**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.106 AIRPORT IMPROVEMENT PROGRAM**

**I. PROGRAM OBJECTIVES**

The objective of the Airport Improvement Program is to assist sponsors,
owners, or operators of public-use airports in the development of a
nationwide system of airports adequate to meet the needs of civil
aeronautics.

**II. PROGRAM PROCEDURES**

States, counties, municipalities, U.S. Territories and possessions, and
other public agencies, including Indian tribes or Pueblos (sponsors) are
eligible for airport development grants if the airport on which the
development is required is listed in the National Plan of Integrated
Airport Systems (NPIAS). Applications for grants must be submitted to
the appropriate Federal Aviation Administration (FAA) Airports Office.
Primary airport sponsors must notify FAA by January 31 or another date
specified in the *Federal Register* of their intent to apply for funds
to which they are entitled under Pub. L. No. 97-248 (49 USC Chapter 31).
A reminder is published annually in the *Federal Register*. Other
sponsors are encouraged to submit early in the fiscal year and to
contact the appropriate FAA Airports Office for any local deadlines.
Sponsors must formally accept grant offers no later than September 30
for grant funds appropriated for that fiscal year.

**Source of Governing Requirements**

This program is authorized by 49 USC Chapter 471.

**Availability of Other Program Information**

Additional program information is provided in FAA Order 5100.38C,
*Airport Improvement Program Handbook* (available on the Internet at
<http://www.faa.gov/airports_airtraffic/airports/aip/aip_handbook>) and
FAA Advisory Circulars in the 150/5100 series (available on the Internet
at
[http://www.faa.gov/airports_airtraffic/airports/aip/](http://www.faa.gov/airports_airtraffic/airports/aip)).
The FAA also maintains an Airports *Federal Register* Notice page
available on the Internet at
<http://www.faa.gov/airports_airtraffic/airports/resources/publications/federal_register_notices/>.

Program related questions may be directed to Kendall Ball, FAA Airports
Financial Assistance Division, at 202-267-7436 (direct) and 202-267-3831
(main) or by e-mail at Kendall.Ball@faa.dot.gov. Questions related to
the revenue diversion requirement may be directed to Lyle Fjermedal, FAA
Airport Compliance Division at 202-267-5879 (direct) and 202-267-3446
(main) or by e-mail at Lyle.Fjermedal@faa.dot.gov.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. *Activities Allowed*
>
> Grants can be made for planning, constructing, improving, or repairing
> a public-use airport or portion thereof and for acquiring safety or
> security equipment. Eligible terminal building development is limited
> to non-revenue-producing public-use areas that are directly related to
> the movement of passengers and baggage in air carrier and commuter
> service terminal facilities within the boundaries of the airport.
> Eligible construction is limited to items of work and to the
> quantities listed in the grant description and/or special conditions
> (49 USC 47110).
>
> 2\. *Activities Unallowed*
>
> a\. In general, Federal funds cannot be expended for:
>
> \(1\) Passenger automobile parking facilities, buildings to be used as
> hangars, and portions of terminals that are revenue-producing or not
> directly related to the safe movement of passengers and baggage at the
> airports, and
>
> \(2\) Costs incurred before the execution of the grant agreement,
> unless such costs are for land, necessary costs in formulating a
> project, or costs covered by a letter of intent. However, an airport
> designated by the FAA as a primary airport may use passenger
> entitlement funding made available under 49 CFR section 47114(c) for
> costs incurred: (1) prior to the execution of the grant agreement; (2)
> in accordance with the airport layout plan approved by the FAA; and
> (3) according to all statutory and administrative requirements that
> would have applied had work on the project not commenced until after
> the grant agreement had been executed (49 USC 47110(b)(2)(C)).
>
> b\. The following are examples of items for which FAA funds cannot be
> expended (FAA Order 5100.38C, *Airport Improvement Program Handbook*,
> and FAA Advisory Circulars in the 150/5100 series.)
>
> \- Fuel farms.
>
> \- Emergency planning.
>
> \- Decorative landscaping, sculpture, or art works.
>
> \- Communication systems except those used for safety/security.
>
> \- Training facilities, except those included in an otherwise eligible
> project as an integral part of that project and that are of a
> relatively minor or incidental cost, i.e., less than 10 percent of the
> project cost. An example of an exception would be a training room
> included as part of a new Aircraft Rescue and Firefighting (ARFF)
> facility. Interactive training systems and "live fire" ARFF training
> facilities are eligible.
>
> \- Roads of whatever length, exclusively for the purpose of connecting
> public parking facilities to an access road.
>
> \- Roads serving solely industrial or non-aviation-related areas or
> facilities.
>
> \- General aviation terminals.
>
> \- Equipment that is used by air traffic controllers such as Airport
> surface detection systems (ASDE).
>
> \- Maintenance/service facilities except for those allowed to service
> required ARFF equipment.
>
> \- Office/administrative equipment, including data processing
> equipment, computers, recorders, etc.
>
> \- Projects for the determination of latitude, longitude, and
> elevation except as an incidental part of master planning.
>
> 3\. *Exception*
>
> For a non-hub airport (one that accounts for less than 0.05 percent of
> total U.S. passenger boardings), the FAA may approve as allowable
> costs the expenses of terminal development in a revenue-producing area
> and construction, repair, and improvement of parking lots (49 USC
> 47110(d)(2)).

**D. Davis-Bacon Act**

> The requirements of the Davis-Bacon Act are applicable to construction
> work for airport development projects financed with grants under this
> program (49 USC 47112).

**F. Equipment and Real Property Management**

> Under this program, FAA is authorized by 49 USC 47107(c), as amended,
> to allow recipients to reinvest the proceeds from the disposition of
> real property acquired with Federal awards for noise compatibility or
> airport development purposes.

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> The shares of allowable costs for a particular grant-supported project
> to be borne by FAA and by other parties are established in the grant
> agreement.
>
> **2. Level of Effort** - Not Applicable
>
> **3. Earmarking** - Not Applicable

**L. Reporting**

**1. Financial Reporting**

a\. SF-269, *Financial Status Report* - Applicable

b\. SF-270, *Request for Advance or Reimbursement* - Applicable

> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> e\. FAA Form 5100-125, *Operating and Financial Summary (OMB No.
> 2120-0557)*
>
> Sponsors of commercial service airports are required to submit this
> report, which captures revenues and expenditures at the airport,
> including revenue surplus.
>
> f\. FAA Form 5100-126, *Financial Government Payment Report (OMB No.
> 2120-0557)*
>
> This report captures amounts paid and services provided to other units
> of government. This reporting requirement technically applies to all
> sponsors of federally assisted airports who accepted grants with
> assurance no. 26(d)(I)(ii); however, FAA is currently requiring
> submission only from commercial service airports. Commercial service
> airports are the airports most likely to generate excess revenue that
> could be diverted to non-airport uses.

**2. Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **Revenue Diversion**
>
> **Compliance Requirement** - The basic requirement for use of airport
> revenues is that all revenues generated by a public airport must be
> expended for the capital or operating costs of the airport, the local
> airport system, or other local facilities which are owned or operated
> by the owner or operator of the airport and are directly and
> substantially related to the actual air transportation of passengers
> or property. The limitation on the use of revenue generated by the
> airport shall not apply if the governing statutes controlling the
> owner's or operator's financing, that was in effect before September
> 3, 1982, provided for the use of any revenue from the airport to
> support not only the airport but also the airport owner's or
> operator's general debt obligations or other facilities (49 USC
> 47107(b)).
>
> *Policies and Procedures Concerning the Generation and Use of Airport
> Revenue*, issued February 16, 1999 (64 FR 7695), contains definitions
> of airport revenue and unlawful revenue diversion; provides examples
> of airport revenue; and describes permitted and prohibited uses of
> airport revenue. The policy can be obtained from FAA's Airports
> *Federal Register* Notices Page on the Internet
> (<http://www.faa.gov/airports_airtraffic/airports/resources/publications/federal_register_notices/>).
>
> Penalties imposed for revenue diversion may be up to three times the
> amount of the revenues that are used in violation of the requirement
> (49 USC 4603(a)(5)).
>
> **Audit Objective** - Determine whether the airport revenues were used
> for required or permitted purposes.
>
> **Suggested Audit Procedures**
>
> a\. Review the policy for using airport revenue.
>
> b\. Perform tests of airport revenue generating activities (e.g.,
> passenger facilities charges, leases, and telephone contracts) to
> ascertain that all airport-generated revenue is accounted for.
>
> c\. Test expenditures of airport revenue to verify that airport
> revenue is used for permitted purposes.
>
> d\. Perform tests of transactions to ascertain that payments from
> airport revenues to the sponsors, related parties, or other
> governmental entities are airport-related, properly documented, and
> are commensurate with the services or products received by the
> airport.
>
> e\. Perform tests to assure that indirect costs charged to the airport
> from the sponsor's cost allocation plan were allocated in accordance
> with the FAA policy on cost allocation.

**IV. OTHER INFORMATION**

The Federal Aviation Reauthorization Act of 1996, Section 805 (49 USC
47107(m)) requires public agencies that are subject to the Single Audit
Act Amendments of 1996 (Act) that have received Federal financial
assistance for airports to include as part of their single audit a
review and opinion of the public agency's funding activities with
respect to their airport or local airport revenue system. In the
February 16, 1999, *Federal Register* (64 FR 7675), the FAA issued a
notice titled *Policy and Procedures Concerning the Use of Airport
Revenue*. This notice provides that the opinion required by 49 USC
47107(m) is only required when the Airport Improvement Program (AIP) is
audited as major program under Circular A-133 and that the auditor
reporting requirements of Circular A-133 satisfy the opinion
requirement. However, the notice provides that the AIP may be selected
as a major program based upon either the risk-based approach prescribed
in Circular A-133 §\_\_\_.520 or the FAA designating the AIP as a major
program under §\_\_\_.215(c).

**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.205 HIGHWAY PLANNING AND CONSTRUCTION (Federal-Aid\
Highway Program)**

**CFDA 23.003 APPALACHIAN DEVELOPMENT HIGHWAY SYSTEM**

**I. PROGRAM OBJECTIVES**

The objectives of the Highway Planning and Construction Cluster are to:
(1) assist States in the planning and development of an integrated,
interconnected transportation system important to interstate commerce
and travel by constructing and rehabilitating the National Highway
System (NHS), including Interstate highways and most other public roads;
(2) provide aid for the repair of Federal-aid highways following
disasters; (3) foster safe highway design, and replace or rehabilitate
structurally deficient or functionally obsolete bridges; and (4) to
provide for other special purposes. This cluster also provides for the
improvement of roads in Puerto Rico, Guam, the Virgin Islands, American
Samoa, the Northern Marina Islands, the Alaskan Highway, and the
Appalachian Development Highway System (ADHS). The objective of the ADHS
program is to provide a highway system which, in conjunction with other
federally aided highways, will open up areas with development potential
within the Appalachian region where commerce and communication have been
inhibited by lack of adequate access.

