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United States Government Accountability Office: 
GAO: 

Report to the Ranking Member, Subcommittee on Highways and Transit, 
Committee on Transportation and Infrastructure, House of 
Representatives: 

April 2012: 

Highway Infrastructure: 

Federal-State Partnership Produces Benefits and Poses Oversight Risks: 

GAO-12-474: 

GAO Highlights: 

Highlights of GAO-12-474, a report to the Ranking Member, Subcommittee 
on Highways and Transit, Committee on Transportation and 
Infrastructure, House of Representatives. 

Why GAO Did This Study: 

The U.S. Department of Transportation (DOT) provides about $40 billion 
to the states annually to build and maintain highways and bridges 
through the federal-aid highway program. While this program has grown 
and changed over time, the federal-state relationship has been 
consistently one of “partnership” since 1916. DOT’s FHWA has offices 
in all 50 states that have developed close working relationships with 
states. Legislation approved by the Senate in March 2012 would 
establish a more performance-based highway program, introducing 
performance measures for highways and bridges and requiring FHWA to 
monitor states’ progress in meeting those measures. As requested, GAO 
examined (1) how the federal-aid highway program and FHWA’s oversight 
have changed over time; (2) the extent to which FHWA’s partnership 
approach produces benefits; (3) the extent to which FHWA’s partnership 
approach poses risks; and (4) how FHWA’s partnership with state DOTs 
could affect a transition toward a performance-based highway program. 
To do this work, GAO conducted site visits and a survey, reviewed 
relevant documentation, and interviewed FHWA and state officials. 

What GAO Found: 

Over the years, the federal-aid highway program has expanded to 
encompass broader goals, more responsibilities, and a variety of 
approaches. As the program grew more complex, the Federal Highway 
Administration’s (FHWA) oversight role also expanded, while its 
resources have not kept pace. As GAO has reported, this growth 
occurred without a well-defined overall vision of evident national 
interests and the federal role in achieving them. GAO has recommended 
Congress consider restructuring federal surface transportation 
programs, and for this and other reasons, funding surface 
transportation remains on GAO’s high-risk list. 

FHWA benefits from using recognized partnership practices to advance 
the federal-aid highway program and conduct program oversight-—such as 
clear delineation of roles and responsibilities between FHWA and its 
state partners and formal and informal conflict resolution-—that are 
recognized as leading practices. FHWA’s partnership approach allows it 
to proactively identify issues before they become problems, achieve 
cost savings, and gain states’ commitment to improve their processes. 

FHWA’s partnership approach also poses risks. We observed cases where 
FHWA was lax in its oversight or reluctant to take corrective action 
to bring states back into compliance with federal requirements, 
potentially resulting in improper or ineffective use of federal funds. 
For example, while FHWA has made it a national priority to recoup 
funds from inactive highway projects—-projects that have not expended 
funds for over 1 year-—FHWA officials in three states we visited were 
reluctant to do so because of concerns about harming their partnership 
with the state. In other cases, FHWA has shown a lack of independence 
in decisions, putting its partners’ interests above federal interests. 
For example, FHWA allowed two states to retain unused emergency relief 
allocations to fund new emergencies, despite FHWA’s policy that these 
funds are made available to other states with potentially higher-
priority emergencies. In some instances, FHWA became actively and 
closely involved in implementing solutions to state problems—this can 
create a conflict when FHWA later must approve or review the 
effectiveness of those solutions. 

If proposals for a performance-based highway program are adopted, FHWA 
would have to work with states to develop measures and take corrective 
action if states do not meet them. FHWA’s partnership could help 
states develop measures, but it would need to mitigate the risks posed 
by its partnership to ensure corrective action was effective when 
needed. The fundamental reexamination of surface transportation 
programs, including the highway program, that GAO previously 
recommended presents an opportunity to narrow FHWA’s responsibilities 
so that it is better equipped to transition to a performance-based 
system. GAO identified areas where national interests may be less 
evident but where FHWA expends considerable time and resources—areas 
where devolving responsibilities to the states may be appropriate. 

What GAO Recommends: 

Congress should consider restructuring federal surface transportation 
programs. Based on GAO’s review, there may be areas where national 
interests are less evident and where opportunities exist to narrow 
FHWA’s responsibilities. Also, DOT should address the risks posed by 
its partnership approach. DOT generally agreed with the recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-12-474]. For more 
information, contact Phillip R. Herr at (202) 512-2834 or 
herrp@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

FHWA's Partnership Role Was Established a Century Ago, but over Time 
Its Responsibilities Have Expanded: 

FHWA Benefits from Using Recognized Partnership Practices: 

FHWA's Partnership with States Poses Risks in FHWA's Oversight: 

Partnering Could Help FHWA Implement a Performance-Based System, but 
Long-standing Challenges Would Remain: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: FHWA Organization: 

Appendix II: Scope and Methodology: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Figures: 

Figure 1: FHWA and State Oversight and Approval Activities for Full 
and Delegated Projects: 

Figure 2: Locations of FHWA's Offices: 

Abbreviations: 

DBE: Disadvantaged Business Enterprise: 

DOT: Department of Transportation: 

FHWA: Federal Highway Administration: 

MAP-21: Moving Ahead for Progress in the 21st Century: 

MPO: Metropolitan Planning Organization: 

NRT: National Review Team: 

Recovery Act: American Recovery and Reinvestment Act of 2009: 

TMA: Transportation Management Area: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

April 26, 2012: 

The Honorable Peter A. DeFazio:
Ranking Member:
Subcommittee on Highways and Transit:
Committee on Transportation and Infrastructure:
House of Representatives: 

Dear Mr. DeFazio: 

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. Over the years, in response to changing 
transportation, environmental, and societal goals, the highway program 
has expanded to encompass broader goals, more responsibilities, and a 
variety of grant structures. As the highway program grew more complex, 
the federal government's responsibility to oversee the program 
expanded as well. The role of the Department of Transportation's (DOT) 
Federal Highway Administration (FHWA) has grown from overseeing the 
construction of highway projects to a wide range of activities 
including overseeing states' transportation planning processes; 
assessing environmental impacts; and monitoring states' compliance 
with property acquisition, contracting, civil rights, and other 
requirements.[Footnote 1] As we have reported, FHWA has faced 
challenges in ensuring that federal funds are efficiently and 
effectively used because the highway program is one in which there is 
limited federal control--it is a state-administered, federally 
assisted program.[Footnote 2] Funds are largely apportioned by 
formula, and the states enjoy broad flexibility in deciding which 
projects are supported. Furthermore, for nearly half of federal-aid 
highway funds, FHWA's responsibility to oversee the design and 
construction of projects has been assumed by the states. 

To adapt to its evolving role, FHWA has relied on its historical 
partnership with the states in which FHWA and the states work 
collaboratively to construct highway infrastructure. Specifically, 
FHWA division offices, which are located in every state, the District 
of Columbia, and Puerto Rico, have developed close working 
relationships with state departments of transportation (state DOTs). 
(For a complete list of division offices, see appendix I.) We have 
reported that this partnership approach offers benefits, such as more 
efficient project delivery, but can also create challenges. When an 
overseer becomes an active partner in a project, the independent 
perspective important to effective project oversight can be lost. 
[Footnote 3] 

Legislation approved by the Senate in March 2012[Footnote 4] would 
establish performance measures for highways and require FHWA to 
monitor states' progress in meeting these measures. As a consequence, 
FHWA's oversight approach could undergo significant change, as FHWA 
would need to work with the states to develop measurable goals to 
improve the condition and performance of the nation's highway system 
and take action when performance measures are not met. Given its 
history, FHWA is likely to use its partnership with the states to 
implement such a system. Also, administering a performance-based 
system would be an addition to FHWA's other duties. 

You asked us to examine how FHWA's partnership with state DOTs affects 
its oversight of the highway program and, in particular, how it might 
affect the transition to a more performance-based highway program. 
This report addresses (1) the basis for FHWA's partnership and 
oversight role in relation to the states, and how the federal-aid 
highway program and FHWA's oversight have changed over time; (2) the 
extent to which FHWA's partnership approach produces benefits; (3) the 
extent to which FHWA's partnership approach poses risks; and (4) how 
FHWA's partnership with state DOTs could affect a transition toward a 
performance-based highway program. 

To achieve these objectives, we reviewed and analyzed relevant laws 
and regulations, historical documentation, and stewardship agreements 
between FHWA and state DOTs that delineate oversight responsibilities. 
We conducted site visits to 9 of FHWA's 52 division offices, which are 
located in all 50 states, the District of Columbia, and Puerto Rico, 
chosen based on a range of criteria, including the size of the state's 
transportation program and proportion of federal funding, the rural 
and urban composition of the state, and geographic distribution. 
During our site visits, we interviewed FHWA division office leadership 
as well as state officials, when possible, to understand how they 
characterize their relationship. To obtain a broader perspective than 
site visits provide, we designed and conducted a survey of the 
division administrators from each of the 52 FHWA division offices; our 
response rate was 100 percent. We also conducted 4 discussion groups 
that included representatives from 38 of 52 state DOTs. Through a 
literature review, we identified best practices and risks associated 
with partnering, and used these criteria to assess FHWA's current 
oversight approach by reviewing information from our audit work. We 
also analyzed available results from states' 2010 Single Audit 
findings to independently identify areas of concern in oversight 
activities. See appendix II for more details on our scope and 
methodology. 

We conducted this performance audit from April 2011 to April 2012 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. 

Background: 

Federal assistance for highway and bridge infrastructure--about $40 
billion each year--is distributed through multiple formula and 
discretionary grant programs collectively known as the federal-aid 
highway program. The federal-aid highway program is financed through 
the Highway Trust Fund, a dedicated source of federal revenue based on 
the "user-pay principle"--that is, users of transportation systems pay 
for the systems' construction through the federal tax on motor fuels, 
tires, and trucks. 

FHWA uses a decentralized organizational structure to administer the 
federal-aid highway program, meaning that decision-making authority is 
largely delegated to FHWA's 52 division offices. FHWA division offices 
have 10 to 61 staff each, depending on the size of the state's highway 
program. While there are variations in division office organizational 
structures, each typically has teams that cover areas such as 
planning, environment, engineering, technical services, finance, and 
civil rights. As of February 2012, FHWA had 2,960 staff--1,962 in the 
field and 998 at headquarters. 

FHWA's responsibilities for the federal-aid highway program fall into 
two broad categories: (1) advancing the program and (2) ensuring 
compliance with federal law and regulations. To advance the program, 
FHWA engages in a range of activities to encourage the effective and 
efficient use of federal-aid highway funding and assist states in 
progressing projects through construction to improve the highway 
system. To accomplish these tasks, FHWA works with states to identify 
issues, develop and advocate solutions, approve and obligate project 
funding for eligible activities, and provide technical assistance and 
training to state DOTs.[Footnote 5] To ensure that states comply with 
federal laws and regulations, FHWA, through its division offices, 
conducts oversight of federally funded projects and reviews state DOT 
capacity and systems used to administer approved projects. Actual 
project-level oversight is divided or shared between FHWA and the 
state. FHWA oversees major interstate highway projects. FHWA division 
offices and states jointly decide how to divide oversight 
responsibility for other National Highway System projects.[Footnote 6] 
States assume oversight responsibility for projects that are not on 
the National Highway System. These can include locally administered 
projects, which are projects in which a state DOT has given approval 
to a local public agency (e.g. a city or county) to administer a 
project or phase of a project such design, property acquisition, or 
construction. 

For those projects where both FHWA and the state make decisions about 
oversight responsibilities, the respective responsibilities are 
generally mapped out in a "stewardship agreement." This agreement 
defines which projects will receive "full" oversight, in which FHWA 
oversees most aspects of the construction process, or projects in 
which states assume oversight responsibility (we refer to these as 
"delegated" projects). Figure 1 describes aspects of oversight that 
are led by FHWA or the state depending on the status of the project. 

Figure 1: FHWA and State Oversight and Approval Activities for Full 
and Delegated Projects: 

[Refer to PDF for image: illustration with 4 photographs] 

Planning: 
State role: Prepare long-range (e.g., 20 years) plans and short-range 
(e.g., 4 years) transportation improvement programs; 
FHWA role: 
* Approve state transportation improvement program. 

Environmental review: 
State role: Prepare environmental documents identifying and assessing 
environmental alternatives, when required; 
FHWA role: 
* Approve environmental documentation. 

Design and property acquisition: 
State role: Acquire property and prepare design plans and 
specifications according to applicable standards; 
FHWA role: 
* Authorize project; 
* Approve design consultant selection (if applicable)[A]; 
* Approve property acquisition; 
* Approve design exception[A]; 
* Approve plans, specifications and estimates (PS&E)[A]. 

Construction: 
State role: Advertise bids, award contracts, and oversee construction; 
FHWA role: 
* Concur in award[A]; 
* Approve contract change order[A]; 
* Approve contract claims settlement[A]; 
* Inspect construction site[A]; 
* Review construction documentation[A]; 
* Conduct final inspection[A]; 
* Render project acceptance[A]. 

