Federal-Aid Highways
FHWA Has Improved Its Risk Management Approach, but Needs to Improve Its Oversight of Project Costs Gao ID: GAO-09-751 July 24, 2009The federal-aid highway program provides about $33 billion a year to states for highway projects. The federal government provides funding for and oversees this program, while states largely choose and manage the projects. As requested, GAO reviewed the Federal Highway Administration's (FHWA) implementation of several requirements in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU): (1) oversight of states using a risk management approach; (2) efforts to develop minimum standards for estimating project costs, and periodically evaluate states' cost estimating practices; and (3) reviews of states' financial management systems. GAO also reviewed FHWA's policy on presenting an estimate of financing costs in financial plans for major projects (i.e., projects estimated to cost over $500 million). GAO reviewed FHWA plans, risk assessments, reviews, and other documents; visited five FHWA field offices and reviewed financial management reviews in an additional five field offices; and interviewed FHWA officials.
FHWA has improved its approach to managing risks to the federal-aid highway program by requiring field offices to identify risks, assess them on the basis of the potential impact and the likelihood they will occur, and develop response strategies for key risks in their planned oversight activities. For fiscal years 2007 through 2009, most of the field offices GAO visited had oversight activities to address a majority of the key risks. However, most of the field offices that GAO visited were not fully tracking risk mitigation activities, thereby limiting the effectiveness of FHWA's efforts to mitigate risks to the federal-aid highway program. FHWA has made limited progress in meeting SAFETEA-LU's requirement to develop minimum standards that states must follow when estimating project costs. GAO has reported that project cost estimates typically have not been reliable predictors of project costs or financing needs. While FHWA has efforts under way, it is unlikely to issue standards until 2011, at the earliest. In addition, FHWA has not established a process to periodically evaluate states' cost estimating practices, and four of the five field offices GAO visited were doing little in this regard. However, for major projects, FHWA has established a process for evaluating the credibility of states' cost estimates. Establishing standards for cost estimates and periodically evaluating states' cost estimating practices could help to ensure that highway projects are effectively and efficiently managed. FHWA's guidance and documentation for reviews of state departments of transportation's financial management systems and practices generally meet key federal standards and principles, but they lack specific steps and documentation in some key areas. For example, FHWA's guidance does not require reviewers to provide certain specific information on improper payments. In addition, while the 10 field offices that GAO reviewed generally covered the required areas in their financial management reviews in 2008, their documentation sometimes lacked information on the specific procedures performed or issues identified by reviewers. Without this information, it is difficult for FHWA to monitor and follow up on field offices' and states' progress in correcting deficiencies. FHWA does not require states' financial plans for major projects to present an estimate of the projects' financing costs. According to a senior FHWA official, this is partly because it is difficult to develop accurate estimates. While uncertainty about a major project's financing cost can exist, and presenting estimates of financing costs for all projects could be impractical, financing costs on major projects can represent a significant cost to a state, and can, when combined with payments on the principal portion of the debt, tie up large shares of future federal transportation funding. Presenting an estimate of a project's financing costs would help ensure that decision makers who approve funding for these projects have key information that is relevant to such decisions.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-751, Federal-Aid Highways: FHWA Has Improved Its Risk Management Approach, but Needs to Improve Its Oversight of Project Costs
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
July 2009:
Federal-Aid Highways:
FHWA Has Improved Its Risk Management Approach, but Needs to Improve
Its Oversight of Project Costs:
GAO-09-751:
GAO Highlights:
Highlights of GAO-09-751, a report to congressional requesters.
Why GAO Did This Study:
The federal-aid highway program provides about $33 billion a year to
states for highway projects. The federal government provides funding
for and oversees this program, while states largely choose and manage
the projects. As requested, GAO reviewed the Federal Highway
Administration‘s (FHWA) implementation of several requirements in the
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU): (1) oversight of states using a risk
management approach; (2) efforts to develop minimum standards for
estimating project costs, and periodically evaluate states‘ cost
estimating practices; and (3) reviews of states‘ financial management
systems. GAO also reviewed FHWA‘s policy on presenting an estimate of
financing costs in financial plans for major projects (i.e., projects
estimated to cost over $500 million). GAO reviewed FHWA plans, risk
assessments, reviews, and other documents; visited five FHWA field
offices and reviewed financial management reviews in an additional five
field offices; and interviewed FHWA officials.
What GAO Found:
FHWA has improved its approach to managing risks to the federal-aid
highway program by requiring field offices to identify risks, assess
them on the basis of the potential impact and the likelihood they will
occur, and develop response strategies for key risks in their planned
oversight activities. For fiscal years 2007 through 2009, most of the
field offices GAO visited had oversight activities to address a
majority of the key risks. However, most of the field offices that GAO
visited were not fully tracking risk mitigation activities, thereby
limiting the effectiveness of FHWA‘s efforts to mitigate risks to the
federal-aid highway program.
FHWA has made limited progress in meeting SAFETEA-LU‘s requirement to
develop minimum standards that states must follow when estimating
project costs. GAO has reported that project cost estimates typically
have not been reliable predictors of project costs or financing needs.
While FHWA has efforts under way, it is unlikely to issue standards
until 2011, at the earliest. In addition, FHWA has not established a
process to periodically evaluate states‘ cost estimating practices, and
four of the five field offices GAO visited were doing little in this
regard. However, for major projects, FHWA has established a process for
evaluating the credibility of states‘ cost estimates. Establishing
standards for cost estimates and periodically evaluating states‘ cost
estimating practices could help to ensure that highway projects are
effectively and efficiently managed.
FHWA‘s guidance and documentation for reviews of state departments of
transportation‘s financial management systems and practices generally
meet key federal standards and principles, but they lack specific steps
and documentation in some key areas. For example, FHWA‘s guidance does
not require reviewers to provide certain specific information on
improper payments. In addition, while the 10 field offices that GAO
reviewed generally covered the required areas in their financial
management reviews in 2008, their documentation sometimes lacked
information on the specific procedures performed or issues identified
by reviewers. Without this information, it is difficult for FHWA to
monitor and follow up on field offices‘ and states‘ progress in
correcting deficiencies.
