contents

message from the secretary 1

message from the chief financial officer 4

management’s discussion and analysis

mission and values 11

organization 12

performance highlights 15

financial highlights 22

compliance with laws and regulations 26

performance report

performance framework 59

FY 2005 performance report 63

SAFETY STRATEGIC OBJECTIVE 71

MOBILITY STRATEGIC OBJECTIVE 89

GLOBAL CONNECTIVITY STRATEGIC OBJECTIVE 99

SECURITY STRATEGIC OBJECTIVE 105

ENVIRONMENTAL STEWARDSHIP STRATEGIC OBJECTIVE 109

ORGANIZATIONAL EXCELLENCE STRATEGIC OBJECTIVE 117

performance completeness and reliability 129

dot program evaluations 133

financial report

inspector general’s audit report 154

principal statements 184

notes to principal statements 189

required supplementary information 226

required supplementary stewardship information 231

other accompanying information

performance data completeness and reliability details 238

improper payments information act (ipia) reporting details 273

fy 2005 omb “part” program for dot 281

fy 2005 direct obligations 284

inspector general’s FY 2005 management challenges 287

www.dot.gov

MESSAGE FROM THE SECRETARY

The top priorities of the Department of Transportation (DOT) are to keep the

traveling public safe, to increase mobility, and to ensure that our transportation

system supports the Nation’s economic growth and development. To ensure we

achieve our goals, DOT managers keep a watchful eye on performance metrics

and closely monitor our progress.

I’m proud to report that for the last five years, DOT has earned an unqualified

audit opinion on our financial statements. This shows that we provide strong

stewardship and accountability for the resources entrusted to us by the Nation.

To improve our operations, we continue to consolidate and streamline

programs and to improve service delivery and project management. To support

these efforts, this year the Congress realigned programs and established two

new organizations within the Department: the Pipeline and Hazardous Materials Safety Administration

and the Research and Innovative Technology Administration.

Transportation Safety

Safety remains our most important strategic goal, and the Nation’s roads are the safest in history. However,

highway crashes cause 95 percent of all transportation-related fatalities and 99 percent of transportation

injuries and are the leading cause of death for people ages 4 through 33. Alcohol is the biggest contributing

factor to fatal crashes, claiming 16,694 lives in 2004 alone (39 percent of all crash related fatalities). Our

projected highway fatality rate is the lowest in 30 years, but is still higher than our target. An upsurge in

the number of trucks on the road and the number of miles traveled caused a slight increase in truckrelated fatalities. The Department is realizing that we may have achieved as much as possible with our

current safety strategies. To continue to make our roads safer, we will need to explore new strategies and

technologies and best practices.

In May 2005, I unveiled a new National Rail Safety Action Plan that will analyze data to identify potential

high risk accident causes so we can focus oversight and inspection resources on them.

Surface Transportation Re-authorization

On August 10, 2005, the President signed into law the Safe, Accountable, Flexible, Efficient Transportation

Equity Act: A Legacy for Users (SAFETEA-LU), which authorizes transportation programs for highways,

highway safety, hazardous materials transportation, transit, and motor carriers for 2005 through 2009.

With $286.4 billion in funding for highways, highway safety, and public transportation, SAFETEA-LU

represents the largest surface transportation investment in our Nation's history. SAFETEA-LU also refines

the programmatic framework for the investments needed to maintain and grow our vital transportation

infrastructure. SAFETEA-LU promotes more efficient and effective surface transportation programs by

focusing funding on transportation issues of National significance, while giving State and local

transportation decision makers more flexibility for solving transportation problems in their communities.

We are also preparing for the reauthorization of our aviation programs and the Aviation Trust Fund that

supports them. As always, we are requesting public input and involving our stakeholders in preparing for

aviation reauthorization.

1
2

Next Generation Air Transportation System

Our Nation’s air transportation system serves as a critical engine of economic growth and facilitates the

safe and efficient movement of people and goods across the globe. We must be prepared to accommodate

this growing demand in the years ahead. The Next Generation Air Transportation System will take

advantage of the latest technologies while incorporating the many security improvements that have been

introduced in the recent years. It will also establish an effective security system without limiting mobility

or civil liberties; reduce the impact of weather on air travel by using enhanced weather forecasts; minimize

the impact of aircraft noise and emissions; and harmonize global air operations standards, policies and

procedures. 

As air travel levels have increased and are set to surpass pre-September 11, 2001 levels, airport capacity is

becoming a pressing issue. The Federal Aviation Administration is implementing an Operational

Evolution Plan to keep pace with airport demand over the next decade. This Plan focuses on

infrastructure, primarily runways, as well as new technology and enhanced processes. The Plan is based on

the Nation’s changing population distribution, particularly in the South and Southwest, to ensure that

capacity needs are addressed before they become aviation choke points.

The Department continues to negotiate “open skies” agreements—bilateral agreements that let passenger

demand and market conditions, not government regulation, determine landing and departure schedules.

New agreements with Ethiopia, India, Maldives, Paraguay, Thailand and Uruguay have created access to

better quality, lower priced air service for almost 3 billion people.

Security

The relationship between transportation security and maintaining transportation’s contributions to our

Nation’s economic vitality is a critical challenge facing several Departments. Working with the Department

of Homeland Security, we are continuing to enhance the security of the Nation’s transit systems and the

St. Lawrence Seaway infrastructure, and we are working to harmonize safety and security regulations for

the rail industry. We are working with the States to enhance the security of highway connections to

strategic ports and critical elements on the highway system, such as tunnels and bridges, and are working

with the Military Transportation Command to ensure adequate planning for the strategic movement of

military cargos on the highways. The Federal Motor Carrier Safety Administration is working with the

Departments of Justice and Homeland Security and the American Association of Motor Vehicle

Administrators to update security checks for hazardous materials endorsements on commercial driver

licenses.

President's Management Agenda

The Department maintained four green status ratings on the President's Management Agenda scorecard in

FY 2005. For the competitive sourcing goal, DOT completed seven competitions, including a large,

complex competition for FAA's automated flight service stations. To date DOT has completed 20

competitions for 2,900 positions with anticipated savings of $2 billion. For the human capital goal, we

linked our performance management system to our strategic goals and enhanced our accountability

system and training for managers. Under the E-Government goal, we migrated DOT employees to a new

payroll and personnel system and service provider. For the budget-performance integration goal, we
incorporated marginal cost of performance data for each operating administration into our FY 2007

budget request and presented our marginal cost of performance methodology at a government-wide

summit as a model to other Federal agencies.

I’m also proud that in February 2005, DOT was named a Center of Excellence to provide our financial

system and services to other Federal agencies. DOT now cross-services the National Endowment for the

Arts and recently signed up two new customers: the Commodity Futures Trading Commission and the

Institute for Museum and Library Services.

Hurricane Relief Stewardship

Under the National Response Plan, DOT is the lead agency for providing transportation in disaster areas.

Following Hurricane Katrina, we immediately sent personnel and direct support to the affected region.

DOT coordinated the largest civilian airlift operation in U.S. history to move evacuees to safe locations

and coordinated the formation of an emergency bus fleet rivaling the size of the Greyhound fleet in a

matter of days. In addition, we moved 14,000 truckloads of water, ice, meals ready-to-eat, and generators.

I took the initiative to activate our Ready Reserve Force vessels to support command and control centers.

DOT is a critical part of the on-going effort to repair the infrastructure at airports, roadways, ports and

pipelines.