[A] State DOT carries out these actions when it assumes oversight 
responsibility for a project (i.e. delegated projects). 

Source: GAO analysis of FHWA information; Art Explosion and Photodisc 
(photographs). 

[End of figure] 

To evaluate state DOTs' systems and capacity to administer approved 
projects, FHWA division offices assess internal controls and processes 
across programmatic areas such as construction, finance, property 
acquisition, and locally administered projects. A common tool for this 
type of oversight is a "process review," which involves an analysis of 
key program components and processes employed by the state DOT. 
Typically, this includes a file review of a sample of projects, 
interviews with relevant state DOT staff, and field reviews when 
applicable. In addition, FHWA, in conjunction with the Federal Transit 
Administration, performs a federal certification review of 
Metropolitan Planning Organizations (MPO), which are responsible for 
transportation planning in urban areas with populations larger than 
50,000[Footnote 7] every 4 years,[Footnote 8] meaning that 
periodically FHWA determines if the organization complies with 
applicable federal requirements. FHWA division offices have a range of 
corrective actions they can use if a state does not comply with 
federal requirements. Among other things, it may withhold funding from 
all or part of a project, deobligate inactive funds, withhold approval 
until an issue is resolved, or require corrective action plans. 

FHWA's Partnership Role Was Established almost a Century Ago, but over 
Time Its Responsibilities Have Expanded: 

Over the years, the federal-aid highway program has grown to encompass 
broader goals, more responsibilities, and a variety of approaches; 
however, the concept of a federal-state partnership has been an 
integral feature of the highway program since it was established by 
the Federal Aid Road Act of 1916.[Footnote 9] This and other early 
highway legislation established federal-state responsibilities, 
wherein states select the placement of roads, construct, and maintain 
them, and the federal government sets standards and provides a portion 
of the funding. The Federal-Aid Highway Act of 1973 further refined 
the federal-state relationship by stating that "the authorization of 
the appropriation of Federal funds…shall in no way infringe on the 
sovereign rights of the States to determine which projects shall be 
federally financed" and defined the federal-aid highway program as a 
"federally assisted State program."[Footnote 10] This language helped 
shape FHWA's interpretation of the federal-state relationship, leading 
to an understanding of its role that anchors FHWA's approach to 
oversight in partnership and is cited today in FHWA's policy 
documents.[Footnote 11] Almost all the division administrators we 
surveyed described their work with states as a partnership and in ways 
that emphasized the importance of partnership in carrying out FHWA's 
mission to advance the transportation program. In addition, as we 
previously reported, both FHWA and state officials believe that over 
the years the partnership has helped to build trust and respect 
between state transportation agencies and FHWA, ensuring that as 
partners they can accomplish tasks such as planning and building 
projects more efficiently and effectively.[Footnote 12] 

The goals and scope of the federal-aid highway program expanded during 
much of the 20th century, as did the roles and responsibilities of 
FHWA. Initially, the highway program was administered by the 
Department of Agriculture through the Bureau of Public Roads, a 
predecessor to FHWA.[Footnote 13] The bureau focused oversight at the 
project level to ensure that materials and construction methods met 
federal standards. The bureau also brought engineering expertise to 
the states, many of which either lacked skilled engineers or were not 
ensuring that federal dollars were being used to produce quality 
construction. The Defense Highway Act of 1941 extended the 1916 act to 
fund a strategic network of highways, including secondary and feeder 
routes. Eligibility was extended again in 1944 to include an array of 
other secondary roads, including rural farm-to-market roads, rural 
mail and bus routes, county roads, and others that became eligible for 
post-war federal aid.[Footnote 14] In 1950, Congress made additional 
roads--including county, township, and urban roads--eligible for aid. 
[Footnote 15] By then, however, the focus of the highway program was 
turning increasingly to constructing the Interstate Highway System. 
Designated as mandated in 1944,[Footnote 16] construction of the 
system began in earnest with passage of the Federal-Aid Highway Act of 
1956[Footnote 17] and establishment of the Highway Trust Fund, a 
dedicated funding source deriving revenue primarily from taxes on 
motor fuels, tires, and trucks to finance the construction of the 
Interstate system.[Footnote 18] 

Construction of the Interstate remained the focus of the federal-aid 
highway program in the years that followed, and Congress continued to 
expand the types of projects eligible for federal funds. In the 1970s, 
Congress expanded the federal role in bridge infrastructure by making 
highway bridges located on public roads and longer than 20 feet 
eligible for federal funds.[Footnote 19] Congress also expanded the 
eligibility of federal aid beyond initial construction. Under the 1916 
Act and Interstate authorizations, the federal government was to fund 
the construction of highways while maintenance was the states' 
responsibility. However, as the Interstate began to age, Congress 
allowed states to use federal funds for road maintenance on Interstate 
highways and all eligible bridges by redefining certain activities--
such as resurfacing, rehabilitation, and reconstruction--as capital 
investments rather than maintenance.[Footnote 20] By 1991, as a result 
of changes over the years, use of highway funds was authorized to fund 
a wide range of transportation enhancement activities, including 
activities connected with highway beautification, historic 
preservation, and the establishment of bicycle and pedestrian trails. 
[Footnote 21] 

In addition to expanding the types of projects eligible for federal 
highway funds, over time Congress adopted legislation to achieve 
social goals such as advancing civil rights and environmental 
protection, and enhancing urban planning and economic development, 
which affected the federal-aid highway program and FHWA's role and 
responsibilities. For example, the National Environmental Policy Act 
of 1969[Footnote 22] required grant recipients to comply with federal 
environmental requirements by conducting environmental reviews for 
federally funded transportation projects. The Federal-Aid Highway Act 
of 1962 established urban transportation planning as a matter of 
national interest and required all construction projects to be part of 
a continuing, comprehensive, and cooperative planning process. 
[Footnote 23] Other federal requirements have included requiring 
compliance with prevailing wage standards applicable to federal 
contracts under the Davis-Bacon Act, a Disadvantaged Business 
Enterprise program to enhance participation of women-and minority-
owned businesses, and Buy America provisions for acquiring steel and 
other materials. As the goals of the highway program expanded, FHWA 
added expertise in its division offices beyond civil engineers and 
hired economists, right-of-way specialists, planners, historians, 
ecologists, safety experts, civil rights experts, and others. 

In the early 1990s, Congress revised FHWA's role and responsibilities. 
With the Interstate Highway System nearly complete, Congress created 
the National Highway System and subsequently states began to assume 
authority from FHWA. In addition, FHWA's staff was reduced from 3,556 
in 1998 to 2,960 in February 2012.[Footnote 24] Recognizing its 
changing roles, responsibilities, and decline in staff levels, FHWA 
continued to adapt its oversight approach. In 2006, it began adopting 
a risk management approach to its oversight, recognizing in part that, 
while its role had expanded, its resources had not.[Footnote 25] 

FHWA has adapted to changes in demands for its oversight, but its role 
and responsibilities are complicated by the fact that the current 
federal approach to surface transportation in general--and to highways 
in particular--is not working well.[Footnote 26] The expansion of the 
program did not result from a specific rationale or plan, but rather 
an agglomeration of policies and programs since the 1950s without a 
well-defined overall vision of the national interest and federal role 
in our surface transportation system.[Footnote 27] Federal goals and 
programs are now numerous and sometimes conflicting, and federal roles 
are unclear. Furthermore, although DOT and FHWA establish national 
goals and priorities, federal highway funding is apportioned to states 
without regard to the accomplishment of specific outcomes or the 
performance of grantees. This makes it difficult to assess the extent 
to which funding is achieving transportation goals. For these and 
other reasons, funding surface transportation remains on GAO's high-
risk list.[Footnote 28] 

FHWA Benefits from Using Recognized Partnership Practices: 

Partnering Activities and Practices: 

In the face of its evolving roles and responsibilities, FHWA has 
relied on its historical partnership with the states in which FHWA and 
the states work collaboratively to construct highway infrastructure. 
FHWA uses partnering activities and practices with the states that 
are, based on our review and synthesis of partnering literature, 
recognized as best practices. These activities and practices enable 
parties to achieve individual and mutually beneficial goals and 
results, such as expedited project time frames and cost savings. We 
observed the following examples of successful partnerships: 

* Open and regular communication includes clear and candid discussions 
among partners as well as an understanding of the inner workings and 
decision-making processes of participating organizations. FHWA 
division and state DOT officials reported having regular formal and 
informal meetings (at leadership and working levels) as well as 
frequent contact by e-mail and telephone. 

* Clear delineation of roles and responsibilities involves 
understanding individual partner roles as well as articulating 
responsibilities for joint actions and tasks. FHWA stewardship 
agreements describe the roles of FHWA divisions and state DOTs. Some 
stewardship agreements that we examined include detailed matrices 
addressing factors such as work activities and their frequency, legal 
authority, and specific division office and state DOT responsibilities. 

* Proactive issue identification and resolution, in a mutually 
agreeable way, is closely linked to open and regular communication 
between partnering members. FHWA officials in several division offices 
told us that they work closely with their state DOT counterparts to 
identify problems early and develop solutions. For example, one 
division administrator explained that, at times, the division office 
is forced to tell the state DOT that, because of its approach, a 
certain portion, or an entire construction project, is not eligible 
for federal funding. However, the administrator stated that the next 
question the division staff asks is, "How can we do this?" to work 
with the state DOT to bring the project into compliance with federal 
requirements, and therefore allowing the state DOT to use federal 
funds. 

* Conflict resolution processes include formal (documented protocols 
or escalation procedures) and informal (verbal agreements between 
parties) procedures for how to handle disagreements. FHWA division and 
state officials discussed their commitment to collaborative problem 
solving and using informal issue escalation procedures, for example, 
by elevating problematic issues to the leadership level for 
resolution. One FHWA division incorporated conflict resolution 
protocols into its formal partnering agreement with the state DOT. The 
agreement advocated using face-to-face communication for conflict 
resolution and outlined procedures for escalating issues. 

Partnership Benefits in Advancing the Federal-Aid Highway Program: 

In our survey and interviews, FHWA division administrators reported 
that FHWA uses its partnering relationship with state DOTs to advance 
the federal-aid highway program by ensuring that projects move to 
construction in a timely fashion, facilitating knowledge transfer, and 
promoting federal transportation priorities. Specifically, 51 of 52 
survey respondents stated that their partnering relationship with 
their state was very or somewhat important to their ability to achieve 
the mission of the federal-aid highway program. Most division 
administrators (44 of 52) also indicated that the partnering 
relationship produces multiple benefits. Some of these benefits--such 
as expedited project time frames and cost savings--were noted as 
positive outcomes of partnership in the literature we reviewed. For 
example, FHWA officials in a northern state with a short summer 
construction season told us they work closely with state DOT officials 
to make timely decisions and move projects along to ensure that 
construction can be completed during the warmer months. FHWA officials 
in this state generally conducted non-construction-related process 
reviews in the winter season so that they and state DOT officials 
could focus on construction inspections and construction-related 
process reviews during the warmer months. Similarly, in another state, 
FHWA and state officials told us that by working together to resolve 
issues expediently, they were able to complete the environmental 
review and approval process for a large-scale project to reduce 
congestion on an important regional highway in about half of the time 
normally required. 

Forty-four of 52 division administrators indicated in response to our 
survey that partnering was very helpful in facilitating the transfer 
of technical knowledge. In our site visits, FHWA officials explained 
that partnering helps FHWA to use technical knowledge transfer to 
advance the federal-aid highway program by assisting states in 
addressing technical or programmatic concerns, closing skill gaps, 
enhancing compliance, and informing decision making. FHWA division 
officials in one state told us that they had financed a trip by state 
DOT officials to learn about an alternative interchange design. As a 
result, the state DOT was able to make interchange improvements 
without removing and replacing an existing bridge, reducing costs from 
estimated $10 to $15 million to $3 million. Similarly, when FHWA 
officials observed crumbling materials used for retaining walls and 
supporting structures, they brought in the technical expertise of the 
FHWA Resource Center, which resulted in the state DOT revising its 
materials specifications to ensure higher-quality materials are used. 

Forty-nine of 52 division administrators also indicated in response to 
our survey that partnering helps the agency to advance federal 
transportation priorities. One respondent stated that "partnering 
helps us advance more federal priorities and achieve greater public 
benefit than simply being parochial authoritarians that refuse to 
discuss anything that doesn't directly involve a federal dollar or 
regulation." For example, officials in one FHWA division office 
developed a business case for an approach to address congestion in a 
key section of highway as an alternative to the state's planned 
solution. FHWA promoted its alternative to the state DOT and other 
stakeholders, and ultimately the state accepted FHWA's approach 
because the data showed it would be more effective and less costly. In 
another example, FHWA division officials believed they influenced the 
state DOT to improve safety by using higher-quality barriers and 
rumble strips on highways to alert drivers straying off the road. 
Likewise, to improve safety, officials in another FHWA division office 
promoted cable barriers on highway medians as a risk-based, lower-cost 
alternative to concrete barriers. 