FHWA does not require states‘ financial plans for major projects to
present an estimate of the projects‘ financing costs. According to a
senior FHWA official, this is partly because it is difficult to develop
accurate estimates. While uncertainty about a major project‘s financing
cost can exist, and presenting estimates of financing costs for all
projects could be impractical, financing costs on major projects can
represent a significant cost to a state, and can, when combined with
payments on the principal portion of the debt, tie up large shares of
future federal transportation funding. Presenting an estimate of a
project‘s financing costs would help ensure that decision makers who
approve funding for these projects have key information that is
relevant to such decisions.
What GAO Recommends:
GAO is making recommendations to improve FHWA‘s tracking of risks and
its oversight of states‘ estimates of project costs, financial
management systems, and financial plans for major projects. The
Department of Transportation stated it would consider the report's
recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-09-751] or key
components. For more information, contact Phillip Herr at (202) 512-
2834 or herrp@gao.gov.
[End of section]
Contents:
Letter:
Background:
FHWA Has Improved Its Risk Management Approach but Is Not Fully
Tracking Risk Mitigation Activities:
FHWA Has Made Limited Progress in Meeting SAFETEA-LU's Requirements for
Cost Estimating:
FHWA's Guidance and Documentation for Reviews of State DOTs' Financial
Management Systems and Practices Generally Meet Key Standards and
Principles, but Lack Some Important Details:
Financial Plans for Major Highway Projects Lack Information on
Financing Costs:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Types of Projects Receiving FHWA Oversight Versus State
Oversight:
Figure:
Figure 1: Stages of a Highway or Bridge Project and State and FHWA
Roles and Approval Actions:
Abbreviations:
AASHTO: American Association of State Highway and Transportation
Officials:
DBE: Disadvantaged Business Enterprise:
DOT: Department of Transportation:
FHWA: Federal Highway Administration:
OMB: Office of Management and Budget:
SAFETEA-LU: The Safe, Accountable, Flexible, Efficient Transportation
Equity Act: A Legacy for Users:
[End of section]
United States Government Accountability Office: Washington, DC 20548:
July 24, 2009:
The Honorable James L. Oberstar:
Chairman:
Committee on Transportation and Infrastructure:
House of Representatives:
The Honorable Peter A. DeFazio:
Chairman:
Subcommittee on Highways and Transit:
Committee on Transportation and Infrastructure:
House of Representatives:
The federal-aid highway program provides about $33 billion a year to
states for highway and bridge projects, often paying 80 percent of
these projects' costs. The program is federally financed and state
administered--that is, the federal government provides funding and
oversees the program, while the states largely choose and manage the
projects. These projects can take years of planning, environmental
review, design, and construction. With highway congestion projected to
worsen over the next 20 years and freight traffic expected to double,
widespread consensus exists on the need to maintain and improve the
nation's surface transportation infrastructure. At the same time,
revenues to support the Highway Trust Fund--the major source of federal
highway and transit funding--are eroding. Receipts for the fund are
derived from motor fuel and truck-related taxes. These receipts are
declining in purchasing power because the federal motor fuel tax rate-
-which has remained constant at 18.4 cents per gallon since 1993--has
not kept pace with inflation.[Footnote 1] Furthermore, as vehicles
become more fuel efficient and increasingly run on alternative fuels,
fuel taxes may not be a sustainable source of transportation financing.
As a result, we have designated funding the nation's transportation
infrastructure as a high-risk issue.[Footnote 2] Ensuring that states
effectively manage and control the cost and schedule performance of
federally aided projects, and that federal funds are used efficiently
and effectively, is critically important.
The Federal Highway Administration (FHWA), under the Department of
Transportation (DOT), is responsible for overseeing the federal-aid
highway program. FHWA oversees the program through its headquarters in
Washington, D.C., and its 52 field offices in the 50 states, the
District of Columbia, and Puerto Rico. FHWA delegates much decision
making and program implementation authority to these field offices.
FHWA reviews and approves the transportation plans and environmental
impact assessments that states periodically prepare, as well as states'
property acquisition activities; it also enforces a variety of
requirements, such as civil rights laws, that states accept as a
condition of federal aid. FHWA also oversees the design and
construction of federally aided projects, but this oversight has
evolved over the years and currently focuses on two broad areas: (1)
for selected projects, direct review and approval of state design
plans, contract awards, and construction progress and (2) process
reviews--that is, reviews of state management processes--to ensure that
the states have adequate controls to effectively manage federally
assisted projects. FHWA requires its field offices to use a risk
management approach to allocate oversight resources. Risk management
typically includes assessments to identify and prioritize risks, and is
used in a variety of contexts, including the management of government
programs. For the federal-aid highway program, examples of risks that
FHWA has identified include inadequate construction practices that
could degrade the quality of state highway projects, and the risk that
projects delegated by states to local governments may not meet federal
requirements and could have cost or schedule overruns. FHWA has
additional requirements for "major projects"--that is, generally those
projects estimated to cost over $500 million--such as reviewing and
approving annual finance plans required by law.[Footnote 3]
We and others have raised concerns regarding FHWA's oversight of the
federal-aid highway program. For example, in reports that we issued
from 1997 to 2005, we highlighted several problems, including a lack of
useful project cost estimates, which typically had not been reliable
predictors of the project costs or financing needs. We also found that
the guidance that FHWA provided to states on developing cost estimates
was voluntary and covered only major projects. In addition, we found
that although FHWA field offices were assessing risks to the highway
programs in their states, they were not always using their risk
assessments to direct their process reviews. In 2005, Congress enacted
the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU), which authorized funding for the federal
surface transportation programs from fiscal years 2005 through 2009.
[Footnote 4] SAFETEA-LU also established the following requirements for
FHWA's oversight of the federal-aid highway program:
* annually review elements of each state Department of Transportation's
(DOT) project delivery system;[Footnote 5]
* develop minimum standards that state DOTs must follow when estimating
project costs, and periodically evaluate state DOTs' practices for
estimating project costs; and:
* annually review elements of each state DOT's financial management
system that affect projects.
SAFETEA-LU continued an earlier requirement for sponsors of major
projects to submit a financial plan based on detailed cost estimates to
complete the project and on reasonable assumptions, as determined by
FHWA. FHWA evaluates states' cost estimates for major projects to
assess the reasonableness of their assumptions. SAFETEA-LU also lowered
the threshold for a project to be classified as major from $1 billion
to $500 million.