**II. PROGRAM PROCEDURES**

Federal-aid highway funds are generally apportioned by statutory
formulas to the States and generally restricted to use on Federal-aid
highways (i.e., roads open to the public and not functionally classified
as local). Exceptions to the use on Federal-aid highways include
planning and research activities, bridge and safety improvements which
may be on any public road, and the Federal Lands Highway Program. Some
categories of funds may be granted directly to Local Public Agencies
(LPAs), such as cities, counties, tribal governments, Metropolitan
Planning Organizations (MPOs), and other political subdivisions. States
also may pass funds through to such agencies. Federal-aid funds may be
used for: surveying; engineering; right-of-way acquisition and
relocation assistance; capital improvements classified as new
construction or reconstruction; improvements for functional, geometric,
or safety reasons; 4R projects (restoration, rehabilitation,
resurfacing, and reconstruction); planning; research, development, and
technology transfer; intelligent transportation systems projects;
roadside beautification; wetland and natural habitat mitigation; traffic
management and control improvements; improvements necessary to
accommodate other transportation modes; development and establishment of
transportation management systems; billboard removal; construction of
bicycle facilities and pedestrian facilities; fringe and corridor
parking; car pool and van pool projects; and transportation
enhancements, such as scenic and historic highway improvements. These
funds generally cannot be used for routine highway operational
activities, such as police patrols, mowing, snow plowing, or
maintenance, unless it is preventative maintenance. Also, certain
authorizations (e.g., Surface Transportation Program (STP) Congestion
Mitigation and Air Quality (CMAQ) Improvement Program) may be used for
improvements to transit; CMAQ funds are for projects and programs in air
quality, non-attainment and maintenance areas for ozone, carbon
monoxide, and small particulate matter, which reduce transportation
related emissions. ADHS projects are subject to the same standards,
specifications, policies, and procedures as other Federal-aid highway
projects.

Eligibility criteria for the programs differ, so program guidance should
be consulted. Projects in urban areas of 50,000 or more population must
be based on a transportation planning process carried out by the MPOs in
cooperation with the State and transit operators, and be included in
metropolitan plans and programs. Projects in nonmetropolitan areas of a
State must be consistent with the State's Transportation Plan. All
projects must also be included in the approved Statewide transportation
improvement program (STIP) developed as part of the required Statewide
transportation planning process.

The ADHS is a cost-to-complete program (i.e., sufficient funding is to
be provided over time to complete the approved initial
construction/upgrading of the system) authorized by Section 201 of the
Appalachian Regional Development Act of 1965. The Appalachian Regional
Commission (ARC) has programmatic oversight responsibilities, which
include approval of the location of the corridors and of State-generated
estimates of the cost to complete the ADHS. FHWA has project-level
oversight responsibilities for the ADHS program. If the location, scope,
and character of proposed ADHS projects are in agreement with the latest
approved cost-to-complete estimate and all Federal requirements have
been satisfied, FHWA authorizes the work and disburses the ADHS funds.
FHWA oversees the construction and accepts the ADHS projects upon
satisfactory completion of the work.

**Source of Governing Requirements**

The primary sources of program requirements are 23 USC (Highways).
Implementing regulations are found in 23 CFR (Highways) and 49 CFR
(Transportation).

**Availability of Other Program Information**

The Federal Highway Administration maintains a web site that provides
program laws, regulations, and other general information
(<http://www.fhwa.dot.gov/>).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Federal funds can be used only to reimburse costs that are: (a)
> incurred subsequent to the date of authorization to proceed, except
> for certain property acquisition costs permitted under 23 USC 108; (b)
> in accordance with the conditions contained in the project agreement
> and the plans, specifications, and estimates (PS&E); (c) allocable to
> a specific project; and (d) claimed for reimbursement subsequent to
> the date of the project agreement (23 CFR sections 1.9, 630.106, and
> 630.205).
>
> 2\. Federal funds can be used to reimburse for administrative
> settlement costs incurred in defending contract claim proceedings
> before arbitration boards or State courts only if approved by FHWA for
> Federal-aid projects. If special counsel is used, it must be
> recommended by the State Attorney or State Department of
> Transportation (DOT) legal counsel and approved in advance by FHWA (23
> CFR section 140.505).
>
> 3\. ADHS funds may be used only for work included in the ADHS cost
> estimate approved by the ARC.

**D. Davis-Bacon Act**

> The requirements of the Davis-Bacon Act are applicable to construction
> work on highway projects on Federal-aid highways or with ADHS funds
> (23 USC 113 and\
> 40 USC 14701).

**F. Equipment and Real Property Management**

> The State shall charge, at a minimum, a fair market value for the
> sale, lease, or use of real property acquired with Federal assistance
> from the Highway Trust Fund (other than the Mass Transit Account) for
> the non-transportation purposes and shall use such income for projects
> eligible under 23 USC. Exceptions may be granted when the property is
> used for social, environmental or economic purposes (23 USC 156).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> a\. The State is generally required to pay a portion of the project
> costs. Portions vary according to the type of funds authorized and the
> type of project and are stated in project agreements.
>
> b\. A State's matching share for a project may be credited by certain
> toll revenues used to build or improve highways, bridges and tunnels
> (23 USC 120(j)).
>
> c\. Donations of funds, materials, and services by a person or local
> government may be credited towards a State's matching share. Donated
> materials and services must meet the eligibility requirements of the
> project (23 USC 323(c)).
>
> d\. The fair market value of land provided by State or local
> governments for highway purposes is eligible for matching share on a
> project. The fair market value of donated land shall not include any
> increase or decrease in value of donated land caused by the project.
> The fair market value of donated land shall be established as of the
> earlier of (1) the date on which the donation becomes effective or (2)
> the date on which equitable title to the land vests in the State (23
> USC 323(b)).
>
> e\. For transportation enhancement (TE) projects, funds from Federal
> agencies (except U.S. DOT) may be used for the non-Federal share of
> the project. Credit for the value of donations of funds, materials,
> land, or services (including the value of local and State government
> services, materials and land applied to the project and the cost of
> preliminary engineering prior to project approval) may be credited
> toward the non-Federal share (23 USC 133(e)(5)(C)).
>
> f\. Funds appropriated to any Federal land management agency may be
> used to pay the non-Federal share of any Federal-aid highway project
> funded under 23 USC 104 (23 USC 120(k)).
>
> g\. Federal Lands Highway Program funds may be used to pay the
> non-Federal share of Federal-aid highway projects which provide access
> to or within Federal or Indian lands (23 USC 120(*l*)).
>
> h\. For TE projects, the non-Federal share may be calculated on a
> project, multi-project, or program basis (23 USC 133(e)(5)(C)).
>
> i\. Any cost in excess of 20 percent of the cost of the replacement or
> rehabilitation of a bridge not on a Federal-aid highway that is wholly
> funded with State and local funds may be used to meet the matching
> share requirement of projects funded under 23 USC 144 (23 USC 144(n)).
>
> **2. Level of Effort** - Not Applicable
>
> **3. Earmarking** - Not Applicable

**J. Program Income**

> State and local governments may only use the Federal share of net
> income from the sale, use, or lease of real property previously
> acquired with Federal funds if the income is used for projects
> eligible under 23 USC (23 USC 156).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269, *Financial Status Report* - Not Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> e\. PR-20, *Voucher for Work Under Provisions of the Federal-Aid and
> Federal Highway Acts, as Amended (OMB No. 2125-0507)*
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

> **1. Use of Other State or Local Government Agencies**
>
> **Compliance Requirement** - A State may use other public land
> acquisition organizations or private consultants to carry out the
> State's authorities under 23 CFR section 710.201(b) in accordance with
> a written agreement (23 CFR section 710.201(h)).
>
> **Audit Objective** - Determine whether other public land acquisition
> organizations or private consultants are carrying out the State's
> authorities under 23 CFR section 710.201(b) in accordance with their
> agreements with the State.
>
> **Suggested Audit Procedures**
>
> a\. Examine records and ascertain if other agencies were used for
> right-of-way activities on Federal-aid projects.
>
> b\. Review a sample of right-of-way agreements with other agencies.
>
> c\. Perform tests of selected right-of-way activities to other
> agencies to verify that they comply with the written agreement.
>
> **2. Replacement of Publicly Owned Real Property**
>
> **Compliance Requirement** - Federal funds may be used to reimburse
> the reasonable costs actually incurred for the functional replacement
> of publicly owned and publicly used real property provided that FHWA
> concurs that it is in the public interest. The cost of increases in
> capacity and other betterments are not eligible except: (1) if
> necessary to replace utilities; (2) to meet legal, regulatory, or
> similar requirements; or (3) to meet reasonable prevailing standards
> for the type of facility being replaced (23 CFR section 710.509).
>
> **Audit Objective** - Determine whether the functional replacement of
> real property was accomplished within FHWA requirements.
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if there were any functional replacements of publicly
> owned real property.
>
> b\. Verify that FHWA concurred in the State's determination that the
> functional replacement is in the public interest.
>
> c\. Review a sample of transactions involving functional replacements
> and verify that the transactions were consistent with the FHWA
> requirements.
>
> **3. Project Extensions**
>
> **Compliance Requirement** - FHWA must approve extensions affecting
> project costs or the amount of liquidated damages, except those for
> projects administered by the State DOT under 23 USC 106(c) which allow
> the State DOT to assume the responsibilities for design, plans,
> specifications, estimates, contract awards and inspection of progress
> (23 USC 106(c); 23 CFR section 635.121).
>
> **Audit Objective** - Determine whether proper FHWA approvals were
> obtained for contract extensions affecting project costs and the
> amount of liquidated damages assessed.
>
> **Suggested Audit Procedures**
>
> a\. Review the systems for monitoring and controlling contract time
> and review project files to determine if there were project
> extensions.
>
> b\. Verify that FHWA approval was obtained for time extensions
> affecting project cost and, where applicable, the amount of liquidated
> damages assessed.
>
> **4. Sampling Program**
>
> **Compliance Requirement** - A State DOT or LPA must have a sampling
> and testing program for construction projects to ensure that materials
> and workmanship generally conform to approved plans and specifications
> (23 CFR section 637.205).
>
> **Audit Objective** - Determine whether the State is following a
> quality assurance program that meets FHWA's requirements.
>
> **Suggested Audit Procedures**
>
> a\. Obtain an understanding of the recipient's sampling and testing
> program.
>
> b\. Review documentation of test results on a sample basis to verify
> that the proper number of tests is being taken in accordance with the
> program.
>
> **5. Contractor Recoveries**
>
> **Compliance Requirement** - When a State recovers funds from highway
> contractors for project overcharges due to bid-rigging, fraud, or
> anti-trust violations or otherwise recovers compensatory damages, the
> Federal-aid project involved shall be credited with the Federal share
> of such recoveries (Tennessee v. Dole 749 F.2d 331 (6th Cir. 1984); 57
> Comp. Gen. 577 (1978); 47 Comp. Gen. 309 (1967)).
>
> **Audit Objective** - Determine whether the proper credit was made to
> the Federal share of a project when recoveries of funds are made.
>
> **Suggested Audit Procedures**
>
> a\. Determine the extent to which the State has recovered overcharges
> and other compensatory damages on Federal-aid projects through
> appropriate interviews and a review of legal, claim, and cash receipt
> records.
>
> b\. Review a sample of cash receipts and verify that appropriate
> credit is reflected in billings to the Federal Government.
>
> **6. Project Approvals**
>
> **Compliance Requirement** - FHWA project approval and authorization
> to proceed is required before costs are incurred for all construction
> projects other than those administered by the State DOT under 23 USC
> 106(c). Construction projects administered under standard procedures
> cannot be advertised nor force account work commenced until FHWA: (1)
> approves the plans, specifications, and estimates; and (2) authorizes
> the State DOT to advertise for bids or approves the force account work
> (23 CFR sections 630.205(c), 635.112(a), 635.204, and 635.309).
> Construction cannot begin until after FHWA concurs in the contract
> award (23 CFR section 635.114). This requirement does not apply to
> construction projects administered by the State DOT under 23 USC
> 106(c) which allow the State DOT to assume the responsibilities for
> design, plans, specifications, estimates, contract awards, and
> inspection of progress (23 USC 106(c)).
>
> **Audit Objective** - Determine whether project activities are started
> with required Federal approvals.
>
> **Suggested Audit Procedures**
>
> a\. Review a sample of projects and identify dates of the necessary
> approvals, authorizations, and concurrences.
>
> b\. Identify dates that projects were advertised and contract or force
> account work was initiated and compare to FHWA's approval dates.

