POLICY: Report finds FHWA shortcomings in accounting for PE costs

Sept. 1, 2016

The audit report from the Office of the Inspector General determined that the administration does not effectively assess states' systems to account for PE funds

A recent Federal Highway Administration (FHWA) audit report revealed that the FHWA does not effectively ensure that states account for preliminary engineering (PE) costs and reimburse funds as required.

The FHWA authorizes billions of dollars in federal-aid funding for PE to assist states in the design and related groundwork needed before a highway or bridge project advances to physical construction or acquires right-of-way.

The results of the audit found that four FHWA division offices reviewed do not effectively assess whether states’ systems and processes accurately account for federal highway and bridge funds used for PE.

According to the report, one division office determined that a state lacked processes for monitoring whether PE requirements were followed at the 10-year limit. That office, however, did not follow up on those findings for five years, contributing to the state’s PE expenditures that have yet to be repaid. The report indicated that this occurs as a result of the FHWA not enforcing PE oversight requirements.

Additionally, the report determined that FHWA lacks effective controls and practices to promote transparent and accurate accounting for PE projects.

In response to the findings in the report, the Office of the Inspector General with the U.S. Department of Transportation is making several recommendations to help FHWA better account for federal funds spent on PE and ensure states reimburse the Highway Trust Fund for federally funded PE expenditures when required.