Federal Aid Billing and Federal Funds Management
Federal Aid Billing and Federal Funds Management
Federal-aid Highway Program
July 2015
Program Description
The Federal-Aid Highway Program (FAHP) provides financial assistance for the planning, construction, preservation and operations to support State and local highway systems. These funds are generally targeted to federal-aid highways, which account for approximately 1 million miles of the Nation’s 3.9 million-mile highway network. A road is designated as a federal-aid highway based on its functional classification and includes the higher level public roads including all arterial roads, urban collector roads, and major rural collector roads. The National Highway System, which includes the Interstate system, are federal-aid highways. The Federal Highway Administration (FHWA) is charged with implementing the Federal-aid Highway Program (FAHP) in cooperation with the States and local government. Apportionments to the State DOTs from the Highway Trust Fund (HTF) are computed based on prescribed formulas set forth in law, United States Code (U.S.C)., Title 23, and the Federal Authorization Statute, which is currently Moving Ahead for Progress in the 21st Century (MAP-21) or other legislation; resulting in the issuance of project authorizations or agreements, to carry out the FAHP. These grant agreements are referred to as formula grants, for the purposes of this document. The State DOT is generally the grant recipient for funds made available in accordance with 23 U.S.C., which provides a formula to calculate the apportionment. As a result, no application or competitive process is involved in issuing a formula grant. A Stewardship & Oversight Agreement between the State DOT and their respective FHWA Division Office formalizes roles and responsibilities to address how the FAHP will be administered in the State.
Apportionments to the State DOTs from the Highway Trust Fund (HTF) are computed based on prescribed formulas set forth in law, U.S.C., Title 23, and MAP-21 or other legislation. Before the apportionments are distributed, rescissions, takedowns, set-asides, and penalties may be deducted from the authorized amount. The FHWA apportionment notices, providing guidance and procedures denoting the sums deducted and exact amount of each apportionment, are prepared by the FHWA Budget Office staff and reviewed by the FHWA Budget Director, Chief Counsel, Chief Financial Officer, and/or other contacts as necessary. The necessary reviews and clearance signatures are included on a distribution list and tracked using that list. The apportionment notices are then signed by the FHWA Administrator. Signed notices are electronically provided to the FHWA Division Offices, who make them available to their State DOTs. Apportionments are entered into FHWA’s Financial Management Information System (FMIS) by the FHWA Budget Office and made available to State DOTs for obligation. The funds are controlled in FMIS through the use of an assigned federal program code for each category of funds as outlined in authorizing legislation. These apportionments are often referred to as Contract Authority.
The amount of contract authority provided to State DOTs made under the HTF that can be used or obligated each year is limited by the Office of Management and Budget (OMB) based on Congressional Appropriations Acts or Continuing Resolution Acts. This limitation is referred to as obligation limitation. The distribution of obligation limitation to each State is determined by applying the obligation limitation distribution methodology in section 1102 of MAP-21, Public Law 112-141, and is calculated based on the contract authority provided under MAP-21 for the specific fiscal year. The available obligation limitation for each State is loaded into FMIS by the FHWA Budget Office. FMIS controls the availability of the obligation limitation and what can be used on project agreements/authorizations.
After August 1 of each fiscal year, the FHWA Office of the Chief Financial Officer (OCFO) and Program Offices working collaboratively with Division Offices and State DOTs. FHWA will revise the distribution of obligation authority made available if a State does not plan to obligate the amount distributed during that fiscal year. The amount returned will be redistributed as formula obligation limitation to those States able to obligate amounts in addition to those previously distributed during the fiscal year. This is commonly known as the August Redistribution process. This process ensures that all one-year obligation limitation for a fiscal year will be utilized prior to its expiration at the end of the fiscal year
Before funds can be obligated, State DOTs are required to develop a Statewide Transportation Improvement Program (STIP) that describes FHWA and Federal Transit Administration (FTA) planned projects. The STIP covers a period of no less than four years and must be updated at least every four years. It includes capital and non-capital surface transportation projects such as transportation enhancement projects, Federal Lands Highway program projects, State DOT’s Strategic Highway Safety Plan projects, trail projects, and bicycle and pedestrian projects. State DOTs work cooperatively with Metropolitan Planning Organizations (MPOs) to develop the STIP. Each MPO develops its own Transportation Improvement Program (TIP), which is included, either directly or by reference, in the STIP.
At least every four years, State DOTs must submit an updated copy of the STIP to the FHWA Division Office and FTA Regional Office for review and approval. Title 23 U.S.C. allows FHWA to rely on State self-certifications and assurances of compliance with applicable laws, regulations and policies. The State DOT submits the Statewide Planning Process Self-Certification (or STIP Certification) to the FHWA and Division Office and FTA Regional Office for review. The purpose of their review is to determine if the STIP or amendment substantially meets the requirements of 23 U.S.C. part 135, and 23 Code of Federal Regulation (CFR) part 450 for any identified categories of projects.