Similarly, during our site visits, some FHWA officials said that their 
partnering relationship creates an opportunity to promote projects of 
national or regional significance within a state. For example, FHWA 
officials in one division office persuaded the state to address 
congestion around a toll plaza on a major interstate route. The state 
did not consider the project a high priority, because it did not 
affect most state residents as much as out-of-state drivers traveling 
through the state. However, FHWA division officials were able to 
persuade the state to construct the project when funding from the 
American Recovery and Reinvestment Act of 2009 (Recovery Act)[Footnote 
29] became available. One of the FHWA officials commented, "Without 
partnerships, you lose opportunities to do things that would be good 
for the taxpayer." 

Partnership Benefits in Oversight and Effects on Corrective Action 
Decisions: 

FHWA relies on its partnering approach with state DOTs to facilitate 
oversight of the federal-aid highway program by engaging states in 
open dialogue about risks and obtaining their buy-in on program 
improvements. In our survey, 50 of 52 FHWA division administrators 
said that their division office's partnering relationship was very or 
somewhat helpful in producing more effective oversight. Officials we 
spoke with during our site visits offered several illustrations of how 
partnership improves oversight. One FHWA division administrator told 
us that the state DOT proactively brings problems to FHWA's attention 
rather than waiting for FHWA to discover them. We observed that this 
open dialogue about risks allows FHWA to address issues in a timely 
fashion and adopt a more responsive and problem-solving attitude. 
According to one FHWA division official, FHWA worked collaboratively 
with the state DOT to determine which process reviews to conduct 
during the year and then conducted the majority of those reviews 
jointly. According to the FHWA official, this practice strengthened 
oversight by helping to gain the state DOT's buy-in and commitment to 
improving its processes, facilitating honest communication about risk 
areas, and creating an opportunity for FHWA to provide on-the-spot 
training when problems were identified. In another example, an FHWA 
division office holds annual meetings with state DOT officials where 
the two parties determine which projects should receive full oversight 
and which should be assumed by the state. We observed that this 
approach can strengthen oversight by allowing FHWA to incorporate the 
state's perception of risk and weaknesses into their oversight plan by 
engaging in open dialogue with state officials about risks. 
Additionally, for each summer construction season, the two parties 
identify one of the state's regions as a focus for full oversight. 
This allows each region and their project managers to receive training 
while their projects, primarily related to pavement preservation, are 
being reviewed by FHWA. 

FHWA's partnership with state DOTs also affects its use of corrective 
action. FHWA emphasizes working with state DOTs to bring them back 
into compliance through less stringent corrective action instead of 
more punitive action. Responses to our survey of division 
administrators showed that the most frequently used corrective action 
in the last 3 fiscal years was withholding approval of a particular 
request until an issue was resolved. According to one division 
administrator, withholding approval provides the greatest ability to 
address and resolve a particular issue and encourages the state to 
take corrective action in a timely manner. Additionally, 43 of 52 
division administrators reported that in the last 3 fiscal years they 
have used the threat of a corrective action, which helps to achieve 
compliance without actual punitive actions. Reportedly, the threat of 
a corrective action is effective because it communicates the 
consequences of not complying with federal requirements and helps to 
bring about problem resolution. In addition, to address deficiencies, 
51 of 52 division administrators reported that they had required state 
DOTs to develop a corrective action plan to outline how the state 
would change a process or program to comply with federal requirements. 

When FHWA moves toward a more punitive corrective action, it is most 
likely to withhold funding from a part of a project. Withholding 
partial funding often amounts to not paying for a line item in a 
project's budget. For example, one division administrator explained 
that when the state purchases proprietary equipment, such as certain 
types of light posts or signs, when a less expensive nonproprietary 
option is available, FHWA withholds funds for the purchase. The 
federal-aid highway program is a reimbursement program. As a 
consequence, if FHWA withholds funds, state DOTs must replace federal 
funding with state funding. All 52 division offices indicated they 
withheld partial federal funding from a project in the last 3 fiscal 
years, and withholding partial funding was the second most frequently 
used tool for corrective action. 

FHWA division offices reported that they rarely use their most 
punitive corrective actions, such as withholding funding for an entire 
project or organization. Although 30 division administrators we 
surveyed reported that they had withheld federal funding from an 
entire project during the past 3 fiscal years, none listed this action 
as one of their three most frequently used corrective actions. 
According to FHWA officials, such action is damaging to the state's 
federal-aid highway program and provokes tension with state DOTs. FHWA 
officials stated that they see this measure as a last resort and try 
to use their partnership with the states to elicit compliance. 
Furthermore, division offices periodically review MPOs, which can 
receive federal-aid highway funding and implement construction 
projects. If the office declines to certify an MPO, federal funds for 
that organization are withheld until the deficiencies identified are 
corrected. 

Navigating the "Gray Areas": 

FHWA division officials use partnering practices, such as open and 
regular communication, with state DOT officials as they exercise 
administrative discretion[Footnote 30] in situations where the rules 
and how to apply them are not clear--situations we refer to as "gray 
areas." In administering the federal-aid highway program, FHWA often 
has discretion to take a less stringent action even when the law 
permits a harsher one, if circumstances warrant. Such an approach is 
embodied in a stewardship agreement from one division office, which 
states that the division office "will make use of available regulatory 
flexibility when in the public interest." FHWA officials spend time 
and effort addressing gray areas, as they seek to make a decision that 
is not only consistent with federal regulations but also appropriate 
to the particular facts and circumstances of the situation. For 
example, the federal regulations governing federal-aid contracts call 
for state DOTs to use reasonable judgment in evaluating contractors' 
good faith effort to hire women-and minority-owned businesses but do 
not specify the type of documentation contractors must submit to 
demonstrate their effort.[Footnote 31] Because there are no 
specifications on the type of documentation demonstrating a good faith 
effort, FHWA and state DOT officials must work through this gray area 
to determine how best to demonstrate their efforts. 

In our interviews and observations, we noted that FHWA officials rely 
on partnering practices with states when federal regulations and FHWA 
policies leave room for interpretation and discretion, creating gray 
areas for FHWA officials to resolve. For example, routine roadway 
maintenance is not eligible for federal reimbursement,[Footnote 32] 
but preventive maintenance can be.[Footnote 33] According to an FHWA 
division administrator in one state, there is room for interpretation 
and discretion between the two types of maintenance. This division 
administrator told us that in recent years the state DOT has sought 
reimbursement from FHWA for roadway maintenance activities that are 
typically ineligible for reimbursement--a situation he attributed to 
the economic environment affecting state budgets. This required time 
and effort by both FHWA and the state DOT to work through their 
different interpretations of the regulation. Ultimately, FHWA and the 
state agreed to develop asset management systems to identify and 
prioritize preventive maintenance needs in a systematic way. The 
division administrator explained that this approach would show and 
document how the maintenance strategies would extend the roadway life 
and prevent deterioration and higher maintenance costs later, which 
would make these costs eligible for federal funding. 

We also observed FHWA using partnering practices to negotiate the gray 
areas that may arise when the rules are clear, but practical 
considerations complicate implementing the rule. When implementing a 
rule, public officials may need to consider cost-benefit implications, 
time frames, local economic conditions, or other local circumstances 
that are not necessarily dealt with explicitly in rules or 
regulations. For example, FHWA officials in one division office 
explained that FHWA's regulations require roadside guardrails on 
National Highway System routes to be a minimum height of 27 ¾ inches 
from the top of the guardrail to the top of the pavement. The height 
of a guardrail governs its effectiveness. However, as states overlay 
pavement with new asphalt to address road deterioration, the height of 
the guardrail relative to the road surface decreases and the guardrail 
becomes less effective. This creates practical trade-offs with regard 
to the costs of guardrail replacement and safety, raising questions 
regarding whether to use funds to improve the pavement condition of, 
for example, 20 miles of road without replacing guardrails or to pave 
fewer miles of road but replace the guardrails to ensure they are at 
the full height prescribed in the regulation. Both approaches offer 
safety benefits. Determining the best course of action requires 
navigating a gray area and requires FHWA to understand the state's 
priorities, weigh the safety outcomes, and use its partnership with 
the state to agree on an approach that meets transportation needs and 
federal responsibilities. 

States' Perspectives on Partnering and Oversight: 

While FHWA officials largely viewed their partnering relationship with 
state DOTs in positive terms, state officials offered a more tempered 
response. Specifically, our interviews and discussion groups with 
officials from 38 state DOTs revealed that while states acknowledged 
having good working relationships with their FHWA division 
counterparts, they also expressed some frustrations. On the positive 
side, state DOT officials appreciated regular and ongoing 
communication with FHWA officials and characterized FHWA staff as 
accessible, responsive, and solution-oriented. State DOT officials 
told us that stewardship agreements were helpful in clarifying roles 
and expectations and that they consider risk-based oversight to be a 
strength of the FHWA-state relationship. Officials also appreciated 
FHWA's help in navigating federal requirements and sharing technical 
expertise and industry best practices. Furthermore, state officials 
appreciated that FHWA officials recognized the unique needs, context, 
and features of their state. State DOT officials participating in our 
discussion groups asserted that they do not want a "one size fits all" 
FHWA. 

However, state DOT officials' positive feedback about FHWA was 
tempered with other perspectives on partnering and FHWA decision 
making. We noted three themes among the comments of state DOT 
officials when voicing perspectives different from FHWA. 

1. State officials viewed partnership less favorably than FHWA. Many 
state DOT officials characterized FHWA's role as providing oversight 
and enforcing regulations rather than acting as a partner. Some 
officials indicated FHWA began emphasizing enforcement over 
partnership around the time of the completion of the Interstate 
Highway System, as FHWA responded to legislative changes, adopting 
what many state officials viewed as an audit-focused approach to 
oversight. According to some state DOT officials, the sense of 
camaraderie between state DOT and FHWA officials that existed during 
the building of the Interstate is no longer there, and currently there 
is "less partnership and more regulation." Reflecting the states' more 
tempered perspective, one state DOT official characterized the 
relationship with FHWA as "a partnership within an arranged marriage." 

2. State officials viewed FHWA as imposing personal preferences. Many 
state DOT officials told us that FHWA officials routinely imposed 
personal preferences--for example, questioning particular design 
solutions--and would threaten to withhold federal funds or approval 
even though, in the states' view, the approach the state had developed 
complied with federal standards and regulations. State DOT officials 
pointed out that these preferences are not covered in the regulations 
but rather involve professional judgment regarding such factors as 
cost, appearance, and durability that are not prescribed in regulation 
and are often unique to a particular construction project. For 
example, according to officials at one state DOT, FHWA had a 
preference for sequencing construction activities in a particular way 
rather than leaving the decision up to the state DOT, and on this 
particular project FHWA made its preference a requirement. Some states 
also said that FHWA gives too much focus to smaller issues and is 
overly involved in routine matters. 

3. State officials were frustrated by inconsistencies in FHWA's 
decision making across states. Many state DOT officials expressed 
frustration about the inconsistencies they perceived in FHWA's 
decisions across states. Specifically, several noted that FHWA 
division offices in other states had been more permissive of certain 
solutions or requirements compared to the FHWA division office in 
their state and stated that FHWA does not always use the maximum 
flexibility it has at its disposal in interpreting federal rules. For 
example, a state DOT official told us that the division office in his 
state did not approve a certain material for markings on the state's 
highways, but he learned that the same material had been approved in 
17 other states. 

The inconsistencies experienced by state DOTs may not be unreasonable 
and could stem from the decentralized nature of the federal-aid 
highway program and the fundamental challenge FHWA and the states face 
in navigating gray areas on complex projects with unique political, 
financial, engineering, and other challenges. These complexities 
likely contribute to FHWA and state DOTs' differing perspectives. For 
example, we previously reported a case in which a state DOT planned to 
construct new soundwalls on an existing highway. FHWA noted that the 
state was planning to widen the road a few years later and that the 
walls would likely have to be destroyed and rebuilt. FHWA recommended 
that the state construct the walls at the location envisioned for the 
widening project, but state DOT officials resisted because of the 
additional costs to acquire property. FHWA then informed the state 
that it would only fund construction of the walls once--either at the 
location along the existing highway as the state had planned or at the 
location needed once the road was widened.[Footnote 34] This example 
illustrates a case in which state officials may have viewed FHWA as 
imposing its personal preferences and may have been aware of similar 
situations in other states in which FHWA officials made different 
decisions inconsistent with this approach. FHWA, on the other hand, 
may have viewed its decision as exercising professional judgment to 
promote the most long-term cost-effective solution, consistent with 
its role as a steward of federal funds. 

FHWA's Partnership with States Poses Risks in FHWA's Oversight: 

While successful partnering relationships offer benefits, they also 
present potential risks, according to the literature we reviewed. 
First, one partner may grow lax in holding the other to standards. 
Second, one partner can lose independence in its decisions. We 
observed cases where FHWA was lax in its oversight by trusting but not 
verifying state activities and cases where FHWA demonstrated 
reluctance to take corrective action to bring states back into 
compliance, which can result in ineffective, wasteful, and potentially 
improper use of federal funds. We also observed instances in which 
FHWA sometimes showed a lack of independence in decisions, putting the 
states' interests above federal ones, and other instances in which 
FHWA took extraordinary measures to advance the program to the point 
of becoming actively and closely involved in implementing solutions to 
state problems. This can create an inherent conflict when FHWA later 
must review and approve those actions or review their effectiveness. 
Despite the risks partnership poses, FHWA has good oversight practices 
in several areas of the federal-aid highway program. 

