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February 1, 2023

DOT’s Oversight Is Not Sufficient To Ensure the City of Seattle Meets Requirements for Managing Federal Transportation Funds

Self-initiated
Project ID: 
ZA2023014
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What We Looked At
The Department of Transportation (DOT) and its Operating Administrations (OA) are charged with overseeing billions of dollars in grant funds for projects aimed at building, maintaining, and enhancing our Nation’s transportation system. Between fiscal years 2014 and 2019, the City of Seattle’s Department of Transportation (SDOT) received $259.8 million in grants and cooperative agreements from the Federal Highway Administration (FHWA), the Federal Railroad Administration (FRA), and the Federal Transit Administration (FTA). Over the past few years, our office received hotline complaints concerning federally funded SDOT projects that are subject to DOT’s oversight. Given the significant amount of Departmental funds allocated to SDOT projects and concerns raised by the hotline complaints we received, we initiated this review. Our objective was to assess the Department’s oversight of Federal funds received by SDOT.
 
What We Found
Our review identified weaknesses in the OAs’ oversight regarding (1) execution of change orders that lacked required approval signatures, (2) approval of a $140 million project estimate and contingency amounts with limited support, (3) the inability to track where and how Federal funds were spent, and (4) procedures to ensure that Federal funds transferred from FHWA to FTA are used in a timely manner or put to better use. In addition, weaknesses related to OST’s and FRA’s oversight of a project’s cost estimates and contingency rates resulted in $21 million in lapsed funds that could be put to better use. Also, as part of our efforts to determine how the grant funds were used, we identified $10.7 million in questioned costs due to a lack of adequate supporting documentation. Further, we identified $3.6 million in transferred FHWA funds that remain unobligated more than 6 years after being transferred, resulting in these funds lapsing. Lastly, we found that FTA had not deobligated $3.8 million in other transferred funds that have been inactive since 2017. By increasing focus on these issues, DOT will be better positioned to ensure the City of Seattle and SDOT effectively manage and use the Federal taxpayer dollars they receive.
 
Our Recommendations
We made 14 recommendations to improve DOT’s management and oversight of Federal funds provided for SDOT projects. DOT concurred with recommendations 1, 2, and 4–14, and provided an alternative action from FHWA for recommendation 3 that meets the intent of our recommendation. We consider all recommendations as resolved but open pending completion of the planned actions.

Recommendations

Open

Closed

No. 1 to OST

Develop and implement, for each discretionary grant program that relies on cost estimates to establish compliance with program requirements and eligibility, a risk-based process for validating cost estimates prior to the execution of grant award agreements, as well as document the Department's review of the cost estimates.

No. 2 to OST

Direct FHWA and FTA to coordinate with grantees to ensure the City of Seattle develops and implements appropriate internal controls to track Federal funds in accordance with 2 CFR 200.302(b)(1) and (3).

$21,000,000
No. 3 to FHWA

Remove $21 million in lapsed funding identified in this report from FHWA's unobligated balances. Implementing this recommendation could put $21 million in funds to better use on other transportation programs.

No. 4 to FHWA

Advise WSDOT as part of stewardship and oversight activities to include change orders in WSDOT's next project management review of SDOT.

No. 5 to FHWA

Direct the FHWA WA Division to review WSDOT's established process of reviewing subrecipients' supporting documentation for internal staffing charges (e.g., billing records, invoices, timecards) to ensure compliance with 2 CFR 200.403.

$753,839
No. 6 to FHWA

Work with WSDOT to collect adequate supporting documentation for $753,839 in internal staffing costs identified by OIG or recover from WSDOT any portion that is determined to be unallowable or unsupported.

No. 7 to FRA

Incorporate change orders as a focus area in FRA's annual review process.

No. 8 to FRA

Develop and implement policy to evaluate whether to deobligate funds when there is a significant reduction in project costs prior to closeout.

No. 9 to FTA

Include a sample of SDOT's change orders as part of FTA's triennial reviews. In doing so, FTA could better detect and prevent the risk for paying for unapproved change orders.

No. 10 to FTA

Require FTA Region 10 to conduct a review of the City of Seattle's internal controls for supporting documentation of expenditures billed to Federal awards to ensure compliance with 2 CFR 200.403.

$9,946,977
No. 11 to FTA

Recover the $9,946,977 in costs we identified for which SDOT provided incomplete information or provide a justification for accepting the costs.

$3,600,000
No. 12 to FTA

Direct FTA Region 10 to notify WSDOT in writing that the $3.6 million in lapsed funds identified in this report have been credited to the State and are available for other eligible transit projects. Implementing this recommendation could put up to $3.6 million in funds to better use.

$3,800,000
No. 13 to FTA

Require FTA Region 10 to review $3.8 million in inactive funds identified in this report and determine whether they will be used, and if not, deobligated. Implementing this recommendation could put up to $3.8 million in funds to better use.

No. 14 to FTA

Implement procedures and related mechanisms to show when unobligated transferred funds are obligated and to what projects.