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Audit Initiated of the Federal Highway Administration’s Oversight of Federal-aid Highway Project Agreements

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Each year, the Federal Highway Administration (FHWA) oversees the management by State Departments of Transportation of over $40 billion in Federal financial assistance for the construction, maintenance, and operations of the Nation’s 3.9 million-mile highway network. Federal law requires FHWA to enter project agreements with State Departments of Transportation for Federal-aid highway projects. Execution of these agreements authorizes work to begin and obligates Federal funds to the projects. The agreements can be modified to reflect additional costs that are incurred during projects, and Federal participation in these additional costs. These project agreements and modifications are key internal control mechanisms to ensure that funds are obligated and costs are incurred in accordance with Federal requirements. Our objectives for this self-initiated audit are to assess FHWA’s controls for reviewing and authorizing (1) project agreements, and (2) modifications to project agreements.