You asked us to review FHWA's implementation of several requirements in
SAFETEA-LU, including its (1) oversight of states' project delivery
systems, in particular, its use of a risk management approach to
allocate their oversight resources; (2) efforts to develop minimum
standards for states to follow when estimating project costs, and to
periodically evaluate states' cost estimating practices; and (3)
efforts to review elements of states' financial management systems and
practices that affect projects. You also asked us to review FHWA's
policy on presenting an estimate of financing costs in financial plans
for major projects.
To address these objectives, we reviewed key agency and state documents
and relevant regulations and legislation. We conducted interviews with
FHWA and state DOT officials and representatives from the American
Association of State Highway and Transportation Officials (AASHTO). In
addition, we observed a risk management training class that is
available to FHWA staff. We also visited 5 FHWA field offices that
oversee states that receive a range of federal-aid dollars, several of
which were overseeing a major project. Because we used a nonprobability
sample, information obtained from the field offices that we visited
cannot be generalized to all field offices. Also, we assessed financial
management reviews in 5 additional randomly selected field offices, for
a total of 10 field offices. We conducted this performance audit from
June 2008 through July 2009 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
See appendix I for a more complete description of our scope and
methodology.
Background:
Federal funding for highways is provided to the states mostly through a
series of formula grant programs collectively known as the federal-aid
highway program. Periodically, Congress enacts multiyear legislation
that authorizes the nation's surface transportation programs. In 2005,
Congress enacted SAFETEA-LU, which authorized $193.2 billion for the
federal-aid highway program from fiscal years 2005 through 2009.
FHWA oversees the federal-aid highway program and distributes most
funds to the states through annual apportionments established by
statutory formulas. Once FHWA apportions these funds, they are
available for states to obligate for construction, reconstruction, and
improvement of highways and bridges on eligible federal-aid highway
routes and for other purposes. About 1 million of the nation's 4
million miles of roads are eligible for federal aid--including the
161,000 mile National Highway System, of which the 47,000 mile
Interstate Highway System is a part.[Footnote 6] While FHWA oversees
and funds the program, the responsibility for selecting specific
highway projects generally rests with state DOTs and local planning
organizations, which have considerable discretion in determining how to
allocate available federal funds among various projects. The federal-
aid highway program is generally referred to as a federally assisted,
state-administered partnership.
A highway or bridge construction or repair project usually has four
stages: planning, environmental review, design and property
acquisition, and construction. FHWA reviews and approves long-term and
short-term state transportation plans and programs, environmental
documents, and the acquisition of property for all highway projects.
[Footnote 7] However, its role in overseeing the design and
construction of projects varies. On selected projects, FHWA exercises
what is often considered "full" oversight, meaning that FHWA (1)
prescribes design and construction standards, (2) approves design plans
and estimates, (3) approves the selection of the contract award, (4)
periodically inspects the progress of construction, and (5) renders
final acceptance on projects when they are completed. However,
relatively few projects are subject to this full FHWA oversight. Under
current law, FHWA exercises full oversight of certain high-cost
interstate system projects, while states oversee design and
construction on other federal-aid projects. Figure 1 shows the stages
of a highway or bridge project and the corresponding state role and
FHWA approval actions. Table 1 shows the types of projects for which
FHWA exercises full oversight, as compared with state oversight.
Figure 1: Stages of a Highway or Bridge Project and State and FHWA
Roles and Approval Actions:
[See PDF for image: illustrated table]
Stage: Planning;
State's role: Prepare long-range (e.g., 20 years) plans and short-range
(e.g., 4 years) transportation improvement programs;
FHWA's role: Approve short-range transportation improvement programs.
Stage: Environmental review;
State's role: Prepare environmental documents identifying and assessing
environmental alternatives when required;
FHWA's role: Approve environmental documents.
Stage: Design and property acquisition;
State's role: Acquire property and prepare design plans and
specifications according to applicable standards;
FHWA's role, when FHWA has oversight responsibility[A]: Approve
property acquisition and approve design plans and specifications;
FHWA's role, when state has primary oversight responsibility[A]: Approve
property acquisition, no specific role in design plans and
specifications.
Stage: Construction;
State's role: Advertise bids, award contracts, and oversee
construction;
FHWA's role, when FHWA has oversight responsibility[A]: Approve
construction awards, inspect progress, and accept final product;
FHWA's role, when state has primary oversight responsibility[A]: No
specific role.
Source: GAO.
[A] The types of projects for which FHWA exercises full oversight, as
compared with state oversight, are shown in table 1 of this report.
[End of figure]
Table 1: Types of Projects Receiving FHWA Oversight Versus State
Oversight:
Type of project: Interstate System;
Miles of road: 47,000;
Percentage of federal highway funds obligated in 2006: 8%;
Design and construction oversight: FHWA oversight;
Exception: Certain types of projects, or projects below a certain
dollar threshold, in which FHWA and state determine that state
oversight is appropriate.
Type of project: National Highway System, non Interstate routes;
Miles of road: 115,000;
Percentage of federal highway funds obligated in 2006: 44;
Design and construction oversight: FHWA and state agree on which entity
will provide oversight;
Exception: State or FHWA determines state oversight is not appropriate.
Type of project: Federal-aid highways off the National Highway System;
Miles of road: 798,000;
Percentage of federal highway funds obligated in 2006: 48;
Design and construction oversight: State assumes oversight;
Exception: State determines that state oversight is not appropriate.
Source: GAO analysis of FHWA data.
[End of table]
Over the past 12 years, we and others have identified problems with
FHWA's oversight of the federal-aid highway program. For example:
* In 1997, we reported that the overall amount of and reasons for cost
increases on highway and bridge projects could not be determined
because data were not readily available from FHWA or the
states.[Footnote 8] We found on many of the projects for which we could
obtain information that initial costs estimates--developed in
connection with the environmental review stage of projects--had
increased, sometimes significantly. Several factors accounted for the
increases, including that these initial cost estimates were preliminary
and were not designed to be reliable predictors of a project's cost.