Program and Financial Performance

Our FY 2005 Performance and Accountability Report contains performance and financial data that are

substantially complete and reliable. The Performance Data Completeness and Reliability section in the

report contains a detailed assessment of the inadequacies in DOT’s performance data, and explains how

we will remedy those deficiencies. The Department continues to work to ensure we have no material

noncompliance with laws or regulations. However, DOT has a qualified statement of assurance with

exceptions noted under the Federal Managers’ Financial Integrity Act (FMFIA). Three material

weaknesses are for Section 2 and one material weakness is for Section 4. We will continue to make

improvements throughout FY 2006.

Conclusion

Our accomplishments underscore the Department’s commitment to continue improving the management

of all our resources and programs. While reporting on our accomplishments over the last year, this report

also provides a blueprint for our future performance objectives in safety, mobility, global connectivity,

environmental stewardship and security. I look forward to continuing to work with the President, the

Administration, and the Congress to achieve a safer, simpler and smarter transportation system for our

Nation.

November 15, 2005

3
4

MESSAGE FROM THE ASSISTANT SECRETARY

FOR BUDGET AND PROGRAMS & CHIEF FINANCIAL OFFICER

The Department of Transportation (DOT) has significantly improved its

financial management over the last year. It is now two years since we became the

first cabinet level agency to finish converting all our organizations to a state-ofthe-art financial management system. Our 3,500 system users are realizing

significant benefits from the new system, including receiving financial

statements produced from our core accounting system monthly and at the end of

the fiscal year. We are very proud that we have earned an unqualified audit

opinion on the DOT consolidated financial statements for the last 5 years and

that we have continued to meet the accelerated deadline for audited financial

statements.

In July 2005, I issued a new policy that enhances the organizational placement and oversight functions of

the Chief Financial Officer (CFO) in each DOT Operating Administration. The effectiveness of our

financial managers is enhanced by our Departmental CFO Council and the specialized financial

workgroups we have established to resolve specific issues.

The FY 2005 financial audit determined that two material weaknesses have been downgraded to

reportable conditions (reconciliation within DOT and with other Federal agencies, and financial systems

controls). While significant progress has also been made on grants oversight and financial reporting for

Highway Trust Fund agencies, they remain material weaknesses. In addition, the Federal Aviation

Administration (FAA) has a new material weakness in timely processing of transactions and reconciliation

of accounts. Solutions for correcting audit weaknesses and noncompliance include better oversight and

stronger controls over financial operations. We are committed to correcting these issues as quickly as

possible.

DESIGNATED A FINANCIAL MANAGEMENT CENTER OF EXCELLENCE

In February 2005, the President’s FY 2006 budget named DOT as one of four government-wide Financial

Management Centers of Excellence. Through this designation, other Federal agencies are encouraged to

take advantage of the experience and expertise DOT developed as we implemented our new financial

system. By using DOT’s financial system, other agencies lower their cost and risks in adopting a new

financial system and realize significant economies of scale. Joining our first customer, the National

Endowment for the Arts, are two new customers, the Commodity Futures Trading Commission and the

Institute for Museum and Library Services, which recently signed up to use our financial system and

accounting services.

ACCOMPLISHMENTS IN IMPROVING FINANCIAL MANAGEMENT

In addition to our new processes for monthly and year-end closing and producing financial statements, we

have established a new reimbursable agreement reconciliation process and developed a new chart of

accounts and sets of books for the Department’s two new organizations: the Pipeline and Hazardous

Materials Safety Administration and the Research and Innovative Technology Administration.
We are also:

CONSOLIDATING ACCOUNTING OPERATIONS. A critical element in strengthening our financial management

programs has been to consolidate accounting operations at the Department’s Enterprise Services Center,

which is operated by the FAA’s Mike Monroney Aeronautical Center in Oklahoma City. Accounting

functions for nearly all remaining DOT organizations will be consolidated during FY 2006. We are also

working closely with the Department’s Senior Procurement Executive and the procurement community to

be able to interface procurement data directly into our financial system. This will complete the effort

started by the FAA, which conducts a majority of DOT procurements and already has its procurement

system integrated with the Department’s financial system.

IMPLEMENTING MANAGERIAL COST ACCOUNTING. The FAA, whose cost accounting system now covers about 90%

of its budget, is currently working to implement cost accounting for the two remaining lines of business.

During the last quarter of FY 2005, the Federal Highway Administration began implementing labor

distribution reporting through the Department’s new Time and Attendance and Labor Distribution

system. The Federal Transit Administration completed its pilot test on labor distribution reporting, and

the entire agency will be reporting labor hours in January 2006, in preparation for full implementation of

managerial cost accounting in March 2006.

CONSOLIDATING REDUNDANT FINANCIAL SYSTEMS. In early 2004, we completed the sunset of our legacy

accounting system, and in early 2006 we are sunsetting our legacy personnel, payroll, and time and

attendance systems. Under the Office of Management and Budget (OMB) e-Payroll initiative, during

FY 2005 we migrated our 55,000 employees to the Department of the Interior’s Federal Personnel and

Payroll System. In conjunction with this migration, we upgraded our Time and Attendance and Labor

Distribution system to support managerial cost accounting throughout the Department; full

implementation of labor distribution will be completed in FY 2006. Also in FY 2006, we will sunset half a

dozen legacy travel systems as we complete the Department-wide implementation of our new GovTrip

e-Travel system, which is interfaced with the Department’s financial system and replaces an earlier self

booking system, authorization/voucher processing system, and travel management services with one

paperless end-to-end travel solution.

PRESIDENT'S MANAGEMENT AGENDA

The Department has maintained our five green scores among eight initiatives on the President’s

Management Agenda (PMA) goals. For the budget and performance integration goal, we identified

efficiency measures for all programs that have been scored by the Program Assessment Rating Tool

(PART) and provided marginal cost of performance information in budget submissions for selected

performance goals. OMB has recognized DOT as a Government-wide leader in the marginal cost of

performance program and asked us to present our approach to other Federal agencies at an

OMB-sponsored seminar on improving marginal cost methods and practices.

For the financial performance PMA goal, we developed, pilot-tested, and implemented the first phase of a

managers’ DASHboard that presents financial and performance data to support business decision-making

by our managers. We will be expanding and enhancing our DASHboard throughout FY 2006. For the

improper payment PMA goal, DOT completed risk assessments of our largest programs, which revealed

an extremely low rate of improper payments. Working with the Tennessee Department of Transportation,

we conducted an innovative research project which developed a methodology that we will use to assess

improper payments for additional transportation programs across the Nation. We will also include the

5
6

Hurricane Katrina response effort in our improper payments assessment program for FY 2006. For the real

property PMA goal, the FAA is serving as the executive agent for the Department and is coordinating

implementation of the Federal Real Property Council’s performance measures.

CONCLUSION

DOT is committed to having a reliable financial management system that produces timely and accurate

information for our managers. Now that DOT has been named a Center of Excellence for financial systems

and services, we are working with our private sector business partners to add new customers to our

Center. Our plans for further enhancing our financial and performance management programs by

consolidating financial systems and operations and implementing managerial cost accounting will build

on our accomplishments and continue to strengthen our accountability to Congress, the President, and the

public in FY 2006 and beyond.

November 15, 2005
Management’s

Discussion & Analysis

The Department of Transportation’s (DOT) Performance and Accountability Report (PAR) for Fiscal Year

2005 (Report) provides performance and financial information that enables Congress, the President, and

the public to assess the performance of the Department relative to its mission and stewardship of the

resources entrusted to it. This Report satisfies the reporting requirements of the following major

legislation.

