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FHWA Does Not Effectively Ensure States Account for Preliminary Engineering Costs and Reimburse Funds as Required

Self-Initiated
Project ID: 
ST2016095

The Federal Highway Administration (FHWA) authorizes billions of dollars in Federal-aid funding to assist States in the design and related ground work—known as preliminary engineering (PE)—needed before a highway or bridge project advances to physical construction or acquires right-of-way. If a project does not acquire right-of-way or start construction within 10 years after the Federal funds expended on PE became available, Federal law requires States to repay the Highway Trust Fund the full amount of Federal-aid expended on PE. Given the billions of dollars in Federal funds spent on State highway and bridge PE projects, we assessed FHWA’s policies and procedures for (1) accounting for Federal PE funds used for highway projects, and (2) ensuring States repay the Highway Trust Fund for Federal PE expenditures when required.

FHWA does not effectively account for Federal highway and bridge funds used for PE. Specifically, the four FHWA Division Offices we reviewed do not effectively assess whether States’ systems and processes accurately account for PE projects. In addition, FHWA lacks effective controls and practices to promote transparent and accurate accounting for PE projects. For example, States incorrectly coded non-PE projects as PE in FHWA’s financial information database. Based on these results, we project that Division Offices approved approximately $3.1 billion in Federal PE expenditures (8 percent of total PE expenditures) for non-PE highway and bridge projects nationwide. We also found that FHWA lacks adequate processes to ensure States repay Federal funds spent on PE. For one-third of the projects in our statistical sample, FHWA did not take prompt action to ensure the State complied with Federal PE requirements when the project did not acquire right-of-way or start construction within the 10‑year limit. Based on these results, we project that $3.3 billion of Federal funds authorized during fiscal years 2000 through 2004 were at risk of not being repaid to the Highway Trust Fund or not used effectively due to FHWA’s inaction. When PE actions were taken, the four Division Offices we reviewed did not consistently follow FHWA policy. For example, the Division Offices allowed States to avoid PE repayment without adequate justification, and did not ensure States repaid PE costs timely. These issues occurred, in part, because FHWA has not implemented sufficient controls and guidance for enforcing compliance with PE requirements. FHWA concurred or partially concurred with our seven recommendations to help FHWA better account for Federal funds spent on PE and ensure States reimburse the Highway Trust Fund when required. 

Recommendations

Open

Closed

No. 1 to FHWA

Conduct an assessment of the risks and existing controls associated with the Division Offices' oversight of State's processes to track PE projects, and identify improvements to Division Office oversight.

No. 2 to FHWA

Conduct an assessment of the accuracy and completeness of PE project authorizations. Correct any errors in FMIS projects that should be coded as PE as a result of this assessment.

No. 3 to FHWA

Update FHWA Order 5020.1 or develop Agency guidance to state FHWA's policy concerning compliance with Title 23 U.S.C. Section 102(b ), including the following: a) Define when a project progresses to right-of-way or construction; b) Describe accurate coding parameters for PE projects in FMIS; c) Define the means of tracking the 10-year limit for PE projects, including those involving multiple Federal project numbers; d) Define recordkeeping and documentation expectations for tracking reimbursements, extending the 10-year limit, and decisions not to pursue reimbursements; e) Define roles and responsibilities for Division Offices and FHWA Headquarters for consistent oversight and enforcement of PE requirements before and after the 10-year limit; f) Define FHWA Headquarters' policy on resolving differences arising between Division Offices and States regarding required PE actions.

$1,100,000,000
No. 4 to FHWA

Obtain a legal determination from the Office of the Secretary to permit SPES projects and similar funding agreements and establish internal controls to ensure compliance with Federal requirements. Implementing this recommendation could put the $1.1 billion in PE funds to better use.

$3,300,000,000
No. 5 to FHWA

Develop and implement financial controls and processes to monitor PE projects exceeding the 10-year limit, approved extensions, and reimbursements not pursued when PE projects do not progress within the 10-year limit. Implementing this recommendation could put $3.3 billion in PE funds to better use.

No. 6 to FHWA

Develop performance measures that track compliance with the 10-year limit and report progress.

$143,000,000
No. 7 to FHWA

For the $143 million in PE projects questioned in this report without adequate justification for time extensions or avoided repayments, obtain from the States appropriate support or repayment of PE expenditures as required.