* In our May 2002 testimony, we reported that FHWA had begun to improve
its oversight by implementing Congress's finance plan requirements for
major projects but opportunities existed for improving the quality of
cost estimating and developing reliable and accurate information on the
extent and nature of projects' cost performance to help direct federal
oversight efforts.[Footnote 9]
* In 2003, the DOT Inspector General reported progress in FHWA's
stewardship over major projects but identified improvements needed in
eight areas, including developing more reliable cost estimates,
managing project schedules better, and refocusing FHWA's efforts on
project management and financial oversight.[Footnote 10]
* We and others have raised concerns regarding FHWA's use of risk
assessments to identify and prioritize risks to the federal-aid highway
program. In 2004, the DOT Inspector General reported that FHWA's risk
assessments did not provide a systematic approach for assessing program
risks throughout the agency.[Footnote 11] As a result, risk assessment
results were not reliable or comparable across states. The Inspector
General recommended that FHWA issue guidance to its field offices to
ensure that risk assessments are conducted more strategically by
identifying major programs and program components to be evaluated,
correlating the assessments with agency priorities, and providing field
offices with a disciplined methodology for evaluating and classifying
program risks. In addition, in 2005, we reported that FHWA field
offices were not always using risk assessments to help guide their
reviews of state management processes.[Footnote 12]
FHWA Has Improved Its Risk Management Approach but Is Not Fully
Tracking Risk Mitigation Activities:
FHWA has improved its risk management approach by requiring field
offices to identify risks to the federal-aid highway program in their
states, assess the risks on the basis of the potential impact and the
likelihood that they will occur, and include response strategies for
key risks in the offices' planned oversight activities. FHWA also has
improved its use of risk assessments to guide oversight activities.
However, most of the field offices that we visited were not fully
tracking risk mitigation activities, thereby limiting the effectiveness
of FHWA's efforts to mitigate risks to the federal-aid highway program.
FHWA Has Improved Its Risk Management Approach and Is Using Risk
Assessments to Guide Oversight:
FHWA has improved its risk management approach by establishing a
process for field offices to identify, assess, and respond to risks to
the federal-aid highway program. Following the issuance of the 2004 DOT
Inspector General report, FHWA issued risk management guidance to field
offices in 2006, 2007, and 2008, and the Inspector General told us that
FHWA has implemented the recommendation. FHWA has also developed risk
management training and offers a class through the National Highway
Institute. According to an FHWA official, senior management from each
field office received the training in 2007.
FHWA's guidance requires field offices to identify risks to the federal-
aid highway program (usually on an annual basis), assess the risks on
the basis of the potential impact and the likelihood that they will
occur, develop response strategies for key risks (typically, the top
10), and include these strategies in the offices' planned oversight
activities. We assessed FHWA's risk management guidance and training
against the best practices that we developed in the following four
areas: strategic planning, identifying and assessing risks,
implementing and monitoring risk mitigation plans, and evaluating and
selecting alternatives for responding to risks.[Footnote 13] We found
that FHWA adequately reflected these best practices in the first three
areas, but not the fourth. For example, in the area of strategic
planning, FHWA's guidance directs staff to develop risk planning
strategies and identify actions that could mitigate the impact of
negative events. In addition, in the area of assessing risks, the
guidance and training provide detailed discussion of considering the
likelihood and potential impact of risks to help field offices
prioritize identified risks. However, in the area of evaluating and
selecting alternatives for responding to risk, FHWA's guidance and
training have limited discussion of evaluating the impact of
alternative response strategies in terms of their potential to reduce
risks and their associated costs, or of documenting the basis for
choosing the selected alternative.
Since our 2005 report, FHWA has improved its use of risk assessments to
guide oversight activities. We found that risk assessments were a
significant factor in determining oversight activities in the field
offices that we visited for this work. Officials from these five field
offices said they used risk assessments to inform their planned
oversight activities for the year. In addition, for fiscal years 2007
through 2009, three of the five field offices documented planned
oversight activities to address a majority of the key risks identified
during their annual risk assessment process. The other two field
offices addressed one-half or more of the risks in 2 of the 3 years.
For instance, for fiscal year 2008, one field office identified 10
risks and documented a planned oversight activity for 9 of these risks
in its performance plan. For example, to address risks associated with
projects delegated by the state to local governments or agencies, over
20 percent of the field office's construction inspections in fiscal
year 2008 focused on local projects. It found deficiencies in some
areas, including construction documentation and meeting disadvantaged
business enterprise goals.[Footnote 14] In another field office we
visited, staff identified a risk that inadequate construction practices
could degrade the quality of state highway projects. To respond to the
risk, the field office initiated a review of the state's practices for
addressing discrepancies between the construction materials and methods
used and the plans and specifications for projects. The review found
that the state's process and guidance were adequate, but made
recommendations to improve the efficiency and consistency of the
process.
The American Recovery and Reinvestment Act of 2009 (Recovery Act)
provides an additional $26.7 billion in highway spending to the states.
[Footnote 15] FHWA is taking steps to oversee the increased spending by
directing its field offices to revise their existing annual plans so
that they address risks associated with delivering these projects.
Field offices were required to identify and prioritize their primary
risks and submit their plans to FHWA's field office directors by late
March 2009. On the basis of these efforts, in April 2009, FHWA issued a
risk management framework identifying eight key risks in implementing
the Recovery Act, including risks associated with weak internal
controls,[Footnote 16] which may lead to the payment of ineligible
costs, and difficulty in meeting the public's expectations for
stimulating economic recovery and delivering transportation projects
that yield long-term value. The framework also includes eight risk
mitigation strategies, including reviews of previously identified risks
in all states and providing guidance on the Recovery Act to funding
recipients.
FHWA Is Not Fully Tracking Risk Mitigation Activities and Associated
Recommendations:
FHWA's field offices are not fully tracking risk mitigation activities
and associated recommendations. FHWA field offices often initiate
reviews of state or local agency processes in response to identified
risks. These reviews can result in recommendations. Standards for
internal control state that agencies should have policies and
procedures that help ensure that actions are taken to address risks and
enforce recommendations.[Footnote 17] Also, monitoring of internal
control should include policies and procedures for ensuring that the
findings of reviews are promptly resolved. However, we found that only
1 of the 5 field offices that we visited had information about both its
own progress in addressing risks and its state's progress in resolving
related review recommendations. Also, in a 2008 survey of its 52 field
offices, FHWA found that of the 29 field offices that responded to the
survey, 7 did not have a system for tracking review recommendations. Of
the 22 field offices with tracking systems, FHWA found 8 different
systems in use, which could make it difficult to aggregate review
recommendation tracking information at the national level.