• Reports Consolidation Act of 2000

• Government Performance and Results Act of 1993

• Chief Financial Officers Act of 1990

• Government Management Reform Act of 1994

Under the Reports Consolidation Act of 2000, agencies are permitted to submit combined reports in

implementing statutory requirements for financial and performance management reporting to improve

the efficiency of executive branch performance.

These reports are combined in the PAR, which consists of the Annual Performance Report—required by

the Government Performance and Results Act of 1993—with annual financial statements—required under

the CFO Act, as amended by the Government Management Reform Act of 1994—and other reports, such

as assurances on internal control, accountability reports by agency heads, and Inspector General

assessments of an agency’s management challenges.

Additional copies of the Department of Transportation’s Fiscal Year 2005 Performance and Accountability

Report are available by writing to

U.S. Department of Transportation

Office of the Chief Financial Officer

400 7th Street S.W., Room 10101

Washington, DC 20590

You may also view this Report online at http://www.dot.gov

9

About This Report

Management’s Discussion and Analysis
10 FY 2005 Performance and Accountability Report

How This Report is Organized

Management’s Discussion and Analysis (MD&A)

The Management’s Discussion and Analysis (MD&A) section provides a summary of the entire Report. It

includes an organizational overview; a summary of the most important performance results and challenges

for FY 2005; a brief analysis of financial performance; a brief description of systems, controls, and legal

compliance; and information on the Department's progress in implementing the President's Management

Agenda. The MD&A also addresses the management challenges identified by the Department’s Inspector

General and a summary of the Inspector General’s audit report.

The Performance Report

The Performance Report section contains the annual program performance information required by the

Government Performance and Results Act of 1993 (GPRA), and includes all of the required elements of an

annual program performance report as specified in OMB Circular A-11, Preparing, Submitting and

Executing the Budget. The results are presented by Strategic Objective.

The Financial Report

The Financial Report section contains the Department's financial statements, notes, required

supplementary information, supplementary information pertaining to the Department's stewardship of

Federal assets, related Inspector General’s audit report, and other accompanying information.
MISSION

To develop and administer policies and programs that contribute to providing fast, safe, efficient, and

convenient transportation at the lowest cost consistent with the National objectives of general welfare,

economic growth and stability, the National security, and the efficient use and conservation of the

resources of the United States.

VALUES

Professionalism

As accountable public servants, we exemplify the highest standards of excellence, integrity, courtesy and

respect in the work environment.

Teamwork

We support each other, respect differences in people and ideas, and work together in ONE DOT fashion.

Customer Focus

We strive to understand and meet the needs of our customers through service, innovation, and creativity.

We are dedicated to delivering results that matter to the American people.

Management’s Discussion and Analysis 11

DOT Mission and Values
12

History

Established in 1967, DOT sets Federal transportation policy and works with State, local, and private sector

partners to promote a safe, secure, efficient, and interconnected National transportation system of roads,

railways, pipelines, airways, and seaways. DOT’s overall objective of creating a safer, simpler, and smarter

transportation program is the guiding principle as we move forward to achieve specific goals.

How We Are Organized

DOT employs almost 60,000 people across the country, in the Office of the Secretary of Transportation

(OST) and through twelve Operating Administrations (OAs) and bureaus, each with its own management

and organizational structure.

The Office of the Secretary of Transportation provides overall leadership and management direction,

administers aviation economic programs, and provides administrative support. The Office of Inspector

General (OIG) and the Surface Transportation Board (STB), while formally part of DOT, are independent

by law.

Organization

ASSISTANT

SECRETARY FOR

TRANSPORTATION

POLICY

ASSISTANT SECRETARY

FOR AVIATION AND

INTERNATIONAL

AFFAIRS

UNDERSECRETARY

FOR POLICY

SECRETARY

DEPUTY SECRETARY

OFFICE OF

THE CHIEF

INFORMATION

OFFICER

ASSISTANT SECRETARY

FOR BUDGET AND

PROGRAMS &

CHIEF FINANCIAL

OFFICER

BOARD OF

CONTRACT

APPEALS

ASSISTANT

SECRETARY FOR

ADMINISTRATION

OFFICE OF

CIVIL RIGHTS

OFFICE OF

DRUG AND ALCOHOL

POLICY & COMPLIANCE

EXECUTIVE

SECRETARIAT

FEDERAL

AVIATION

ADMINISTRATION

FEDERAL

HIGHWAY

ADMINISTRATION

FEDERAL MOTOR

CARRIER SAFETY

ADMINISTRATION

FEDERAL

RAILROAD

ADMINISTRATION

FEDERAL

TRANSIT

ADMINISTRATION

MARITIME

ADMINISTRATION

NATIONAL

HIGHWAY TRAFFIC

SAFETY

ADMINISTRATION

OFFICE OF

INSPECTOR

GENERAL

PIPELINE AND

HAZARDOUS

MATERIALS SAFETY

ADMINISTRATION

RESEARCH AND

INNOVATIVE

TECHNOLOGY

ADMINISTRATION

SAINT LAWRENCE

SEAWAY

DEVELOPMENT

CORPORATION

SURFACE

TRANSPORTATION

BOARD

GENERAL

COUNSEL

ASSISTANT

SECRETARY FOR

GOVERNMENTAL

AFFAIRS

OFFICE OF

HEARINGS

OFFICE OF

PUBLIC

AFFAIRS

OFFICE OF SMALL AND

DISADVANTAGED

BUSINESS

UTILIZATION

OFFICE OF

INTELLIGENCE

AND SECURITY

FY 2005 Performance and Accountability Report
Overview of Legislative Authorities

The DOT strategic plan summarizes the legislative authorities of each Operating Administration. To

provide a context for the reader, the highlights of the responsibilities of each OA are listed below.

Office of the Secretary. The Office of the Secretary (OST) oversees the formulation of National

transportation policy and promotes intermodal transportation. Other responsibilities range from

negotiation and implementation of international transportation agreements, assuring the fitness of U.S.

airlines, enforcing airline consumer protection regulations, issuance of regulations to prevent alcohol and

illegal drug misuse in transportation systems and preparing transportation legislation.

Federal Aviation Administration. The Federal Aviation Administration's (FAA) mission is to promote

aviation safety and mobility by building, maintaining, and operating the Nation's air traffic control system;

overseeing commercial and general aviation safety through regulation and inspection; and providing

assistance to improve the capacity and safety of our airports.

Federal Highway Administration. The mission of the Federal Highway Administration (FHWA) is to

enhance mobility through innovation, leadership, and public service.

Federal Motor Carrier Safety Administration. The Federal Motor Carrier Safety Administration's

(FMCSA) primary mission is to prevent commercial motor vehicle-related fatalities and injuries.

Federal Railroad Administration. The Federal Railroad Administration's (FRA) mission is to ensure that

our Nation has safe, secure, and efficient rail transportation that enhances the quality of life for all.

Federal Transit Administration. The Federal Transit Administration (FTA) provides leadership, technical

assistance, and financial resources for safe, technologically advanced public transportation that enhances

mobility and accessibility, improves America's communities, preserves the natural environment, advances

economic growth, and ensures that transit systems are prepared to function during and after criminal or

terrorist attack.

Maritime Administration. The Maritime Administration's (MARAD) mission is to promote the

development and maintenance of an adequate, well-balanced U.S. merchant marine that is sufficient to

carry the Nation's domestic waterborne commerce and a substantial portion of its waterborne foreign

commerce, and to serve as a naval and military auxiliary in time of war or National emergency.