Partnership Created Challenges for FHWA in the Past: 

We have expressed concerns about the risks posed by FHWA's partnership 
approach in the past. The Central Artery/Tunnel project in Boston, 
Massachusetts, provides examples of both lax oversight and a lack of 
independence that resulted in ineffective and inefficient use of 
federal funds and damaged FHWA's credibility.[Footnote 35] This 
highway project--one of the largest, most complex, and expensive ever 
undertaken--experienced widely reported cost increases, growing from 
around $2.3 billion in the mid-1980s to almost $15 billion in 2004. 
From 1995 through 1997, we reported concerns about cost growth and 
funding gaps on the project and weaknesses in FHWA's efforts to 
address them and to hold the state accountable.[Footnote 36] In March 
2000, an FHWA task force charged with reviewing FHWA's oversight of 
the project concluded that "FHWA's long history of strong 
Federal/State partnerships failed" and that FHWA "had failed to 
maintain an independent enough relationship with the state to 
adequately fulfill its oversight role." The task force attributed lax 
oversight to FHWA placing too much trust in the state, reporting that 
FHWA's partnership approach failed to achieve independent and critical 
oversight of the project.[Footnote 37] 

As this example illustrates, although FHWA has experienced partnership 
risks to its programs in the recent past, FHWA division administrators 
generally do not recognize the risks of partnering as significant. In 
our survey, more than half (29) stated they did not believe that 
partnering creates any risks to their oversight of the federal-aid 
highway program. Of the remainder, 5 said it may create "some risk," 
17 said there was a "slight risk," and only one stated partnering was 
a "significant risk" to oversight. 

FHWA Sometimes Was Lax in Its Oversight or Reluctant to Take 
Corrective Action: 

In some instances, FHWA was lax in its oversight in that it did not 
verify compliance with the requirements of the federal-aid highway 
program, instead trusting states to ensure its actions were in 
compliance, which could have resulted in ineffective, wasteful, and 
potentially improper use of federal funds. For example: 

* Our November 2011 report on the Emergency Relief program (which 
provides funds to states to repair roads damaged by natural disasters 
and catastrophic failures) found that many of the project files 
reviewed did not contain documentation to support FHWA decisions that 
projects met program eligibility requirements.[Footnote 38] 
Specifically, of the 83 projects reviewed, 81 projects (representing 
$193 million in federal funds) had missing or incomplete 
documentation. As a result, we were unable to determine the basis of 
FHWA's eligibility decisions for many of the projects reviewed. We 
also found that FHWA divisions relied heavily upon the information 
provided by states to make FHWA eligibility decisions without 
verifying that information. For example, one FHWA division office 
reported that it reviewed preliminary cost estimates for about one-
third of the projects included in our review before determining that 
projects were eligible.[Footnote 39] As a result, we could not 
determine the basis of FHWA's eligibility decisions for those project 
cost estimates it did not review and as such, FHWA ran the risk of 
providing funds to ineligible projects. 

* In the Disadvantaged Business Enterprise (DBE) program, which aims 
to increase the participation of small businesses owned and controlled 
by socially and economically disadvantaged individuals, state DOTs are 
among those entities responsible for certifying firms to participate. 
[Footnote 40] In an interview with one FHWA division office, the FHWA 
official said that he knows that the state DOT official is very 
experienced with the DBE certification process and, because of that, 
relies on the state to make certification decisions consistent with 
federal regulations. As a result, the official stated that FHWA is 
generally not involved in verifying the eligibility of DBE firms 
certified by the state. Although FHWA is not required to review every 
certification, in this instance FHWA's partnering relationship with 
the state influenced the level of oversight conducted in this area and 
exposed FHWA to the risk that ineligible firms might be certified as 
DBEs. 

* Officials from the FHWA division offices we spoke to said they 
tended not to do unannounced inspections. Instead, FHWA alerts the 
relevant construction sites and offices of an inspection ahead of 
time. Officials from one FHWA division office explained that they rely 
primarily on announced visits because they do not want to create a 
"gotcha" environment, which might hurt their relationship with the 
state. Division officials from another office explained that 
announcing inspections gives state DOT staff time to do things like 
assemble the appropriate records or personnel for FHWA's inspection or 
allows FHWA to observe specific activities, such as materials testing, 
on the day that particular activity is occurring. While there are some 
advantages to announced inspections, the Institute of Internal 
Auditors includes unannounced visits as a common practice used by 
firms to mitigate risks associated with partnering.[Footnote 41] By 
not conducting unannounced inspections, FHWA is essentially trusting 
the state and its contractors to put compliance with federal 
requirements over meeting competing demands like cost and schedule. In 
doing so, it may be missing the opportunity to more accurately verify 
compliance with federal requirements, observe normal operations, and 
create an environment conducive to compliance. 

The partnering relationship between FHWA and state DOTs at times may 
have also resulted in FHWA being reluctant to require corrective 
action to bring a state back into compliance with program 
requirements. Specifically, FHWA staff acknowledged that, in their 
daily decision making, they have to think about how to preserve their 
relationship with their state counterpart and that they view taking 
corrective action as potentially damaging to that relationship. For 
example: 

* We and the DOT Office of Inspector General have reported multiple 
times on the problem of funds committed to inactive federal-aid 
highway projects.[Footnote 42] FHWA has made it a priority to decrease 
nationally the number of outstanding inactive projects to ensure that 
federal funds are being used in a timely and effective way. For 
example, FHWA had reduced the percent of funds obligated to inactive 
projects to about 3.4 percent of all obligations by March of 2012--
this percentage had stood at around 8 percent as recently as September 
2010.[Footnote 43] In 2008, it established a Financial Integrity 
Review and Evaluation program requiring division offices to conduct a 
quarterly review of inactive projects and determine the validity of 
the amount obligated for each project. FHWA division offices have the 
authority to de-obligate funds from inactive projects. However, FHWA 
division officials with oversight responsibility for three states we 
visited expressed reluctance to use this authority because of concerns 
that it would negatively affect their working relationship with the 
state. Instead, these division offices negotiated with state officials 
to get them to explicitly agree to allow FHWA to de-obligate funds. 
FHWA officials acknowledged that this is a long, time-intensive 
process. For example, over the course of 6 months, one FHWA division 
office sent reminder letters with specific deadlines for the state to 
provide a rationale for allowing inactive funds to remain obligated. 
Yet at the end of this process there were still outstanding inactive 
projects that had not been resolved. In another state, FHWA finance 
personnel described having ongoing conversations with their state 
counterparts, asking them the status of inactive projects and 
negotiating to de-obligate those funds. The FHWA division office 
described the process as "walking the tightrope" with the states when 
making decisions to de-obligate. The amount of time officials we spoke 
with devoted to addressing inactive funds raises questions about 
whether, on the whole, division offices could have moved more quickly 
to make these funds available to other needed projects had officials 
not had to consider the impact of withdrawing funds on their 
partnership with the state. 

* One state identified serious compliance issues with one of its major 
cities dating as far back as 2003, including federal construction 
specifications not being followed, insufficient field equipment, and 
lack of appropriate construction supervision. In 2009, FHWA withheld 
funding from the city for about 2 weeks while the state DOT drafted a 
corrective action plan. FHWA approved the plan and resumed funding. 
However, nearly 2 years later, as of August 2011, there were still 
points in the plan that had not been addressed. As a result, federal 
funds continued to flow to projects that may not have fully met 
federal requirements. 

* FHWA can delegate to the state the responsibility of approving 
consultant contracts to ensure compliance with federal regulations. 
One state DOT lacked FHWA-approved written procedures for how it 
selects consultants, which are necessary to comply with federal 
regulations. The FHWA division office had given the state an extended 
opportunity--about 5 years--to address the compliance issue, allowing 
it to use interim procedures as long as the state DOT was developing 
final procedures and planning to have them approved by FHWA. After 5 
years, due to the failure of the state to develop final procedures, 
the FHWA division office suspended all state DOT contract approvals 
and temporarily re-assumed the responsibility of approving consultant 
contracts to ensure compliance with federal procurement regulations. 
Once the state DOT developed written procedures and they were 
approved, FHWA restored consultant contract approval authority to the 
state DOT. 

As discussed earlier, FHWA division administrators reported that they 
rarely use their most punitive corrective action tools such as cutting 
off funding for a program or organization. While FHWA, in cooperation 
with the Federal Transit Administration, is responsible for certifying 
that MPOs meet federal requirements, as we reported in September 2009, 
FTA and FHWA officials were unaware of any instance in which an MPO 
was not certified due to noncompliance in the previous 10 years. 
[Footnote 44] In our survey of division administrators, for fiscal 
years 2009 through 2012, one FHWA division administrator reported that 
he withheld certification of an MPO due to issues in its congestion 
mitigation plan. However, FHWA still allowed project approvals to move 
forward. The FHWA division office put together a corrective action 
plan with the MPO, identifying action steps, deadlines, and people 
responsible. According to the FHWA division administrator, as long as 
the state is making progress toward resolving the issue, FHWA will not 
prevent the MPO from obtaining project approvals and moving 
construction forward. He noted that MPOs have a 4-year window to 
become recertified, and if an MPO reached the end of its window but 
still had not taken sufficient action for FHWA to certify it, FHWA 
would likely provide an extension and grant the MPO "conditional" 
certification, rather than decertify it. 

Similarly, none of the 52 FHWA division administrators stated they had 
not approved their state's bridge program any time in the past 3 
fiscal years. In 2010, the DOT Office of Inspector General found some 
cases where FHWA bridge engineers reported that a state's bridge 
program substantially complied with federal regulations despite 
deficiencies that could have posed serious risks to public safety. 
[Footnote 45] For example, one FHWA bridge engineer judged a state to 
be substantially compliant despite reporting that the state failed to 
close 96 bridges, as required. A bridge engineer in another state 
reported that 47 bridges were not closed as required, but concluded 
that the state was substantially compliant. In two other cases, FHWA 
bridge engineers reported states as substantially compliant even 
though 200 bridges in one case and over 500 bridges in the other case 
were not posted with maximum weight limit signs, as required. 

FHWA Sometimes Showed a Lack of Independence in Decisions: 

FHWA's partnership relationship with the state may have made it 
vulnerable to a lack of independence in decisions to advance the 
program in some cases, resulting in it putting the states' interests 
above federal interests. For example: 

* The Recovery Act required that projects from economically distressed 
areas be given priority for project selection. The Public Works and 
Economic Development Act of 1965, as amended, defined these areas, and 
FHWA supplemented it with guidance to address determination questions. 
However, as we reported previously, three states developed their own 
guidelines to determine eligibility.[Footnote 46] FHWA eventually 
determined that the states' efforts to determine eligibility did not 
meet the federal criteria, but it did so after obligating nearly all 
the funds in those states, meaning FHWA's determination was too late 
to affect project selection.[Footnote 47] 

* Our November 2011 report on the Emergency Relief program found 
instances in which two division offices funded new emergency events 
with allocations that were no longer needed from previous 
emergencies.[Footnote 48] FHWA's procedures specify that FHWA division 
offices are to identify, and then withdraw, unused program funding 
allocations so that FHWA can direct these funds to other emergencies. 
This provision exists because Emergency Relief program funding is 
often insufficient to fund emergency needs and a "backlog" list of 
projects exists. These two FHWA division offices gave priority to the 
state's interest in maintaining control of funds over the federal 
interest of ensuring that scarce unused Emergency Relief funds were 
made available to other states with potentially higher-priority 
emergencies. In response to our recommendation that it do so, FHWA 
instructed its division offices in January 2012 to no longer permit 
states to transfer unobligated allocations from one emergency event to 
a new event. 

* We have previously expressed concerns about the Emergency Relief 
program prioritizing state's interests in other instances as well. 
[Footnote 49] In 1996, we questioned the use of Emergency Relief 
funding in relocating and bettering the Cypress Viaduct, an elevated 
highway that collapsed in a catastrophic earthquake in Oakland, 
California. FHWA's regulations limit the use of emergency relief funds 
for improvements to or changes in the character of a destroyed 
facility. The regulations allow for funding "betterments"--such as 
relocation, replacement, upgrades, or added features that did not 
exist prior to the disaster--only when they are clearly economically 
justified to prevent recurring damage. In 1991, FHWA and the 
California Department of Transportation decided, as a result of 
environmental and community concerns, to replace the collapsed 1.5 
mile connection with roughly 5 miles of new freeway segments. We 
questioned funding these improvements and additional costs through the 
Emergency Relief program, rather than through the annual formula 
funding states receive from the federal-aid highway program. This 
decision provided California with over $1 billion in additional 
funding that it then did not have to utilize from regular federal-aid 
funds or state sources. In 2007 and 2011, we reported additional cases 
of FHWA using the Emergency Relief program to fund projects that had 
grown in scope and cost as a result of environmental and community 
concerns. In 2007, we recommended that FHWA revise its regulations to 
tighten eligibility criteria and place limits on the use of Emergency 
Relief program funds to fully finance projects with scope and costs 
that have grown as a result of environmental and community concerns. 
FHWA has not acted on this recommendation. 