To improve the situation, FHWA plans to develop an information system
to track states' progress in addressing review recommendations. FHWA
has not yet decided whether to require all field offices to use the
system. Also, FHWA has not yet determined whether it will develop an
information system for its field offices to track their own progress in
addressing risks. Without complete and consistent tracking information,
it is difficult to aggregate national-level information from the field
offices and to ensure that risks and related review recommendations
have been addressed.
FHWA Has Made Limited Progress in Meeting SAFETEA-LU's Requirements for
Cost Estimating:
FHWA has made limited progress in meeting SAFETEA-LU's requirements to
develop minimum standards that states must follow when estimating
project costs, and to periodically evaluate states' practices for
estimating project costs. Although FHWA field offices are doing little
to periodically evaluate states' cost estimating practices overall,
FHWA has established a process for evaluating the credibility of
states' cost estimates for major projects.
FHWA Has Made Limited Progress in Developing Minimum Standards for
Estimating Project Costs:
FHWA has made limited progress in meeting SAFETEA-LU's requirement to
develop minimum standards that states must follow when estimating
project costs. In 1997, we reported that project cost estimates
typically had not been reliable predictors of project costs or
financing needs.[Footnote 18] Although FHWA has efforts under way, it
is unlikely to issue standards until 2011, at the earliest. To meet the
SAFETEA-LU requirement, the agency is participating in AASHTO's effort
to develop cost estimating guidance for states. As part of this effort,
AASHTO sponsored the development of such guidance by the National
Cooperative Highway Research Program, which was completed in 2007.
[Footnote 19] AASHTO is developing additional cost estimating guidance;
an AASHTO official who is helping to coordinate this effort told us
that he expects the guidance to be completed in the latter half of
2010. FHWA's Director of Program Administration told us that once the
guidance is complete, FHWA plans to issue a regulation adopting as its
minimum standards for cost estimating either the guidance developed by
NCHRP, the additional guidance being developed by AASHTO, or both. This
would take more time. For instance, the official provided us with an
example in which it took about 18 months from the time AASHTO issued
guidance until FHWA regulation took effect.
FHWA Has Not Established a Process for Evaluating States' Cost
Estimating Practices:
FHWA has not established a process to meet SAFETEA-LU's requirement
that it periodically evaluate states' cost estimating practices. FHWA's
Director of Program Administration told us that the agency has not
established such a process because it has been focused on developing
minimum cost estimating standards.
Four of the five FHWA field offices that we visited were doing little
to periodically evaluate states' cost estimating practices. For
example, one field office has not recently evaluated states' cost
estimating practices because, officials stated, most of the state's
cost estimates that they evaluate before contracts are awarded for
construction are reasonably accurate, in that they are close to the
lowest bid received from bidders. However, estimates that are close to
the lowest bid are not always a good indicator of sound cost estimating
practices. As we reported in 1997, most of a project's cost growth can
occur before a project goes to construction.[Footnote 20] In addition,
cost increases can also occur after a contract is awarded. Another
field office is working with its state DOT to refine the state's cost
estimating guidance, but the field office will not be formally
evaluating the state's current practices as part of this effort. In
2008, however, one field office evaluated its state DOT's practices for
documenting cost estimates, and it is conducting an evaluation of the
state DOT's cost estimating practices to determine if they produce
accurate and reliable estimates. Periodically evaluating states' cost
estimating practices could help to enhance the credibility of states'
cost estimates.
FHWA Has Established a Process for Evaluating the Credibility of
States' Cost Estimates on Major Projects:
Although FHWA field offices are doing little to periodically evaluate
states' cost estimating practices overall, for major projects--those
estimated to cost over $500 million--FHWA has established a process for
evaluating the credibility of states' cost estimates. SAFETEA-LU
requires sponsors of major projects to submit a financial plan that is
based on detailed cost estimates to complete the project and on
reasonable assumptions, as determined by FHWA. To help meet this
requirement, FHWA evaluates states' cost estimates for major projects.
We assessed FHWA's evaluations of cost estimates for two major
projects--an expansion of 21 miles of a highway to a four-lane
expressway in Wisconsin and an expansion of 11 miles of an expressway
to a six-lane freeway in Colorado. We found that, consistent with GAO's
best practices for estimating project costs[Footnote 21], both of the
evaluations involved conducting and documenting an analysis of risks
and uncertainties related to the cost estimate.[Footnote 22] These
analyses (1) identified the effects on the estimate of changing
assumptions about key cost drivers; (2) developed a probability
distribution of the expected cost using a Monte Carlo simulation tool;
[Footnote 23] and (3) identified a point estimate, along with the
probability that the actual cost will not exceed the point
estimate.[Footnote 24]
FHWA's Guidance and Documentation for Reviews of State DOTs' Financial
Management Systems and Practices Generally Meet Key Standards and
Principles, but Lack Some Important Details:
FHWA's guidance to its field offices on reviewing state DOTs' financial
management systems and practices generally follows key federal
standards and principles, but lacks specific steps and documentation in
some key areas, such as improper payments, that could help improve
oversight of state projects.[Footnote 25] The Office of Management and
Budget (OMB) has established standards and principles related to
financial management systems in circulars on internal control, improper
payments, financial systems, and audits of state and local governments.