Once the STIP/TIP and other planning documentation are submitted by the State DOT, the FHWA Division Office’s designated personnel review the highway related component of the STIP to ensure that it is consistent with Federal regulations. The transit related component of the STIP is reviewed by FTA Regional Office for compliance with requirements set-forth in the public law. The FHWA Division Office will follow up with the State DOT for all non-compliance issues. A joint approval letter is prepared by designated personnel within the FHWA Division Office and FTA Regional Office once the review of the STIP is completed, and the State DOT’s compliance with required public laws is determined by both agencies (FHWA Division Office and FTA Regional Office). The approval letter also details the findings identified during the review process and recommendations for those findings. A due date for corrective actions is also provided to the State DOT. The approval letter is reviewed and approved/signed by the FHWA Division Administrator and FTA Regional Administrator. Once the joint letter is approved by both FHWA and FTA, it is forwarded to the State DOT.
Once approved, the STIP is in place for the duration of the approval period but may be modified or amended to reflect changes in project priorities or scope. Subsequent highway project modifications and STIP amendments are submitted to the FHWA Division Administrator or their designee for review and approval; transit project STIP amendments are submitted to FTA for review and approval. Approval of the STIP does not constitute a commitment of Federal funds for the projects contained therein. Federal funding for the projects is determined when project authorization is requested of FHWA or upon submission of a grant application to FTA.
Projects identified in an approved STIP/TIP may become eligible for federal-aid funding as requested by the State DOT or other grantee and approved by the FHWA Division Office through the issuance of a federal-aid project agreement. State DOTs, their subgrantees, and other grantees may submit project documentation for planned projects to the Division Office and/or State DOT prior to issuance of a Federal-aid project Agreement. This documentation may include items such as the required National Environmental Policy Act (NEPA) documentation; Right-of-Way (ROW) Certification; and Plans, Specifications and Estimates.
- Environmental Impact Assessment:
NEPA is triggered when a federal action is required for a project. For FHWA, action is defined in 23 CFR 771(b) as: “A highway or transit project proposed for FHWA or FTA funding. It also includes activities such as joint and multiple use permits, changes in access control, etc., which may or may not involve a commitment of Federal funds.” Federal transportation statutes, Title 23, U.S.C., Highways and Title 49, U.S.C., Transportation, require FHWA to ensure NEPA requirements are met before a Federal action is taken. Potential Federal-aid highway projects are identified through the planning process and incorporated in the previously mentioned STIP/TIP. Once a project is identified for advancement, the State DOT provides information and documentation describing projects they wish to advance to the FHWA Division Office. Based on the information submitted, the designated personnel within the FHWA Division Office review the documentation submitted and advise the applicant of the probable class of action and the related level of documentation required for NEPA compliance in accordance with 23 CFR 771. FHWA Division Offices may delegate responsibilities and liabilities for making project specific categorical exclusion (CE) determinations to State DOTs. Additionally, some select States may assume the Secretary's responsibilities under the NEPA for one or more highway projects. These assumptions of responsibilities are generally outlined in the Stewardship & Oversight Agreement between the FHWA Division Office and the State DOT.
- Right-of-Way Certification:
During the development phase of a Federal-aid construction project, the State DOT must acquire ROW in accordance with the Uniform Act. In compliance with 23 CFR 710.201(c), each State DOT prepares and submits to FHWA for approval a ROW Operations Manual, certifying that the manual conforms to existing practices and contains necessary procedures to ensure compliance with Federal and State real estate law and regulation. The FHWA Division Office may receive and review ROW certifications for applicable projects as specified in the Stewardship & Oversight Agreement between the FHWA Division Office and State DOT. The primary purpose of the right-of-way certification is to ensure that all ROW is acquired in accordance with Federal laws and regulations (i.e. the Uniform Act.). The certification in part will state that either all right-of-way clearance, utility, and railroad work has been completed or that all necessary arrangements have been made for it to be undertaken and completed as required for proper coordination with the physical construction schedules or appropriate notification will be provided in the bid proposals identifying the right-of-way clearance, utility, and railroad work which is to be underway concurrently with the highway construction.
- Plans, Specifications, and Estimates:
State DOTs are required to prepare plans, specifications, and estimates (PS&E) in accordance with 23 U.S.C. 106 and 23 CFR 630 subpart B for all Federal-aid construction projects. State DOTs may, with FHWA approval, assume oversight responsibilities for projects delegated to them by 23 U.S.C. 106. State DOTs are not required to obtain FHWA approval on their PS&E for projects where oversight responsibilities are delegated to them.