In addition, FHWA has on occasion taken extraordinary measures, 
expending considerable resources to advance the program, to the point 
of becoming actively and closely involved in developing and 
implementing solutions to state problems. When an overseer becomes 
part of the solution, the arms-length, independent perspective may be 
lost, as agencies that are responsible for implementing program 
improvements face an inherent conflict when they later approve those 
actions or review their effectiveness. For example: 

* FHWA spent a substantial amount of time and effort with state DOT 
personnel and others trying to determine if funds used on a private 
bridge were eligible for use to help the state meet its matching 
requirement for federal funding. According to division office 
officials, the state was struggling to meet the 20 percent funding 
match required of states in order to receive the 80 percent federal-
aid highway funding, due to the economic recession and poor fiscal 
situation of the state. Division office officials further explained 
that had it not met the match, the state could have lost about $200 
million in federal funds in fiscal year 2012. States may receive "toll 
credits"--funds that can be credited by FHWA toward the state's 
federal match--if it can demonstrate that toll revenues were spent on 
facility improvements and meet other requirements. In an effort to 
meet its match, officials explained that the state identified a 
private toll bridge that it repaired and improved using toll revenue, 
but had never claimed the revenues as federal toll credits. The FHWA 
division office committed staff, including their financial manager, to 
work with the state DOT, the private bridge company, and an outside 
auditing firm to determine the eligibility of the toll credits. 
Together they identified more than $50 million in eligible toll 
expenditures, finding individual line item expenditures in areas such 
as preventative maintenance and capital improvements related to 
tolling equipment and real estate acquisition. The eligible toll 
credits helped the state meet its fiscal year 2012 federal match 
requirement. While FHWA officials characterized the Division's 
activities as appropriate technical assistance that was needed because 
the state did not have the skills to identify these credits, it placed 
the agency in a position of approving actions it was actively and 
closely involved in developing. 

* In one state, an FHWA division office detailed a staff person to 
work full-time on-site at the state DOT to help bring the state into 
compliance with the requirements of the Highway Beautification Act of 
1965.[Footnote 50] Division office officials had identified ongoing 
compliance issues with the state's outdoor advertising program, 
including multiple examples of signs that were not in compliance with 
the state's agreement with DOT.[Footnote 51] As a result, FHWA could 
have withheld 10 percent of the state's federal-aid funds. However, 
the division did not withhold these funds. The division adopted an 
approach that entailed considerable time and effort on the part of 
FHWA by detailing a staff person to (1) research sign regulations on 
federally controlled routes to determine compliance with the federal-
state agreement and the Highway Beautification Act, (2) review the 
state's outdoor advertising inventory to determine the status of 
signs, and (3) provide interpretations, clarifications, and 
authoritative determinations concerning FHWA policy, among other 
activities. 

Despite Partnership Risks, FHWA Has Good Oversight Practices in 
Several Areas: 

Despite the risks partnership poses, in several areas of the federal-
aid highway program, FHWA has good oversight practices. The Institute 
of Internal Auditors has identified segregation of duties in the type 
of partnership FHWA has with state DOTs as one of the most common 
practices used in managing partnership-related risks.[Footnote 52] 
During the administration of the Recovery Act, FHWA developed the 
National Review Teams (NRT) composed of FHWA staff--separated from the 
rest of the FHWA--to act as a neutral third party to conduct 
oversight. The NRTs were able to maintain their neutrality and 
objectivity in part because they did not have to concern themselves 
with preserving a partnering relationship while conducting oversight 
and making recommendations for action. In addition, the findings and 
recommendations of the NRTs were reported both to the FHWA division 
office, which was responsible for developing action items in response, 
and the responsible FHWA Director of Field Services, who was 
responsible for ensuring the action items were completed within the 
established time frames. This practice of providing an independent 
review had several benefits. According to FHWA officials, it provided: 

* a consistent, comparative perspective on the oversight regularly 
conducted by division offices, and it gathered information at the 
national level on both best practices and recurring trouble spots 
across FHWA division offices; 

* additional "boots on the ground" for project-level oversight and 
increased awareness of federal oversight activity among states, MPOs, 
and other transportation organizations receiving Recovery Act funds; 
and: 

* an independent outside voice to examine the Recovery Act projects 
and point out problems, keeping the partnering relationship between 
the division offices and the state DOTs intact. 

The response to the NRT reviews from both division office and state 
officials with whom we spoke was positive. For example, division 
office officials said that the NRT reviews often echoed their own 
observations of weaknesses in the state DOT's program, but they said 
the state DOT seemed more inclined to act because the NRT was a fresh 
voice presenting the observations. Division office officials also told 
us that having the NRT point out deficiencies was helpful to them in 
maintaining their partnering relationship with the state. State DOT 
officials we spoke with in our discussion groups generally agreed that 
the NRT reviews, while they created an additional burden, provided an 
independent third-party perspective during the implementation of the 
Recovery Act. 

In administering the federal-aid highway program, FHWA makes use of 
two practices that facilitate good oversight: 

* A risk management approach to oversight. Conducting risk 
assessments, which are part of FHWA's approach, to identify both 
internal and external risks to an agency is another best practice for 
agencies.[Footnote 53] In particular, by targeting areas of risk at 
both the state and national level, FHWA can focus on specific program 
areas of concern and better utilize limited resources. Division 
offices conduct annual assessments of their states to identify the 
greatest risks and vulnerabilities, and FHWA headquarters uses this 
information to identify common risk areas across the nation. FHWA 
officials in several division offices we spoke with stated that they 
use the risk assessment to inform their oversight activities 
throughout the year and take specific steps, when applicable, to 
address the risks. In 2009, we reported that FHWA had improved its use 
of risk assessments by proactively identifying risks and their 
potential impact, as well as developing specific response strategies 
to inform its planned oversight activities. Our report concluded that 
FHWA's guidance and training reflected best practices in risk 
management in three of four key areas.[Footnote 54] 

* Random sampling to review documentation of various financial 
transactions--a practice that is in keeping with its risk-based 
approach. This approach ensures that FHWA can assess compliance with 
financial requirements in a systematic way when it is impossible for 
FHWA to survey all occurring financial transactions. Furthermore, 
selecting transactions randomly protects the sample from selection 
bias, to which FHWA division offices could potentially be vulnerable 
because of their partnering relationship with the state. For example, 
in its Financial Integrity Review and Evaluation system, FHWA 
headquarters selects a random sample of transactions for each division 
office to check for compliance with the Improper Payments Information 
Act of 2002.[Footnote 55] FHWA headquarters also randomly selects 
billing transactions each quarter to determine if there is sufficient 
documentation to support the billing item and amount. 

Partnering Could Help FHWA Implement a Performance-Based System, but 
Long-standing Challenges Would Remain: 

Legislation has been approved in the Senate that would move the 
federal-aid highway program toward a more performance-based approach. 
FHWA's partnership--its close working relationship with the states--
could be useful in making the transition to such a system; however, 
FHWA would need to effectively address the risks posed by such a close 
partnership--lax oversight and lack of independence. In addition, it 
would have to address other existing weaknesses that we have 
identified in previous reports, including improving the transportation 
planning process and data collection and evaluation. Finally, long-
standing challenges stemming from the growth in the number of 
responsibilities and complexity within the federal-aid highway 
program, as well as the lack of well-defined federal goals and roles, 
would remain. Reexamining and refocusing surface transportation 
programs, which we have previously recommended, presents an 
opportunity to narrow the scope of FHWA's responsibilities so that it 
is better equipped to transition to a performance-based system. This 
review identified areas where FHWA expends considerable time and 
resources but exercises little effective control--areas where 
devolving responsibilities to the states may be appropriate. 

Legislation Approved by the Senate for a Performance-Based Highway 
Program: 

A performance-based system is critical to the reexamination and 
restructuring of surface transportation programs that we and others 
have recommended.[Footnote 56] Currently, most highway grant funds are 
distributed through formulas that have only an indirect relationship 
to infrastructure needs and many have no relationship to outcomes or 
the performance of the grantees. Because funds are distributed without 
regard to performance, it is difficult to know whether federal 
spending is improving the performance of the nation's highway 
infrastructure.[Footnote 57] 

Under Moving Ahead for Progress in the 21st Century (MAP-21)--FHWA 
would develop performance targets for minimum condition levels in two 
areas: (1) pavement on the Interstate and non-Interstate highways on 
the National Highway System and (2) bridges on the National Highway 
System.[Footnote 58] If a state did not to meet the minimum condition 
levels for 2 consecutive years, it would be required to commit a 
specific percentage of its federal-aid highway funding to the 
deficient area. For other areas, MAP-21 directs states to develop 
performance targets related to national priorities identified in the 
legislation,[Footnote 59] document these targets in their statewide 
transportation improvement programs, and link investment priorities to 
these targets. FHWA would have to (1) work with the states to develop 
performance goals that represent real improvements relative to the 
state's current conditions and will improve the performance of the 
nation's transportation system, and (2) monitor and measure states' 
progress and take corrective action should states not meet performance 
targets. Legislation approved by the House Transportation and 
Infrastructure Committee and the President's fiscal year 2013 budget 
proposal also refer to states developing performance measures and 
goals to improve safety, congestion, and other areas. 

FHWA's Partnership Approach Could Facilitate a Transition to a 
Performance-Based Program: 

FHWA's partnership with states could offer several benefits in moving 
toward a performance-based program. In particular, through the 
partnership's collaborative approach, FHWA could provide technical 
assistance to help states develop performance goals and targets and 
establish data collection methodologies to evaluate and track their 
progress. States participating in our discussion groups found the 
technical assistance, knowledge transfer, and policy advice that FHWA 
provides a highly valuable benefit of the partnership relationship. 
Likewise, FHWA division office personnel recognized the benefit 
partnership offers in facilitating technical assistance. 

Developing effective performance goals and targets and the data 
collection methods to track targets poses challenges that technical 
expertise can address. As we have reported, the more specific, 
measurable, achievable, and outcome-based the goals are, the better 
the foundation for allocating resources and optimizing results. 
[Footnote 60] Also, goals must be linked to project selection and 
funding decisions, and without specific and measurable outcomes for 
federal involvement, policymakers will have difficulty determining 
whether certain parts of the federal-aid highway program are achieving 
the desired results. In addition, developing data collection methods 
that consistently and reliably capture the metrics needed requires 
technology, planning, and training staff to ensure high-quality data. 

FHWA has recently developed performance metrics and revamped its data 
collection approach for the National Bridge Inventory System. 
Specifically, it adopted a new risk-based, data-driven approach that 
incorporates the review of 23 individual performance metrics, and, 
where appropriate, makes use of random sampling of the state's bridges 
to evaluate the metrics.[Footnote 61] This recent experience, coupled 
with its technical expertise in other areas and division office 
officials' relationship with, and knowledge of, their state, would 
help to facilitate knowledge transfer and have the potential to create 
an effective performance-based program. 

FHWA Would Need to Mitigate Risks of Partnership: 

Moving to a more performance-based approach means monitoring and 
measuring states' progress, holding states accountable for meeting 
performance targets, and taking corrective action objectively and 
consistently across states when needed. However, this can only be 
achieved if the risks posed by partnership discussed earlier--lax 
oversight, reluctance to take corrective action, and lack of 
independence in decision making--are overcome. 

In addressing the risks posed by its partnership, FHWA can draw on 
some of its existing organizational structures. For example, during 
the implementation of the Recovery Act, FHWA used its NRTs to augment 
the oversight provided by division offices by conducting additional 
programmatic reviews and project inspections. Officials stated that 
the NRTs were able to maintain their neutrality and objectivity while 
conducting oversight and making recommendations, and that NRT 
personnel provided a consistent, comparative perspective to the 
oversight regularly conducted by division offices. Officials also 
explained that the NRTs' observations often reinforced those of 
division staff while also allowing the partnering relationship between 
the division offices and state DOTs to remain strong. 

FHWA Would Need to Address Existing Oversight Weaknesses in Planning 
and Data Collection: 

Although FHWA would have to work with the states to develop 
performance goals and monitor and measure states' progress, we have 
reported weaknesses in federal oversight of both the statewide and 
metropolitan area planning processes that prevent effective 
measurement and tracking of performance outcomes. For example, we 
found that FHWA's oversight of statewide planning focuses on process, 
rather than specific transportation outcomes.[Footnote 62] As such, 
FHWA cannot assess whether states' investment decisions are improving 
the condition and performance of the nation's transportation system. 
Similarly, pursuant to federal law, federal oversight of metropolitan 
planning is process-oriented rather than outcome-oriented, making it 
difficult to determine whether this oversight was improving 
transportation planning. Specifically, FHWA's oversight is geared 
toward determining whether MPOs are in compliance with federal laws 
and regulations, and this procedural focus, coupled with the fact that 
FHWA rarely withholds certification of MPOs, makes it difficult to use 
the certification process as a performance indicator for MPOs. In 
addition, we found that while FHWA identifies corrective actions to 
bring MPOs into compliance, it does not routinely assess the progress 
MPOs are making toward completing those corrective actions. 