National Highway Traffic Safety Administration. The National Highway Traffic Safety Administration’s

(NHTSA) mission is to save lives, prevent injuries and reduce economic costs due to road traffic crashes

through education, research, safety standards, and enforcement activity. The agency conducts critical

behavioral and vehicular programs, and provides grants to the States for the administration of highway

traffic safety programs.

Office of Inspector General. The Inspector General Act of 1978, as amended, established the Office of

Inspector General (OIG) as an independent and objective organization within the DOT. The OIG’s

mission is to promote economy, effectiveness, and efficiency and to prevent and detect fraud, waste, and

abuse in DOT operations and programs by conducting and supervising independent and objective audits

and investigations.

Management’s Discussion and Analysis 13
14 FY 2005 Performance and Accountability Report

Pipeline and Hazardous Materials Safety Administration. The Pipeline and Hazardous Materials Safety

Administration (PHMSA) is dedicated to safety and security by working toward the elimination of

transportation-related deaths and injuries in hazardous materials and pipeline transportation, and by

promoting transportation solutions that enhance communities and protect the natural environment.

Research and Innovative Technology Administration. The Research and Innovative Technology

Administration (RITA) is dedicated solely to the advancement of DOT priorities for innovation and

research in transportation technologies and concepts. Innovations that will improve our mobility, promote

economic growth, and ultimately deliver a better integrated transportation system.

Saint Lawrence Seaway Development Corporation. The U.S. Saint Lawrence Seaway Development

Corporation (SLSDC), a wholly owned government corporation and an OA of DOT, is responsible for the

operations and maintenance of the U.S. portion of the St. Lawrence Seaway between Montreal and Lake

Erie.

Surface Transportation Board. The Surface Transportation Board (STB) is charged with promoting

substantive and procedural regulatory reform in the economic regulation of surface transportation, and

with providing an efficient and effective forum for the resolution of disputes and the facilitation of

appropriate business transactions.
Secretary Norman Y. Mineta is committed to ensuring that our transportation system remains safe, secure,

and efficient and that it serves as the engine that drives our Nation's economy. Because economic activity

and global trade are increasing our roads, railways, pipelines, public transit systems, airways, and

waterways are experiencing unprecedented growth in demand.

This Administration is working to ensure that our transportation system has the capacity to accommodate

the needs of a growing and prosperous America. Below we present the highlights of our Fiscal Year

(FY) 2005 results in our five strategic areas: safety, mobility, global connectivity, environmental

stewardship, and security. We also present our internal organizational achievements that enhance

DOT's performance as a results-driven Federal agency.

Safety

Transportation makes possible the movement of people and goods fueling our economy and improving

our quality of life. At the same time, transportation exposes us to the risk of harm. While we have made

progress in making all modes of transportation safer, the Department's top priority and central focus

remains improving safety. All modes of transportation have a share in achieving our strategic safety

objective: Enhance public health and safety by working toward the elimination of transportation-related

deaths and injuries.

Although we have more work to do to meet our aggressive performance

targets, we can report results in several areas this year that are the best since

record keeping began. The highway fatality rate reported in FY 2005 was the

lowest in 30 years. The early estimate of the fatality rate per 100 million

vehicle-miles traveled shows a decline to an estimated value of 1.43, below

1.50 for the third consecutive year. The total number of fatalities also

declined, reversing a six-year trend, to 42,643 fatalities. The number of crash

related injuries dropped to a historic low. The early estimates for the large

truck-involved fatality rate show a slight increase over last year’s due to the

increase in number of miles traveled and number of large trucks on the road.

Safety belt use reached a historic high of 82% in 2005. In addition, all

50 States, the District of Columbia, and Puerto Rico have contributed to

highway safety by lowering the legal threshold for impaired driving to

0.08 blood alcohol concentration, contributing to a 2.4% decrease in the

alcohol-related fatality rate.

In aviation, DOT achieved the lowest airline fatal accident rate in the history of aviation and has improved

trends in reducing general aviation accidents. The FAA is currently exceeding its FY 2005 goal of reducing

the airline fatal accident rate to a three-year rolling average rate of 0.023 per 100,000 departures. The

actual figure of 0.017 fatal accidents per 100,000 departures translates to about one fatal accident per

5.9 million departures.

Management’s Discussion and Analysis 15

Performance Highlights

© AP/Wide World Photos/Middletown

Journal/Pat Auckerman
16 FY 2005 Performance and Accountability Report

For the third year in a row, runway incursions are down. A runway incursion is “any occurrence in the

airport runway environment involving an aircraft, vehicle, person, or object on the ground that creates a

collision hazard, or results in a loss of required separation with an aircraft taking off, intending to take off,

landing, or intending to land.” (“Loss of required separation” refers to the loss of minimum safe distances

between aircraft and other objects on the runway surface.)

Total rail-related accidents/incidents declined for the fourth consecutive year. Based on preliminary

estimates, DOT expects to exceed the FY 2005 target of 17.14 accidents/incidents per million train miles,

limiting accidents/incidents to 16.79 per million train miles. Total rail-related casualties (fatalities and

injuries) fell 8.4% for the 10 month period of October 2004 to July 2005.

Transit safety continued to exceed expectations although there was a slight increase in the number of

fatalities in FY 2005. FY 2005, transit fatalities increased from 0.359 to 0.492 per 100 million passenger

miles traveled. Through capital investment programs, older bus and rail vehicles were replaced with newer,

safer vehicles and improvements were made in track and transit facility conditions.

The leading cause of pipeline incidents is excavation damage and PHMSA promotes damage prevention in

communities across the U.S. to reduce these failures. Programs in Connecticut, Georgia, Massachusetts,

Minnesota, and Virginia contributed to a 30% reduction in damages following the implementation of

enforcement in those States.

DOT's impressive safety performance results from targeting unsafe practices for improvement, partnering

with an ever-widening group of stakeholders to leverage our resources, and fostering the use of

Web-enabled and other technologies to achieve safer transportation.

MOBILITY

Historically, the mobility that transportation provides has helped define us as a people and as a Nation.

Our ability to travel from place to place allows us to connect with other people, work, school, and

marketplaces throughout the United States and around the world. In partnerships with the States and

private transportation providers, we have made continuous improvements in mobility as stated in our

strategic objective: Advance accessible, efficient, intermodal transportation for the movement of people and

goods. Highlights of our results are presented below.

Recent forecasts indicate that commercial aviation is rebounding. By FY 2007, air carrier, commuter, and

air taxi operations are anticipated to increase approximately 12% from 2004. To manage increased air

traffic, FAA continued to focus on easing congestion in eight metropolitan areas; improving overall

capacity at the Nation's top 35 airports; building new runways; enhancing access to reliever airports for

general aviation operations; and increasing traffic coordination and communication by using new

technologies.
Mobility and accessible transportation go hand-in-hand. For our

aging population and for persons with disabilities, we must be

proactive to ensure their mobility and access to transportation,

now and in the future. For FY 2005, DOT has met both of its

performance targets measuring compliance with the Americans

with Disabilities Act (ADA). An estimated 97% of bus fleets are

now ADA compliant either being lift-equipped or having low

floors to accommodate wheelchairs and people with limited

mobility. Approximately 91% of rail stations are also ADA

compliant increasing transportation access for all of our citizens.

DOT exceeded the performance target for employment sites

made accessible by Job Access and Reverse Commute (JARC)

transportation services. This program successfully meets the transportation needs of low-income

individuals seeking transportation to jobs and community services. JARC transportation services have

reached over 82,000 employment sites, making jobs, employers, job training, and child care accessible for

those citizens utilizing the program's services.