**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.500 FEDERAL TRANSIT \-- CAPITAL INVESTMENT GRANTS**

**CFDA 20.507 FEDERAL TRANSIT \-- FORMULA GRANTS (Urbanized Area Formula
Program)**

**I. PROGRAM OBJECTIVES**

The objectives of Federal Transit - Capital Investment Grants (49 USC
5309) (5309 program) and Federal Transit - Urbanized Area Formula Grants
(49 USC 5307) (5307 program) are to assist in financing the planning,
acquisition, construction, preventative maintenance, and improvement of
facilities and equipment in public transportation services. Operating
expenses are also eligible under the 5307 program in urbanized areas
with populations of less than 200,000 and, under some limited
exceptions, to some urbanized areas with population of 200,000 and
above.

**II. PROGRAM PROCEDURES**

Grants are awarded to public agencies on approval of applications for
specific programs or projects submitted to the Federal Transit
Administration (FTA). FTA monitors the progress of those projects
through on-site inspections, telephone contacts, correspondence, and
quarterly progress and financial status reports.

**Source of Governing Requirements**

The programs in this cluster are authorized by 49 USC 5307 and 5309.
Program regulations are at 49 CFR parts 601 through 665.

**Availability of Other Program Information**

Additional information is available on the FTA web site at
<http://www.fta.dot.gov/>. FTA is required to perform reviews and
evaluations of 49 USC 5307 grant activities at least every three years.
The most recent FTA Triennial Review Workbook provides guidance to FTA
staff and recipients on the conduct of triennial reviews and is
available at <http://www.fta.dot.gov/FY2007TriReview/contents.htm>.
These reviews are conducted with specific reference to compliance with
statutory and administrative requirements and consistency of actual
program activities with (1) the approved program of projects and (2) the
planning process required under 49 USC 5303. Copies of these triennial
reviews are available from the regional offices. Regional office
addresses and telephone numbers are available on the FTA web site listed
above.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. *Activities Allowed*
>
> a\. Under the 5307 and 5309 programs, capital activities, as defined
> in\
> 49 USC 5302 (a), are eligible, including preventive maintenance and
> certain expenses related to crime prevention and security (49 USC
> 5307(b) and 5309(b)).
>
> \(1\) For projects authorized after August 10, 2005, the only capital
> projects authorized under 49 USC 5309 are:
>
> \(a\) Bus and bus facilities;
>
> \(b\) New fixed guideways, including Small Starts;
>
> \(c\) Fixed guideway modernization; and
>
> \(d\) Corridor improvements (49 USC 5309(b)(1) through (b)(4)).
>
> \(2\) Under the 5307 program, operating expenses related to the
> conduct of emergency response drills with public transportation
> agencies and local first-response agencies and security training for
> public transportation employees are eligible capital expenses (49 USC
> 5302(a)(1)(J)).
>
> b\. Under the 5307 program, mobility management, as defined in 49 USC
> 5302(a)(1)(L), and planning (49 USC 5307 (b)(1)).
>
> c\. Under the 5307 and 5309 programs, preliminary engineering and
> final design, as defined in 49 USC 5302(a)(1)(A)) (49 USC 5307(b) and
> 5309(b)).
>
> d\. Under the 5307 program, operating assistance for all urbanized
> areas under 200,000 population, and certain larger urbanized areas
> under limited exceptions (49 USC 5307(b)(1)(D) and (1)(E)).
>
> 2\. *Activities* *Unallowed*
>
> a\. Under the 5309 program:
>
> \(1\) Mobility management;
>
> \(2\) Operating expenses; and
>
> \(3\) Alternatives analysis, including planning, with funds
> appropriated after FY 2005 (49 USC 5309 (b)(1) and 5339).
>
> b\. Under the 5307 program, operating assistance in areas over
> 200,000, unless under certain limited exceptions (49 USC
> 5307(b)(2)(A)).

**D. Davis-Bacon Act**

> The requirements of the Davis-Bacon Act are applicable to construction
> work financed with a grant or loan under this program (49 USC 5333).

**F. Equipment and Real Property Management**

> Recipients, with FTA approval, are allowed to transfer, sell, or lease
> property, equipment, or supplies acquired with Federal transit funds
> that are no longer needed for transit purposes. FTA may authorize the
> recipient to transfer the asset to a local governmental authority to
> be used for a public purpose (49 USC 5334 (h)(1) through (h)(3)). If a
> recipient sells the asset, the proceeds must be used to reduce the
> gross project costs of another federally funded capital transit
> project (49 USC 5334(h)(4) or handled as stated in 49 CFR sections
> 18.31 or 18.32 (49 USC 5334(h)).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> The share of allowable costs for a particular grant is established in
> the grant agreement.
>
> **2. Level of Effort** - Not Applicable
>
> **3. Earmarking**
>
> a\. One percent of 5307 program funds apportioned to urbanized areas
> with a population of at least 200,000 shall be made available for
> transit enhancement activities (49 USC 5307(d)(K)(i))).
>
> b\. One percent of 5307 program funds apportioned to urbanized areas
> with a population of at least 200,000 shall be expended for public
> transportation security projects. These projects may include increased
> lighting in or adjacent to a public transportation system (including
> bus stops, subway stations, parking lots, and garages), increased
> camera surveillance of an area in or adjacent to that system,
> providing an emergency telephone line to contact law enforcement or
> security personnel in an area in or adjacent to that system, and any
> other project intended to increase the security and safety of an
> existing or planned public transportation system. The recipient may
> certify that the expenditure for security projects is not necessary
> and then one percent expenditure will not be required (49 USC 5307
> (d)(1)(J)(i)).
>
> c\. Both of these requirements are at the urbanized area, not grant or
> grantee level (49 USC 5307).

**I. Procurement and Suspension and Debarment**

> 1\. *Buy America* - All steel, iron, and manufactured products used in
> the project must be manufactured in the U.S., as demonstrated by a Buy
> America certificate, or, in the case of rolling stock, the cost of
> components produced in the United States is more than 60 percent of
> the cost of all components and final assembly of the vehicle takes
> place in the United States (49 CFR part 661).
>
> a\. The FTA Administrator may grant specific waivers following
> case-by-case determinations that: (1) applying the requirement would
> be inconsistent with the public interest; (2) the goods are not
> produced in the U.S. in a sufficient and reasonably available quantity
> and of satisfactory quality; or (3) the inclusion of the domestically
> produced material will increase the overall project cost by more than
> 25 percent (49 CFR sections 661.7(b) through (d)).
>
> b\. Appendix A to 49 CFR section 661.7 provides general waivers for
> the following items:
>
> \(1\) Those articles, materials, and supplies exempted from the Buy
> America Act of 1933 as listed in 48 CFR section 25.104;
>
> \(2\) Microprocessors, computers, microcomputers, or software, or
> other such devices, which are used solely for the purpose of
> processing or storing data; and
>
> \(3\) All "small purchases" (under \$100,000) made by FTA recipients.
>
> c\. Appendix A to 49 CFR section 661.11 provides a general Buy America
> waiver when foreign-sourced spare parts for buses and other rolling
> stock (including train control, communication, and traction power
> equipment) whose total cost is 10 percent or less of the overall
> contract cost are being procured as part of the same contract for the
> major capital item.
>
> d\. A recipient that purchases rolling stock for transportation of
> fare-paying passengers must conduct, or cause to be conducted, a
> pre-award audit before entering a formal contract for the purchase of
> rolling stock, and certify that a post-delivery audit is complete
> before title to the rolling stock is transferred. Pre-award and
> post-delivery audits verify the accuracy of the Buy America
> certification, purchaser's requirements certification, and
> certification of compliance with or inapplicability of Federal motor
> vehicles safety standards (49 CFR part 663).
>
> 2\. *Disadvantaged Business Enterprises (DBE)* - Recipients shall
> require that each transit vehicle manufacturer certify that it has
> complied with the requirements of 49 CFR section 26.49, as a condition
> to bid on a transit vehicle procurement in which FTA funds are
> involved. Recipients may, with FTA approval, establish
> project-specific goals for DBE participation in the procurement of
> transit vehicles that a transit vehicle manufacturer must meet (49 CFR
> section 26.49(d)).
>
> 3\. *Procurement of Vehicles and Facilities* - In prohibiting
> discrimination in the provision of transportation services against
> persons with disabilities, the Americans with Disabilities Act of 1990
> requires that vehicles purchased or leased after August 25, 1990, and
> new and altered facilities designed and constructed (as marked by the
> notice to proceed) after January 25, 1992, must comply with the
> applicable standards of accessibility in 49 CFR parts 37 and 38 (42
> USC 12101-12213).

