Office of Inspector General

Audit Report

FEDERAL HIGHWAY ADMINISTRATION’S 

OVERSIGHT OF FEDERAL-AID AND

RECOVERY ACT PROJECTS ADMINISTERED

BY LOCAL PUBLIC AGENCIES

NEEDS STRENGTHENING

Federal Highway Administration

Report Number: MH-2011-146

Date Issued: July 15, 2011
U.S. Department of

Memorandum

Transportation

Office of the Secretary

of Transportation

Office of Inspector General

Subject: ACTION: Federal Highway Administration’s 

Oversight of Federal-aid and Recovery Act 

Projects Administered by Local Public Agencies

Needs Strengthening

Report Number MH-2011-146

Date: July 15, 2011

From:

Joseph W. Comé

Assistant Inspector General for

Highway and Transit Audits

Reply to 

Attn. of: JA-40

To: Federal Highway Administrator

Each year states entrust the administration of approximately $8 billion in 

Federal-aid highway program funds to governments in cities and counties–referred

to as local public agencies (LPA)–for construction of highway infrastructure. The 

American Recovery and Reinvestment Act (ARRA) of 2009 invested an additional 

estimated $8 billion in LPA-led infrastructure projects.

1

FHWA considers those states that do not employ comprehensive oversight of 

LPA-administered Federal-aid highway projects as being high risk to the effective 

implementation of ARRA. In 2010, FHWA determined that 9 states had not 

employed a comprehensive level of LPA oversight and had material weaknesses in 

their LPA oversight programs. These weaknesses included a lack of resources to 

perform state oversight of LPAs, LPAs’ inadequate contract administration and 

quality assurance procedures, noncompliance with Federal labor requirements, and 

improper processing of contract changes.

 Along with this 

substantial infrastructure investment, ARRA legislation requires the Federal 

Highway Administration (FHWA) to perform oversight to ensure that ARRAfunded projects meet Federal requirements and legislative goals, and are 

adequately protected against fraud, waste, and abuse.

 1 Pub. L. No. 111-5 (2009). The estimated $8 billion is based on the ARRA funding requirement that apportions 

30 percent of ARRA funds for sub-allocation within each state.
2

As part of our ongoing ARRA oversight, we initiated this audit to determine 

whether FHWA has taken actions to reduce risks identified with locally

administered highway projects. Specifically, we assessed (1) the extent of LPA 

compliance with Federal requirements and (2) the effectiveness of FHWA’s 

actions in ensuring that states have adequate LPA oversight programs. To conduct 

this audit, we selected 4 states for site visits (California, Louisiana, Tennessee, and 

Texas) from 50 states and Washington, D.C., based on FHWA’s internal 

assessment of the risks related to states’ LPA oversight programs and the total 

ARRA funds authorized. In these four states, we visited 29 LPAs and reviewed 

59 ARRA and Federal-aid highway projects.

2

RESULTS IN BRIEF 

 These projects received a total of 

$2.5 billion in Federal, state, and local funds. We interviewed FHWA, state, and 

local officials and contract consultants, and reviewed relevant project documents. 

This performance audit was conducted from November 2009 through April 2011

in accordance with generally accepted government auditing standards and 

included such tests as we considered necessary to detect fraud, waste, and abuse. 

Exhibit A contains a detailed description of our scope and methodology.

We found at least one instance of noncompliance with Federal requirements in 

88 percent (52 of 59) of the LPA projects we reviewed in California, Louisiana, 

Tennessee, and Texas. Most prevalent were shortcomings related to construction 

management requirements. Although our review of transactions per project was 

limited, we still identified $5 million in unsupported costs. Due to similarities in 

the approach to LPA oversight in other states, the extent of noncompliance and 

unsupported costs we found suggest the potential for broader vulnerabilities with 

LPA-administered ARRA projects in other parts of the country. As a result, more 

than 2 years after the enactment of ARRA, FHWA still faces a significant 

challenge in ensuring LPAs are appropriately expending Federal funds.

Specifically:

• In California, each of the 15 LPAs we reviewed failed to comply with at 

least one key Federal or state requirement.

3 For example, field diary entries 

and other evidence, such as engineering calculations, were not recorded to 

substantiate the accuracy of periodic payments made to contractors.

4

 2 In the four states, we selected projects with recent significant activity from 829 LPAs and 5,934 Federal-aid and 

ARRA LPA highway projects identified by FHWA.

Our 

results are consistent with FHWA’s 2010 internal assessment, which 

3 We reviewed 37 active and recently completed construction projects administered by 15 LPAs valued at $2.1 billion 

in Federal, state, and local funds. 4 Engineering calculations include field measurements made by the resident engineering team to verify that specific 

contract items have been delivered and are eligible for progress payments. Progress payments are periodic payments 

made to a contractor for work satisfactorily performed as a project progresses, on a monthly basis. Payments are 

usually made to a contractor for work satisfactorily performed up to that point.
3

concluded California did not have a comprehensive LPA oversight 

program.

• In Texas, our results contradict FHWA’s 2010 internal assessment, which 

concluded that Texas had a comprehensive LPA oversight program. We

found that 9 of 10 LPAs failed to comply with at least one key Federal 

requirement, such as not adequately documenting cost analyses that should

serve as the basis for negotiating contract change orders.

• In Tennessee and Louisiana, we found instances of incomplete cost 

analyses to support negotiated change orders on the relatively small number 

of projects we reviewed. For example, in Tennessee, we found that one 

LPA approved multiple change orders totaling over $100,000 with 

incomplete or no evidence of cost analyses. 

As a result of noncompliance with Federal requirements, amounts paid with 

Federal dollars in California, Louisiana, Tennessee, and Texas could be greater 

than necessary. We identified $5 million in unsupported costs as a result of errors 

in project change orders, progress payments, and other financial transactions. 

Based on our results, additional unsupported project costs could be uncovered if 

FHWA or states performed more thorough inspections and reviews of project 

documentation.

While FHWA has taken action to address weaknesses in state LPA oversight 

programs, its actions are having a limited impact. In 2007, FHWA enhanced its 

programs for monitoring states’ oversight of LPA projects by evaluating the 

adequacy of states’ LPA oversight programs and urging states to adopt better 

management practices. For example, FHWA encouraged states to implement 

comprehensive LPA program manuals that document project requirements, and to 

perform detailed inspections of LPA projects to ensure they adhere to Federal 

requirements. However, our work in California, Louisiana, Tennessee, and Texas 

showed weaknesses in FHWA’s oversight actions. Specifically:

• FHWA Division Offices do not assess the adequacy of state LPA oversight 

programs fully and uniformly, limiting FHWA’s ability to make 

meaningful comparisons between states regarding their level of compliance 

with Federal requirements.