To improve the capability of the Nation's transportation system to move current and future levels of freight

traffic safely and efficiently, DOT began to implement the Safe, Accountable, Flexible, and Efficient

Transportation Equity Act: A Legacy for Users (SAFETEA-LU) legislation. Among the goals outlined in

the legislation are; upgrading our nation's network of roads, bridges and mass transit systems; establishing

a safety belt incentive program; providing financing for needed road improvements; and aiming to ease

traffic congestion.

Work continued to improve the pavement condition on the Nation's highways. The performance measure

that DOT uses to assess pavement condition has been revised to measure pavements with “good” rated

ride quality, which is a more stringent standard than previously used. The results from this year show that

54.6% of our roads meet this higher standard, meeting the target for FY 2005. DOT adopted a more

ambitious standard because our previous measurement of “acceptable” rated ride quality was consistently

in the 90th percentile.

The percent of travel nationwide that is under congested conditions is estimated to be 32.1% in calendar

year 2005 which meets this year’s target. Although the congestion levels continue their upward trend,

DOT’s efforts have contributed to slowing the rate of the increase. Based on the current state of the

highway system, DOT expects that the congestion levels will continue to rise if there is no significant

change in transportation system capacity or existing operating practices.

GLOBAL CONNECTIVITY

Transportation systems within and among nations are lifelines to economic growth, to freer trade, and

greater cultural exchange. A domestic and international intermodal approach is central to DOT’s role in

promoting global connectivity. Our strategies to address transportation in the global economy have two

prongs. One is directed toward opening international transportation markets and the other is directed

toward the improvement of essential, intermodal transportation linkages.

Management’s Discussion and Analysis 17

© AP/Wide World Photos/Jeffrey Haderthauer
18 FY 2005 Performance and Accountability Report

Supporting economic growth is a fundamental purpose of our transportation network. Transportation

facilitates distribution of goods and creates economic value for the producer. Our strategic objective:

Facilitate a more efficient domestic and global transportation system that enables economic growth and

development, concerns the efficiency of transportation, an important part of our competitive edge in global

trade.

In an effort to open more international transportation markets, the Department continues to negotiate

“open skies” agreements with other countries. An open skies agreement is another term for a bilateral

agreement that lets passenger demand and market conditions, not government regulations, determine

landing and departure schedules. In FY 2005, DOT conducted 25 rounds of negotiations, some of which

resulted in new open skies agreements with the following six countries: Ethiopia, India, Maldives,

Paraguay, Thailand, and Uruguay. Through FY 2005, DOT has negotiated bilateral open skies agreements

with 69 countries.

As a result of open skies agreements, more people from around the world have access to better quality,

lower priced, more competitive air service. With the new agreements negotiated this year, DOT exceeded

its target by providing 2.97 billion potential air transportation consumers the opportunity to travel

between the United States and countries with open skies agreements.

Since 1997, the St. Lawrence Seaway Development Corporation (SLSDC) has

joined with its Canadian counterpart, the St. Lawrence Seaway Management

Corporation, as well as the U.S. and Canadian Coast Guards, to institute a joint

boarding program for the foreign vessels that use the Seaway. In FY 2005, the

SLSDC continued this program by inspecting 100% of all ocean vessels in

Montreal. This improved inspection regime has saved vessels, on average, four

hours per transit and ensured that any safety, security, or environmental issues

are addressed prior to entering U.S. waters.

SLSDC met its performance target to have the U.S. portion of the Seaway

available 99% of the time during the shipping season (frozen rivers and lake

conditions prevent shipping during parts of the winter). As a result, delays

were reduced and ocean carriers using the Seaway saved more than $500,000

in operating costs during FY 2005.

ENVIRONMENTal stewardship

While transportation ties us together as a Nation, it can also produce unwanted side effects such as air and

water pollution, the loss of ecosystems and disruption of communities. Americans want solutions to

transportation problems that are consistent with sound environmental planning. DOT is committed to

avoiding or mitigating the adverse environmental effects that can accompany transportation as stated in

our strategic objective: Promote transportation solutions that enhance communities and protect the natural

and built environment. Highlights of our results follow.

Once again, DOT exceeded its target of creating/replacing at least 1.5 acres of wetlands for every acre

affected by Federal-aid Highway projects, achieving a ratio of 2.4 to 1 in FY 2005. Federal-aid projects

nationwide provided 1,814 acres of compensatory mitigation. A leader in expanding the use of wetland

banking and sponsoring wetland research, DOT is proud of its eight year track record of exceeding the

target. In a demonstration of commitment to environmental stewardship and ecosystem conservation,

© Department of Transportation
DOT recognized eight new Exemplary Ecosystem Initiatives (EEIs), exceeding its target of designating two

additional projects in the year. EEIs are reducing habitat fragmentation and barriers to animal movement,

encouraging the development of more sustainable mitigation sites, stimulating early ecosystem planning,

and fostering ecosystem-based research.

The Maritime Administration (MARAD) has more than 100 obsolete and deteriorating ships awaiting

disposal that pose potentially costly environmental threats to the waterways near where they are stored.

Due to legal, financial, and regulatory factors that have complicated the disposal effort, MARAD is behind

the congressionally mandated disposal schedule. However, in FY 2005, MARAD removed 18 obsolete

ships that posed potential environmental hazards at its three fleet sites and dismantled 13 additional ships.

SECURITY

Our transportation system must remain a vital link for mobilizing our armed forces for military

contingencies and for supporting civilian emergency response. Examples of our achievements under our

strategic objective: Balance homeland and National security transportation requirements with the mobility

needs of the Nation for personal travel and commerce, are described below.

DOT provided sealift capacity to the Department of Defense (DoD) in support of Operation Iraqi

Freedom during the redeployment phase of the war using 58 Ready Reserve Force vessels, an increase of

37 vessels over FY 2004.

DoD, in conjunction with the DOT’s Maritime Administration negotiates an agreement with each strategic

port specifying which facilities will be needed to conduct a military deployment. DOT met a performance

target by achieving 95% shipping capacity within mobilization timelines. However, we did not meet our

93% availability target due to commercial congestion at two of the strategic ports. The ports are expected

to make their facilities available to the military within 48 hours of notification.

ORGANIZATIONAL EXCELLENCE

Secretary Mineta understands that a culture of foresight and continuous improvement is essential to

achieving our strategic objectives. We have put this into practice as evidenced by DOT's achieving the

Office of Management and Budget’s “green” rating for four of the five government-wide President's

Management Agenda (PMA) initiatives.

DOT's Inspector General released the annual report on the Department's consolidated financial

statements, for which we were issued an unqualified audit opinion for the fifth consecutive year.

Consolidated financial statements show how the Department is accountable for budgetary resources,

provided by American, taxpayers for Federal transportation activities. Individual audits were also

conducted for the Aviation and Highway Trust Funds, which both received unqualified opinions.

DOT continues its stewardship of taxpayer monies through its management of large transportation

projects (over $1 billion in total cost). Project financial plans are approved at the Department-level and

reviewed yearly to track any significant cost and schedule deviations. Areas of program risk are identified

earlier so that managers can implement the necessary changes in a timely fashion. Last year, FTA’s New

Starts transit program began using a quantitative risk assessment tool to incorporate risk factors into

program management planning, thus enhancing our ability to ensure that transit projects meet cost,

Management’s Discussion and Analysis 19
20 FY 2005 Performance and Accountability Report

schedule, and transportation benefit expectations. This year, with implementation of the risk assessment

tool, all large transit projects are within 10% of cost estimates. The tool has provided improved project

execution trend assessments and helped managers track the impact of their mitigation efforts.

