
  ASSIGNMENT OF VEHICLES
TO ROUTES
·   Does the operator employ part time
drivers?
·   If not, has the operator analyzed and
estimated the potential labor savings
available from employing part time
drivers?
 
·   If so, what portion of the total
number of drivers are part time?
 
·   Does the operator employ standby
drivers, who report to work but are
not assigned to a route?
 
·   Does the operator employ on- call
drivers who are available to work but
who do not report to work unless
called in?
·   Is there a method for dispatch to
communicate with maintenance to
ensure that all routes have been
assigned vehicles which are in good
repair?
 
·   Are vehicles assigned to routes based
on passenger loads? ( Does the
operator use smaller vehicles on low
demand routes)?
 
·   Is there a method to ensure that the
vehicle assigned to a route can be
driven by the driver assigned to the
route ( e. g.: automatic transmission, or
special brakes)?
 
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
59
P e r sonnel M anagement a nd T raining F u nctio n
This functional area concerns an operators recruiting and management of human resources. The
sub- functions within this area include:
• Recruiting;
• Motivation;
• Training;
• Discipline; and
• Benefits.
The sub- functions in the Personnel Management and Training function are shown in Exhibit
III. 10. The questions included in the exhibit are not exhaustive, and the auditor should consider
the significance and relevance of responses in relation to the specific operator being reviewed.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
60
Exhibit III. 10 PERSONNEL MANAGEMENT AND TRAINING FUNCTIONAL REVIEW
  RECRUITING   MOTIVATION   TRAINING AND SAFETY
·   Are enough drivers being
recruited to meet the
operator’s needs?
·   What recruiting methods are
being used?
 
·   Are recruits experienced or
do they require initial
training ?
 
·   Does the operator have an
affirmative action goal or
program ? ( Is it effective?)
·   What is the operator’s
turnover rate and
experience? ( Why does
turnover happen?)
 
·   Are any monetary or non-monetary
incentive
programs in place ?
 
·   Are job performances
evaluations completed
regularly for all operator
staff?
 
 
·   Does the operator provide
or arrange for initial training
of inexperienced drivers ?
 
·   Does the operator provide
or arrange for ongoing
training for drivers? Does it
meet state requirements?
 
·   Is specified safety training
( bus evacuation, CPR)
provided?
 
·   Are vehicles equipped with
fire extinguishers, safety
brakes, bells for reverse, or
other safety equipment?
 
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
61
Exhibit III. 10 PERSONNEL MANAGEMENT AND TRAINING FUNCTIONAL REVIEW
( continued)
DISCIPLINE BENEFITS
·   Is there a clear communicated policy
regarding absences and tardiness?
·   Does the operator have and enforce a
drug/ alcohol policy? Does the policy
conform to applicable federal and
state requirements?
 
·   Is there a defined progressive ( eg:
warning, suspension, termination)
and communicated disciplinary
policy?
 
·   Does the discipline policy conform
with labor agreements?
·   Are drivers and dependents offered
life, health, dental insurance, sick
leave, maternity, retirement, etc.??
·   Do benefits differ for full- time and
part- time drivers?
 
·   How are benefits described and
availability communicated to
personnel?
 