[Footnote 26] To implement these circulars, FHWA has established a
program in which its field offices conduct annual reviews of state DOTs
designed to cover the following five areas: (1) a key financial process
or system (e.g., reviewing states' procedures for recouping costs
incurred on federal-aid highway projects), (2) improper payments, (3)
unobligated balances on inactive projects, (4) findings reported
pursuant to the Single Audit Act,[Footnote 27] and (5) findings
reported by the DOT Inspector General and GAO. FHWA's guidance to its
field offices on how to conduct the reviews generally follows OMB's
standards and principles in the circulars. However, the guidance
sometimes does not provide enough direction about the specific steps
that reviewers are supposed to complete to help ensure that the
reviewer provides sufficient evidence to support the work performed and
the reviewer's conclusions as required by generally accepted government
auditing standards.[Footnote 28] For example, in one of the five areas--
improper payments--the guidance does not require reviewers to identify
the causes of improper payments and the actions taken to correct those
causes, assess related information systems, and determine whether a
plan has been developed to reduce the outstanding amount. Without
requiring this information, FHWA is missing an opportunity to improve
its oversight of state-managed projects.
The 10 field offices we assessed generally documented coverage of the
required areas in their financial management reviews in 2008, when 5 of
the field offices documented coverage of all five areas and 4 of the
field offices documented coverage of four areas. This represents an
improvement over 2006, when 7 of the field offices documented coverage
of three areas, and the other 3 the field offices documented coverage
of two areas. However, the field offices' documentation sometimes
lacked information on the specific procedures performed or any issues
identified by reviewers, as required by generally accepted government
auditing standards.[Footnote 29] A reason why the information is
lacking is because the template that FHWA developed and that the field
offices used to report the results of their reviews does not call for
this information. As a result, it is more difficult for headquarters
staff to monitor and follow up on field offices' and states' progress.
For the five field offices that we visited, we also assessed the field
offices' tracking of states' progress in responding to recommendations
from the field offices' reviews of state DOTs. The five field offices
did not use consistent approaches to track states' progress. However,
four of the five field offices had useful approaches for tracking
states' progress on recommendations. For example, one field office
conducted a follow-up review in 2008, which found that the state had
addressed most findings from a 2007 review of local projects, and the
field office also tracked the state's progress through written
correspondence. Three other field offices periodically updated tracking
sheets with specific information on actions that states have taken to
address recommendations. In contrast, another field office also used a
tracking sheet, but for most recommendations that had not yet been
implemented, the status field in the database said either "mostly
complete" or "ongoing," but did not provide any information on what
steps have been taken to address the recommendations. The agencywide
tracking system that FHWA plans to develop is partly intended to help
improve the tracking of these recommendations.
Financial Plans for Major Highway Projects Lack Information on
Financing Costs:
FHWA does not require states' financial plans for major highway
projects to present an estimate of the projects' financing costs.
FHWA's guidance on financial plans for major projects states that the
plan should reflect the project's cost estimate and revenue sources and
amounts and provide reasonable assurance that there will be sufficient
financial resources available to implement and complete the project as
planned. FHWA's guidance also states that financial plans are to
provide information on immediate and long-term financial implications
of projects, and to provide reasonable assurance that the project's
impact on the state's transportation capital improvement program has
been assessed. However, FHWA's guidance does not require, and states'
plans generally do not present, an estimate of financing costs.
According to FHWA's Major Projects Team Leader, the agency does not
require states to include an estimate of financing costs in the
project's financial plan, in part because (1) financing costs are
already reflected in statewide transportation planning documents and
(2) accurately estimating financing costs for individual projects is
difficult because states often fund multiple projects from a single
bond issuance. However, while some uncertainty about a major project's
financing cost is expected, and presenting estimates of financing costs
for projects of all dollar amounts may be impractical, the costs of
major projects can represent a significant cost to a state. These costs
can, when combined with payments on the principal portion of the debt,
consume large shares of future federal transportation funding,
potentially impacting a state's transportation capital improvement
program. For example, Maryland DOT officials provided us the estimated
financing costs associated with the Intercounty Connector project,
which are $1.4 billion, more than half as much as the $2.5 billion cost
of designing and constructing the project. The financing costs are
scheduled to be paid over a 34-year period, with annual payments on the
portion of the debt repayable with future federal-aid highway funds
scheduled to peak in 2010, requiring 14 percent of the federal-aid
highway funds that Maryland is expected to receive that year.[Footnote
30] While estimating a project's financing costs can be complicated due
to market conditions and other factors that can change over time,
without presenting an estimate of these costs, a financial plan may not
be meeting its intended purposes of providing information on immediate
and long-term financial implications of projects, and providing
reasonable assurance that a project's impact on the state's
transportation capital improvement program has been assessed.
Conclusions:
FHWA has strengthened its oversight of the federal-aid highway program
by making improvements to its risk management approach, implementing a
process to evaluate the credibility of major project cost estimates,
and issuing financial management review guidance to its field offices
that generally follows OMB's standards and principles. The agency is
targeting its resources by systematically analyzing risks that could
have a significant impact on the federal aid highway program and
developing response strategies. FHWA's evaluations of major project
cost estimates assess, quantify, and document how risks and
uncertainties could affect a project's cost. Also, FHWA's guidance on
financial management reviews could help ensure that federal funds are
used efficiently and effectively.
While FWHA has made substantial improvements, further progress in
tracking risk mitigation activities, overseeing state cost estimates,
providing guidance and documentation for financial management reviews,
and including information in financial plans, would enhance its ability
to ensure that states effectively manage and control the cost and
schedule performance of federally aided projects. First, while FHWA
plans to develop a new system for tracking states' progress in
addressing review recommendations, it has not yet committed to
requiring its field offices to use the planned system, nor has it
determined whether it will develop an information system for its field
offices to track its own progress in addressing risks. As a result,
FHWA may not be able to fully ensure that identified risks to the
federal-aid highway program are mitigated or detect broader trends or
concerns across states. Second, because FHWA has made limited progress
in meeting SAFETEA-LU's requirement to periodically review states' cost
estimating practices, it cannot ensure that states' estimates are
credible or that highway projects are effectively and efficiently
managed. Third, while FHWA's guidance and documentation for reviews of
state financial management systems and practices generally meet key
standards and principles, requiring more information on the procedures
reviewers should and do perform, such as identifying the causes of
improper payments and the actions taken to correct those causes, would
enhance the agency's ability to oversee these systems and practices.
Finally, while financial plans for major projects are designed to
provide reasonable assurance that sufficient financial resources will
be available to complete a project, requiring states to present an
estimate of the financing costs of major projects would help decision
makers consider and make fully informed decisions about whether to
approve the substantial investment of public funds that major projects
require.