USC Title 23, section 106 requires a project agreement be submitted by the State DOT for each project. FMIS is FHWA’s system for managing federally funded highway projects within the Federal-aid Highway Program. Staffs of FHWA Division Office and State DOTs are assigned FMIS access and levels of project approval authority. The audit trail for all FHWA project authorizations and obligations is contained in the FMIS.
State DOT’s identify, determine, and plan which projects will be undertaken with federal-aid highway program funds and includes them in their STIP/TIP. When the State DOT is ready to advance a project that is included in the STIP/TIP a request for project authorization, which may also be referred to as a project agreement or federal-aid highway program grant, is submitted to the FHWA Division Office for review and approval. The request in most cases is submitted electronically by the State DOT through FMIS using direct data entry or an electronic batch process. However a hardcopy request may be submitted using FHWA Form 37. When a hardcopy FHWA Form 37 is utilized, the FHWA Division Office keys the project information into FMIS. FMIS keeps track of the various funding amounts available to each State for obligation by federal program code; when the State applies their final signature to a FMIS project authorization request - funds availability is verified and the requested funding is reserved pending FHWA Division Office project authorization approval.
While all the phases of a project may not be federally funded, Federal-aid highway projects typically follow a life-cycle that encompasses the following progressive work phases:
•Preliminary Engineering (PE) – (For the preparation of plans, specifications, and estimates (PS&E), traffic, and related studies including field inspections, surveys, material testing, and borings. Includes preliminary design, environment, final design, development of plans specifications and estimates.)
•Rights-of-Way (ROW) – (For purchase of land, improvements and easements, in addition to the cost of moving and relocating buildings, businesses, and persons.)
•Construction (CONST) (For the construction of highways, bridge rehabilitation, construction engineering, planning, research, safety, rail/highway crossing, transit, landscaping and debt service.)
Prior to beginning each of these work phases, FHWA Division Office project authorization is required. Flexibility for these work phases to be entered into FMIS as one comprehensive project or as individual projects is provided to State DOTs in order for them to maintain eligibility controls for the projects and related reimbursement requests (current bills). Every project’s authorized phases-of-work have a corresponding FHWA Effective Authorization Date identified in the FMIS project authorization by the FHWA Division Office during their approval process. Effective with the changes to 2CFR 200, all projects are now required to have an end date.
Upon receipt of an authorization request, the FHWA Division Office reviews the project information and any related documentation provided in accordance with their project authorization standard operating procedures. The Division’s review may vary based on the type of funds, project purpose, work phase requested for authorization, location of the project, dollar amount of the request, or other criteria determined by the FHWA Division Office. FMIS contains an edit check to ensure that a minimum of two responsible FHWA officials perform the review, recommendation, and approval of any pending FMIS action request; FMIS project actions executed by a single signer are flagged for follow-up action by the Division Administrator.
When changes are needed to items such as project funding, scope, etc., or upon advancement of the project to the next work phase, or upon project completion; a modification to an existing project authorization is submitted by the State DOT for Division approval. The modification request is routed and processed by the Division in accordance with their office procedures.
Approved FMIS project authorizations and modifications are uploaded through the DELPHI Interface Maintenance System (DIMS) by the FHWA Budget Office for obligation in DELPHI. DELPHI is the accounting system utilized by the U.S. DOT and is based on ORACLE Federal Financial Software.
FHWA utilizes a number of mechanisms to monitor State DOT and sub-grantee stewardship of Federal funds and compliance with pertinent laws and regulations: Stewardship & Oversight Agreement oversight and approval actions; a robust agency risk management program; the Financial Integrity Review and Evaluation (FIRE) program; and Division, Program Office and National review initiatives. FIRE is a risk-based financial management oversight program that each Assessable Unit (AU) (i.e., Federal-aid division office, Federal Land's division office, Headquarters office, and the Office of Technical Services) is required to execute. The FIRE Program supports the FHWA annual assurances, certifications, and financial reporting. This directive consolidates FHWA's various financial management oversight requirements and responsibilities.
- Improper Payment Reviews
Improper payment reviews are performed annually by the designated personnel within the FHWA Division Offices and overseen by the OCFO. Improper payment reviews are conducted in a accordance with the Improper Payment Information Act (IPIA) of 2002 and the Improper Payment Elimination and Recovery Act (IPERA) of 2010. Additional billing transaction reviews may be conducted by the FHWA Division Office if required by their annual risk assessment. The purpose of these reviews is to ensure that project costs incurred and claimed are supported by adequate documentation; proper internal control is implemented by the State DOT to avoid misuse of Federal funds; and also to determine the extent to which improper payments were made in the Federal-aid Highway Programs. Sample transactions are randomly selected from the Rapid Approval State Payment System (RASPS) by the FHWA Chief Financial Officer, Office of Financial Management and provided to the FHWA Division Office. The designated personnel within the FHWA Division Office obtain the State DOT billing detail to support each payment. The billing detail is matched against the amount paid in RASPS to ensure that the amounts agree.