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
62
A dministratio n
This functional area includes the business and support type services which are necessary for almost
any organization to continue operating and performing its primary functions. The sub- functions in
this area include:
• Budgeting and Management Information Systems;
• Financial and Grants Management;
• Risk Management and Insurance;
• Contract Management;
• Facility Management;
• Accounts Payable;
• Procurement;
• Internal Audit;
• Revenue Collection and Cash Management; and
• Payroll.
The sub- functions in the Administration function are displayed in Exhibit III. 11. The questions
included in the exhibit are not exhaustive, and the auditor should consider the significance and
relevance of responses in relation to the specific operator being reviewed.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
63
Exhibit III. 11 ADMINISTRATION
BUDGETING AND
MANAGEMENT
INFORMATION
SYSTEMS
FINANCIAL AND
GRANTS MANGEMENT
RISK MANAGEMENT
AND INSURANCE
·   Can and does the operator
regularly compare its
budgeted expectations with
actual revenue and
expenses?
·   Are substantial excesses
over budgeted expenses
approved by the operator’s
general manager or
governing board?
·   Does a system exist which
provides accurate and
timely performance and
financial data to the
operator’s management and
governing board? ( Data
such as those making up
TDA - required
performance indicators and
additional indicators
discussed elsewhere in this
Guidebook, as well as
detailed expenditure and
revenue data. Data should
be available by route.)
·   Does the operator have
appropriate data processing
equipment and software?
·   Is grant application and
compliance responsibility
clearly assigned within the
organization?
·   Has the operator lost any
grants ( eg., inadvertently
failed to file required forms
or data, become otherwise
ineligible, etc.) or neglected
grant opportunities? ( Why?
What might prevent this
from happening in the
future?)
·   Does the operator have a
procedure for processing
accident and injury claims?
·   Has the operator considered
self insurance or joining a
self insurance pool?
·   Does the operator have an
appropriate or required
amount of liability
coverage?
·   Does the operator
periodically review or have
reviewed the safety of its
operating practices?
·   Is someone on the
operator’s staff responsible
for proactive safety/ loss
prevention initiatives?
·   Does the operator have a
current disaster
preparedness and response
plan?
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
64
Exhibit III. 11 ADMINISTRATION ( continued)
CONTRACTS MANAGEMENT FACILITY MANAGEMENT
·   Are contract management
responsibilities clearly assigned
within the organization?
·   Does the contract administrator
regularly monitor performance ( both
quantity and quality of service)? Is
performance linked to contract
progress payments?
·   If required, have contracts been
approved by the operator’s
governing board?
·   Do contracts have a limited and
defined term, a clearly specified
scope of work, as an explicit price
for goods and services?
·   Are controls over changes in scope
adequate?
·   Has the operator considered
contracting out the facility
management ( janitorial,
groundskeeping, building maintenance
and repair, copier and computer
maintenance, etc.) of its office, shop,
terminal and/ or bus stops?
·   Are facility management
responsibilities clearly assigned within
the operator?
 
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
65
Exhibit III. 11 ADMINISTRATION ( continued)
REVENUE COLLECTION AND
CASH MANGEMENT
PAYROLL
·   Are on- vehicle fare collection
mechanisms appropriately secure,
given the amount of fares
collected? ( Does the driver have
access? Does the person
removing fares from the bus have
access?)
·   Obtain and evaluate any recent
studies of fare collection
practices?
·   Are cash receipts for pass sales
reconciled back to the number of
passes issued?
·   Is there appropriate security
surrounding fare and pass sale
cash receipts as they are counted,
stored, and deposited?
·   Are operator banking records
( deposits and checks) reconciled
to bank statements?
·   Is substantiated excess cash
invested prudently and in
accordance with regulations?
·   Do employees submit timesheets
as a basis for payroll?
·   Is there a secure database of
employee records, pay rate,
benefit selections, and other key
data?
·   Is there an appropriate method for
changing personnel and payroll
data?
·   Are payroll checks
approved/ signed by someone
other than the person who
prepares them?
·   Has the possibility of direct
payroll deposit been investigated?
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
66
Exhibit III. 11 ADMINISTRATION ( continued)
ACCOUNTS PAYABLE PROCUREMENT INTERNAL AUDIT
·   Is the receiving function
separate from the
purchasing authorization
function and separate from
the disbursement
authorization function?
 
·   Are invoice items,
quantities and prices
verified against approved
purchase orders?
 
·   Is there a system which
ensures goods or services
have been received before
are invoiced is paid?
 