• FHWA Headquarters does not accurately report the status of states’ LPA 

oversight programs because state assessments are not based on objective 

criteria and do not sufficiently focus on whether states administer federally 

funded projects in compliance with Federal requirements.
4

• FHWA Headquarters does not independently assess or enforce corrective 

action plans that are needed to improve states’ oversight of LPAs.

We are making a series of recommendations to improve the effectiveness of 

FHWA’s LPA oversight.

BACKGROUND

The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 

for Users (SAFETEA-LU),5 holds states responsible for overseeing LPAs’ (subrecipients of Federal funding) project delivery and accounting. Accordingly,

states’ oversight programs must ensure that LPAs are meeting all Federal 

requirements during the design and construction of Federal-aid highway and 

bridge projects. In 2006, FHWA completed an internal review of LPAs and 

reported significant deficiencies in LPAs’ administration of Federal-aid projects, 

including compliance with construction and project management requirements in 

Titles 23 and 49 of the Code of Federal Regulations (C.F.R.).

6

FHWA also directed the Division Offices located in each state, Puerto Rico, and 

the District of Columbia to work with their counterparts to develop a date-specific 

action plan to bring LPA programs into compliance with Federal requirements. 

After Division Offices informed FHWA Headquarters that this action was a 

significant burden, FHWA gave the Division Offices the flexibility to determine 

the appropriate level and method of review to assess whether a state had a 

comprehensive LPA oversight program. However, FHWA still instructed

Division Offices to develop action plans to address deficiencies they identified.

 Based on the 

results of its 2006 review, FHWA directed its Division Offices to assess whether 

the states’ LPA oversight programs reliably resulted in LPA projects being 

administered in accordance with Federal requirements.

To promote accountability in ARRA, FHWA established national review teams

(NRTs) to conduct independent assessments of states’ compliance with Federal 

requirements. Using standard guides to conduct their reviews, the NRTs assess 

state processes and compliance in six risk areas: LPAs; plans, specifications, and 

estimates; contract administration; quality assurance; disadvantaged business 

enterprises; and eligibility for payments. At the close of each review, NRTs 

provide the Division Office with a report that summarizes the results, rates each

 5 Pub. L. No. 109-59 (2005). 6 The C.F.R. contains requirements for states and LPAs related to the management and construction of highway and 

bridge projects funded by the Federal Government. For example, 23 C.F.R. states that LPAs must ensure changes 

made to projects are reviewed and documented, an effective quality assurance program is in place, and projects 

comply with Federal laws. Additionally, 49 C.F.R. requires states and LPAs to ensure the use of disadvantaged 

business enterprises and to close out projects effectively.
5

review area, and cites observations and recommendations. The summary report 

forms the basis of a corrective action plan.

LPAS HAD A HIGH LEVEL OF NONCOMPLIANCE WITH 

FEDERAL REQUIREMENTS

LPA projects we reviewed exhibited a high level of noncompliance with Federal 

requirements, which has continued since ARRA’s implementation. We reviewed 

145 of the most recent project payments and change orders for LPA project 

activities covering basic Federal-aid and state requirements at 29 LPAs 

administering 59 Federal highway projects in California, Louisiana, Tennessee,

and Texas. These projects received $2.5 billion in Federal, state, and local 

funding, of which $394 million were ARRA funds. (See exhibit B for a list of the 

LPAs and projects we reviewed.)

For the 59 LPA projects selected, we conducted compliance reviews in 12 key 

project activities (detailed in exhibit C), and found a range of errors, with

7 activities having error rates at or above 39 percent. Most errors were related to 

highway and bridge construction management. For example, we found 

compliance errors in 33 of the 42 projects (79 percent) we reviewed for change 

orders and claims. Table 1 shows the number of projects we reviewed in each 

activity, and the number and percent of errors we found.

Table 1: Results of 12 LPA Project Activities Reviewed

Project Activities Reviewed

Number of 

Projects 

Reviewed*

Number of 

Projects 

Reviewed 

with Errors

Percent of 

Projects 

Reviewed with 

Errors

1. Change Orders and Claims 42 33 79%

2. Project Bidding—Plans, Specifications, 

and Estimates/Contractor 

Selection/Unbalanced Bid Analysis

30 22 73%

3. Utility Agreements/Reimbursements 3 2 67%

4. Consultant Selection and Billings 24 15 63%

5. Construction Pay Quantities and 

Progress Payments 45 22 49%

6. Project Reporting and Tracking 39 17 44%

7. Quality Assurance Procedures 44 17 39%

8. Value Engineering 13 3 23%

9. Construction Close-Out 17 3 18%

10. Right-of-Way Acquisitions 15 1 7%

11. Force Account Justification 1 0 0%

12. In-Kind Local Matching of Funds 1 0 0%

*All project activities were not reviewed in the 59 LPA projects selected.

Source: OIG analysis.
6

In California, we reviewed 37 Federal highway projects, managed by 15 LPAs,

valued at $2.1 billion in Federal, state, and local funds.7

• 8 LPAs could not provide sufficient engineering calculations for 12 projects

or the required daily construction diary entry that would demonstrate that 

the LPA engineers measured the quantities for which periodic progress 

payments were made to contractors.

 Each LPA had at least 

one error in the project activities we reviewed. Our review results are consistent 

with FHWA’s 2010 internal assessment, which concluded that California did not 

have a comprehensive LPA oversight program, indicating the potential for

significant vulnerabilities remaining in California. We further identified

$4 million in unsupported project costs in our selection of project transactions, 

resulting from these errors. Specifically, we found that of the 15 California LPAs 

we reviewed:

• 11 LPAs did not adequately document their cost analysis of negotiated 

contract change orders or sufficiently validate the time and material paid to

construction contractors on 19 projects. For example, in the City of 

Richmond, officials at the Transit Station project could not provide 

adequate field diaries to substantiate work hours, equipment, or materials 

relating to $190,000 in time and material contract change orders. Officials 

also could not provide evidence of a completed cost analysis required to

support payments the City made to contractors for a $31,000 negotiated 

work order.