To ensure a secure infrastructure, DOT has certified and accredited 85% of its information technology

(IT) systems. This provides management with an acceptable level of assurance that all systems either meet

a minimum level of baseline requirements or have plans of action and milestones to mitigate any

remaining risks. A continuous vulnerability scanning program has been implemented Department-wide.

RESPONDING TO NATURAL DISASTERS

The National Response Plan (NRP) designates DOT as the lead support agency to the Department of

Homeland Security/Federal Emergency Management Agency (FEMA) for transportation-related

emergency support and recovery efforts from damage due to an event like Hurricane Katrina. In the

aftermath of Hurricane Katrina, DOT oversees Federal infrastructure programs which support the

rebuilding of highway, bridge, and airport assets. The FHWA and FAA administer our largest relief

programs, the Emergency Relief program, which provides reimbursement to States for expenses related to

highway infrastructure damage, and the Airport Improvement Program (AIP), which helps rebuild airport

infrastructure.

Specifically, DOT provided $5 million in immediate relief funds to begin

repairs to the I-10 Twin Span Bridge which connects New Orleans and

Slidell, Louisiana. DOT released $5 million in immediate emergency relief

funds to the Mississippi Department of Transportation to reimburse the

State for repairs to U.S. 90, I-10, and other Federally funded roads and

bridges. DOT announced a grant of $15.2 million to repair and rebuild

airfield lighting, fencing, and other security systems damaged at Louis

Armstrong New Orleans International Airport. DOT has issued a

$1.6 million grant for terminal repairs and airfield lighting at GulfportBiloxi International Airport.

DOT also uses its expertise in other modes of transportation to help port

authorities, transit agencies, and private rail and pipeline operators assess

damage to their infrastructure, identify specific needs, and restore service

to their customers. When electrical damage resulting from Hurricane

Katrina shut down the Colonial and Plantation pipelines (the only major

source of gasoline, jet and diesel fuel for the southeast United States), the

Pipeline and Hazardous Materials Safety Administration (PHMSA) immediately took action. In order to

restore service as quickly as possible, PHMSA approved the manual operation of pipeline facility controls

to provide for a “low-tech”, 1950s style configuration for both pipelines. PHMSA then deployed inspectors

to each rural pumping station along the Alabama to Maryland route to assure the safety of these

operations. Within four days of Katrina making landfall and the Department’s engagement, the Colonial

and Plantation pipelines were operating at 50% capacity. Approximately three days later, they were at 100

percent. Ninety-five percent of the Nation’s refining capacity was restored within ten days after Katrina hit,

and we are once again seeing 100% flow of gasoline, diesel, and jet fuel throughout the country.

© AP/Wide World Photos/Kyle Niemi
The Department has also worked closely with the two largest transit agencies affected by Katrina—in New

Orleans and Baton Rouge—to secure $47 million in FEMA Public Assistance Funds for emergency transit

services. These funds will give evacuees in Baton Rouge access to vital social services, jobs, and medical

care, and help returning residents of New Orleans reclaim their city.

In response to Hurricane Katrina, we have provided 11,377 trucks to FEMA in order to move 14,097

truckloads of goods. Over 1,350 buses and 15 helicopters were mobilized to support the evacuation and to

assist in the response. We have delivered over 19 million meals ready-to-eat, 25 million liters of water,

13 million pounds of ice, 11,000 power units, and 2,000 mobile homes.

Management’s Discussion and Analysis 21
Preparing these statements is part of the Department’s goal to improve financial management and to

provide accurate and reliable information that is useful for assessing financial performance and allocating

resources. Departmental management is responsible for the integrity and objectivity of the financial

information presented in the financial statements.

The financial statements and financial data presented in this Report have been prepared from the

accounting records of DOT in conformity with generally accepted accounting principles (GAAP). GAAP

for Federal entities are the standards prescribed by the Federal Accounting Standards Advisory Board

(FASAB).

OVERVIEW OF FINANCIAL POSITION

Assets

The Consolidated Balance Sheet shows the Department had total assets of $66 billion at the end of

FY 2005. This represents a decrease of $2.3 billion (-3.4%) over the previous year’s total assets of

$68.3 billion. The decrease is primarily the result of decreases of $1.6 billion in Investments and

$581 million in Fund Balance with Treasury. The decrease in Fund Balance with Treasury primarily

resulted from a decrease in obligated balances not yet disbursed. The Department’s assets reflected in the

Consolidated Balance Sheet are summarized in the following table.

22 FY 2005 Performance and Accountability Report

financial highlights

ASSETS BY TYPE • DOLLARS IN THOUSANDS 2005 % 2004 %

Fund Balance with Treasury $ 29,140,842 44.2 $ 29,721,350 43.52

Investments 19,000,999 28.8 20,618,224 30.19

General Property, Plant & Equipment 15,325,392 23.2 15,395,359 22.55

Accounts & Loans Receivable and

Related Foreclosed Property, Net 1,263,872 1.9 1,132,939 1.66

Inventory and Related Property, Net 939,639 1.4 913,513 1.34

Cash and Other Assets 297,802 0.5 504,624 0.74

Total Assets $ 65,968,546 100.0 $ 68,286,009 100.0
Liabilities

The Department had total liabilities of $12.9 billion at the end of FY 2005. This represents a decrease of

$535.6 million (-4.0%) over the previous year’s total liabilities of $13.4 billion, which is reported on the

Consolidated Balance Sheet and summarized in the following table.

Of the total liabilities, $3.5 billion were not covered by budgetary resources. The $3.5 billion is primarily

comprised of the $477 million liabilities to other Federal agencies (intragovernmental), $1.0 billion liability

to Federal Employees’ and Veterans’ Benefits Payable, $1.0 billion of environmental and disposal liabilities,

and $1.0 billion other liabilities with the public.

Net Position

The Department’s Net Position at the end of FY 2005 on the Consolidated Balance Sheet and the

Consolidated Statement of Changes in Net Position is $53.1 billion, a $1.8 billion (-3.3%) decrease from

the previous fiscal year, principally due to an increase in net cost of operations. Net Position is the sum of

the Unexpended Appropriations and Cumulative Results of Operations.

RESULTS OF OPERATIONS

The results of operations are reported in the Consolidated Statement of Net Cost and the Consolidated

Statement of Changes in Net Position.

Management’s Discussion and Analysis 23

LIABILITIES BY TYPE • DOLLARS IN THOUSANDS 2005 % 2004 %

Other Liabilities $ 5,019,980 39.0 $ 4,957,398 36.97

Grant Accrual 4,086,728 31.7 4,180,440 31.18

Accounts Payable 1,416,058 11.0 1,605,730 11.98

Environmental and Disposal Liabilities 1,003,585 7.8 1,135,163 8.47

Debt 952,536 7.4 1,150,606 8.58

Loan Guarantees 393,451 3.1 378,612 2.82

Total Liabilities $ 12,872,338 100.0 $ 13,407,949 100.0
24 FY 2005 Performance and Accountability Report

Program Costs

The Department’s total net cost of operations for FY 2005, after intra-departmental eliminations, was

$56.9 billion.

Surface and air costs represent 99% of the Department’s net cost of operations. Surface transportation

program costs represent the largest investment for the Department at 74.3% of the Department’s net cost

of operations; Air transportation is the next largest investment for the Department at 24.7% of the

Department’s net cost of operations.