·   If petty cash is maintained,
are receipts required in
order to replenish petty
cash, and is petty cash
reasonably secure?
·   Have practices, policies or
procedures been
established controlling
purchasing authority?
·   Do procurement practices
conform to UMTA and
State and local
requirements?
·   Are purchasing policies and
procedures regarding
competitive bids, quotes
and contracting well
defined and appropriate?
·   Are purchases ( above a
certain amount) reviewed
against budge
authorization?
·   Does the operator
competitively procure fuel,
vehicles, and other items of
major expenses, or does
the operator cooperate with
other organizations which
purchase similar items?
·   Does the operator have an
internal audit function? If
an internal audit function
exists considering the
following:
·   Does the internal audit
activity conduct audits in
accordance with the
Comptroller General’s
“ Standards for Audit of
Governmental
Organizations, programs
activities and functions”?
If so, are the general
standards for continuing
education and quality
reviews met?
·   Is the internal audit
function at an appropriate
organizational level to
ensure its effectiveness?
·   Review how the annual
audit work plan is
developed. Does
management and the
governing Board provide
input to the plan?
·   Review recent internal audit
reports and determine if
action were taken on
recommendations.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
67
M arketing a nd P u blic I nf o r matio n
This functional area concerns an operator's marketing and public information effort and
communication activities within its jurisdiction. The sub- functions within this area include:
• Marketing; and
• Public Information.
The sub- functions in the Marketing and Public Information function are shown in Exhibit III. 12.
The questions included in the exhibit are not exhaustive, and the auditor should consider the
significance and relevance of responses in relation to the specific operator being reviewed.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
68
Exhibit III. 12 MARKETING AND PUBLIC INFORMATION
PUBLIC INORMATION MARKETING
·   Does the operator publish and
distribute schedules and descriptions
of service to potential and current
riders?
·   Does the operator effectively
respond to telephone inquires
regarding service?
·   Does the operator have a system for
accepting, responding directly to, and
summarizing complaints ( from
riders, residents near stops, drivers
of other vehicles, etc.)?
 
·   Is performance and survey data
analyzed to develop goals and target
markets?
 
·   Have targets, goasls and plans been
developed to and marketing efforts
and promote ridership growth?
 
·   Has the operator conducted an
advertising and promotion campaign
other than publishing a schedule?
 
·   Is the public’s perception and opinion
of the operator generally positive,
negative, neutral, or uniformed?
 
·   Does the operator communicate
effectively with schools and
employers to promote transit
services?
 
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
69
M aintenanc e
This functional area consists of the maintenance and repair of the operator's vehicles and other
capital assets directly related to providing transportation ( rail track and right- of- way, overhead
trolley lines, etc.) Maintenance of other equipment and facilities is included above in
Administration. The sub- functions in this area include:
• Preventive Maintenance;
• Sufficiency of Facility;
• Vehicle Condition;
• Repair Prioritization and Scheduling;
• Parts Procurement and Management;
• Communications With Dispatch;
• Contracting Out; and
• Providing Maintenance to Other Organizations.
The sub- functions in the Maintenance function are displayed in Exhibit III. 13. The questions
included in the exhibit are not exhaustive, and the auditor should consider the significance and
relevance of responses in relation to the specific operator being reviewed.
California Department of Transportation
III. PERFORMANCE AUDITS OF TRANSIT OPERATORS
70
Exhibit III. 13 MAINTENANCE FUNCTION REVIEW
PREVENTIVE
MAINTENANCE
SUFFICIENCY OF
FACILITY
·   Is the preventive maintenance
schedule in place?
·   Does the maintenance schedule
conform with the manufacturer’s
recommended schedule?
 
·   Can compliance with the schedule be
judged easily?
 
·   Does maintenance conflict with
regular vehicle use?
 
·   Does the operator identify repairs
that are covered by a manufactures
warranty?
 
·   If so, are the warranty adjustments
appropriate?
·   Is the facility capable of
accommodating the types of repairs
which are not sent out?
 
·   Is it capable of accommodating those
which are sent out?
 
·   Is the number of bays and lifts
sufficient for the number of vehicles?
 
·   Is there an office area for
administration staff and records?
 
·   Is the facility suited to all aspects of