• 4 LPAs could not demonstrate that they used competitive consultant 

selection procedures on 7 construction projects. Additionally, 8 LPAs did 

not prepare an independent cost estimate on 10 construction projects 

required to establish fair and reasonable compensation prior to negotiating 

contracts with construction consultants.

• 6 LPAs did not meet important aspects of quality assurance on 

11 construction projects we reviewed. A quality assurance program 

includes testing to ensure that all materials and workmanship meet contract 

specifications and requirements.

Texas had errors similar to those in California. In Texas, we reviewed 17 Federal 

highway projects, managed by 10 LPAs, totaling $364 million. Of the 10 LPAs, 

9 had at least one compliance error relating to the project activities we reviewed. 

The errors are of particular concern because they contradict FHWA’s assertion in 

 7 LPAs and projects were selected from 578 LPAs and 5,230 projects in California, 35 LPAs and 74 projects in 

Louisiana, 204 LPAs and 569 projects in Tennessee, and 12 LPAs and 61 projects in Texas. For the projects we 

selected, we reviewed 83 payments and change orders in California, 4 in Louisiana, 8 in Tennessee, and 50 in Texas.
7

a 2010 internal assessment that Texas had a “comprehensive” LPA oversight 

program. Texas projects had errors relating to contract progress payments, 

contract change orders, and construction quality assurance requirements. We 

identified almost $1 million in unsupported costs on the Texas LPA projects we 

selected, which resulted from the errors. Specifically, of the 10 Texas LPAs we 

reviewed:

• 7 LPAs could not demonstrate they performed sufficient engineering 

calculations to support whether the resident engineers had appropriately 

measured the quantity paid in progress payments on 10 construction 

projects. For example, in the City of El Paso, Texas, we selected two 

payments each from the Central Business District III and the Magoffin 

Street Improvement projects totaling $244,251. The City’s resident 

inspectors could not provide quality calculations, field diaries, or other 

documents to support progress payments made to contractors.

• 7 LPAs did not adequately document their cost analysis of negotiated 

contract change orders or sufficiently validate the time and material paid to 

construction contractors on 11 construction projects. For example, we 

found that the City of El Paso did not prepare or document a cost analysis 

on any of the four approved change orders we reviewed.

• 5 LPAs did not meet important aspects of quality assurance testing 

requirements on six construction projects. For example, City of El Paso 

officials could not provide documentation to show that they performed 

material quality testing on either the Central Business District III or the 

Magoffin projects.

Finally, our review of a small number of LPAs (4 LPAs) in Tennessee and 

Louisiana found instances of noncompliance with Federal requirements similar to

those in California and Texas. In Tennessee, we found that the City of 

Murfreesboro approved seven change orders totaling over $100,000 with 

incomplete or no evidence of a cost analysis to support negotiated change order 

prices. Additionally, on Louisiana’s Fleur de Lis Drive Improvement Project, the 

City of New Orleans incorrectly invoiced FHWA for $197,000 in change order 

work that was performed for another Federal agency. In this case, Louisiana 

allowed New Orleans to bill FHWA, instead of the Federal Emergency 

Management Agency, which was responsible for delaying the project. After our 

review, the FHWA Louisiana Division Office rescinded the Federal 

reimbursement.

The errors in project change orders, progress payments, and other financial 

transactions we selected resulted in $5 million in unsupported LPA project costs. 
8

Based on our test results, additional unsupported project costs could be uncovered 

if FHWA or states performed more thorough inspections and reviewed

documentation to support project costs billed to FHWA. We did not project our 

results to LPA projects in all states, because this was not a statistical sample.

FHWA’S ACTIONS ARE HAVING A LIMITED IMPACT ON 

IMPROVING THE EFFECTIVNESS OF STATE LPA OVERSIGHT 

PROGRAMS

While FHWA has taken actions to address weaknesses in state LPA oversight 

programs, its actions are having a limited impact. To date, FHWA has appointed a 

Headquarters LPA Coordinator, evaluated the adequacy of states’ LPA oversight 

programs, and advised states to develop and disseminate LPA manuals that detail

procedures for administering projects in compliance with Federal requirements. In 

addition, FHWA’s NRTs conducted LPA compliance reviews for ARRA projects 

in some states. However, our work in California, Louisiana, Tennessee, and Texas 

showed weaknesses in FHWA’s oversight efforts. Specifically, FHWA Division 

Offices do not assess the adequacy of state LPA oversight programs fully and 

uniformly; FHWA Headquarters does not accurately report the level of states’

compliance with Federal LPA requirements; and FHWA Headquarters does not 

independently assess the severity or validity of LPA deficiencies identified by 

Division Offices or enforce corrective actions needed to improve states’ oversight 

of LPAs.

FHWA Division Offices Do Not Assess the Adequacy of State LPA 

Oversight Programs Fully and Uniformly 

Since 2007, FHWA has attempted to formally assess the effectiveness of state

LPA oversight programs by directing Division Offices to determine whether state 

departments of transportation were ensuring that LPAs properly administer

federally funded projects. Initially, FHWA Headquarters provided Division 

Offices specific criteria to conduct the LPA reviews, but shortly thereafter, gave 

Division Offices the flexibility to choose the appropriate level and method of 

review to make this determination. Because Division Offices have inconsistent 

assessment criteria, FHWA cannot make meaningful comparisons between states 

regarding their levels of compliance with Federal requirements. Comparisons 

would allow FHWA to focus attention on improving high-risk states and identify 

emerging risks across the Nation. Accordingly, FHWA has no assurance that 

Division Office reviews consistently assess all LPA project management activities 

that the states must oversee to ensure compliance with Federal requirements. 

Our four-state review found that FHWA encourages states to perform field 

inspections of LPA projects, but what FHWA considers an acceptable inspection 
9

varies by Division Office. In some instances, states perform field inspections 

using a simple inspection checklist that only identifies that an activity was 

inspected. This process does not provide details on the specific procedures the 

inspectors reviewed or the methodology used to perform the inspection. For 

example, our work on five federally funded highway projects in Tennessee

showed that inspection checklists did not demonstrate that state engineers assessed 

whether project change orders and payments were based on a well-documented 

cost analysis. In contrast, for ARRA projects, California recently implemented a 

comprehensive field inspection process that involves documenting the specific 

procedures reviewed by inspectors. This will allow FHWA to assess LPA 

compliance with Federal requirements fully and uniformly, and ensure 

compliance.