We recommended to Congress that FHWA more closely review states' 
transportation improvement programs to assess whether states' 
investments are achieving intended outcomes, rather than limiting its 
evaluation to whether the state complied with federal processes for 
developing the plan. We also recommended that Congress make the 
metropolitan planning processes more performance-based in order for 
FHWA to better assess the MPOs' progress in achieving results and 
better understand whether federal funds are being used to achieve 
national goals.[Footnote 63] When we completed our review, Congress 
has not yet approved a multi-year surface transportation 
reauthorization measure, which could potentially address these 
recommendations. 

In addition, FHWA would need to improve its ability to collect 
national-level data on highway performance to hold states accountable. 
Although the Government Performance and Results Act of 1993[Footnote 
64] requires agencies to measure performance toward the achievement of 
program goals and objectives,[Footnote 65] we have stated previously 
that the federal government is not equipped to implement a performance-
based approach to transportation funding because it lacks 
comprehensive data.[Footnote 66] For example, during the 
administration of the Recovery Act we recommended that DOT assess the 
long-term benefits of Recovery Act investments in transportation 
infrastructure. In its response, DOT said it expected to be able to 
report on Recovery Act outputs, such as the miles of road paved, but 
not on outcomes, such as reductions in travel times. We have found 
other areas in which the lack of comprehensive, national-level data 
would hinder any move toward a performance-based system. For example, 
in administering the on-the-job training program, FHWA does not 
collect consistent national-level data on the number and demographics 
of program participants, the trades involved, and status of trainees. 
As a result, FHWA is not able to assess program results and hold 
states accountable.[Footnote 67] In another example, our review of 
statewide transportation planning found that while FHWA division 
offices were collecting data on progress made by states to advance 
projects on their statewide transportation improvement programs to 
their construction phase, the data were unreliable to the point of 
being unusable because they were collected inconsistently across 
states and could not be used to compare states' progress.[Footnote 68] 
We have made numerous recommendations to DOT related to the need for 
national-level data--a number of which DOT has yet to implement. 

Long-standing Challenges and the Need to Reexamine and Reform the 
Federal-Aid Highway Program Remain: 

FHWA's success in transitioning to a performance-based program is 
dependent not only on addressing risks posed by its partnering 
relationship, but also by factors it cannot control. A performance-
based program represents new responsibilities at a time when the 
growth in the number and complexity of its responsibilities and the 
lack of well-defined federal goals and roles leave FHWA, to a large 
extent, with a broad mandate in an increasingly constrained budget 
environment. As we have reported previously, a performance-based 
system is one part of the broader need to reexamine and restructure 
the program. A clearer definition of the federal role and, in turn, 
FHWA's responsibilities is under Congress's purview, and therefore 
beyond FHWA's or its partners' ability to address. 

In 2008, we recommended that Congress consider a fundamental 
reexamination and reform of surface transportation programs that would 
potentially result in a more clearly defined federal role in relation 
to other levels of government and thus a more targeted federal role 
focused around evident national interests. For issues in which there 
is a strong national interest, ongoing federal financial support and 
direct federal involvement could help meet federal goals. Where 
national interests are less evident, other stakeholders could assume 
more responsibility, and some programs and activities may better be 
devolved to other levels of government. In some cases, it may be 
appropriate to "turn back" activities and programs to state and local 
governments if they are best suited to perform them.[Footnote 69] 

Devolving parts of the federal-aid highway program may be appropriate 
in cases where not only national interests are less evident, but also 
where FHWA expends considerable time and resources yet exercises 
little effective control. During this review, we identified two such 
areas: (1) delegated projects and (2) locally administered projects. 
By law, the states assume oversight responsibility for delegated 
projects--that is, all projects that are not on the National Highway 
System, and are thus off the federal-aid system and not the focus of 
the national program.[Footnote 70] In fiscal year 2011, about 48 
percent of federal-aid funds were obligated for projects for which 
oversight could be assumed by the states. Even though the states are 
responsible for oversight of the design and construction of these 
projects, FHWA is still expected to evaluate state DOT capacity 
through a number of processes and reviews. Division office officials 
told us that these activities require a considerable amount of time 
and effort on the part of their staff. 

Locally administered projects are projects in which a state DOT has 
given approval to a local public agency (e.g., a city or county) the 
responsibility to administer a project or phase of a project such as 
design, property acquisition, or construction. These projects can 
either receive full oversight from FHWA or that responsibility can be 
assumed by the state. During our review, FHWA did not have national-
level information on the number of projects or amount of federal funds 
spent on locally administered projects. However, it began requiring 
division offices to collect this information for newly authorized 
projects on March 12, 2012, so such data will be available in the 
future. Nevertheless, locally administered projects are ranked by 
FHWA's risk assessments as among the highest-risk areas in FHWA's 
oversight portfolio at both the state and national levels. For 
example, at least 33 division offices included risks related to 
locally administered projects as their most pressing risk areas in 
2010. These risks included a lack of understanding of federal-aid 
construction contract requirements and use of innovative or 
nontraditional construction techniques by inexperienced local 
agencies. Likewise, FHWA headquarters identified locally administered 
projects as high risk. According to FHWA division and state officials, 
local agencies struggle to meet federal regulations that accompany 
federal-aid funding because of high staff turnover at the local level 
and the infrequency with which local agencies receive federal funding. 

These challenges were reiterated throughout the discussion groups we 
conducted, as well as at the site visits to FHWA division offices that 
we conducted across the country. FHWA officials from two states 
described a wide range of risks posed by locally administered 
projects, including use of outdated design standards, lack of quality 
control and assurance, lack of standard documentation and 
recordkeeping, and insufficient knowledge of the right-of-way 
acquisition requirements. One FHWA division office provided examples 
of locally administered projects in their state that did not conduct 
construction inspections or materials testing or bought supplies from 
foreign countries, actions that are out of compliance with federal 
regulations. According to officials in three of the FWHA division 
offices we visited, locally administered projects require considerable 
time, attention, and resources. For example, according to officials in 
three division offices, FHWA staff expend a good deal of time and 
effort providing technical assistance and capacity-building to enhance 
the ability of local agencies to successfully administer federal-aid 
projects. 

Further, our analysis of the 2010 state Single Audits[Footnote 71] 
showed that insufficient monitoring of subrecipients,[Footnote 72] 
such as on locally administered projects, was one of the most common 
findings and that 18 of 47 reporting states had findings related to 
monitoring of subrecipients. Our analysis also showed that state DOTs 
did not properly communicate federal requirements in their awards to 
or contracts with subrecipients and that their monitoring of 
subrecipients during the award was inadequate. Specifically, state 
DOTs' monitoring of subrecipients for compliance with federal and 
state requirements lacked procedures for or had poor compliance with 
existing procedures for regular site visits, risk assessments, and 
performance reporting. 

As we have reported, devolving parts of the federal-aid highway 
program would have many implications and would require careful 
decisions to be made at the federal, state, and local levels. Since 
the federal-aid highway program has a dedicated source of funding (in 
that it is funded from fuel taxes and other fees deposited into the 
Highway Trust Fund), devolving parts of the highway program could 
entail reducing revenues into the Highway Trust Fund. The decision to 
reduce revenues at this time would be difficult because the 
Congressional Budget Office estimates, as of March 2012, that to 
maintain current spending levels plus inflation between 2013 and 2022, 
the Highway Trust Fund will require over $125 billion more than it is 
expected to take in over that period.[Footnote 73] At the federal 
level, it would need to be determined what functions would remain and 
how federal agencies would be structured and staffed to deliver those 
programs. At the state and local levels, it would need to be 
determined whether to replace federal revenues with state taxes and 
what types of programs to finance. Deciding whether to replace federal 
revenues with state taxes would be difficult because states also face 
fiscal challenges and replacing revenues would have different effects 
on different states.[Footnote 74] 

Conclusions: 

FHWA's partnership approach with the states allows it to proactively 
identify issues before they become problems, achieve cost savings, and 
gain states' commitment to improve their processes. In some areas, 
FHWA division offices have good oversight practices that complement 
its partnership, including using a risk-based approach to its 
oversight and using an independent, third-party review (the NRTs) to 
augment its oversight activities during the implementation of the 
Recovery Act. 

However, FHWA's partnership also poses risks that it has not to date 
directly addressed, that can potentially result in improper or 
ineffective use of federal funds and the loss of independence 
necessary for effective oversight. Should Congress direct FHWA to move 
to a performance-based system, holding states accountable for 
achieving performance measures--and taking action when they do not--
would be essential. Because of the nature of their partnership with 
the states, FHWA's division offices may not be in the best position to 
mitigate partnership risks. Given that partnership produces benefits, 
the solution does not lie with eliminating FHWA's partnership 
approach. Rather, a strategy built around leveraging the strengths of 
the partnership approach while managing its risks could provide a 
better way for FHWA to verify the states' use of federal funds. 

While such a strategy could take many forms, greater separation of the 
responsibilities to advance, oversee, and make corrective action 
decisions in the program would be consistent with good internal 
control practices and may help FHWA transition to a performance-
oriented program. Specifically, a nationally focused, independent 
oversight entity modeled on the NRTs could be an effective vehicle to 
mitigate risks associated with partnering between FHWA division 
offices and state DOTs by conducting periodic evaluations of selected 
activities and making recommendations for improvement. This could be 
particularly helpful in instances in which the division offices have 
been reluctant to take corrective action because of concerns about 
damaging the partnering relationship. In addition, if Congress 
directed FHWA to move to a performance-based system, an entity modeled 
on the NRTs could assess states' progress toward performance measures 
and hold states accountable for meeting them. Responsibilities such as 
technical assistance and knowledge transfer--areas where FHWA's 
partnering relationship can help states develop performance goals and 
targets--could remain with the division offices. 

Any successful transition to a performance-based system in the highway 
program requires accurate, reliable national-level data. The 
partnership that division offices have with state DOTs could help to 
ensure that states develop data collection methods that would help 
determine whether the highway system overall was improving. 
Furthermore, FHWA has the expertise to develop and implement a 
rigorous national-level data collection effort as it recently did with 
the National Bridge Inventory System. We are not making a new 
recommendation to DOT on this matter because many of our 
recommendations on collecting national-level data remain open. 

In 2008, we recommended that Congress consider reexamining and 
refocusing surface transportation programs, establishing well-defined 
goals with direct links to identified federal interests and roles, and 
consider devolving to the states and other levels of government 
responsibility for programs where national interests are less evident. 
The information we gathered during the course of this review and the 
pending transition to a more performance based federal-aid highway 
program reinforces the need to act. First, FHWA's responsibilities 
have expanded over the years while its resources have not, and the 
addition of a performance-based system to its already broad mandate 
would further expand FHWA's responsibilities. Reexamining and 
refocusing surface transportation programs presents an opportunity to 
narrow the scope of FHWA's responsibilities so that it is better 
equipped to transition to a performance-based system. Second, this 
review has identified specific areas where devolving or turning back 
to the states the responsibilities for managing and funding some parts 
of the highway program may be appropriate. Turnback would have many 
implications and would require careful decisions. Yet nearly half of 
federal-aid highway funds are spent on roads off the National Highway 
System--projects for which oversight has been assumed by the states--
raising questions about whether evident federal interests are at 
stake. In addition, the considerable federal resources FHWA expends 
overseeing locally administered projects--including capacity-building 
activities for city and county governments--raises questions about 
whether such time and effort is better spent in support of more 
nationally focused programs and objectives. 

Matter for Congressional Consideration: 

As we have previously recommended, Congress should consider 
reexamining and refocusing surface transportation programs, including 
establishing well-defined goals with direct links to identified 
federal interests and roles. Based on this review, there may be areas 
where national interests are less evident and where Congress may wish 
to consider narrowing FHWA's responsibilities. 

Recommendations for Executive Action: 

We recommend that the Secretary of Transportation direct the FHWA 
Administrator to develop a strategy based on the NRT model to mitigate 
the risks associated with its partnering approach with state DOTs, 
while maintaining the strengths that the partnership approach brings 
to the program. This strategy should address existing risks and, if 
Congress directs FHWA to move to a performance-based system, 
partnering risks that could affect the successful implementation of 
such a system. 

Agency Comments: 

We obtained oral comments from DOT officials, including the Director 
of FHWA's Office of Program Administration. These officials stated 
that DOT generally agreed with the findings and recommendations in the 
report. Specifically, they recognized that the agency's partnership 
approach with the states poses oversight risks. They stated that they 
are implementing efforts based on the NRT model to provide independent 
reviews and accountability services to improve the efficiency and 
effectiveness of FHWA programs. We will monitor these efforts to 
assess if the department is responsive to our recommendation that DOT 
mitigate the risks of its partnership with the states.[Footnote 75] 
DOT officials also provided technical comments which we incorporated 
as appropriate. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to congressional subcommittees with responsibilities for surface 
transportation issues and the Secretary of Transportation. In 
addition, this report will be available at no charge on GAO's website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff 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 that made significant 
contributions to this report are listed in appendix III. 