**L. Reporting**

> **1. Financial Reporting**
>
> a\. SF-269A*, Financial Status Report* - Applicable - (submitted
> through the FTA electronic grants management system (TEAM)).
>
> b\. SF-270*, Request for Advance or Reimbursement* - Applicable
>
> c\. SF-271*, Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272*, Federal Cash Transactions Report* - Not Applicable
>
> **2. Performance Reporting** - Not Applicable
>
> **3. Special Reporting**
>
> *Report of DBE Awards or Commitments and Payments (OMB No. 2105-0510)
> -* Based on the level of FTA funding, exclusive of transit vehicle
> purchases, recipients are required to implement a DBE program. To
> monitor the progress of the DBE program, the recipient is required to
> submit semi-annual reports based on a recordkeeping system (49 CFR
> section 26.11 and Appendix B to part 26).

**N. Special Tests and Provisions**

**1. Environmental Review**

> **Compliance Requirement** - For construction projects, Federal
> transit law requires that no adverse environmental effect result from
> the project, or that no feasible and prudent alternative to the
> adverse effect of the project exist and that all reasonable steps be
> taken to minimize the adverse effect (49 USC 5324(b)). The National
> Environmental Policy Act (NEPA) and its implementing regulation (23
> CFR part 771) require that the significant environmental effects of
> public transportation projects proposed for FTA assistance be
> documented, and that alternatives to avoid, minimize, and mitigate the
> adverse effects be considered (42 USC 4321 et seq.). Section 6002 of
> SAFETEA-LU requires that the sponsor of an FTA-assisted project (i.e.,
> the grant recipient) comply with all design and mitigation commitments
> made in any environmental document prepared for the project (49 USC
> 139(c)(4)).
>
> Accordingly, the measures to mitigate the adverse environmental and
> community impacts of a project, if any, are described in NEPA and
> related environmental documents. For projects requiring an
> Environmental Impact Statement (EIS), mitigation measures are
> summarized in a Record of Decision.  For projects requiring an
> Environmental Assessment, mitigation measures are summarized in a
> Finding of No Significant Impact (FONSI).  For categorically excluded
> projects, mitigation is usually not required, but if any mitigation
> measure is required, it will be documented in the FTA approval
> memorandum for the project. In all cases, these environmental
> documents should be referenced in the construction grant agreement
> with the recipient.
>
> **Audit Objective** - Determine whether the measures to mitigate the
> adverse impacts on the community and the environment that were
> specified in the environmental documents referenced in the grant
> agreement for construction projects were implemented.
>
> **Suggested Audit Procedures**
>
> a\. Identify any FTA-assisted construction projects and review the
> grant agreement and environmental documents to identify mitigation
> measures specified.
>
> b\. For sample of mitigation measures, compare the status of
> implementation with the commitments made in the environmental
> documents or grant agreement.
>
> **2. Charter Service**
>
> **Compliance Requirement** - As part of the annual certifications and
> assurances required by the FTA, a recipient must execute an agreement
> with the FTA which provides that neither the recipient nor any of its
> subrecipients will provide charter service that uses equipment or
> facilities acquired with FTA funds, unless: (a) there are no willing
> and able private charter service operators, or (b) one or more of the
> exceptions listed in 49 CFR part 604 are met and the charter service
> is incidental to the provision of mass transportation. Charter service
> is defined as transportation, using buses or vans (funded in whole or
> in part by FTA), of a group of persons pursuant to a common purpose,
> under a single contract at a fixed charge for the vehicle or service,
> which has acquired the exclusive use of the vehicle or service to
> travel together under an itinerary either specified in advance or
> modified after leaving the place of origin. This definition includes
> the incidental use of FTA-funded equipment for the exclusive
> transportation of school students, personnel and equipment, and the
> housing of charter vehicles in FTA-funded facilities. "Incidental
> charter service" is defined as service that does not: (a) interfere
> with or detract from the provision of the mass transportation service
> for which the facilities or equipment were funded under the Act, or
> (b) shorten the mass transportation life of the equipment or
> facilities (49 CFR part 604).
>
> **Audit Objective** - Determine whether the use in charter service of
> equipment and facilities acquired with FTA funds conformed to 49 CFR
> part 604.
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if the recipient provides charter service with
> FTA-funded equipment by: (1) obtaining written representation from the
> recipient, (2) reviewing revenue accounts for indications of charter
> bus revenue statements, and (3) reviewing the recipient's web site and
> local business "Yellow Pages" for indications of charter-service
> operations.
>
> b\. Review the recipient's policies and procedures for charter,
> rental, or lease of its transit equipment.
>
> c\. Test transactions that meet the definition of charter service and
> ascertain if:
>
> \(1\) FTA-assisted equipment or facilities (e.g., parking lots and
> maintenance garages) were used;
>
> \(2\) Documentation was available evidencing the absence of a willing
> and able private operator or an exception provided in 49 CFR part 604;
>
> \(3\) Documentation was available evidencing a charter fee that
> recovers the entire operating and capital costs of equipment used; and
>
> \(4\) Inventory records were adjusted to extend the useful life of the
> FTA subsidized transit equipment by the amount of charter service.
>
> **3. School Bus Operation**
>
> **Compliance Requirement** - As part of the annual certifications and
> assurances required by FTA, a recipient must enter into an agreement
> with the FTA Administrator stating that the recipient will not engage
> in school bus operations exclusively for the transportation of
> students and school personnel in competition with private school bus
> operators, unless it demonstrates to the FTA Administrator any one of
> the exceptions listed in 49 CFR section 605.11 and the Administrator
> concurs. Indicators of exclusive school bus service are:
>
> a\. Bus schedules that only operate one way to schools in the morning
> and the other way from schools in the afternoon.
>
> b\. Destination signs that say "school bus" "school special" or a
> school name are indicative of prohibited exclusive school bus service.
>
> c\. Buses that have flashing lights and swing arms like standard
> yellow school buses are indicative of prohibited exclusive school bus
> service.
>
> d\. Bus stop signs that say "school" are indicative of prohibited
> exclusive school bus service.
>
> e\. Bus stops that are located on school property away from general
> public thoroughfares are indicative of prohibited exclusive school bus
> service.
>
> However, all recipients can operate "Tripper Service," which is
> defined as regularly scheduled mass transportation service that is
> open to the public, and designed or modified to accommodate the needs
> of school students and personnel, using various fare collections or
> subsidy systems. Buses used in "Tripper Service" are required to be
> clearly marked as open to the public and should not carry designations
> such as "school bus" or "school special." All routes traveled by
> tripper buses must be within a grantee or operator's regular route
> service as indicated in their published schedules (49 CFR part 605).
>
> **Audit Objective** - Determine whether school bus service provided
> with FTA-funded equipment was approved by FTA or that FTA-assisted
> equipment and facilities used to accommodate students conformed to the
> definition of "Tripper Service."
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if the recipient operates any transit service
> exclusively for school children through: (1) reviews of bus schedules,
> published fares, and service contracts; (2) discussions with recipient
> officials; and (3) reviews of school district or individual school web
> sites for information on bus transportation of school students.
>
> b\. Ascertain if FTA-funded equipment (e.g., buses or vans) or
> facilities (e.g., bus maintenance garages) were used to provide school
> service by reviewing inventory records, maintenance logs, parking
> sites, names on bus and van destination signs, school facilities, or
> by performing other appropriate procedures.
>
> c\. If exclusive school bus service is identified, review
> documentation that the service was approved by the FTA.

**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.509 FORMULA GRANTS FOR OTHER THAN URBANIZED AREAS
(Nonurbanized Area Formula Program)**

**I. PROGRAM OBJECTIVES**

The objectives of the Section 5311 formula program are to initiate,
improve, or continue public transportation service in nonurbanized areas
by providing financial assistance for operating and administrative
expenses, and for the acquisition, construction, and improvement of
facilities and equipment. In addition, Section 5311(f) specifically
provides for the support of rural intercity bus service. The Rural
Transit Assistance Program (RTAP), Section 5311(b)(2), provides
additional funding to provide training, technical assistance, research
and related support services to support rural transit service.

**II. PROGRAM PROCEDURES**

**State Agencies**

The Federal Transit Administration (FTA) annually publishes formula
apportionments to the States in a Federal Register Notice published
within ten days after the Department of Transportation (DOT)
Appropriations Act is signed into law. The Governor of each State
designates a State agency to administer the program. The State is
responsible for fair distribution of the funds in the State, including
Indian reservations. The State may also provide transit service directly
or through contracts with private operators. The State describes its
procedures for administering the program in a State management plan. The
State applies to FTA for approval of a program of projects, usually
annually, and reports annually to FTA on financial status and revisions
to the program of projects. The State agency may be the recipient on
behalf of Indian tribes that are subrecipients, but federally recognized
tribes may also elect to apply to FTA as a direct recipient.

FTA monitors compliance with Federal requirements through administrative
"State Management Reviews," generally every three years.

**Tribal Transit Program**

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A
Legacy for Users (SAFETEA-LU) (Pub. L. No. 109-59) created a new Tribal
Transit Program under the Nonurbanized Area Formula Program, and funded
it as a takedown under the Section 5311 program. Under the Tribal
Transit Program, federally recognized Indian tribes are eligible direct
recipients. Based on an annual national competitive selection process
conducted by FTA, FTA awards Tribal Transit grants directly to eligible
Indian tribes. Recipients of Tribal Transit Program funds may use these
funds for any purpose that is eligible under Section 5311. Only
federally recognized tribes are eligible recipients under the Tribal
Transit Program.

**Subrecipients**

The State selects subrecipients and monitors their compliance with
Federal requirements. FTA does not directly monitor the subrecipients,
but checks the State's procedures for monitoring during the State
Management Review. The State may impose program criteria in addition to
those imposed by the FTA and may require additional reports from
subrecipients. These State requirements are included in the State
Management Plan.

**Source of Governing Requirements**

This program is authorized by 49 USC 5311. Program regulations are in 49
CFR. Note that certain exceptions or dollar thresholds in these rules
may exclude many rural transit activities.

**Availability of Other Program Information**

Information about the program may be found on the FTA web site at
<http://www.fta.dot.gov/>. Program Guidance and Application Instructions
are contained in FTA Circular 9040.1F which may be found on the web
site. In referring to the program, FTA uses the term "rural" to include
both rural and small urban areas (all areas not included in the
urbanized areas designated by the U.S. Bureau of the Census).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

1\. *Activities Allowed*

> a\. The project must provide local transportation service (transit
> service available to the public) in an area other than an urbanized
> area (49 USC 5311(d)) or support intercity bus transportation (49 USC
> 5311(f)). Coordination of mass transportation assisted under this
> section with transportation service assisted by other United States
> Government sources is permitted and encouraged (49 USC 5311(b)).
>
> b\. RTAP funds may be used to provide training, technical assistance,
> research and other related support services for providers of rural
> public transit and related services (49 USC 5311(b)(2)).