In addition, FHWA has not ensured that all states have comprehensive and 

consistent processes in place to promptly resolve deficiencies on federally funded 

highway and bridge projects when LPA inspections identify them. For example, 

while California has implemented a comprehensive field inspection process for 

ARRA projects, it does not have an effective follow-up process for confirming

that LPAs took appropriate actions to resolve project deficiencies identified. 

FHWA Headquarters Does Not Accurately Report the Status of States’

LPA Oversight Programs

FHWA’s annual reports on the status of LPA oversight in individual states were

not based on objective criteria and did not focus on whether states administered 

federally funded projects in compliance with Federal requirements. Rather, the 

reports presented Division Offices’ subjective assessments on how well state 

programs were generally working in each respective state. These assessments did 

not routinely include a sample of LPA projects to validate compliance with 

Federal requirements. Such independent testing could determine whether states

are consistently enforcing Federal requirements.

In preparing the annual reports, the Headquarters LPA Coordinator8

 8 In 2007, FHWA established a Headquarters LPA Coordinator position to assist in setting FHWA’s LPA oversight 

policy and coordinate each Division Office’s assessment of state LPA oversight programs.

asks Division 

Offices to respond to a survey questionnaire, which contains open-ended questions 

regarding the status of each state’s LPA oversight program. The LPA Coordinator 

then judgmentally interprets the survey response narratives and produces a report 

on the national status of all state LPA oversight programs and any program 

weaknesses and corrective actions the Division Offices identified. We found the 

FHWA survey was based on a short series of open-ended questions rather than an 

assessment of LPA compliance with Federal requirements. Survey questions 

mainly based on Federal requirements would provide the LPA Coordinator with 
10

objective criteria to evaluate state programs. Accordingly, the reports do not 

contain meaningful information that would enable FHWA Headquarters to 

measure or understand existing oversight vulnerabilities, or clearly identify 

corrective actions that each state needs to accomplish.

FHWA’s 2010 internal assessment of Texas’ LPA program demonstrates the 

shortcomings of FHWA’s current approach to characterizing state LPA oversight.

This assessment showed that Texas had a “comprehensive” LPA oversight 

program, while California did not. However, we found similar high levels of

noncompliance with basic Federal construction management requirements at LPAs 

in California and Texas. Based on our review, FHWA’s California and Texas 

Division Offices used different approaches to reach their conclusions, but the

FHWA Headquarters LPA Coordinator accepted the Division Offices’

assessments without confirming their validity.

FHWA Headquarters Does Not Independently Assess or Enforce 

Corrective Action Plans Needed To Improve States’ Oversight of

LPAs 

Since 2007, FHWA has required Division Offices to develop action plans to 

address LPA-related deficiencies identified in their state LPA program 

assessments, including specific tasks to resolve deficiencies and timelines for 

completion. However, FHWA Headquarters only conducts a cursory review of 

the action plans and does not evaluate whether planned actions were adequate and 

timely to address the deficiencies noted. Therefore, the resolutions of deficiencies 

are likely protracted. For example, in 2009, the California Division Office 

determined that it would take California 3 to 5 years to establish a 

“comprehensive” LPA oversight program. As a result, California’s LPA program 

deficiencies could impact Federal funding well after most ARRA funds are 

expended.

Without Headquarters’ independent assessment or enforcement activities, it is not 

clear whether critical actions have been completed. After deficiencies are

identified in an action plan, the Division Office becomes primarily responsible for 

monitoring and resolving them. FHWA guidance suggests, but does not require, 

Divisions to provide Headquarters with quarterly updates of the status of their 

action plans. When quarterly updates are submitted, Headquarters provides little

follow through. As a result, subsequent reports on actions may be incomplete, 

outdated, or lacking specificity. For example, California’s quarterly update to its 

fiscal year 2009 plan indicated that actions were complete, while a description of 

the reported actions indicated only partial completion. A Texas quarterly update 

stated that actions were completed, but then did not describe how the actions were 

accomplished. We reported a similar concern in our January 2011 report on 

FHWA’s NRT efforts to identify and address corrective actions on ARRA 
11

highway projects.

9

Targeted assistance from FHWA Headquarters could improve the timeliness of 

Division efforts to improve LPA oversight. Further, Division Offices in states 

with acute LPA oversight deficiencies may not receive sufficient assistance and

direction from FHWA Headquarters to ensure that the corrective actions are 

appropriate and will be completed in a timely manner to improve management of 

projects funded with Federal dollars.

 We reported that FHWA Headquarters has not done enough to 

monitor Division Offices’ efforts to correct the oversight deficiencies the NRTs

identified during their state reviews.

CONCLUSION

ARRA greatly increased the number of federally funded highway and bridge 

projects that LPAs plan to construct across the country. To protect the billions in

ARRA investments in these projects, FHWA must ensure that all states have 

effective LPA oversight programs. While FHWA has made some progress in 

improving state programs, it must take more action to ensure that states provide 

effective oversight and that LPA-administered ARRA projects meet all Federal 

requirements. Further, continued noncompliance with Federal requirements could 

result in improper payment of limited Federal dollars at a time when infrastructure 

needs are increasing faster than funding resources.

RECOMMENDATIONS

To strengthen oversight of LPA projects, we recommend that FHWA:

1. Implement a policy establishing uniform procedures and criteria for Division 

Offices to use when assessing the ability of states to ensure LPAs meet Federal 

requirements. The policy should also require FHWA Headquarters to validate 

the accuracy of Division Office assessments.

2. Develop a Headquarters process to assess the effectiveness of Division and 

state LPA corrective action plans to ensure deficiencies are promptly resolved. 

The process should specify the planned actions, milestones, level of 

government responsible for implementation, and ensure actions are completed 

as planned and on schedule.

3. Develop a Division Office-based plan that will increase state oversight in the 

seven project activities in which we identified a high level of noncompliance 

with Federal requirements (change orders and claims, project bidding, utility 

 9 OIG Report Number MH-2011-027, “Actions Needed to Strengthen Federal Highway Administration’s National 

Review Teams,” January 6, 2011. OIG reports are available on our website: www.oig.dot.gov. 
12

agreements and reimbursements, consultant selections and billings, 

construction pay quantities and progress payments, project reporting and 

tracking, and quality assurance procedures).