Sincerely yours, 

Signed by: 

Phillip R. Herr: 
Managing Director: 
Physical Infrastructure Issues: 

[End of section] 

Appendix I: FHWA Organization: 

The Federal Highway Administration (FHWA) has 52 division offices--one 
in each state, the District of Columbia, and Puerto Rico--to carry out 
the day-to-day activities of the federal-aid highway program. These 
offices are generally located in the same city as the state 
departments of transportation (state DOTs), which is usually the state 
capital. In addition, jointly with the Federal Transit Administration, 
the FHWA operates four metropolitan offices in Philadelphia, 
Pennsylvania; New York, New York; Chicago, Illinois; and Los Angeles, 
California, which are extensions of their respective division offices. 
FHWA division offices are organized geographically under three 
directors of field service who provide administrative supervision and 
leadership on strategic initiatives to their constituent division 
offices. FHWA headquarters provides leadership and policy direction 
for the agency, and FHWA's Resource Center, with five locations, 
provides technical expertise, guidance, and training to the states in 
areas such as air quality, civil rights, construction, environment, 
safety and bridges. 

Figure 2: Locations of FHWA's Offices: 

[Refer to PDF for image: illustrated U.S. map] 

Directors of Field Services (DFS): 3 areas of responsibility: 

DFS North: 

Division Offices: 
Connecticut: Glastonbury; 
Illinois: Springfield; 
Indiana: Indianapolis; 
Iowa: Ames; 
Maine: Augusta; 
Massachusetts: Cambridge; 
Michigan: Lansing; 
Minnesota: St. Paul; 
Missouri: Jefferson City; 
New Hampshire: Concord; 
New Jersey: West Trenton; 
New York: Albany; 
Ohio: Columbus; 
Pennsylvania: Harrisburg; 
Rhode Island: Providence; 
Vermont: Montpelier; 
West Virginia: Charleston. 

DFS South: 

Division Offices: 
Alabama: Montgomery; 
Arkansas: Little Rock; 
Delaware: Dover; 
District of Columbia: Washington; 
Florida: Tallahassee; 
Georgia: Atlanta; 
Kansas: Topeka; 
Kentucky: Frankfort; 
Louisiana: Baton Rouge; 
Maryland: Baltimore; 
Mississippi: Jackson; 
North Carolina: Raleigh; 
Oklahoma: Oklahoma City; 
Puerto Rico: San Juan; 
South Carolina: Columbia; 
Tennessee: Nashville; 
Texas: Austin; 
Virginia: Richmond; 

DFS West: 

Division Offices: 
Alaska: Juneau; 
Arizona: Phoenix; 
California: Sacramento; 
Colorado: Lakewood; 
Hawaii: Honolulu; 
Idaho: Boise; 
Montana: Helena; 
Nebraska: Lincoln; 
Nevada: Carson City; 
New Mexico: Santa Fe; 
North Dakota: Bismarck; 
Oregon: Salem; 
South Dakota: Pierre; 
Utah: Salt Lake City; 
Washington: Olympia; 
Wisconsin: Madison; 
Wyoming: Cheyenne. 

Metropolitan Offices: 

Chicago, Illinois; 
Los Angeles, California; 
New York, New York; 
Philadelphia, Pennsylvania. 

Headquarters: 
Washington, D.C. 

Resource Centers: 
Atlanta, Georgia; 
Baltimore, Maryland; 
Lakewood, Colorado; 
Mattison, Illinois; 
San Francisco, California. 

Source: FHWA and Map Resources. 

[End of figure] 

Appendix II: Scope and Methodology: 

To address our objectives, we reviewed and analyzed relevant laws, 
regulations, and FHWA documentation. Specifically, we reviewed 
previous and current authorizations of the federal-aid highway 
program, as well as proposed reauthorization language. We also 
reviewed relevant sections of U.S. Code that pertain to FHWA and its 
relationship with the states. Additionally, we reviewed and summarized 
past GAO work regarding FHWA's programmatic oversight responsibilities 
and its relationship with the states. 

To obtain information on current FHWA structure and oversight 
activities, we conducted site visits to nine FHWA division offices, 
including Colorado; Delaware/Maryland, which has a joint office; 
Maine; Michigan; North Carolina; Oklahoma; Virginia; and Washington, 
D.C. We selected these states to include a range of selection 
criteria, including the extent to which oversight responsibilities 
have been assumed by the state, the size of the state's transportation 
program and proportion of federal funding relative to state funds, the 
type of transportation system in the state (e.g., primarily rural 
highways and interstate or primarily infrastructure in densely 
populated urban areas); and geographic distribution. We interviewed 
FHWA and state DOT officials in multiple settings to learn how they 
characterize their relationship and what role partnership plays in 
oversight. 

We also reviewed selected academic literature on formal partnering 
practices and tools. To perform this analysis, GAO conducted a variety 
of literature and Internet searches, reviewed previous GAO reports, 
and analyzed literature recommended by engagement stakeholders. We 
read, analyzed, and synthesized these documents to construct a common 
definition of partnering, namely that "partnering is an approach that, 
through collaborative processes and activities, enables parties to 
achieve individual and mutually beneficial goals and results." We also 
identified nine features of partnership from our review of the 
literature. Of those, we selected four features based on the 
applicability of these features to FHWA's partnering relationship with 
state DOTs based on our observations of FHWA, interviews with FHWA and 
state DOTs, and from our review of documentation of formal partnering 
arrangements between states and FHWA division offices. In doing so, we 
developed the following definition of features of partnership: 
"Partnering processes and behaviors span a continuum of collaborative 
activities including information sharing, participative and 
consultative processes, collaborative problem solving, and formal team-
building such as charter signing and relationship assessment." 
Further, we reviewed literature to identify partnership risks, and 
after identifying a list of six risks, we identified two risks which 
were most evident in our audit work and that were most relevant to 
FHWA's partnering relationship with state DOTs: lax oversight and a 
lack of independence emerged as two primary themes of partnering risk. 

To obtain an independent view of issues in FHWA's oversight, we 
examined the results of the 2010 Single Audits--statewide audits of 
financial statements and compliance with federal program requirements 
for certain programs among recipients of federal funds. Forty-seven 
states reported their results in the Federal Audit Clearinghouse as of 
October 28, 2011.[Footnote 76] To determine relevant findings to our 
work, we identified audit records for FHWA funding categories, which 
provided us with funding amounts that were subject to audit findings 
as well as the types of audit findings.[Footnote 77] We analyzed these 
findings to determine the types of findings occurring most frequently. 
For subrecipient monitoring, one of the most frequent audit finding 
types, we examined full-text Single Audit reports, comparing them 
against each other to identify common themes. 

In addition to these efforts, we conducted a survey of all FHWA 
division administrators, who lead the FHWA division offices located in 
each state, as well as Washington, D.C., and Puerto Rico. With all 50 
states and Washington, D.C., and Puerto Rico, our universe was 52 
division offices.[Footnote 78] We developed a web-based survey 
instrument of seven closed-ended questions and one open-ended 
question, regarding (1) FHWA's partnering relationship with state 
DOTs, and (2) FHWA's use of available corrective actions. We pre-
tested the instrument with two division administrators in November 
2011. The survey was released in December 2011. We received 52 
completed surveys, for a 100 percent response rate. 

To obtain input from states on their relationship with FHWA division 
offices and their oversight of the federal-aid highway program, we 
conducted four discussion groups of state DOT representatives. We 
worked in conjunction with the American Association of State Highway 
and Transportation Officials to speak with personnel from a variety of 
geographic locations and various programs, including personnel from 
the areas of construction, locally administered projects, engineering, 
bridges, and leadership. 

To determine the extent to which FHWA's incorporation of partnering 
practices into its oversight approach supports effective oversight, we 
used academic literature and GAO reports to identify criteria and 
effective practices for productive partnering and robust oversight. 
Using these criteria and effective practices, we assessed FHWA's 
current oversight practices by reviewing information from interviews 
with FHWA headquarters and division offices and state DOTs; site visit 
observations; and relevant findings from recent and ongoing GAO 
engagements examining various FHWA program areas. 

To determine the extent to which FHWA's partnering approach serves as 
a foundation for moving toward a performance-based transportation 
program, we identified principles for a performance-based 
transportation system in previous GAO reports that can be applied to 
FHWA, including (1) national transportation goals, (2) performance 
measures, (3) appropriate performance targets, and (4) employing the 
best tools to emphasize return on investment. We also reviewed the 
proposed reauthorization bill, Moving Ahead for Progress in the 21st 
Century (MAP-21),[Footnote 79] to incorporate Congress' expectations 
for moving toward a performance-based system. 

We conducted this performance audit from April 2011 to April 2012 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 III: 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, other key contributors to 
this report were Steve Cohen (Assistant Director), Joah Iannotta 
(Analyst-in-Charge), Irina Carnevale, Kathryn Crosby, Peter Del Toro, 
Holly Dye, Bert Japikse, Thomas James, Stuart Kaufmann, SaraAnn 
Moessbauer, Amy Rosewarne, and Jeffrey Sanders. 

[End of section] 

Footnotes: 

[1] Prior to 1967, the federal-aid highway program was administered by 
the Bureau of Public Roads, then a bureau in the Department of 
Commerce. These responsibilities were transferred to the Secretary of 
Transportation in 1967. Department of Transportation Act, Pub. L. No. 
89-670, § 6(a), 80 Stat. 931, 937 (1966), eff. April 1, 1967, 32 Fed. 
Reg. 5453. 

[2] 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). 

[3] [hyperlink, http://www.gao.gov/products/GAO-05-173]. 

[4] S. 1813 §§ 1106, 1112, 112TH Cong. (as adopted by the Senate March 
14, 2012). 

[5] FHWA's mission to advance the program is articulated in its 
national leadership strategic goal, which states that FHWA "leads in 
developing and advocating solutions to national transportation needs" 
as well as in its stewardship agreements. 

[6] The National Highway System consists of approximately 160,000 
miles of roadway important to the nation's economy, defense, and 
mobility. It includes Interstates, principal arterials, roads, and 
connectors important to the United States' strategic defense policy. 
These roadways provide access, continuity, and emergency capabilities 
for defense purposes, and connect to major intermodal facilities, such 
as airports or transit hubs. 

[7] Federal and state governments oversee this regional planning 
process. At the federal level, the Federal Transit Administration and 
FHWA work together to perform federal certification reviews--
certifying that each Transportation Management Area (TMA) has carried 
out its planning according to the applicable federal statutes. More 
specifically, the certification review requires that the federal 
government assess TMAs every 4 years to determine how well they are 
working with the transportation-related organizations, local 
governments, public transportation operators, and citizens in their 
area, as well as with the state DOTs, to meet the many statutory and 
regulatory requirements applicable to the planning process. 
Additionally, the certification review assesses the quality of the 
required planning documents. The certification review includes a desk 
review of the MPO's plans and a site visit, among other things. 
Additionally, all MPOs, including both TMAs and non-TMAs, must also 
self-certify that their planning process meets the federal 
requirements. 

[8] Required by 23 U.S.C. § 134(k)(5). 

[9] Act of July 11, 1916, ch. 241, § 4, 64TH Cong., 39 Stat. 355, 357. 

[10] The act also referred to the federal-state relationship as 
contractual and authorized withdrawal of a portion of the San Antonio 
North Expressway as a federal-aid highway project upon repayment into 
the Highway Trust Fund of funds previously paid by the federal 
government. Texas' desire to withdraw the Expressway stemmed from an 
impasse over routing to minimize environmental impact by complying 
with the National Environmental Policy Act of 1969, Pub. L. No. 91-
190, 83 Stat. 852 (1970) (codified, as amended at 42 U.S.C. ch. 55). 
Congress has enacted legislation authorizing states to withdraw 
highways from the program in other specific instances as well. 

[11] FHWA policy documents and officials have altered this language 
slightly and widely refer to the program today as a "federally 
assisted state-administered program." 

[12] [hyperlink, http://www.gao.gov/products/GAO-05-173]. 

[13] Responsibility for public roads was at various times with the 
Department of Agriculture (Act of July 11, 1916, § 1, 39 Stat. 355), 
Federal Works Administration (Reorganization Plan No. 1 of 1939, § 
302, 53 Stat. 1423, 1427), and the Department of Commerce 
(Reorganization Plan No. 7 of 1949, 63 Stat. 1070). The Department of 
Transportation Act established a Federal Highway Administration, 
headed by an administrator, into which was transferred the Department 
of Commerce Bureau of Public Roads reporting to its former 
administrator, retitled the Director of Public Roads. (Pub. L. No. 89-
670, §§ 3(d), (4), 80 Stat., 932-933 (1066)). The position of Director 
of Public Roads was abolished by the Federal-Aid Highway Act of 1970, 
Pub. L. No. 91-605, § 114, 84 Stat. 1713, 1722-1723. 

[14] Act of December 20, 1944, ch. 626, §§ 1, 3(b), 58 Stat. 838-839. 
Federal-aid-Secondary Program (1952-1991), Urban Extensions (1944-
1976). 

