Highway Dollars

1
Highway Dollars enseOCFOs Issues and
Perspectives
Federal Highway Administration Office of the CFO

• Mr. Joe Dailey
• Southern States Federal Transportation Finance
  Conference
• May 13, 2008

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Agenda

• Status of Highway Trust Fund
• Financial Integrity Review Evaluation (FIRE)
  Update
• Federal Funding Accountability Transparency Act
  (FFATA)
• Grant Management Line of Business
• Implementing New Accounting Systems
• Use of Consultants
• Single Audit Quality
• Indirect Cost Allocation
• Settlements

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Status of Highway Trust Fund

• Receipt levels are higher than ever but
• SAFETEA-LU funding levels were intended to spend
  down HTF balances
• FHWA taking steps to protect GOE funding during
  reauthorization
• FHWA intends to use reauthorization to address

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Financial Integrity Review Evaluation (FIRE)
Whats New?

• FHWA Clean Audit Opinion no significant
  deficiencies noted in 2007
• FY 2008 Integrating HQ Program Offices and
  Resource Center into FIRE Program
• Implication will be more grant management and
  oversight involvement by Program Offices
• Local Public Agency compliance emerging key issue
• Improper Payment Improvement Act (IPIA) schedule
  similar to last year, Quality Control efforts
  expanded to cover IPIA and FIRE samples

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Inactive Project Status

• Thank you for your efforts to manage Inactive
  Obligationsas you can see we are making progress

As of 31 March 2008
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Grant Management Line of Business

• OMB requiring Departments to assess ability of
  chosen providers to replace current systems (i.e.
  SOAR, TEAM, FMIS)
• Office of Secretary of Transportation and
  Operating Administrations are currently
  conducting Fit Gap analysis for these systems
  with Health and Human Services Administration for
  Children and Families
• While in progress development funding for
  Department systems continues to be frozen.

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Federal Funding Accountability Transparency Act

• FFATA requires the Office of Management and
  Budget to disclose all federal funding contracts,
  grants, and loans in a public searchable database
  available on the internet
• FFATA implementation is complete for primary
  award data (available at http//www.federalspendin
  g.gov/)
• Details of sub award implementation are under
  development -- could cause large workload
  depending on definition of sub award

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State Accounting Systems

• Several system implementations were beset by
  problems
• FHWA responded by
• RC FST members trained in Oracle Financial
  Systems in 2007
• Created State DOT Financial Systems Community of
  Practice
• Internal State DOT Financial System Group
• External State DOT Financial System Group
• State DOT Financial Systems Status
• Documenting Best Practices
• http//knowledge.fhwa.dot.gov/cops/finsys.nsf/home
  ?openform

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Community of Practice
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FHWA Involvement in New Accounting Systems, cont

• Contacts
• Robert Clark, Finance TST, Team Leader
• Dana Hafenstine, Finance TST
• Gina Laney, Finance TST

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Use of Consultants

• Signs of increasing risk within FHWA and States
  DOTs
• Pending USDOT Office of Inspector General Audit
  on Executive Compensation Overhead
• National Program Review of Consultant Procurement
  and Agreement Administration
• Multiple State level reviews

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Use of Consultants Some Recent Concerns

• Growing use of consultants nation-wide
• Lack of consistent audit quality
• Ambiguity in cognizant audit agency roles and
  responsibilities
• Unallowable costs reimbursed on contracts
• Accounting treatment related to use of
  consultants in administrative services and to
  manage programs

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Consultant Issues Mitigation Strategies

• Proposed Outcomes from Mitigation Efforts
• Achieving a standard level of audit quality
• Establishing and assigning cognizant audit agency
  responsibilities
• Improving oversight to ensure compliance with
  laws and regulations
• Updating Federal regulations and developing
  national standards to achieve these outcomes
• Raising awareness and building capacity within
  industry and Federal, State and local government
• Developing the toolbox (e.g., guidance, training,
  outreach material) and providing other resources
  (e.g., technical assistance)

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Consultant Issues Mitigation Strategies Under
Way

• AASHTO Uniform Audit Accounting Guide update
• General topics for update process include 
• National policy,
• Audit engagement procedures, and
• Audit cognizance issues.
•  First product is CPA work paper review program

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Consultant Issues Mitigation Strategies, cont

• Assisting the Office of Infrastructure in the
  update 23 CFR 172 Proposed Rule Making
• Procurement
• Management
• Financial management and audit

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Single Audit Quality

• National Single Audit Sampling Project
• Conducted by Presidents Council on Integrity and
  Efficiency
• Only 48.6 of audits for test year (2003-04) were
  found to be acceptable
• 16 were of limited reliability
• 35.5 were found to be unacceptable
• Large programs (such as FAHP) were covered better
  than small ones
• FHWA cannot rely on Single Audit to ensure
  effective oversight

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Single Audit Mitigation Strategies

• FHWA plans to revise the A-133 Compliance
  Supplement
• Based on risk assessment program offices asked to
  provide additional details to ensure that single
  auditors can assist FHWA in oversight of FAHP
  funding
• FHWA Division Offices encouraged to work more
  closely with Single Auditors to ensure greater
  understanding of program
• Opportunity exists to increase oversight of
  program by leveraging grantee financial statement
  auditors efforts

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Indirect Cost Allocation

• Recent issues with unallowable costs charged to
  FHWA programs
• Divisions not adhering to indirect cost projects
  prohibition
• FHWA is cognizant Federal agency for State DOT
  indirect cost allocation plans
• Annual review, negotiation, and approval required
• Many States use various service centers, such as
  fleet, payroll benefit, materials laboratory,
  etc.
• Key goal is to ensure equitable allocation of
  indirect costs to all benefiting cost objectives
  State, FHWA, and other Federal and non-Federal
  entities

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Indirect Cost Mitigation Strategies

• New Internal guidance to be developed for use by
  FHWA Division Offices
• Continued training of FHWA, State DOT staff on 2
  CFR 225 (formerly OMB Circular A-87)

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Settlements

• Standard procedures
• Notification from Dept. of Justice, et al
• Language in settlement agreement identifies
  treatment of proceeds (punitive, compensatory)
• All appropriate damages credited back to affected
  projects
• FHWA Division Offices work with State to identify
  project numbers and to ensure appropriate credits
  applied correctly in billing system and agree to
  State DOT accounting system

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FHWA Future

• Administrator's call to action
• FHWAs mission is to fulfill President
  Eisenhowers original charge
• To move people and goods from place to place in a
  safe, efficient and reliable manner.
• Were Not Done Yet!

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Questions?