**D. Davis-Bacon Act**

> The requirements of the Davis-Bacon Act are applicable to construction
> work financed with a grant under this program (49 USC 5333).

**E. Eligibility**

> **1. Eligibility for Individuals** - Not Applicable
>
> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients**
>
> Eligible subrecipients are State and local governments, Indian tribes,
> non-profit organizations, or operators of public transportation or
> intercity bus service (49 USC 5311(a)).

**F. Equipment and Real Property Management**

> Recipients, with FTA approval, are allowed to transfer, sell, or lease
> property, equipment, or supplies acquired with Federal transit funds
> that are no longer needed for transit purposes. FTA may authorize the
> recipient to transfer the asset to a local governmental authority to
> be used for a public purpose (49 USC 5334 (h) (1) through (3)). If a
> recipient sells the asset, the proceeds must be used to reduce the
> gross project costs of another federally funded capital transit
> project (49 USC 5334(h)(4) or handled as stated in 49 CFR sections
> 18.31 or 18.32 (49 USC 5334(h)).

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> a\. Operating assistance requires a 50 percent match, half of which
> must be non-Federal. Capital and administration require a 20 percent
> non-Federal match. No match is required for State administration or
> RTAP. Revenues from providing mass transportation (e.g., farebox
> revenue) may not be used for the match. Amounts received under a
> service agreement with a State or local social service agency or a
> private social service organization may be used to match operating
> assistance. Recipients may use funds from other Federal agencies
> (non-DOT) for the entire local match if the other agency makes the
> funds available to the recipient for the purposes of the project. The
> only DOT funds that States can use as local match for Section 5311
> projects are from the Federal Lands Highway Program (\
> 49 USC 5311(g)).
>
> b\. Higher Federal share rates (sliding-scale match rates) for capital
> costs are available to 14 States described in 23 USC 120(b). These
> sliding scale rates are based on the ratio of designated public lands
> area to the total area of these 14 States. For FTA capital grants, the
> Federal share increases from 80 percent in proportion to the share of
> public lands in the State. For FTA operating grants in these same
> States, the Federal share increases from 50 percent to 62.5 percent
> (5/8) of the rate for capital grants in those States (49 USC
> 5311(g)(1)(B)).

**2. Level of Effort** - Not Applicable

**3.** **Earmarking**

> a\. The State may expend no more than 15 percent of its annual Section
> 5311 apportionment for state administration, including planning and
> technical assistance (49 USC 5311(e)).
>
> b\. A State must use at least 15 percent of the annual apportionment
> to support intercity bus service unless the Governor certifies, after
> consultation with affected intercity bus service providers, that the
> intercity bus needs of the State are adequately met (49 USC 5311(f)).

**H. Period of Availability of Federal Funds**

> The funds are available to the State for the year of apportionment
> plus two years. Once the funds are obligated for an approved project,
> they remain available to the State until expended (49 USC 5311(c)).

**I. Procurement and Suspension and Debarment**

1.  *Buy America -* All steel, iron, and manufactured products used in
    the project must be manufactured in the U.S., as demonstrated by a
    Buy America certificate, or, in the case of rolling stock, the cost
    of components produced in the United States is more than 60 percent
    of the cost of all components and final assembly of the vehicle
    takes place in the United States (49 CFR part 661).

> a\. The FTA Administrator may grant specific waivers following
> case-by-case determinations that: (1) applying the requirement would
> be inconsistent with the public interest; (2) the goods are not
> produced in the U.S. in a sufficient and reasonably available quantity
> and of satisfactory quality; or (3) the inclusion of the domestically
> produced material will increase the overall project cost by more than
> 25 percent (49 CFR sections 661.7(b) through (d)).
>
> b\. Appendix A to 49 CFR section 661.7 provides general waivers for
> the following items:
>
> \(1\) Those articles, materials, and supplies exempted from the Buy
> America Act of 1933 as listed in 48 CFR section 25.104;
>
> \(2\) Microprocessors, computers, microcomputers, or software, or
> other such devices, which are used solely for the purpose of
> processing or storing data; and
>
> \(3\) All "small purchases" (under \$100,000) made by FTA recipients.
>
> c\. Appendix A to 49 CFR section 661.11 provides a general Buy America
> waiver when foreign-sourced spare parts for buses and other rolling
> stock (including train control, communication, and traction power
> equipment) whose total cost is 10 percent or less of the overall
> project contract cost are being procured as part of the same contract
> for the major capital item.
>
> d\. A recipient that purchases rolling stock for transportation of
> fare-paying passengers must conduct, or cause to be conducted, a
> pre-award audit before entering a formal contract for the purchase of
> rolling stock, and certify that a post-delivery review is complete
> before title to the rolling stock is transferred. Pre-award and
> post-delivery reviews verify the accuracy of the Buy America
> certification, purchaser's requirements certification, and
> certification of compliance with or inapplicability of Federal motor
> vehicles safety standards (49 CFR part 663).
>
> 2\. *Disadvantaged Business Enterprises (DBE)* - Recipients shall
> require that each transit vehicle manufacturer certify that it has
> complied with the requirements of 49 CFR section 26.49, as a condition
> to bid on a transit vehicle procurement in which FTA funds are
> involved. Recipients may, with FTA approval, establish
> project-specific goals for DBE participation in the procurement of
> transit vehicles that a transit vehicle manufacturer must meet (49 CFR
> section 26.49(d)).
>
> 3\. *Procurement of Vehicles and Facilities* - In prohibiting
> discrimination in the provision of transportation services against
> persons with disabilities, the Americans with Disabilities Act of 1990
> requires that vehicles purchased or leased after August 25, 1990, and
> new and altered facilities designed and constructed (as marked by the
> notice to proceed) after January 25, 1992, must comply with the
> applicable standards of accessibility in 49 CFR parts 37 and 38 (42
> USC 12101-12213).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269A, *Financial Status Report* - Applicable (submitted through
> the FTA electronic grants management system (TEAM))
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> **2.** **Performance Reporting** - Not Applicable
>
> **3. Special Reporting**

*National Transit Database* (NTD) (*OMB No. 2132-0008*) - Recipient are
required to submit an annual report containing financial and operating
information. The State agency administering the 5311 program is
responsible for submitting the rural report on behalf of the State and
its subrecipients. The NTD web site is located at
<http://www.ntdprogram.gov/>. Data to be reviewed is on the Rural
General Public Service Transit form (RU-20).

*Key line items*: The following line items contain critical information:

a\. Line 05 - Total Annual Operating Expenses

b\. Line 08 - Local Operating Assistance

c\. Line 13 - Annual Capital Costs

d\. Lines 25a, 25b, 25c (Mode), Column g - Total Trips

**N. Special Tests and Provisions**

> **1. Charter Service**
>
> **Compliance Requirement** - As part of the annual certifications and
> assurances required by the FTA, a recipient must execute an agreement
> with the FTA which provides that neither the recipient nor any of its
> subrecipients will provide charter service that uses equipment or
> facilities acquired with FTA funds, unless: (a) there are no willing
> and able private charter service operators or (b) one or more of the
> exceptions listed in 49 CFR part 604 are met and the charter service
> is incidental to the provision of mass transportation. Charter service
> is defined as transportation, using buses or vans (funded in whole or
> in part by FTA), of a group of persons pursuant to a common purpose,
> under a single contract at a fixed charge for the vehicle or service,
> which has acquired the exclusive use of the vehicle or service to
> travel together under an itinerary either specified in advance or
> modified after leaving the place of origin. This definition includes
> the incidental use of FTA-funded equipment for the exclusive
> transportation of school students, personnel and equipment, and the
> housing of charter vehicles in FTA-funded facilities. Incidental
> charter service is defined as service that does not:\
> (a) interfere with or detract from the provision of the mass
> transportation service for which the facilities or equipment were
> funded under the Act or (b) shorten the mass transportation life of
> the equipment or facilities (49 CFR part 604).
>
> **Audit Objective** - Determine whether the use in charter service of
> equipment and facilities acquired with FTA funds conformed to 49 CFR
> part 604.
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if the recipient provides charter service with
> FTA-funded equipment by: (1) obtaining written representation from the
> recipient, (2) reviewing revenue accounts for indications of charter
> bus revenue statements, and (3) reviewing the recipient's web site and
> local business "Yellow Pages" for indications of charter service
> operations.
>
> b\. Review the recipient's policies and procedures for charter,
> rental, or lease of its transit equipment.
>
> c\. Test transactions that meet the definition of charter service and
> ascertain if:
>
> \(1\) FTA-assisted equipment or facilities (e.g., parking lots and
> maintenance garages) were used;
>
> \(2\) Documentation was available evidencing the absence of a willing
> and able private operator or an exception provided in 49 CFR part 604;
>
> \(3\) Documentation was available evidencing a charter fee that
> recovers the entire operating and capital costs of equipment used; and
>
> \(4\) Inventory records were adjusted to extend the useful life of the
> FTA subsidized transit equipment by the amount of charter service.
>
> **2. School Bus Operation**
>
> **Compliance Requirement** - As part of the annual certifications and
> assurances required by FTA, a recipient must enter into an agreement
> with the FTA Administrator stating that the recipient will not engage
> in school bus operations exclusively for the transportation of
> students and school personnel in competition with private school bus
> operators, unless it demonstrates to the FTA Administrator any one of
> the exceptions listed in 49 CFR section 605.11 and the Administrator
> concurs. Indicators of exclusive school bus service are:
>
> a\. Bus schedules that only operate one way to schools in the morning
> and the other way from schools in the afternoon.
>
> b\. Destination signs that say "school bus" "school special" or a
> school name are indicative of prohibited exclusive school bus service.
>
> c\. Buses that have flashing lights and swing arms like standard
> yellow school buses are indicative of prohibited exclusive school bus
> service.
>
> d\. Bus stop signs that say "school" are indicative of prohibited
> exclusive school bus service.
>
> e\. Bus stops that are located on school property away from general
> public thoroughfares are indicative of prohibited exclusive school bus
> service.
>
> However, all recipients can operate "Tripper Service," which is
> defined as regularly scheduled mass transportation service that is
> open to the public, and designed or modified to accommodate the needs
> of school students and personnel, using various fare collections or
> subsidy systems. Buses used in "Tripper Service" are required to be
> clearly marked as open to the public and should not carry designations
> such as "school bus" or "school special." All routes traveled by
> tripper buses must be within a grantee or operator's regular route
> service as indicated in their published schedules\
> (49 CFR part 605).
>
> **Audit Objective** - Determine whether school bus service provided
> with FTA-funded equipment was approved by FTA or that FTA-assisted
> equipment and facilities used to accommodate students conformed to the
> definition of "Tripper Service."
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if the recipient operates any transit service
> exclusively for school children through: (1) a review of bus
> schedules, published fares, and service contracts; (2) discussions
> with recipient officials; and (3) reviews of school district or
> individual school web sites for information on bus transportation of
> school students.
>
> b\. Ascertain if FTA-funded equipment (e.g., buses or vans) or
> facilities (e.g., bus maintenance garages) were used to provide school
> service by reviewing inventory records, maintenance logs, parking
> sites, names on bus and van destination signs, school facilities, or
> by performing other appropriate procedures.
>
> c\. If exclusive school bus service is identified, review
> documentation that the service was approved by the FTA.