Because FHWA has actions under way to meet SAFETEA-LU's requirement to
issue minimum standards that states must follow when estimating project
costs, we are not making any recommendations in this area. However, to
have the greatest impact on the quality of states' cost estimates, it
will be important for FHWA to issue the standards in a timely manner
and to ensure that the standards are consistent with our best practices
for cost estimating. Some best practices, such as conducting and
documenting an analysis of risks and uncertainties related to the cost
estimate, could be costly and would not be appropriate for smaller-
dollar projects if the anticipated benefit of the practice is exceeded
by its anticipated cost.
Recommendations for Executive Action:
To help ensure effective and efficient management and oversight of the
federal-aid highway program, we recommend that the Secretary of
Transportation direct the Administrator, FHWA, to take the following
five actions:
* Require all field offices to use the agency's planned new system for
tracking states' progress in addressing FHWA's review recommendations.
* Develop the capability for all field offices to uniformly track the
status of their efforts to mitigate risks to the federal-aid highway
program.
* Develop and implement a process to periodically evaluate states' cost
estimating practices.
* Supplement FHWA's guidance for reviewing improper payments by
including information on the specific steps reviewers are supposed to
complete, such as identifying the causes of improper payments and
actions taken to correct those causes. In addition, enhance FHWA's
reporting template for its reviews of states' financial management
systems by requiring reviewers to document the specific procedures
performed.
* For major projects, require states to present an estimate of
financing costs in the project's financial plan.
Agency Comments:
We provided a draft of this report to DOT for its review and comment.
The department did not offer overall comments on the draft report, but
it provided technical comments, which we incorporated as appropriate.
DOT also stated it would consider the report's recommendations.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Transportation, the Director of the Office
of Management and Budget, and other parties. The report will also be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix II.
Signed by:
Phillip R. Herr:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Scope and Methodology:
To assist Congress in the upcoming reauthorization of the federal-aid
highway program, we examined the Federal Highway Administration's
(FHWA) implementation of several requirements in the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy for Users
(SAFETEA-LU), specifically its (1) oversight of states' project
delivery systems, in particular, its use of a risk management approach
to allocate their oversight resources; (2) efforts to develop minimum
standards for states to follow when estimating project costs, and to
periodically evaluate states' cost estimating practices; and (3)
efforts to review elements of states' financial management systems and
practices that affect projects. We also examined FHWA's policy on
presenting an estimate of financing costs in financial plans for major
projects. To address these objectives, we reviewed key agency and state
departments of transportation (DOT) documents and relevant regulations
and legislation. We conducted interviews with FHWA, and state DOT
officials and representatives from the American Association of State
Highway and Transportation Officials (AASHTO). In addition, we observed
a risk management training class available to FHWA staff. We also
visited five FHWA field offices--specifically Colorado, Delaware/
Maryland, Pennsylvania, Washington, and Wisconsin--which were selected
to cover a range of sizes in terms of federal-aid dollars and include
some offices that were overseeing a major project. Because we used a
nonprobability sample, information obtained from the field offices that
we visited cannot be generalized to all field offices. In addition, we
assessed financial management reviews in five randomly selected field
offices, specifically Arizona, Arkansas, Connecticut, Idaho, and Iowa.
To evaluate FHWA's risk-based approach to oversight, we reviewed a
report from DOT's Inspector General (IG) on FHWA's risk management
approach and interviewed a DOT IG official to obtain information on
FWHA's progress in addressing the report's recommendations. We reviewed
FHWA's risk management guidance and training materials and compared
them with GAO's internal risk management guide for analysts.[Footnote
31] In addition, we reviewed FHWA field office risk assessments, annual
performance plans and other related planning documents, and field
office documentation of risk and recommendation tracking efforts. To
evaluate FHWA's efforts related to cost estimating, we assessed FHWA
cost estimating guidance and its evaluations of states' cost estimates
for two major projects against criteria in GAO's cost estimating and
assessment guide.[Footnote 32] We also assessed draft cost estimating
guidance being developed by AASHTO against criteria in GAO's guide. We
also reviewed FHWA field office efforts to periodically assess states'
cost estimating practices by conducting interviews with FHWA
headquarters and field office staff and reviewing field office reports
related to state DOT cost estimating practices. To assess FHWA's
reviews of financial management systems and practices, we reviewed
FHWA's guidance and financial management work papers from field offices
and compared them with relevant federal standards and principles
established by the Office of Management and Budget in circulars on
internal control, improper payments, financial systems, and audits of
state and local governments; and with generally accepted government
auditing standards. We also assessed whether the field offices'
financial management work papers covered all of the areas required by
FHWA's guidance and reviewed field offices' efforts to track related
recommendations. Finally, to examine FHWA's policy on presenting
financing costs in financial plans for major projects, we reviewed
FHWA's financial plan guidance and estimates of financing costs on a
major project. We also interviewed a state official to obtain views on
presenting estimates of financing costs in major projects' financial
plans.
We conducted this performance audit from June 2008 through July 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Phillip Herr, (202) 512-2834 or herrp@gao.gov:
Staff Acknowledgments:
In addition to the individual named above, Steve Cohen, Assistant
Director; Daniel Cain; Jennifer Echard; Fred Evans; Colin Fallon;
Kathleen Gilhooly; David Goldstein; Jason Lee; Flavio Martinez; Amanda
Miller; Karen Richey; Amanda Seese; Laura Shumway; and Jack Warner made
key contributions to this report.
[End of section]
Footnotes:
[1] GAO, Highway Trust Fund: Improved Solvency Mechanisms and
Communication Needed to Help Avoid Shortfalls in the Highway Account,
[hyperlink, http://www.gao.gov/products/GAO-09-316] (Washington, D.C.:
Feb. 6, 2009).
[2] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009); and High-Risk Series: An Update, GAO-07-310 (Washington, D.C.:
January 2007).
[3] FHWA's oversight also applies to projects between $100 million and
$500 million. FHWA reviews and approves financial plans for major
projects. For projects between $100 million and $500 million, financial
plans have to be prepared, but FHWA does not approve them.
[4] Pub. L. No. 109-59 (Aug. 10, 2005).
