Administration of Federal-aid Projects by Local Public Agencies AASHTO Spring Meeting Phoenix, AZ May 4, 20007 King W

1. Administration of Federal-aid Projects by Local Public Agencies AASHTO Spring Meeting Phoenix, AZ May 4, 20007 King W. Gee Associate Administrator for Infrastructure Federal Highway Administration

2. Why Local Project Administration? Number 1 priority area for national review by FHWA field and program offices $6 - $8 Billion per year (approx. 20% of Federal-aid program) 38,000 Local Governments Identified High Risk Area Proliferation of Earmarks Survey: Only 10 offices believe that LPA’s are effectively administered in their state. Survey: Only 3 offices believe that their STA is providing adequate oversight of LPA projects. 98 of the 504 risk statements involving locally administered projects: 13 program areas covered, 25 core elements covered; 82 include mitigation strategies, 4 include acceptance, 2 transference, 2 avoidance. Second Bullet: In comparison, the Major projects expenditures in FY 2006 was $1.116 Billion, yet there is much scrutiny given to the administration of those projects. Last Bullet: Earmarks have grown from around 3000 earmarks in 1998 to more than 11,000 in 2006. Survey: Only 10 offices believe that LPA’s are effectively administered in their state. Survey: Only 3 offices believe that their STA is providing adequate oversight of LPA projects. 98 of the 504 risk statements involving locally administered projects: 13 program areas covered, 25 core elements covered; 82 include mitigation strategies, 4 include acceptance, 2 transference, 2 avoidance. Second Bullet: In comparison, the Major projects expenditures in FY 2006 was $1.116 Billion, yet there is much scrutiny given to the administration of those projects. Last Bullet: Earmarks have grown from around 3000 earmarks in 1998 to more than 11,000 in 2006.

3. National Program Review 7 states, 39 projects, 37 LPAs Program Management Project Development Environment, Right-of-Way, Design Contract Award Construction Administration Billing system National Program Review Team Multi-disciplinary FHWA Team formed in February 2006 Team’s Charge: “Assess the administration, oversight and stewardship of local public agency Federal-aid projects… Identify areas for improvement that will ensure the overall quality and effectiveness of local project activities along with any needed changes in the oversight requirements.” National Program Review Team Multi-disciplinary FHWA Team formed in February 2006 Team’s Charge: “Assess the administration, oversight and stewardship of local public agency Federal-aid projects… Identify areas for improvement that will ensure the overall quality and effectiveness of local project activities along with any needed changes in the oversight requirements.”

4. National Review Findings and Recommendations The administration of Federal-aid projects by LPAs may lack a systematic or comprehensive oversight approach. Ineffective for ensuring that Federal-aid requirements are met on LPA-administered projects. FHWA should take steps to ensure that Federal requirements are met on LPA- administered projects. Follow Up: Multi-Disciplinary Team formed in November 2006 Team’s Charge: “Determine the appropriate actions for FHWA to take to ensure locally administered projects are carried out in accordance with all Federal-aid requirements.” Follow Up: Multi-Disciplinary Team formed in November 2006 Team’s Charge: “Determine the appropriate actions for FHWA to take to ensure locally administered projects are carried out in accordance with all Federal-aid requirements.”

5. Applicable Federal Requirements 23 U.S.C.106(g)(4) [as amended by SAFETEA-LU] (g) OVERSIGHT PROGRAM.- (4) RESPONSIBILITY OF THE STATES.- (A) IN GENERAL.-The States shall be responsible for determining that subrecipients of Federal funds under this title have- (i) adequate project delivery systems for projects approved under this section; and (ii) sufficient accounting controls to properly manage such Federal funds. Legal and Regulatory Provisions Related to Grantee Oversight of Subgrantees. 23 U.S.C. § 106 Project approval and oversight [as amended by SAFETEA-LU section 1904] (g) OVERSIGHT PROGRAM.- (4) RESPONSIBILITY OF THE STATES.- (A) IN GENERAL.-The States shall be responsible for determining that subrecipients of Federal funds under this title have- (i) adequate project delivery systems for projects approved under this section; and (ii) sufficient accounting controls to properly manage such Federal funds. Legal and Regulatory Provisions Related to Grantee Oversight of Subgrantees. 23 U.S.C. § 106 Project approval and oversight [as amended by SAFETEA-LU section 1904] (g) OVERSIGHT PROGRAM.- (4) RESPONSIBILITY OF THE STATES.- (A) IN GENERAL.-The States shall be responsible for determining that subrecipients of Federal funds under this title have- (i) adequate project delivery systems for projects approved under this section; and (ii) sufficient accounting controls to properly manage such Federal funds.