**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.513 CAPITAL ASSISTANCE PROGRAM FOR ELDERLY PERSONS AND PERSONS
WITH DISABILITIES**

**CFDA 20.516 JOB ACCESS - REVERSE COMMUTE**

**CFDA 20.521 NEW FREEDOM PROGRAM**

**I. PROGRAM OBJECTIVES**

**Capital Assistance Program for Elderly Persons and Persons with
Disabilities** (Section 5310)

The objective of the Section 5310 program is to improve mobility for
elderly individuals and individuals with disabilities throughout the
country. Toward this, the Federal Transit Administration (FTA) provides
financial assistance for transportation services planned, designed, and
carried out to meet the special transportation needs of elderly
individuals and individuals with disabilities in all areas---urbanized,
small urban, and rural.

**Job Access - Reverse Commute (JARC)**

The objectives of the JARC program are to improve access to
transportation services to employment and employment-related activities
for welfare recipients and eligible low-income individuals and to
transport residents of urbanized areas and nonurbanized areas to
suburban employment opportunities. Under this program, FTA provides
financial assistance for transportation services planned, designed, and
carried out to meet the transportation needs of welfare recipients and
eligible low-income individuals, and of reverse commuters regardless of
income.

**New Freedom**

The New Freedom program aims to provide additional tools to overcome
barriers facing Americans with disabilities seeking integration into the
work force and full participation in society. Lack of adequate
transportation is a primary barrier to work for individuals with
disabilities. The 2000 Census showed that only 60 percent of people
between the ages of 16 and 64 with disabilities are employed. The New
Freedom program seeks to reduce barriers to transportation services and
expand the transportation mobility options available to people with
disabilities beyond the requirements of the Americans with Disabilities
Act (ADA) of 1990.

**II. PROGRAM PROCEDURES**

FTA annually publishes formula apportionments to the States and
urbanized areas with populations of 200,000 persons or greater (i.e.,
large urbanized area) in a *Federal Register* notice published within 10
days after the Department of Transportation (DOT) Appropriations Act is
signed into law. In the case of the Section 5310 program, the Governor
of each State designates a State agency to administer the program. In
the case of the JARC and New Freedom programs, the Governor: (1)
designates a State agency to administer the program in nonurbanized
areas and in urbanized areas with populations between 50,000 and 199,999
persons; and (2) in consultation with responsible local officials and
public transportation providers, designates a recipient to administer
the program for the large urbanized area(s). The State agencies and
designated recipients are responsible for fair distribution of the
funds. State agencies and designated recipients must describe their
procedures for administering the program in a State management plan
(SMP), or program management plan (PMP) for those JARC and New
Freedom-designated recipients serving large urbanized areas.

State agencies and designated recipients apply to FTA for approval of a
program of projects, usually annually, and report annually to FTA on
financial status and revisions to their program of projects. Federal
transit law, as amended by Safe Accountable Flexible Efficient
Transportation Equity Act, a Legacy for Users (SAFETEA-LU), requires
that projects selected for funding under the Section 5310, JARC, and New
Freedom programs be derived from a locally developed, coordinated public
transit-human services transportation plan and that the plan be
developed through a process that includes representatives of public,
private, and non-profit transportation and human services providers and
participation by members of the public."

FTA monitors compliance with Federal requirements through administrative
"State Management Reviews," in which a State agency is generally
reviewed every 3 years. Designated recipients who also receive FTA
financial assistance under the Urbanized Area Formula Program (CFDA
20.509) are also subject to a "Triennial Review" from the FTA.

**Subrecipients**

State agencies and designated recipients select subrecipients and
monitor their compliance with Federal requirements. FTA does not
directly monitor the subrecipients, but checks the State agency and
designated recipient's procedures for monitoring during the State
Management Review and Triennial Review. The State agency and designated
recipient may impose program criteria in addition to those imposed by
the FTA and may require additional reports from subrecipients. These
State and designated recipient's requirements are included in the State
Management Plan or Program Management Plan.

**Source of Governing Requirements**

The programs in this cluster were authorized by SAFETEA-LU (Pub. L. No.
109-059, enacted on August 10, 2005). The Section 5310 program is
authorized by 49 USC 5310, the JARC program is authorized by 49 USC 5316
and the New Freedom program is authorized by 49 USC 5317. Program
regulations are in 49 CFR.

**Availability of Other Program Information**

Information about the programs may be found on the FTA web site at
<http://www.fta.dot.gov/>. Program guidance and application instructions
for the Section 5310, JARC, and New Freedom programs are contained in
FTA Circulars 9070.1F, 9050.1, and 9045.1, respectively. These circulars
can be found at the "Legislation, Regulations, and Guidance" section of
the FTA web site.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Under the Section 5310 program, funds are available for capital
> expenses (and associated administrative, planning, and technical
> assistance) to support the provision of transportation services to
> meet the special needs of elderly persons and persons with
> disabilities (49 USC 5310(a)).
>
> 2\. Under the JARC program, funds may be used for capital, planning,
> and operating expenses (and associated administrative, planning, and
> technical assistance) that support access to jobs and reverse commute
> projects (49 USC 5316(b)).
>
> 3\. "Access to jobs" projects are defined as projects relating to the
> development and maintenance of transportation services designed to
> transport welfare recipients and eligible low-income individuals to
> and from jobs and activities related to their employment, including:
>
> a\. Transportation projects to finance planning, capital, and
> operating costs of providing access to jobs under this chapter;
>
> b\. Promoting public transportation by low-income workers, including
> the use of public transportation by workers with nontraditional work
> schedules;
>
> c\. Promoting the use of transit vouchers for welfare recipients and
> eligible low-income individuals; and
>
> d\. Promoting the use of employer-provided transportation, including
> the transit pass benefit program under section 132 of the Internal
> Revenue Code of 1986 (49 USC 5316(a)(1)).
>
> 4\. "Reverse commute" projects are defined as public transportation
> projects designed to transport residents of urbanized areas and
> other-than-urbanized areas to suburban employment opportunities,
> including any projects to:
>
> a\. Subsidize the costs associated with adding reverse commute bus,
> train, carpool, van routes, or service from urbanized areas and
> other-than-urbanized areas to suburban workplaces;
>
> b\. Subsidize the purchase or lease by a nonprofit organization or
> public agency of a van or bus dedicated to shuttling employees from
> their residences to a suburban workplace; or
>
> c\. Otherwise facilitate the provision of public transportation
> services to suburban employment opportunities (49 USC 5316(a)(4)).
>
> 5\. Under the New Freedom program, funds are available for capital and
> operating expenses (and associated administrative, planning, and
> technical assistance) that support new public transportation services
> beyond those required by the ADA and new public transportation
> alternatives beyond those required by the ADA designed to assist
> individuals with disabilities with accessing transportation services,
> including transportation to and from jobs and employment support
> services (49 USC 5317(b)(1)).

**D. Davis-Bacon Act**

> The requirements of the Davis-Bacon Act apply to construction work
> financed by a grant under this program (49 USC 5333).

**E. Eligibility**

> **1. Eligibility for Individuals** - Not Applicable
>
> **2. Eligibility for Group of Individuals or Area of Service
> Delivery** - Not Applicable
>
> **3. Eligibility for Subrecipients**
>
> a\. Eligible subrecipients for the Section 5310 program are:
>
> \(1\) Private non-profit organizations;
>
> \(2\) Governmental authorities that certify that no non-profit
> corporations or associations are readily available in an area to
> provide the service; and
>
> \(3\) Governmental authorities approved by the State to coordinate
> services for elderly individuals and individuals with disabilities (49
> USC 5310 (a)(2)).
>
> b\. Eligible subrecipients for the JARC and New Freedom programs are:
>
> \(1\) Private non-profit organizations;
>
> \(2\) State or local governmental authorities; and
>
> \(3\) Operators of public transportation services, including private
> operators of public transportation services (49 USC5316(a)(5) and
> 5317(a)(2)).

**F. Equipment and Real Property Management**

> Recipients, with FTA approval, are allowed to transfer, sell, or lease
> property, equipment, or supplies acquired with Federal transit funds
> that are no longer needed for transit purposes. FTA may authorize the
> recipient to transfer the asset to a local governmental authority to
> be used for a public purpose (49 USC 5334 (h) (1)). If a recipient
> sells the asset, the proceeds must be used to reduce the gross project
> costs of another federally funded capital transit project (49 USC
> 5334(h)(4)) or handled as stated in 49 CFR sections 18.31 or 18.32)
> (49 USC 5334(h)).

**G. Matching, Level of Effort, Earmarking**

> **1. Matching**
>
> a\. For the Section 5310 program, the Federal share of eligible
> project costs may not exceed 80 percent of the net cost of the
> activity (49 USC 5310(c)(1)(a)).
>
> b\. For the JARC and New Freedom programs, the Federal share of
> eligible capital and planning costs may not exceed 80 percent of the
> net cost of the activity. The Federal share of the eligible operating
> costs may not exceed 50 percent of the net operating costs of the
> activity (49 U.S.C. 5316(h) and 5317(g)).
>
> c\. For all three programs, the 10 percent that is eligible to fund
> program administrative costs including administration, planning, and
> technical assistance may be funded at 100 percent Federal share (49
> USC 5310(a)(4), 5316(b)(2), and 5317(b)(2)). (See III.G.3, below)
>
> d\. For all three programs, the Federal share is 90 percent for
> vehicle-related equipment and facilities required by the Clean Air Act
> (CAA) or the ADA (49 U.S.C. 5323(i)).
>
> **2. Level of Effort** - Not Applicable
>
> **3.** **Earmarking**
>
> For all three programs, no more than 10 percent of the recipient's
> total fiscal year apportionment may be used to fund program
> administration costs including administration, planning, and technical
> assistance (49 USC 5310(a)(4), 5316(b)(2), and 5317(b)(2)).