RESOURCES

Budgetary Resources

The Combined Statement of Budgetary Resources provides information on how budgetary resources were

made available to the Department for the year and their status at fiscal year-end. For the 2005 fiscal year,

the Department had total budgetary resources of $114 billion, an increase of 6.5% from FY 2004 levels of

$107 billion.

Budget Authority of $113.2 billion—which consists of $61.5 billion of appropriations received and $50.7

billion of borrowing and contract authority plus net transfers—comprise 99.1% of the total budgetary

resources. The Department incurred obligations of $69.8 billion for the 2005 fiscal year, a 3.75% increase

over the $67.2 billion of obligations incurred during 2004. Outlays reflect the actual cash disbursed against

the Department’s obligations.

Financing

The Consolidated Statement of Financing reconciles the resources available to the Department to finance

operations with the net costs of operating the Department’s programs.

NET PROGRAM COSTS • DOLLARS IN THOUSANDS 2005 % 2004 %

Surface Transportation $ 42,309,410 74.34 $ 41,287,079 76.381

Air Transportation 14,029,096 24.65 12,193,994 22.55

Maritime Transportation 278,914 0.49 237,161 0.439

Costs Not Assigned to Programs 261,911 0.46 347,864 0.664

Less: Earned Revenues Not Attributed to

Programs 25,165 0.04 12,631 0.023

Cost-Cutting Programs 8,728 0.02 746 0.001

Net Cost of Operations $ 56,862,894 100.0 $ 13,407,949 100.0
LIMITATIONS OF THE FINANCIAL STATEMENTS

The principal financial statements have been prepared to report the financial position and results of

operations of the Department of Transportation, pursuant to the requirements of 31 U.S.C. 3515 (b).

While the statements have been prepared from the books and records of the Department of Transportation

in accordance with generally accepted accounting principles (GAAP) for Federal entities and the formats

prescribed by OMB, the statements are in addition to the financial reports used to monitor and control

budgetary resources which are prepared from the same books and records.

The statements should be read with the realization that they are for a component of the U.S. Government,

a sovereign entity.

Management’s Discussion and Analysis 25
26 FY 2005 Performance and Accountability Report

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT

The Federal Managers’ Financial Integrity Act (FMFIA) requires agencies to conduct an annual evaluation

of its management controls and financial systems and report the results to the President and Congress. The

Secretary of Transportation then prepares an annual Statement of Assurance based on these internal

evaluations.

The Secretary of Transportation’s qualified Statement of Assurance for FY 2005 is included in the Message

from the Secretary located at the beginning of this Report. The Department evaluated its management

control systems and financial management systems for the fiscal year ending September 30, 2005. This

evaluation formed the basis of the Secretary’s Statement of Assurance for FY 2005.

FMFIA Annual Assurance Process

The FMFIA review is an agency self-assessment of the adequacy of financial controls in all areas of the

Department’s operations—program, administrative, and financial management.

Managers within the Department, being in the best position to know and understand the nature of the

problems they face, establish appropriate control mechanisms to ensure Departmental resources are

sufficiently protected from fraud, waste, and abuse, and to meet the intent and requirements of the FMFIA.

The head of each Operating Administration and Departmental office submits an annual statement of

assurance representing the overall adequacy and effectiveness of management controls within the

organization to the Department’s Office of Financial Management. FMFIA material weakness and material

nonconformances are also reported, citing milestones and/or accomplishments. Specific guidance for

completing the end of fiscal year assurance statement and reporting on material deficiencies is issued

annually by the Department’s Office of Financial Management.

Management Controls, Financial

Management Systems, and Compliance With

Laws and Regulations

OBJECTIVES OF CONTROL MECHANISMS

1. Financial and other resources are safeguarded from unauthorized use or disposition.

2. Transactions are executed in accordance with authorizations.

3. Records and reports are reliable.

4. Applicable laws, regulations, and policies are observed.

5. Resources are efficiently and effectively managed.

6. Financial systems conform to government-wide standards.
Criteria for Reporting Material Weaknesses and Nonconformances

A material weakness under FMFIA must fall into one or more of the categories below plus merit the

attention of the Executive Office of the President and/or the relevant Congressional oversight committees.

A material nonconformance under FMFIA must fall into one or more of the categories below plus merit

the attention of the Executive Office of the President or the relevant Congressional oversight committees.

Summary of FY 2005 FMFIA Material Weaknesses

STATUS OF INTERNAL CONTROLS—FMFIA, SECTION 2

DOT has three material weaknesses. Two of the material weaknesses—HTF financial reporting and

Highway grants management—were carryovers from FY 2004. FAA financial reporting is a new material

weakness. The three material weaknesses are:

HTF AGENCIES’ FINANCIAL MANAGEMENT AND REPORTING ACTIVITIES. Since the audit of the FY 2003 HTF financial

statements, we reported that material deficiencies existed in internal controls over financial management

and reporting activities in the HTF agencies. While FHWA began making organizational and procedural

improvements during FY 2005, many of the improvements were initiated too late in the year and were not

in effect for sufficient time to overcome the accounting problems that existed in prior years. In addition,

extraordinary efforts were again needed to prepare the HTF financial statements during the year and at

September 30, 2005. The remaining deficiencies to be overcome include (1) financial statement

preparation and analysis, (2) resolving reconciliation differences during the year, (3) implementing

managerial cost accounting, (4) tracking intragovernmental transactions, and (5) linking the FACTS II

reporting to the financial statement preparation process.

Management’s Discussion and Analysis 27

CRITERIA FOR REPORTING A MATERIAL WEAKNESS

1. Significant weakness of the safeguards (controls) against waste, loss, unauthorized

use or misappropriation of funds, property, or other assets.

2. Violates statutory authority, or results in a conflict of interest.

3. Deprives the public of significant services, or seriously affects safety or the

environment.

4. Impairs significantly the fulfillment of the agency’s mission.

5. Would result in significant adverse effects on the credibility of the agency.

CRITERIA FOR REPORTING A MATERIAL NONCONFORMANCE

1. Prevent the primary accounting system from centrally controlling financial

transactions and resource balances.

2. Prevent compliance of the primary accounting system, subsidiary system, or program

system under the Office of Management and Budget Circular A-127.
28 FY 2005 Performance and Accountability Report

FINANCIAL OVERSIGHT OF HIGHWAY GRANTS. Last year we reported that FHWA and the FTA needed to establish

stronger financial and cost controls to better ensure that grant funds are protected from fraud, waste, and

abuse. FHWA and FTA have both implemented improved procedures and controls over grants during

FY 2005. For example, FHWA initiated the Financial Integrity Review and Evaluation (FIRE) program in

March 2005, and FTA instituted sufficient improvements in its oversight of transit grants to not be

included in the material weakness this year. However, FHWA needs to continue to improve its financial

oversight of highway grants.

TIMELY PROCESSING OF FAA TRANSACTIONS AND RECONCILIATION OF ACCOUNTS. Last year, FAA faced problems

implementing Delphi and a new procurement system. During FY 2005, the problems became more severe

and adversely affected FAA’s ability to process transactions and reconcile accounting balances in a timely

manner. FAA needs to improve processes and controls to ensure that property plant and equipment is

consistently and accurately capitalized, obligations are recorded in a timely manner, reconciliations of

Fund balances with Treasury and suspense accounts are timely, abnormal balances in budgetary to

proprietary account relationships are investigated, and subsidiary systems and supporting documentation

are reconciled to general ledger balances. Consequently, FAA’s interim financial statements were not

reliable and FAA needed to make adjustments totaling $2.1 billion to the draft FY 2005 financial

statements in order to make them reliable. FAA is committed to correcting the problems in early FY 2006.