[15] Federal-Aid Highway Act of 1950, ch. 912, § 1(b), (c), 64 Stat. 
785, 786 (1950), See, also, the Federal-Aid Highway Act of 1948, ch. 
732, 62 Stat. 355 (1948). 

[16] Act of December 20, 1944, § 8, 58 Stat., 842. 

[17] Federal-Aid Highway Act of 1956, ch. 462., Title I, 70 Stat. 374. 

[18] Highway Revenue Act of 1956, ch. 462, Title II, 70 Stat. 387. 

[19] Highway Safety Act of 1970, 91-605, Title II, § 204(a), 84 Stat. 
1739, 1741 (1970). 

[20] Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), 
Pub. L. No. 102-240, § 1007(b)(1), 105 Stat. 1914. 

[21] ISTEA, Pub. L. No. 102-240, § 1007(c), 105 Stat. 1914, listed 
these as making "provision of facilities for pedestrians and bicycles, 
acquisition of scenic easements and scenic or historic sites, scenic 
or historic highway programs, landscaping and other scenic 
beautification, historic preservation, rehabilitation and operation of 
historic transportation buildings, structures, or facilities 
(including historic railroad facilities and canals), preservation of 
abandoned railway corridors (including the conversion and use thereof 
for pedestrian or bicycle trails), control and removal of outdoor 
advertising, archaeological planning and research, and mitigation of 
water pollution due to highway runoff." 

[22] Pub. L. No. 91-190, 83 Stat. 852 (1970) (codified as amended at 
42 U.S.C. ch. 55). 

[23] Pub. L. No. 87-866, § 9, 76 Stat. 1148 (1962). 

[24] Congress authorized the final funding apportionments to complete 
the construction of the Interstate Highway legislation and created the 
National Highway System, consisting of the Interstate Highway System 
and other roadways connecting to major transportation hubs such as 
ports, airports, international border crossings, and public 
transportation and transit facilities. ISTEA, §§ 2, 1001, 
1003(a)(2),1006, 105 Stat. 1914. DOT and the states cooperatively 
identified these roads and selected 160,000 miles of interstate and 
other roads that by 1996 carried more than 40 percent of all highway 
traffic, 75 percent of heavy truck traffic, and 90 percent of tourist 
traffic. Once the roads were selected, Congress formalized this plan 
in the National Highway System Designation Act of 1995. Pub. L. No. 
104-59, § 101(a), 109 Stat. 568 (1995). 

[25] FHWA's risk management approach requires field offices to 
identify risks to the federal-aid highway program, assess the risks on 
the basis of the potential impact and the likelihood that they will 
occur, develop response strategies for key risks, and include these 
strategies in the offices' planned oversight activities. 

[26] GAO, Surface Transportation: Restructured Federal Approach Needed 
for More Focused, Performance-Based, and Sustainable Programs, 
[hyperlink, http://www.gao.gov/products/GAO-08-400] (Washington, D.C.: 
Mar. 6, 2008). 

[27] GAO, Surface Transportation: Principles Can Guide Efforts to 
Restructure and Fund Federal Programs, [hyperlink, 
http://www.gao.gov/products/GAO-08-744T] (Washington, D.C.: July 10, 
2008). 

[28] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). 

[29] Pub. L. No. 111-5, Title XII, 123 Stat. 115 (2009). 

[30] Administrative discretion is a public official's ability to 
decide whether a particular administrative act is to be implemented, 
and in what manner. 

[31] 49 C.F.R. Part 26, Appendix A. When a state DOT sets 
Disadvantaged Business Enterprise contract goals on individual U.S. 
DOT-assisted contracts, bidders on those contracts must make good 
faith efforts to meet those goals. The bidder can meet this 
requirement in one of two ways: (1) meet the goal on the individual 
U.S. DOT-assisted contract, or (2) document that it made an adequate 
good faith effort--meaning that the bidder took the necessary and 
reasonable steps to achieve the goal even though it did not succeed in 
obtaining enough DBE participation to do so. State DOTs are 
responsible for evaluating whether bidders made good faith efforts to 
meet their goals, and according to U.S. DOT officials, this evaluation 
is subject to FHWA review as appropriate. 

[32] 23 U.S.C. § 116(a). 

[33] 23 U.S.C. § 116(d). Routine maintenance is defined as work that 
is planned and performed on a routine basis to maintain and preserve 
the condition of the highway system at an adequate level of service. 
Preventive maintenance is defined as a planned strategy of cost-
effective treatments to an existing roadway system that preserves the 
system, retards future deterioration, and maintains or improves the 
functional condition of the system. 

[34] 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). 

[35] 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), 5. 

[36] GAO, Transportation: Central Artery/Tunnel Project, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-95-213R] (Washington, D.C.: June 
2, 1995), Transportation Infrastructure: Central Artery/Tunnel Project 
Faces Financial Uncertainties, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-96-131] (Washington, D.C.: May 
10, 1996), Transportation Infrastructure: Progress On and Challenges 
to Central Artery/Tunnel Project's Costs and Financing, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-97-170] (Washington, D.C.: July 
17, 1997), and [hyperlink, http://www.gao.gov/products/GAO/RCED-97-47]. 

[37] FHWA, Federal Task Force on the Boston Central Artery Tunnel 
Project: Review of Project Oversight and Costs (Mar. 31, 2000). 

[38] GAO, Highway Emergency Relief: Strengthened Oversight of 
Eligibility Decisions Needed, [hyperlink, 
http://www.gao.gov/products/GAO-12-45] (Washington, D.C.: Nov. 8, 
2011). 

[39] FHWA told us that this risk-based approach was appropriate since 
states have assumed oversight responsibility for design and 
construction of many federal-aid highway projects, including emergency 
relief projects. However, we found that this approach did not appear 
to be consistent with FHWA's procedures as outlined in its Emergency 
Relief Manual. 

[40] GAO, Disadvantaged Business Enterprise Program: Assessing Use of 
Proxy Data Would Enhance Ability to Know if States Are Meeting Their 
Goals, [hyperlink, http://www.gao.gov/products/GAO-12-78] (Washington, 
D.C.: Oct. 13, 2011). 

[41] Institute of Internal Auditors Research Foundation, Managing 
Strategic Alliance Risk: Survey Evidence of Control Practices in 
Collaborative Inter-organizational Settings (2006), 7. 

[42] Inactive projects are state and local construction projects to 
which federal funds have been obligated, but which have not had any 
expenditures over a 1-year period or for which funds are available but 
are unlikely to be obligated by FHWA within 1 year, as certified by 
the state. 

[43] FHWA tracks data on inactive projects and, although it does not 
publish these data, it provided them to us in commenting on this 
report. 

[44] GAO, Metropolitan Planning Organizations: Options Exist to 
Enhance Transportation Planning Capacity and Federal Oversight 
[hyperlink, http://www.gao.gov/products/GAO-09-868] (Washington, D.C.: 
Sept. 9, 2009). 

[45] DOT, Assessment of FHWA Oversight of the Highway Bridge Program 
and the National Bridge Inspection Program (Washington, D.C.: Jan. 14, 
2010), 9-10. 

[46] GAO, Recovery Act: States' and Localities' Uses of Funds and 
Actions Needed to Address Implementation Challenges and Bolster 
Accountability, [hyperlink, http://www.gao.gov/products/GAO-10-604] 
(Washington, D.C.: May 26, 2010). 

[47] [hyperlink, http://www.gao.gov/products/GAO-10-604] and GAO, 
Recovery Act: Opportunities to Improve Management and Strengthen 
Accountability over States' and Localities' Uses of Funds, [hyperlink, 
http://www.gao.gov/products/GAO-10-999] (Washington, D.C.: Sept. 20, 
2010). 

[48] [hyperlink, http://www.gao.gov/products/GAO-12-45]. 

[49] GAO, Emergency Relief: Status of the Replacement of the Cypress 
Viaduct, [hyperlink, http://www.gao.gov/products/GAO/RCED-96-136] 
(Washington, D.C.: May 6, 1996). 

[50] Highway Beautification Act of 1965, Pub. L. No. 89-285, Title I, 
79 Stat. 1028 (1965) (codified as positive law in 23 U.S.C. § 131). 

[51] The 1965 act requires each state DOT to enter into a formal 
agreement with DOT to control signs adjacent to the Interstate System 
and other routes included on what is now the National Highway System. 

[52] Institute of Internal Auditors Research Foundation, Managing 
Strategic Alliance Risk: Survey Evidence of Control Practices in 
Collaborative Inter-organizational Settings. 

[53] GAO, Standards of Internal Control in the Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington: D.C. 
November 1999), 10. 

[54] GAO, Federal-Aid Highways: FHWA Has Improved Its Risk Management 
Approach, but Needs to Improve Its Oversight of Project Costs, 
[hyperlink, http://www.gao.gov/products/GAO-09-751] (Washington, D.C.: 
July 24, 2009). 

[55] Pub. L. No. 107-300, 116 Stat. 2350 (2002). 

[56] [hyperlink, http://www.gao.gov/products/GAO-08-744T]. 

[57] [hyperlink, http://www.gao.gov/products/GAO-08-400]. 

[58] S. 1813 §§ 1106, 1112. 

[59] These priorities include (1) safety, (2) infrastructure 
condition, (3) system reliability, (4) freight movement and economic 
viability, and (5) environmental sustainability (S. 1813, § 1203). 

[60] [hyperlink, http://www.gao.gov/products/GAO-08-400]. 

[61] However, at the moment the National Bridge Inspection Standards' 
random sampling selection does not use a stratified approach that may 
be beneficial in this case. As a result, it is equally likely that a 
small, low-traffic, locally owned bridge would be selected for 
inspection as a large, high-volume, load-rated bridge on the 
Interstate. 

[62] GAO, Statewide Transportation Planning: Opportunities Exist to 
Transition to Performance-Based Planning and Federal Oversight, 
[hyperlink, http://www.gao.gov/products/GAO-11-77] (Washington, D.C.: 
Dec. 15, 2010). 

[63] [hyperlink, http://www.gao.gov/products/GAO-09-868]. 

[64] Pub. L. No. 103-62, 107 Stat. 285 (1993) (codified at 31 U.S.C. 
§§ 1115-1116). 

[65] GAO, Executive Guide: Effectively Implementing the Government 
Performance Results Act, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: June 
1996). 

[66] [hyperlink, http://www.gao.gov/products/GAO-08-744T]. 

[67] [hyperlink, http://www.gao.gov/products/GAO-11-703]. 

[68] [hyperlink, http://www.gao.gov/products/GAO-11-77]. 

[69] [hyperlink, http://www.gao.gov/products/GAO-08-400]. 

[70] 23 U.S.C. § 106(c)(2). 

[71] A Single Audit is a required audit of states, local governments, 
and nonprofit entities that expend at least $500,000 per year in 
federal awards. Single Audits include determinations on whether the 
audited entity met the compliance requirements listed in the Office of 
Management and Budget's Circular No. A-133 Compliance Supplement for 
each major program. There are 14 types of compliance requirements 
which include allowable costs/cost principles, activities allowed or 
unallowed, and subrecipient monitoring. 

[72] A subrecipient is an entity that receives a grant award from the 
prime recipient of an award and is accountable to the prime recipient 
for the use of the federal funds provided by the subaward. For the 
federal-aid highway program, this is generally a local public agency 
that administers a federal-aid project, but may also be a nonprofit, 
educational institution, and in some cases, another federal agency. 

[73] Congressional Budget Office-March Fiscal Year 2012 Baseline 
Projections for the Highway Trust Fund. 

[74] [hyperlink, http://www.gao.gov/products/GAO-08-400]. 

[75] Section 236 of the Legislative Reorganization Act of 1970 
requires the head of the agency to submit a written statement on 
action taken on recommendations and submit the statement to the 
Committee on Homeland Security and Governmental Affairs of the Senate 
and the Committee on Oversight and Government Reform of the House of 
Representative within 60 days of the release of this report, and the 
Committees on Appropriations of both Houses of Congress in the first 
request for appropriations submitted more than 60 days after the date 
of the report. Pub. L. No. 91-510, § 236, 84 Stat. 1140, 1171 
(codified as amended at 31 U.S.C. § 720(b)). 

[76] Four of the remaining states do not submit annual Single Audit 
reports, and the fifth state did not submit any statewide Single Audit 
results for 2010 as of October 28, 2011. 

[77] Single Audit finding types include activities allowed or 
unallowed; allowable costs/cost principles; cash management; Davis-
Bacon Act; eligibility; equipment and real property management; 
matching; level of effort; earmarking; period of availability of 
federal funds; procurement and suspension and debarment; program 
income real property acquisition and relocation assistance; reporting; 
subrecipient monitoring; special tests and provisions; and other. 

[78] One division administrator oversees both the Puerto Rico and 
Florida division offices. The survey instrument was sent out for each 
individual division office, and the administrator was given 
instructions on how to determine which instrument was assigned to 
which division office, and to respond fully to both, which he has done. 

[79] S. 1813 §§ 1106, 1112, 112TH Cong. (as adopted by the Senate 
March 14, 2012). 

[End of section] 

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