**I. Procurement and Suspension and Debarment**

> 1\. *Buy America* - All steel, iron, and manufactured products used in
> the project must be manufactured in the U.S., as demonstrated by a Buy
> America certificate, or, in the case of rolling stock, the cost of
> components produced in the United States is more than 60 percent of
> the cost of all components and final assembly of the vehicle takes
> place in the United States (49 CFR part 661).
>
> a\. The FTA Administrator may grant specific waivers following
> case-by-case determinations that: (1) applying the requirement would
> be inconsistent with the public interest; (2) the goods are not
> produced in the U.S. in a sufficient and reasonably available quantity
> and of satisfactory quality; or (3) the inclusion of the domestically
> produced material will increase the overall project cost by more than
> 25 percent (49 CFR sections 661.7(b) through (d)).
>
> b\. Appendix A to 49 CFR section 661.7 provides general waivers for
> the following items:
>
> \(1\) Those articles, materials, and supplies exempted from the Buy
> America Act of 1933 as listed in 48 CFR section 25.104;
>
> \(2\) Microprocessors, computers, microcomputers, or software, or
> other such devices, which are used solely for the purpose of
> processing or storing data; and
>
> \(3\) All "small purchases" (under \$100,000) made by FTA recipients.
>
> c\. Appendix A to 49 CFR section 661.11 provides a general Buy America
> waiver when foreign-sourced spare parts for buses and other rolling
> stock (including train control, communication, and traction power
> equipment) whose total cost is 10 percent or less of the overall
> project contract cost are being procured as part of the same contract
> for the major capital item.
>
> d\. A recipient that purchases rolling stock for transportation of
> fare-paying passengers must conduct, or cause to be conducted, a
> pre-award audit before entering a formal contract for the purchase of
> rolling stock, and certify that a post-delivery audit is complete
> before title to the rolling stock is transferred. Pre-award and
> post-delivery audits verify the accuracy of the Buy America
> certification, purchaser's requirements certification, and
> certification of compliance with or inapplicability of Federal motor
> vehicles safety standards (49 CFR part 663).
>
> 2\. *Disadvantaged Business Enterprises (DBE)* - Recipients shall
> require that each transit vehicle manufacturer certify that it has
> complied with the requirements of 49 CFR section 26.49, as a condition
> to bid on a transit vehicle procurement in which FTA funds are
> involved. Recipients may, with FTA approval, establish
> project-specific goals for DBE participation in the procurement of
> transit vehicles that a transit vehicle manufacturer must meet (49 CFR
> section 26.49(d)).
>
> 3\. *Procurement of Vehicles and Facilities* - In prohibiting
> discrimination in the provision of transportation services against
> persons with disabilities, the ADA requires that vehicles purchased or
> leased after August 25, 1990, and new and altered facilities designed
> and constructed (as marked by the notice to proceed) after January 25,
> 1992, must comply with the applicable standards of accessibility in 49
> CFR parts 37 and 38 (42 USC 12101-12213).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269A*, Financial Status Report* - Applicable - (submitted
> through FTA's electronic grants management system (TEAM)).
>
> b\. SF-270*, Request for Advance or Reimbursement* -- Not Applicable
>
> c\. SF-271*, Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272*, Federal Cash Transactions Report* - Not Applicable

**2.** **Performance Reporting** - Not Applicable

**3. Special Reporting** - Not Applicable

**N. Special Tests and Provisions**

**1. Coordinated Planning**

> **Compliance Requirement** - Recipients must certify that the projects
> selected for funding were derived from a locally developed coordinated
> public transit-human services transportation plan and the plan was
> developed through a process that included representatives of public,
> private, and nonprofit transportation and human services provides and
> participation from the public. The recipient's SMP or PMP should
> contain information on the project selection process and on the local
> coordination plan (49 USC 5310(d)(2)(B), 5316(g)(3), and 5317(f)(3)).
>
> **Audit Objective -** Determine whether subgrants awarded by the State
> or designated recipient were derived from a locally developed
> coordinated public transit-human services transportation plan and the
> plan was developed through a process that included representatives of
> public, private, and nonprofit transportation and human services
> provides and participation from the public.

**Suggested Audit Procedures**

> a\. Obtain and review the recipient's SMP or PMP for designated
> recipients.
>
> b\. Ascertain if the SMP or PMP includes a section on project
> selection criteria and method of distributing funds.
>
> c\. Obtain and review the State or designated recipient's applications
> for funding submitted to FTA.
>
> d\. Obtain and review the State or designated recipients locally
> developed transportation human services coordinated plan.
>
> e\. Ascertain if the applications document the coordinated plan from
> which each project listed is derived.
>
> **2. Competitive Selection Process.**
>
> **Compliance Requirement** **-** Designated recipients of JARC and New
> Freedom funds for large urbanized areas are required to conduct, in
> cooperation with the appropriate metropolitan planning organization,
> an area-wide solicitation for applications for grants to the recipient
> and subrecipient. State recipients of JARC and New Freedom funds are
> required to conduct a statewide solicitation for applications for
> grants to the recipient and subrecipients (49 USC 5310(d), 5316(d),
> and 5317(d)).
>
> Recipients of Section 5310, JARC, and New Freedom grants are required
> to certify that allocations to subrecipients were distributed on a
> fair and equitable basis (49 USC 5310(d)(2)(B), 5316(f)(2), and
> 5317(e)(2)). An equitable distribution refers to equal access to, and
> equal treatment by, a fair and open competitive process, although the
> results of such a process may not be a quantitatively equal allocation
> of funds among projects or communities. Documentation of the process
> for ensuring a fair and equitable competitive selection process should
> be in the recipient's SMP or PMP. These documents should describe the
> designated recipient's competitive process for selecting projects and
> distributing funds among various applicants, including the policy
> rationale and the methods used. Procedure that might indicate a
> competitive selection process would be: (1) announcements for funding
> be made on an annual basis or not less than once every 3 years; (2)
> announcements include the program requirements, the process for
> receiving funds, the timeline for the competitive selection, and
> selection criteria;\
> (3) public advertisement of the availability of funds and selection
> criteria in formats and forums appropriate to the potential recipients
> and subrecipients; and (4) publishing a list of selected projects
> following the competitive selection process.
>
> **Audit Objective** **-** Determine whether the State or designated
> recipient awarded subgrants based on a competitive selection process
> and determine whether grants were distributed on a fair and equitable
> basis.

**Suggested Audit Procedures**

a\. Obtain and review the recipient's State Management Plan (SMP) or
Program Management Plan (PMP) for designated recipients.

b\. Ascertain if the SMP or PMP includes a section on project selection
criteria and method of distributing funds.

c\. Obtain and review the State or designated recipient's announcements
for Section 5310, JARC, and New Freedom projects.

> d\. Ascertain if announcements provide for a fair and equitable
> process.
>
> e\. Ascertain that announcements invite applications on an area-wide
> or state-wide basis as appropriate.

**3. Charter Service**

> **Compliance Requirement** - As part of the annual certifications and
> assurances required by the FTA, a recipient must execute an agreement
> with the FTA which provides that neither the recipient nor any of its
> subrecipients will provide charter service that uses equipment or
> facilities acquired with FTA funds, unless: (a) there are no willing
> and able private charter service operators, or (b) one or more of the
> exceptions listed in 49 CFR part 604 are met and the charter service
> is incidental to the provision of mass transportation. Charter service
> is defined as transportation, using buses or vans (funded in whole or
> in part by FTA), of a group of persons pursuant to a common purpose,
> under a single contract at a fixed charge for the vehicle or service,
> who have acquired the exclusive use of the vehicle or service to
> travel together under an itinerary either specified in advance or
> modified after leaving the place of origin. This definition includes
> the incidental use of FTA-funded equipment for the exclusive
> transportation of school students, personnel and equipment, and the
> housing of charter vehicles in FTA-funded facilities. "Incidental
> charter service" is defined as service that does not\
> (a) interfere with or detract from the provision of the mass
> transportation service for which the facilities or equipment were
> funded under the Act, or (b) shorten the mass transportation life of
> the equipment or facilities (49 CFR part 604).
>
> **Audit Objective** - Determine whether any use in charter service of
> equipment and facilities acquired with FTA funds conformed to 49 CFR
> part 604.
>
> **Suggested Audit Procedures**
>
> a\. Ascertain if the recipient provides charter service with
> FTA-funded equipment by:
>
> \(1\) Obtaining written representation from the recipient,
>
> \(2\) Reviewing revenue accounts for indications of charter bus
> revenue statements, and
>
> \(3\) Reviewing the recipient's web site and local business "Yellow
> Pages" for indications of charter-service operations.
>
> b\. Review the recipient's policies and procedures for charter,
> rental, or lease of its transit equipment.
>
> c\. Test transactions that meet the definition of charter service and
> ascertain if:
>
> \(1\) FTA-assisted equipment or facilities (e.g., parking lots and
> maintenance garages) were used;
>
> \(2\) Documentation was available evidencing the absence of a willing
> and able private operator or an exception provided in 49 CFR part 604;
>
> \(3\) Documentation was available evidencing a charter fee that
> recovers the entire operating and capital costs of equipment used; and
>
> \(4\) Inventory records were adjusted to extend the useful life of the
> FTA subsidized transit equipment by the amount of charter service.

**4. School Bus Operation**

> **Compliance Requirement** - As part of the annual certifications and
> assurances required by FTA, a recipient must enter into an agreement
> with the FTA Administrator stating that the recipient will not engage
> in school bus operations exclusively for the transportation of
> students and school personnel in competition with private school bus
> operators, unless it demonstrates to the FTA Administrator any one of
> the exceptions listed in 49 CFR section 605.11 and the Administrator
> concurs. Indicators of exclusive school bus service are:
>
> a\. Bus schedules that only operate one way to schools in the morning
> and the other way from schools in the afternoon.
>
> b\. Destination signs that say "school bus" "school special" or a
> school name are indicative of prohibited exclusive school bus service.
>
> c\. Buses that have flashing lights and swing arms like standard
> yellow school buses are indicative of prohibited exclusive school bus
> service.
>
> d\. Bus stop signs that say "school" are indicative of prohibited
> exclusive school bus service.
>
> e\. Bus stops that are located on school property away from general
> public thoroughfares are indicative of prohibited exclusive school bus
> service.
>
> However, all recipients can operate "Tripper Service," which is
> defined as regularly scheduled mass transportation service that is
> open to the public, and designed or modified to accommodate the needs
> of school students and personnel, using various fare collections or
> subsidy systems. Buses used in "Tripper Service" are required to be
> clearly marked as open to the public and should not carry designations
> such as "school bus" or "school special." All routes traveled by
> tripper buses must be within a grantee or operator's regular route
> service as indicated in their published schedules (49 CFR part 605).
>
> **Audit Objective** - Determine whether school bus service provided
> with FTA-funded equipment was approved by FTA or that FTA-assisted
> equipment and facilities used to accommodate students conformed to the
> definition of "Tripper Service."