[5] A project delivery system is the process used to move a project
from a concept to a constructed facility, and the system includes
planning, environmental review, design, property acquisition, and
construction.
[6] The 1 million miles of roads eligible for federal aid accounted for
about 83 percent of the vehicle miles traveled on the nation's roadways
in 2007. The 3 million miles of roads that are generally ineligible are
functionally classified as local roads or rural minor collectors.
[7] Specifically, FHWA approves state short-range transportation
improvement programs and reviews state and metropolitan planning
processes.
[8] GAO, Transportation Infrastructure: Managing the Costs of Large-
Dollar Highway Projects, [hyperlink,
http://www.gao.gov/products/GAO/RCED-97-47] (Washington, D.C.: Feb. 27,
1997).
[9] GAO, Transportation Infrastructure: Cost and Oversight Issues on
Major Highway and Bridge Projects, [hyperlink,
http://www.gao.gov/products/GAO-02-702T] (Washington, D.C.: May 1,
2002).
[10] Statement of the Honorable Kenneth H. Mead, Inspector General,
Department of Transportation, Management of Cost Drivers on Federal-Aid
Highway Projects, (May 8, 2003).
[11] U.S. Department of Transportation, Office of Inspector General,
Managing Risk in the Federal-Aid Highway Program, MH-2005-012
(Washington, D.C.: Nov. 19, 2004).
[12] GAO, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to
Improving Project Oversight, [hyperlink,
http://www.gao.gov/products/GAO-05-173] (Washington, D.C.: Jan. 31,
2005).
[13] GAO, Risk Management: A GAO Analysts' Guide.
[14] DOT's Disadvantaged Business Enterprise (DBE) program is designed
to remedy the effects of current and past discrimination against small
businesses owned and controlled by socially and economically
disadvantaged individuals and to foster equal opportunity in
transportation contracting. Federal law generally requires DOT to
ensure that at least 10 percent of the funds authorized for the highway
and transit financial assistance programs be expended with DBEs.
[15] The Recovery Act directs GAO to conduct bimonthly reviews on the
use of funds by selected states and localities, among other things. We
have recently completed the first review, which examined a core group
of 16 states, the District of Columbia, and selected localities. See
GAO, Recovery Act: As Initial Implementation Unfolds in States and
Localities, Continued Attention to Accountability Issues Is Essential,
[hyperlink, http://www.gao.gov/products/GAO-09-580] (Washington, D.C.:
Apr. 23, 2009) and Recovery Act: States' and Localities' Current and
Planned Uses of Funds While Facing Fiscal Stresses, [hyperlink,
http://www.gao.gov/products/GAO-09-829] (Washington, D.C.: July 8,
2009). We expect to track the activities of these 16 states and the
District of Columbia over the next few years to provide an ongoing
longitudinal analysis of the use of Recovery Act funds.
[16] Internal control is an integral component of an organization's
management that provides reasonable assurance that the following
objectives are being achieved: effectiveness and efficiency of
operations, reliability of financial reporting, and compliance with
applicable laws and regulations. Internal control also serves as the
first line of defense in safeguarding assets and preventing and
detecting errors and fraud.
[17] GAO, Standards for Internal Control in the Federal Government,
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]
(Washington, D.C.: November 1999).
[18] [hyperlink, http://www.gao.gov/products/GAO/RCED-97-47].
[19] Stuart Anderson, Keith Molenaar, and Cliff Schexnayder, Guidance
for Cost Estimation and Management for Highway Projects During
Planning, Programming, and Preconstruction (Washington, D.C.: National
Cooperative Highway Research Program, 2007), prepared for the
Transportation Research Board of the National Academies.
[20] [hyperlink, http://www.gao.gov/products/GAO/RCED-97-47].
[21] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[22] The term risk and uncertainty refers to the fact that because a
cost estimate is a forecast, there is always a chance that the actual
cost will differ from the estimate. Recognizing the potential for error
and deciding how best to quantify it is the purpose of a risk and
uncertainty analysis.
[23] The term Monte Carlo simulation refers to a computer-based
analysis that uses probability distributions for key variables, selects
random values from each of the distributions simultaneously, and
repeats the random selection over and over. Rather than presenting a
single outcome--such as the mostly likely or average scenario--Monte
Carlo simulations produce a distribution of outcomes that reflect the
probability distributions of modeled uncertain variables.
[24] A point estimate is usually the most likely value for the cost
estimate, given the underlying data.
[25] The Improper Payments Information Act of 2002 defines improper
payments as any payment that should not have been made or that was made
in an incorrect amount (including overpayments and underpayments) under
statutory, contractual, administrative, or other legally applicable
requirements. The act includes any payment to an ineligible recipient,
any payment for an ineligible service, any duplicate payment, payments
for services not received, and any payment that does not account for
credit for applicable discounts.
[26] OMB, Circular No. A-123 (revised), Management's Responsibility for
Internal Control (Washington, D.C.: 2004); Circular No. A-123, Appendix
C, Requirements for Effective Measurement and Remediation of Improper
Payments (Washington, D.C.: Aug. 10, 2006); Circular No. A-127
(revised), Financial Management Systems (Washington, D.C.: Jan. 9,
2009); and Circular No. A-133 (revised), Audits of States, Local
Governments, and Non-Profit Organizations (Washington, D.C.: June 27,
2003).
[27] See 31 U.S.C. §§ 7501-7507. Nonfederal entities that expend
$500,000 or more a year in federal awards under more than one federal
program are required by the Single Audit Act to undergo a single audit.
The single audit replaces multiple grant audits with one audit of an
entity as a whole. Single audits focus on the recipient's internal
controls and its compliance with laws and regulations governing federal
awards.
[28] GAO, Government Auditing Standards, July 2007 Revision,
[hyperlink, http://www.gao.gov/products/GAO-07-731G] (Washington, D.C.:
July 2007).
[29] [hyperlink, http://www.gao.gov/products/GAO-07-731G].
[30] The project is funded by a combination of grant anticipation
revenue vehicles (state issued bonds or notes repayable with future
federal-aid), toll-backed bonds, state funds, and federal funds.
[31] GAO, Risk Management: A GAO Analysts' Guide.
[32] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[End of section]
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