4. Assess the project transactions related to the $5 million in unsupported project 

costs we identified in California and Texas and review similar transactions 

within these projects for unsupported costs. The assessment would include 

developing an action plan to collect all unsupported costs or identify FHWA’s

rationale for acceptance of these costs. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE

We provided FHWA a draft of this report for review and comment on April 8, 

2011, and received its formal written comments on June 9, 2011. FHWA’s 

complete response is included as an appendix to this report. FHWA fully 

concurred with our recommendations and provided implementation dates. We 

consider all of these recommendations resolved pending completion of the planned 

actions. 

ACTIONS REQUIRED

Subject to the follow-up provisions in Department of Transportation 

Order 8000.1C, we request that within 30 days of this report FHWA provide us 

with information to demonstrate its completion of the planned actions.

We appreciate the courtesies and cooperation of FHWA representatives during this 

audit. If you have any questions concerning this report, please call me at 

(202) 366-5630 or David Pouliott, Program Director, at (202) 366-1844.

#

cc: FHWA Director, Office of Program Management

FHWA California Division Administrator

FHWA Louisiana Division Administrator

FHWA Tennessee Division Administrator

FHWA Texas Division Administrator
13

Exhibit A. Objective, Scope, and Methodology

EXHIBIT A. OBJECTIVE, SCOPE, AND METHODOLOGY 

We conducted this audit from November 2009 through April 2011 in accordance 

with generally accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for 

our findings and conclusions based on our audit objectives. Our objective was to 

determine whether FHWA has taken actions to reduce risks identified with locally 

administered highway projects. Specifically, we assessed (1) the extent of LPA 

compliance with Federal requirements and (2) the effectiveness of FHWA’s 

actions in ensuring that states have adequate LPA oversight programs.

To assess the extent of LPA compliance with Federal requirements, we visited 

29 LPAs and reviewed 59 projects in California, Louisiana, Tennessee, and Texas

and reviewed 54 recent progress billings, 88 recent change orders, and 3 other 

payment actions. These states were selected based on FHWA’s ranking of each 

state’s LPA oversight program comprehensiveness, Federal-aid apportioned in 

fiscal year 2009, and the total dollar amount of highway funds that ARRA 

provided to each state. We selected one state for review in each of FHWA’s 

ranking categories: comprehensive, borderline comprehensive, borderline not 

comprehensive, and not comprehensive. Figure 1 shows FHWA’s ranking of the

comprehensiveness of state LPA oversight programs for each category.

Figure 1. FHWA Headquarters’ FY 2008 Assessment of State 

LPA Oversight Programs

Source: FHWA “Local Public Agency Federal-aid Project Oversight & Stewardship - FY 2008 Status 

Report,” September 2009.

Green - Comprehensive 

Light Green - Borderline Comprehensive

Pink- Borderline Not Comprehensive

Red - Not Comprehensive 
14

Exhibit A. Objective, Scope, and Methodology

We selected projects based on the degree of recent project activity and location,

from project lists provided by FHWA Division Offices in California, Louisiana, 

Tennessee, and Texas. These lists, totaling 5,934 projects and 829 LPA sponsors, 

included LPAs with ongoing ARRA work and LPAs slated to receive ARRA 

funding. In most instances, the data were based on state project records, because

FHWA’s databases do not differentiate between state and LPA-administered 

projects. At each LPA, we reviewed project construction activities to assess LPA 

compliance with Federal regulations. The 12 project activities we selected are 

representative of basic management oversight on a Federal-aid highway or bridge 

project and are required under 23 C.F.R. and 49 C.F.R. Additionally, we assessed 

state requirements that supplemented Federal requirements.

Because many LPA-administered ARRA projects were not in active construction, 

we reviewed one or more ongoing or recently completed federally funded highway 

projects to determine how the LPA sponsor was administering Federal highway 

projects. To determine whether LPA project activities complied with Federal 

requirements, we selected transactions from a project's most recent payments or 

change orders and reviewed the supporting documentation. For example, we 

reviewed the construction payment activity by reviewing up to five line items in a 

claim for reimbursement (progress billing) and determined whether field records

consisting of the resident inspector’s calculation sheets and daily construction 

diaries supported each line item. We reviewed these records further to determine 

whether calculations or diary postings were used to support the quantities claimed 

as delivered or installed and verified the accuracy and the completeness of the 

records with local officials.

To assess the effectiveness of FHWA actions, we interviewed FHWA’s Division 

Office officials in California, Louisiana, Tennessee, and Texas; the FHWA 

Headquarters LPA Coordinator; FHWA Headquarters officials in the Office of 

Professional and Corporate Development and Office of Program Administration; 

and FHWA’s NRT staff. We examined policies and memoranda detailing FHWA 

Division Offices’ LPA oversight responsibilities.

Additionally, we examined FHWA’s “Local Public Agency Federal-aid Project 

Oversight and Program Stewardship Status Reports” for fiscal years 2007, 2008,

and 2009, compiled by the FHWA LPA Coordinator, which reported on each 

Division Office’s yearly assessment of the state LPA oversight program. Our 

examination included identification of the process and procedures for compiling 

and completing the reports; interviewing Division Office staff who developed the 

state assessments and determining how the state assessments were made; 

reviewing Division Office corrective action plans; and interviewing state and local 