6. Components of the Local Project Oversight Program Establishment of a Headquarters level Local Project Oversight Coordinator “Good Practices” Web site Local project oversight program information Action by Divisions to assess STA’s existing processes and procedures Action by Divisions to assist STAs to develop/enhance comprehensive LPA programs. Action by HQ to analyze need for additional regulations The Local Project Oversight Program Team has concluded that the main recommendations contained in the report are appropriate and is currently developing Local Project Oversight Program requirements that are consistent with those recommendations, including the items shown on this slide. The Local Project Oversight Program Team has concluded that the main recommendations contained in the report are appropriate and is currently developing Local Project Oversight Program requirements that are consistent with those recommendations, including the items shown on this slide.

7. Framework for Review of Existing LPA Programs Determine the existence, accuracy and effectiveness of STA procedures and other controls over the LPA program. Include sample LPA projects for compliance with Federal requirements and STA procedures Consider an integrated approach, involving multi-functional, State/FHWA team members Where deficiencies are found, STA must develop corrective action plans – immediate mitigation and long-term resolution Where significant weaknesses are not adequately and timely addressed, the division should consider further action In order to assess the effectiveness of existing practices, each Division Office must review its STA’s processes and procedures for LPA administered projects in order to determine if improvements are warranted. The reviews must be comprehensive to ensure that all aspects of the LPA administered projects are carried out in accordance with Federal requirements including sampling of LPA projects, as the Division Offices deem appropriate, to validate compliance with established processes and procedures. Division Offices that have recently reviewed (or are in the process of reviewing) various aspects of the LPA administered projects may have fulfilled this requirement. The scope of those existing reviews should be compared against the topics covered to determine if additional reviews are appropriate to ensure that LPA administered projects meet Fed. Req’s. Determine whether or not the STA’s processes and procedures reliably result in LPA projects being administered in accordance with the Fed. Req’s. For those areas that don’t reliably result in compliance with Federal requirements, the Division Offices must work with its STA to develop a date specific action plan that will bring them into compliance. In areas where deficiencies are found, the Division Offices should strongly consider imposing additional requirements on the STA and LPA to demonstrate that Federal requirements will be met as a condition of future FHWA project funding. Additional requirements should remain in place until the deficiencies are properly addressed to ensure that LPA projects meet Federal requirements. If the situation warrants, consideration should be given to declaring a LPA or STA “high risk” under the authority of 49 C.F.R. 18.12. [23 CFR 1.36] In order to assess the effectiveness of existing practices, each Division Office must review its STA’s processes and procedures for LPA administered projects in order to determine if improvements are warranted. The reviews must be comprehensive to ensure that all aspects of the LPA administered projects are carried out in accordance with Federal requirements including sampling of LPA projects, as the Division Offices deem appropriate, to validate compliance with established processes and procedures. Division Offices that have recently reviewed (or are in the process of reviewing) various aspects of the LPA administered projects may have fulfilled this requirement. The scope of those existing reviews should be compared against the topics covered to determine if additional reviews are appropriate to ensure that LPA administered projects meet Fed. Req’s. Determine whether or not the STA’s processes and procedures reliably result in LPA projects being administered in accordance with the Fed. Req’s. For those areas that don’t reliably result in compliance with Federal requirements, the Division Offices must work with its STA to develop a date specific action plan that will bring them into compliance. In areas where deficiencies are found, the Division Offices should strongly consider imposing additional requirements on the STA and LPA to demonstrate that Federal requirements will be met as a condition of future FHWA project funding. Additional requirements should remain in place until the deficiencies are properly addressed to ensure that LPA projects meet Federal requirements. If the situation warrants, consideration should be given to declaring a LPA or STA “high risk” under the authority of 49 C.F.R. 18.12. [23 CFR 1.36]

8. Action Items Assess STA’s existing LPA procedures and controls – (to be completed by 10/1/07) If assessment warrants, plan and conduct process reviews – (completed by 10/1/08) Assist STA in the development or enhancement of LPA project oversight program as necessary Periodically report on STA’s development and implementation of a comprehensive LPA project oversight program (10/07, 4/08, 10/08) Headquarters Action Items Establish HQ level local project oversight coordinator Issue LPA Program Information (Apr. 07) Develop web site for local program oversight “good practices” Analyze and develop schedule for rulemaking – (immediate action) Complete rulemaking process as appropriate (Oct. 09) Headquarters Action Items Establish HQ level local project oversight coordinator Issue LPA Program Information (Apr. 07) Develop web site for local program oversight “good practices” Analyze and develop schedule for rulemaking – (immediate action) Complete rulemaking process as appropriate (Oct. 09)

9. Components of the Web Site Information Stewardship and Oversight Agreement for locally administered projects. Dedicated Staffing Oversight and Monitoring Program Qualification Program for Local Agencies Local Agency Guidance Manual

10. FHWA HQ Contact Information National Local Project Oversight Coordinator: Bob Wright E-mail: robert.wright@dot.gov Phone: 202-366-5604 Vince Barone E-mail: vincent.barone@dot.gov Phone: 202-366-4652