**Suggested Audit Procedures**

> a\. Ascertain if the recipient operates any transit service
> exclusively for school children through:
>
> \(1\) Reviews of bus schedules, published fares, and service
> contracts;
>
> \(2\) Discussions with recipient officials; and
>
> \(3\) Reviews of school district or individual school web sites for
> information on bus transportation of school students.
>
> b\. Ascertain if FTA-funded equipment (e.g., buses or vans) or
> facilities (e.g., bus maintenance garages) were used to provide school
> service by reviewing inventory records, maintenance logs, parking
> sites, names on bus and van destination signs, school facilities, or
> by performing other appropriate procedures.
>
> c\. If exclusive school bus service is identified, review
> documentation that the service was approved by the FTA.

**DEPARTMENT OF TRANSPORTATION**

**CFDA 20.600 STATE AND COMMUNITY HIGHWAY SAFETY**

**CFDA 20.601 ALCOHOL TRAFFIC SAFETY AND DRUNK DRIVING PREVENTION
INCENTIVE GRANTS**

**CFDA 20.602 OCCUPANT PROTECTION**

**CFDA 20.603 FEDERAL HIGHWAY SAFETY DATA IMPROVEMENTS INCENTIVE
GRANTS**

**CFDA 20.604 SAFETY INCENTIVE GRANTS FOR USE OF SEATBELTS**

**CFDA 20.605 SAFETY INCENTIVES TO PREVENT OPERATION OF MOTOR VEHICLES
BY INTOXICATED PERSONS**

**CFDA 20.609 Safety Belt Performance Grants**

**CFDA 20.610 State Traffic Safety Information System Improvements
Grants**

**CFDA 20.611 INCENTIVE Grant program to Prohibit Racial Profiling**

**CFDA 20.612 INCENTIVE GRANT PROGRAM TO INCREASE Motorcyclist Safety**

**CFDA 20.613 Child Safety and child booster seaT incentive grants**

**I. PROGRAM OBJECTIVES**

The objective of the highway traffic safety grant programs is to provide
a coordinated national highway safety program to reduce traffic
accidents, deaths, injuries, and property damage.

**II. PROGRAM PROCEDURES**

Funds are provided to the States, following submission of their highway
safety plans, in accordance with a predefined formula and incentive
grants. All funding is administered as one combined program.

**Source of Governing Requirements**

This program is authorized under 23 USC Chapter 4 (Highway Safety) and
Pub. L. No. 109-59, the Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU). Implementing
regulations are 23 CFR parts 1200, 1225, 1240, 1250, 1252, 1313, 1335,
1345, and 1350.

**Availability of Other Program Information**

The National Highway Traffic Safety Administration maintains a web site
that provides program laws, regulations, and other general information
([http://www.nhtsa.dot.gov](http://www.nhtsa.dot.gov/) ). Program
procedures for some programs have been published in the *Federal
Register* at 71 FR 4196 (CFDA 20.604), 71 FR 5110 (CFDA 20.613), 71 FR
5727 (CFDA 20.611), 71 FR 5729 (CFDA 20.610).

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> Funds must be expended as specified in the grantee's highway safety
> plan. Certain specific costs which will not be approved or that
> require prior approval have been identified in Highway Safety Grant
> Funding Policy for the National Highway Traffic Safety Administration
> (NHTSA)/Federal Highway Administration (FHWA) Field-Administered
> Grants and are listed below (23 CFR section 1200.20).

1\. The following costs are allowable or allowable with specific
conditions:

> a\. *Equipment* - Major equipment (tangible, nonexpendable, personal
> property having a useful life of more than one year and an acquisition
> cost of \$5000 or more per unit) purchases for new and replacement
> equipment must be pre-approved.
>
> b\. *Installation* - The purchase and installation of regulatory and
> warning signs and supports and field reference markers are allowable
> for roads off the Federal aid system.
>
> c\. *Travel* - Travel for out-of-state individuals benefiting the host
> State's highway safety program is allowable.
>
> d\. *Training* - The cost of training personnel and the development of
> new training curricula and materials are allowable. However, training
> costs for Federal employees, with the exception of Department of the
> Interior personnel assigned Section 402 responsibility, are
> unallowable.
>
> e\. *Program Administration* - The costs for consultant services,
> promotional activities, alcoholic beverages to support police "sting"
> operations, and meetings and conferences are allowable.
>
> f\. *Public Communications* - Advertising space.
>
> g\. *Child Safety Seats* - For *Child Safety and Child Booster Seat
> Incentive Grants* (CFDA 20.613), child safety seat purchases are
> limited to\
> 50 percent of the annual award (Section 2011(d) of SAFETEA-LU).

2\. The following costs are unallowable:

> a\. *Facilities and Construction*: highway construction, maintenance
> or design, construction or reconstruction of permanent facilities,
> highway safety appurtenances, office furnishings and fixtures, and
> land (except for *Incentive Grant Program to Increase Motorcyclist
> Safety* (CFDA 20.612) funds, which may be used to purchase facilities,
> including the purchase of land (Section 2010(e)(1)(B)(iv) of
> SAFETEA-LU)).
>
> b\. *Equipment*: truck scales, traffic signal preemption systems.
>
> c\. *Training*: individual's salary, and training employees of Federal
> agencies, except as noted above.
>
> d\. *Program Administration*: research costs, expenses to defray
> activities of Federal agencies, and commercial drivers' compliance
> requirements.

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> a\. *State and Community Highway Safety* (CFDA 20.600) and *Safety
> Incentive Grants for Use of Seatbelts* (CFDA 20.604) - The State shall
> pay at least 20 percent, or the applicable sliding scale rate, as
> stated in the grant award, of the total cost of the program. The State
> shall pay at least 50 percent of the costs for planning and
> administration (23 USC 120(b) and 402(d); 23 CFR section 1252.4).
>
> b\. For *Alcohol Traffic Safety and Drunk Driving Prevention Incentive
> Grants* (CFDA 20.601), *Occupant Protection* (CFDA 20.602), and
> *Federal Highway Safety Data Improvements Incentive Grants* (CFDA
> 20.603), States are required to match Federal funds at 25 percent the
> first and second years, 50 percent the third and fourth years, and 75
> percent the fifth and sixth years (23 USC 405, 410, and 411; 23 CFR
> sections 1313.4(b), 1335.10, and 1345.4(a)).
>
> c\. *Safety Incentives to Prevent Operation of Motor Vehicles by
> Intoxicated Individuals* (CFDA 20.605), and *Safety Belt Performance
> Grants* (CFDA 20.609) are 100 percent federally funded (23 USC 163 and
> 406(g); 23 CFR section 1225.4(b)(3)).
>
> d\. *State Traffic Safety Information System Improvements Grants*
> (CFDA 20.610) and *Incentive Grant Program to Prohibit Racial
> Profiling* (CFDA 20.611) are 80 percent federally funded (Indian
> Nations and Territories are exempt from matching requirements and are
> 100 percent federally funded) (23 USC 408(e)(4); Section 1906(e)(2) of
> SAFETEA-LU).
>
> e\. *Child Safety and Child Booster Seat Incentive Grants* (CFDA
> 20.613) - States are required to match Federal funds at 25 percent the
> first, second, and third years, and 50 percent the fourth year
> (Section 2011(c) of SAFETEA-LU).
>
> f\. Additional matching requirements may be specified in the grantee's
> highway safety plan to limit the maximum Federal share of an
> ambulance, helicopter, automated external defibrillators, or aircraft
> to 25 percent.

**2. Level of Effort**

**2.1 Level of Effort** -- *Maintenance of Effort*

a.  For *Incentive Grant Program to Increase Motorcyclist Safety\
    *(CFDA 20.612), a State must maintain its aggregate expenditures
    from all other sources for motorcyclist safety training programs and
    motorcyclist awareness programs at or above the average level of
    such expenditures in fiscal years 2003 and 2004 (23 CFR part 1350).

b.  For *Alcohol Traffic Safety and Drunk Driving Prevention Incentive
    Grants* (CFDA 20.601), a State must maintain its aggregate
    expenditures from all other sources for alcohol traffic safety
    programs at or above the average level of such expenditures in
    fiscal years 2003 and 2004 (23 USC 410(a)(2).

c.  For *Occupant Protection* (CFDA 20.602), a State must maintain its
    aggregate expenditures from all other sources for programs to reduce
    highway deaths and injuries resulting from individuals riding
    unrestrained or improperly restrained in motor vehicles at or above
    the average level of such expenditures in fiscal years 2003 and 2004
    (23 USC 405(a)(2)).

d.  For *State Traffic Safety Information System Improvements Grants*
    (CFDA 20.610), a State must maintain its aggregate expenditures from
    all other sources for highway safety data programs at or above the
    average level of such expenditures in fiscal years 2003 and 2004 (23
    USC 408(e)(3)).

e.  For *Child Safety and Child Booster Seat Incentive Grants* (CFDA
    20.613), a State must maintain its aggregate expenditures from all
    other sources for child safety seat and child restraint programs at
    or above the average level of such expenditures in fiscal years 2003
    and 2004 (Section 2011(b) of SAFETEA-LU).

    **2.2 Level of Effort** -- *Supplement Not Supplant* -- Not
    Applicable

    **3. Earmarking**

> a\. At least 40 percent of Federal funds apportioned to a State under
> *State and Community Highway Safety* (CFDA 20.600) for any fiscal year
> shall be expended by or for the political subdivisions of the State in
> carrying out local highway safety programs (23 USC 402(b)(1)(C); 23
> CFR part 1250).
>
> b\. The costs for planning and administration under *State and
> Community Highway Safety* (CFDA 20.600) and *Alcohol Traffic Safety
> and Drunk Driving Prevention Incentive Grants (*CFDA 20.601) shall not
> exceed 10 percent of the funds received by the State (23 CFR section
> 1252.4).
>
> c\. States receiving grants as High Fatality Rate States under
> *Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants*
> (CFDA 20.601) must use at least one half of those grant monies toward
> High Visibility Enforcement Campaigns (23 USC 410(g)(2)).

**L. Reporting**

**1. Financial Reporting**

> a\. SF-269, *Financial Status Report* - Not Applicable
>
> b\. SF-270, *Request for Advance or Reimbursement* - Not Applicable
>
> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* - Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* - Not Applicable
>
> e\. HS-217, *Highway Safety Plan Cost Summary* *(OMB No. 2127-0003)*
>
> f\. *Federal-Aid Reimbursement Voucher* *(OMB No. 2127-0003)*

**2. Performance Reporting** - Not Applicable

> **3. Special Reporting** - Not Applicable