officials to assess the states’ LPA oversight role and their involvement and 

understanding of FHWA’s assessment of their state.
15

Exhibit B. LPAs and Projects Reviewed by the OIG

EXHIBIT B. LPAS AND PROJECTS REVIEWED BY THE OIG

Local Public Agency 

Reviewed

Project Reviewed FHWA 

Funding 

Sourcea

Unsupported 

Costs Foundb

City of Los Angeles, CA Valley Boulevard Federal-aid Yes

1st St. Viaduct Federal-aid No

Citywide Resurfacing Federal-aid No

City of Oxnard, CA 5th Street parking lot Federal-aid Yes

US 101 Rice Avenue ARRA No

County of Los Angeles, CA I-5/Hasley Canyon Road Federal-aid No

Port of Long Beach, CA Ocean Boulevard Federal-aid No

Gerald Desmond Bridge Federal-aid No

County of Shasta, CA Airport Road Bridge Federal-aid Yes

Blue Jay Lane Federal-aid No

Lone Tree Road Federal-aid Yes

City of Richmond, CA Transit Station Federal-aid Yes

Filbert Street Federal-aid Yes

Greenway Path Federal-aid Yes

City of San Bruno, CA SR82 Federal-aid Yes

San Bruno City Park Way ARRA No

City of Redding, CA Cypress Street Bridge Federal-aid Yes

Bonnyview Road Federal-aid No

County of Riverside, CA River Road Federal-aid Yes

Cantu-Galliano Road Federal-aid Yes

San Bernardino Associated 

Governments, CA

I-215 ARRA Yes

I-10 Ford Street Federal-aid Yes

City of Modesto, CA 9th St. Bridge Federal-aid No

9th St. at two locations Federal-aid Yes

Sylvan Avenue Federal-aid Yes

City of San Jose, CA Stevens Creek Intelligent 

Transportation System Federal-aid No

Street Resurfacing/Round 2 

Overlay Federal-aid Yes

Street Resurfacing/Round 3 

Overlay Federal-aid Yes

Various Roads/Foxworthy ARRA Yes

City of Glendale, CA SR134 Bridge Federal-aid Yes

Glenoaks Boulevard Federal-aid Yes

Pacific and Allen Avenues ARRA No
16

Exhibit B. LPAs and Projects Reviewed by the OIG

Local Public Agency 

Reviewed

Project Reviewed FHWA 

Funding 

Sourcea

Unsupported 

Costs Foundb

Controller Conversion ARRA No

City of Murrieta, CA Ivy St. Bridge Federal-aid No

Clinton-Keith Bridge ARRA No

City of Long Beach, CA Carson Street Federal-aid No

Spring Street ARRA No

City of Austin, TX Cesar Chavez Street Federal-aid Yes

E. 7th Street Federal-aid No

Central Texas Regional 

Mobility Authority, TX 183A Turnpike Federal-aid No

City of Hutto, Texas Cottonwood Trail Phase II ARRA Yes

City of Galveston, TX Traffic Signal Repairs Federal-aid No

City of Houston, TX Brittmoore Road Federal-aid Yes

Whiteheather Storm Sewer Federal-aid Yes

Corpus Christi Port 

Authority, TX

Joe Fulton International

Trade Corridor Phase I Federal-aid No

Joe Fulton International

Trade Corridor Phase II ARRA No

City of El Paso, TX Central Business District III Federal-aid Yes

Magoffin Avenue Federal-aid Yes

City of El Paso -

Sun Metro, TX West Side Transit Terminal Federal-aid Yes

Alamo Regional Mobility 

Authority, TX US 281 Super Street ARRA Yes

City of San Antonio, TX Jones Maltsberger Road ARRA Yes

Callaghan Road Federal-aid Yes

Woodlawn Avenue Federal-aid Yes

Clark Avenue Federal-aid Yes

City of Pineville, LA Susek Drive ARRA No

City of New Orleans, LA Fleur de Lis Drive Federal-aid Yes

Robert E Lee Boulevard Federal-aid No

City of Murfreesboro, TN Gateway Trail Federal-aid Yes

Tennessee Department of 

Environment and 

Conservation, TN

Fiery Gizzard Trail Federal-aid No

a “Federal-aid” denotes that the LPA project reviewed was using Federal-aid highway and bridge program funds and 

“ARRA” denotes that the LPA project reviewed was using ARRA funds. b Unsupported costs were found in our sample of change orders, progress payments, or other financial transactions in 

33 projects.
Exhibit C. Description of Project Activities Reviewed by the OIG

EXHIBIT C. DESCRIPTION OF PROJECT ACTIVITIES REVIEWED BY THE OIG

Project Activity Code of Federal 

Regulation

Description of Project Activity Reviewed

1. Change Orders 

and Claims

23 C.F.R. § 635.109, 

.120, and .124;

§ 140.501-.505

23 C.F.R. § 635 provides guidance on changed conditions and claims. 

State procedures require the use of change orders to document changed

conditions made to a project’s original plan and specifications.a

 23 C.F.R.

§ 635.120 requires the agency’s

b resident engineer to conduct and 

document a cost analysis of any proposed negotiated change order prior to 

award. In cases where change in price cannot be reasonably negotiated, 

the work is conducted on a force account basis, where field diaries are 

used to support the contractor billings. A claim arises when changes are 

not approved by the agency. 23 C.F.R. § 635.124 requires the claim to be

resolved through a formal administrative or legal process and 

administrative settlement costs are defined in 23 C.F.R. § 140.501, .503 

and .505. 

2. Project Bidding 23 C.F.R. § 635.104, 

.112-.114; § 630.205

23 C.F.R. § 635.104 and .112 provide that contracts for project 

construction are generally advertised formally and then competitively 

awarded. However, before advertising, 23 C.F.R. § 630.205, requires the 

agency’s engineer to prepare project’s plans, specifications, and estimates. 

Consistent with C.F.R. § 635.113, bids are publically opened and the 

agency shall prepare a tabulation of bids. Consistent with 23 C.F.R. 

§ 635.114, before awarding a contract, the agency systematically reviews 

the contractor’s proposal to determine, on an item-by-item basis, if the 

items bid are mathematically or materially balanced as a whole and are 

reasonable based on the agency’s cost estimate.

3. Utility/Railroad 

Agreements and 

Reimbursements

23 C.F.R. § 645.113;

§ 646.216

23 C.F.R. § 645.113 and § 646.216 states that when a project must 

relocate a utility or railroad during construction, a formal agreement with 

the utility or railroad should be prepared to identify the work scope and 

methods needed for the relocation. Per 23 C.F.R. § 645.113 and 

17
Exhibit C. Description of Project Activities Reviewed by the OIG

Project Activity Code of Federal 

Regulation

Description of Project Activity Reviewed

§ 646.216, the lump-sum amount needed for the relocation is contained in 

the project’s contract or force account agreement.c Additionally, 

consistent with Federal and state requirements, the agency must review the 

proposed lump-sum price before any agreement is made. When using 

force account agreements the agency must review invoices and project 

field records to ensure that amounts billed are actual and eligible costs to 

the project.

4. Consultant 

Selection and 

Billings

23 C.F.R. § 172.5 and 

172.7

23 C.F.R. § 172.5 provides that when selecting engineering and design 

consulting services, LPAs must use a competitive selection process that 

evaluates the technical qualifications of all candidates. Before negotiating 

the contract price, some states require the LPA to independently estimate 

the cost of planned scope of work. After award, consultant billings 

generally identify labor categories, hourly rates and job categories, other 

direct costs and indirect costs used to complete the consultant service 

deliverables; which should be reviewed by the LPA before approving the 

payments. In most cases, audits are performed of indirect cost rates 

charged by the consultant, as defined in 23 C.F.R. § 172.7.

