Each year, the Federal Highway Administration (FHWA) oversees over $37 billion in Federal-aid for the construction, preservation, and operation of the nation’s highways and bridges. For a project to be eligible for Federal-aid, the State’s Department of Transportation (State DOT) and FHWA must enter into a project agreement authorizing the use of Federal funding. Because of the large amounts of Federal investment in State highway projects, we conducted this audit. Our objective was to assess FHWA’s policies and procedures for reviewing and authorizing project agreements and modifications to the project agreement.
We found that FHWA and its Division Offices ensured that the three State DOTs in our review—Alabama, Massachusetts and Oregon—complied with Federal requirements on record content and preauthorization for project agreements and modifications. However, due to insufficient controls, FHWA did not always ensure that at least two Division officials signed agreements as required, or prevent the same Division official from recommending a project be authorized and authorizing the same project. Additionally, FHWA policy allows one State DOT official to approve all aspects of an agreement and modification, contrary to Federal Internal Control Standards. Furthermore, Federal regulations require States not to advertise projects for bids prior to FHWA’s authorization of Federal funds for the project, but 15 of 60 projects we reviewed—totaling $281 million in Federal-aid funds—were advertised before authorization. Because of insufficient controls, we project that FHWA put an estimated $1.1 billion in Federal-aid funds at risk in the three States we reviewed.
FHWA also has not ensured that States comply with the Office of Management and Budget’s 2014 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, which requires States to add Catalogue of Federal Domestic Assistance information, indirect cost rates, and project end dates to their project agreement and modification requests. The States have not complied in part because FHWA’s current Fiscal Management Information System does not include mandatory fields for this information.
We made four recommendations to improve compliance with FHWA and Federal requirements for project agreements and modifications, and to ensure FHWA follows new requirements in OMB’s Uniform Guidance. FHWA concurred with one of the recommendations.
Closed on 11.13.2017
No. 1 to FHWA
Develop controls to prevent the same FHWA official from signing lines 2 and 3 on project agreements and modifications and develop a plan, procedures, and time frame for FHWA from its headquarters office to monitor Division Offices' authorization processes and verify that they comply with FHWA authorization policy.
Closed on 07.23.2019
No. 2 to FHWA
Revise existing controls to require more than one State DOT official signature on project agreement and modification requests consistent with Federal Internal Control Standards.
Closed on 02.27.2020
No. 3 to FHWA
Develop and implement internal controls to prevent FHWA authorization of construction projects after State DOT advertisement for bid or contract award to ensure compliance with Federal regulations. Implementation of internal controls could have put an estimated $1.1 billion in Federal funds to better use.
Closed on 04.23.2018
No. 4 to FHWA
Add mandatory data fields for project end dates, CFDA numbers, and indirect costs to FMIS as quickly as possible to ensure compliance with Uniform Guidance.