5. Construction 

Pay Quantities 

and Progress 

Payments

23 C.F.R. § 635.122-

.123; 

49 C.F.R. § 18

23 C.F.R. § 635.122 provides for participation in a contractor’s claim for 

reimbursement of delivered materials during project construction. 

23 C.F.R. § 635.123 requires that agencies have procedures in effect that

provide adequate assurances of the quantities of completed work are 

determined accurately. State construction procedures require the 

contractor to identify specific contract line items that have been delivered 

to date. The agency is required to inspect and verify delivery. The main 

evidence to support the line item’s delivery in construction is the resident 

engineer’s daily field diaries and other evidence, such as engineering 

calculations. 49 C.F.R. § 18 specifies that the determination of pay 

quantity records and documents must be retained.

18
Exhibit C. Description of Project Activities Reviewed by the OIG

Project Activity Code of Federal 

Regulation

Description of Project Activity Reviewed

6. Project 

Reporting and 

Tracking

23 U.S.C. § 113;

49 C.F.R. § 26.37 and

.55

State guidance requires the agency to conduct routine field inspections and 

perform project management during construction. This includes 

maintaining field diaries, organizing and retaining project records, and 

monitoring construction schedules. The agency must validate certified 

payroll for labor compliance as stated in 23 U.S.C. § 113 and state 

guidance. The agency must also conduct disadvantaged business 

enterprises compliance reviews to validate that minority firms performed a 

commercially useful function per 49 C.F.R. § 26.37 and 26.55. 

7. Quality 

Assurance 

Procedures

23 C.F.R. § 637.205

and .207

23 C.F.R. § 637.205 requires the agency to have a process in place to 

evaluate the quality of construction workmanship and materials. 

According to 23 C.F.R. § 637.207 and state requirements, the evaluation 

includes pre-inspecting the manufacturer, performing acceptance testing, 

conducting independent assurance sampling and testing, and ensuring 

installed materials conform to specifications. Deficiencies can be 

identified through exception reports and must be resolved in a timely 

manner.d

8. Value 

Engineering

23 C.F.R. § 627 Value engineering requirements are codified in 23 C.F.R. § 627. An 

agency must conduct a systematic review that analyzes a project’s design, 

and develops recommendations to improve design and/or reduce costs. 

The agency should assess each recommendation and make appropriate 

engineering changes to design or processes.e

9. Construction 

Close-Out

49 C.F.R. § 18.50 When the project is completed, 49 C.F.R. § 18.50 requires the agency to 

complete a contract close-out of the award. According to state guidance, 

this includes an assessment of liquidated damages, a final inspection, 

formal acceptance of the contract, and a final invoice. 

10. Right-of-Way 

Acquisitions 

(ROW)

23 C.F.R. § 1.23; § 

710

23 C.F.R. § 1.23 defines ROW to include all project property (land) 

acquired and managed by the agency, which is acquired solely for placing 

the roadway and supporting facilities. The agency must comply with 

19
Exhibit C. Description of Project Activities Reviewed by the OIG

Project Activity Code of Federal 

Regulation

Description of Project Activity Reviewed

Federal requirements in 23 C.F.R. § 710, and state ROW acquisition 

requirements--including using property appraisals, payments of just 

compensation to landowners, and relocation assistance. 

11. Force Account 

Justification

23 C.F.R. § 635.204 When construction work is completed by a public agency, instead of a 

private contractor, 23 C.F.R. § 635.204 requires the agency to demonstrate 

that the planned force account is cost-effective. State guidance requires the 

use of force account to be justified through a “public interest finding” 

because the work was not open to competition. 

12. In-kind Local 

Matching of 

Funds

49 C.F.R. § 18.24 49 C.F.R. § 18.24 defines instances when an agency can use non-monetary 

matching contributions of in-kind services or donated property. These 

matches replace the more traditional cash match that states and local 

agencies are required to provide for most Federal-aid projects. a State procedures described in this exhibit represent the procedures and processes established by the states to implement the CFR requirements. This exhibit provides the 

procedure used in a sampled state that most clearly describes and best exemplifies state implementation of the CFR requirement. b The “agency” refers to a state or local agency responsible for administering a Federal-aid highway or bridge construction project. c Force account includes the labor, equipment, materials, and supplies directly incurred by a state transportation department, county, railroad, or public utility on a federally 

funded highway project. d Some of the quality assurance regulatory requirements referenced pertain only to National Highway System projects. e Some of the value engineering regulatory requirements referenced pertain only to National Highway System or Federal-aid System projects.

20
21

Exhibit D. Major Contributors to This Report

EXHIBIT D. MAJOR CONTRIBUTORS TO THIS REPORT 

David Pouliott Program Director

Name Title

Peter Babachicos Project Manager

John Hannon Senior Analyst

William Lovett Senior Auditor

Paul McBride Senior Analyst

Kristi-Jo Preston Analyst

Daniel Ben-Zadok Analyst

Petra Swartzlander Statistician

Harriet E. Lambert Writer-Editor
22

Appendix. Agency Comments

APPENDIX. AGENCY COMMENTS

Subject: INFORMATION: Federal Highway Administration Date: June 8, 2011

 Response to Office of Inspector General (OIG) Draft Report on 

 FHWA’s Oversight of Federal-aid and Recovery Act Projects 

 Administered by Local Public Agencies (10U3001M000) 

From: Victor M. Mendez 

 Administrator

 

To: Calvin L. Scovel III

 Inspector General (J-1)

The Federal Highway Administration’s (FHWA) successful implementation of the 

American Recovery and Reinvestment Act of 2009 (Recovery Act) funded more than 

13,300 projects, improved more than 41,500 miles of road and more than 2,700 bridges to 

date, and it helped put tens of thousands of Americans back to work. Recognizing that 

the unprecedented scale, speed, and scope of the Recovery Act would magnify the risks 

inherent in providing effective stewardship for these funds, FHWA built upon its existing 

comprehensive risk management framework. Through mechanisms such as the FHWA 

National Review Team (NRT), multidisciplinary experts charged with conducting 

independent reviews of Recovery Act funded projects, the Agency provided consistent, 

national oversight of its administration of Recovery Act programs to help ensure Federal 

funds are used in accordance with statutory and regulatory requirements. Based on its 

previous work, FHWA recognized from the outset that Recovery Act projects 

administered by local public agencies (LPAs) presented a uniquely challenging set of 

risks.

Memorandum

Reply to

Attn. of: HIF/HAIM-10
23

Appendix. Agency Comments

The FHWA’s Corporate Risk Assessment had previously identified subrecipients as one 

of the Agency’s top risk areas. This information was a critical component used to 

formulate the Agency’s Recovery Act Risk Plan, which further focused oversight on 

areas posing the highest risk, particularly LPAs. Using a multifaceted approach to risk 

management, including information from single audits, along with results from FHWA’s 

programmatic reviews and its Financial Integrity Review and Evaluation Program, 

FHWA continues to address inherent challenges with LPA oversight for all projects. 

These include variable quality and oversight by State departments of transportation 

(DOTs) due to resource constraints, weak internal controls, and a general lack of 

experience by LPAs in handling Federal requirements and Federal-aid highway projects 

in particular. 

The NRT’s findings confirmed FHWA’s expectations of the risks posed by States’ 

oversight of LPA-administered highway projects. To date, the NRT has conducted 189 

site visits touching 1,279 Recovery Act projects, resulting in more than 1,588 total NRT 

recommendations for division offices’ appropriate action. Through priority action taken 

and vigilant monitoring, 72 percent of the NRT’s Recovery Act recommendations issued 

have already been fully addressed and closed. For its most significant findings, the NRT 

issues Recovery Act Advisories, highlighting the need for immediate management 

attention. The LPA oversight is addressed in these advisories, including one issued in 

September 2010, which identified recurring LPA issues and emphasized the need for 

FHWA division offices to ensure the State DOT’s preventive measures are effective. 

Specifically, the NRT highlighted a lack of assurance that State DOT’s oversight 

activities complied with the single audit requirements and that audit findings were 

tracked and resolved timely. The NRT advisory also underscored the need to ensure 

required single audits are completed and findings are addressed expeditiously. The 

FHWA recognized the need for priority action to address all single audit findings and 

have already closed 60 percent of OIG Recovery Act related single audit 

recommendations issued as of April. 

Issues associated with subrecipient reporting and oversight have been identified 

governmentwide and have been well documented through the single audit process. With 

oversight responsibilities of the Federal-aid highway program assumed by the States 

according to 23 United States Code (USC) §106, FHWA is utilizing the full scope of its 

authority to ensure that States’ oversight of LPA-administered projects focus on required 

accounting and audit controls at the local government level. The FHWA is fully 

committed to providing reasonable assurance that Federal funds are used effectively with 

adequate safeguards against waste, fraud and abuse. 

OIG Recommendations and FHWA Actions

Recommendation 1: Implement a policy establishing uniform procedures and criteria 

for Division Offices to use when assessing the ability of States to ensure LPAs meet 

Code of Federal Regulations (CFR) requirements. The policy should also require FHWA 

Headquarters to validate the accuracy of Division Office assessments.
24

Appendix. Agency Comments

Response: Concur. The FHWA will issue a new policy to establish uniform procedures 

and criteria for division offices to use when assessing the ability of the State DOTs to 

assure that Federal-aid requirements are met on LPA-administered projects. The new 

policy will include a sampling process for FHWA Headquarters to review assessments 

conducted at the division office level. Issuance of the new policy is targeted for 

completion by September 30, 2011, for use in the annual LPA assessment conducted in 

2012.

Recommendation 2: Develop a Headquarters process to assess the effectiveness of 

division offices and State LPA corrective action plans to ensure deficiencies are promptly 

resolved. The process should specify the planned actions, milestones, level of 

government responsible for implementation, and ensure actions are completed as planned 

and on schedule.

Response: Concur. As noted in the report, FHWA Headquarters annually monitors and 

reports on the progress of the division office and LPA action plans. The policy described 

in the response to Recommendation 1 will help formalize FHWA Headquarters’ 

procedures to assess and monitor the effectiveness of LPA corrective action plans to 

ensure expedited resolution of deficiencies identified. Issuance of the new policy is 

targeted for completion by September 30, 2011 for use in the annual LPA assessment 

conducted in 2012.

Recommendation 3: Develop a division office-based plan that will increase State 

oversight in the seven project activities in which we identified a high level of 

noncompliance with Federal requirements.

Response: Concur. The FHWA implemented the recommended division office-level 

plans throughout the Agency. The FHWA Headquarters will issue a memorandum to the 

division offices emphasizing the importance of working with States to ensure that the 

areas noted as having high rates of noncompliance are given particular attention in the 

oversight of LPA-administered projects. We expect to issue the memorandum by August 

30, 2011. This will allow us to incorporate information obtained during implementation 

of Recommendation 4.

Recommendation 4: Assess the project transactions related to the $5 million in 

unsupported project costs we identified in California and Texas and review similar 

transactions within these projects for unsupported costs. The assessment would include 

developing an action plan to collect all unsupported costs or identify FHWA's rationale 

for acceptance of these costs.

Response: Concur. The FHWA will review the unsupported costs identified in the OIG 

audit and any confirmed unsupported costs will be recovered accordingly. We are 

currently reviewing OIG’s assessment of the project transactions. We will provide a 

report by August 15, 2011, that identifies unsupported costs that will be recovered and 

those costs that are deemed to be adequately supported.
25

Appendix. Agency Comments

Recovery of costs will depend upon the standard that applies to the particular project. 

Not all Federal-aid projects are subject to the construction and contract administration 

provisions of Title 23 of the CFR. In particular, Title 23 of the USC provides that those 

projects not located on the National Highway System must be designed, constructed, 

operated, and maintained in accordance with State laws, regulations, directives, safety 

standards, design standards, and constructions standards. In conducting this review, we 

will assess compliance with the standards applicable to each project.

Overall, FHWA invested Recovery Act funds in highway and bridge projects that not 

only generated tens of thousands of jobs, but also provided a sound investment in 

America’s transportation infrastructure. The FHWA anticipated the oversight risks 

involved with these investments, particularly with regard to LPAs, and implemented 

extraordinary controls in an effort to ensure these investments fully achieved their 

intended goals. The FHWA appreciates the efforts of the OIG to further strengthen its 

oversight of Recovery Act and Federal-aid projects administered by LPAs. If you have 

any questions or comments regarding this response, please contact David Nicol, Director 

of Program Administration, Office of Infrastructure, at 

202-366-5530.