The following table shows the Department’s progress during the past five years with correcting and closing

material weaknesses.

DEPARTMENT OF TRANSPORTATION

STATISTICAL SUMMARY OF PERFORMANCE

SECTION 2, INTERNAL CONTROLS

NUMBER OF MATERIAL WEAKNESSES

NUMBER OF REPORTED

FOR THE FIRST TIME IN:

FOR THAT YEAR,NUMBER THAT HAVE

BEEN CORRECTED:

FOR THAT YEAR,

NUMBER STILL PENDING:

1999 Report 1

FAA Property, Plant and Equipment 0 0

2000 Report 0

FAA Property, Plant and Equipment (R) 0 0

2001 Report

1

FAA Property, Plant and Equipment (R)

Information Security Program

0 0

2002 Report

2

Information Security Program (R)

FTA Management

FAA Contracts

1

FAA Property, Plant and Equipment 0

2003 Report

2

Information Security Program (R)

FAA Contracts (R)

HTF Financial Mgmt.

Reconciling Transactions (Eliminations)

1

FTA Management

1

HTF Financial Management

2004 Report

2

HTF Financial Mgmt. (R)

Reconciling Transactions (Eliminations) (R)

HTF Grants

Financial System Controls

2

Information Security Program

FAA Contracts

1

HTF Grants

2005 Report

1

HTF Financial Mgmt. (R)

HTF Grants (R)

FAA Reconciliations

2

Reconciling Transactions

Financial System Controls

1

FAA Reconciliations

1999 –2005 Total 9 6 3

Of the total number corrected, how many were corrected in 2005 2 ; (R) - Repeat
STATUS OF FINANCIAL MANAGEMENT SYSTEMS FMFIA, SECTION 4

One material nonconformance from FY 2004—financial system controls—was downgraded to a

reportable condition in FY 2005. DOT reported again this year that the Department was not in substantial

compliance with OMB Circular A-127. For FY 2005 this noncompliance consists of three issues:

Preparation of financial statements; Use of a Standard General Ledger (credit reform/loans); and Federal

Accounting Standards (cost accounting).

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT

The Federal Financial Management Improvement Act of 1996 (FFMIA) requires that agencies’ financial

management systems provide reliable financial data in accordance with generally accepted accounting

principles and standards. Under FFMIA, financial management systems must substantially comply with

three requirements: Federal financial management system requirements; applicable Federal accounting

standards; and the U.S. Government Standard General Ledger (SGL). In addition, agencies must

determine annually whether their systems meet these requirements. This determination is to be made no

later than 120 days after the earlier of (a) the date of receipt of the agency-wide audited financial

statement, or (b) the last day of the fiscal year following the year covered by such statement.

To assess conformance with FFMIA, the Department uses OMB Circular A-127 survey results, FFMIA

implementation guidance issued by OMB, results of OIG and GAO audit reports, annual financial

statement audits, the Department’s annual Federal Information Security Management Act (FISMA)

Report, and other relevant information. The Department’s assessment also relies a great deal upon

evaluations and assurances under the FMFIA, with particular importance attached to any reported

material weaknesses and material nonconformances.

Management’s Discussion and Analysis 29

DEPARTMENT OF TRANSPORTATION

STATISTICAL SUMMARY OF PERFORMANCE

SECTION 4, FINANCIAL MANAGEMENT SYSTEMS

NUMBER OF MATERIAL NONCONFORMANCES

NUMBER OF REPORTED

FOR THE FIRST TIME IN:

FOR THAT YEAR,NUMBER THAT HAVE

BEEN CORRECTED:

FOR THAT YEAR,

NUMBER STILL PENDING:

1999 Report 0 0 0

2000 Report

1

FFMIA Nonconformance

1.a. Preparation of Financial Statements

1.b. Standard General Ledger

1.c. Managerial Cost Accounting

0

1

FFMIA Nonconformance

1.a. Preparation of Financial Statements

1.b. Standard General Ledger

1.c. Managerial Cost Accounting

2001 Report

1

Information Security Program

FFMIA Nonconformance (R)

0 0

2002 Report

0

Information Security Program (R)

FFMIA Nonconformance (R)

0 0

2003 Report 0

FFMIA Nonconformance (R)

1

Information Security Program 0

2004 Report

1

Financial System Controls

FFMIA Nonconformance (R)

0 0

2005 Report 0

FFMIA Nonconformance (R)

1

Financial System Controls 0

1999 –2005 Total 3 2 1

Of the total number corrected, how many were corrected in 2005 1 ; (R) - Repeat
30 FY 2005 Performance and Accountability Report

FFMIA of 1996 Noncompliance Issues

In FY 2005, DOT reported that the Department was not in compliance with FFMIA. For FY 2005, this

noncompliance consists of three issues: preparation of financial statements, use of Standard General

Ledger, and Federal Accounting Standards (cost accounting).

PREPARATION OF FINANCIAL STATEMENTS. The process used by FHWA and FAA, including utilization of the

Delphi accounting system, was not adequate to prepare reliable and timely financial statements during the

year or at September 30, 2005. Several adjustments were made to correct system processing errors, record

activities not recorded at the transaction level, and correct discrepancies with the data reflected in

subsidiary systems. FAA system conversion issues contributed to problems in recording all Delphi

transactions, which interfered with FAA’s ability to produce accurate and complete financial and budgetary

reports.

FFMIA requires agencies to produce auditable financial statements based on data from it financial systems

on a timely basis.

USE OF STANDARD GENERAL LEDGER. HTF Agencies have not consistently used Delphi for routine accounting

events at the transaction level to meet OMB and Treasury reporting requirements.

FEDERAL ACCOUNTING STANDARDS. HTF Agencies were not in full compliance with the SFFAS No. 4 Managerial

Cost Accounting Concepts and Standards for the Federal Government and the related provisions of the

Government Performance and Results Act (GPRA). The FY 2005 financial statements did not properly

reflect full costs or measure the effectiveness of the Agencies’ programs.

FEDERAL INFORMATION SECURITY MANAGEMENT ACT

FISMA requires Federal agencies to identify and provide security protections commensurate with the risk

and magnitude of harm resulting from the loss of, misuse of, unauthorized access to, or modification of

information collected or maintained by or on behalf of the agency. DOT maintains one of the largest

portfolios of information technology (IT) systems among Federal civilian agencies; it is therefore essential

that the Department protect these systems, along with their sensitive data. In FY 2005, DOT’s IT budget

totaled about $2.7 billion.

For FISMA, the Inspector General’s office tested a representative subset of DOT systems, including

contractor-operated or -maintained systems that had undergone systems security certification reviews in

order to determine whether DOT had complied with Government standards for (1) assessing system risks,

(2) identifying security requirements, (3) testing security controls, and (4) accrediting systems as able to

support business operations.

The IG identified that DOT needs to better manage corrections of system security deficiencies and that

FAA needs to take aggressive actions to enhance the air traffic control systems security. In FY 2005, the

Government Accountability Office (GAO) identified the need to enhance computer security protection in

air traffic control systems and physical security protection at air traffic control facilities. In April 2005,

FAA started to initiate aggressive actions to correct previously identified air traffic control security

deficiencies.
SAS-70 REVIEW ON DOT’S FINANCIAL MANAGEMENT SYSTEM

An annual external review was conducted for cross-servicing functions within the Department as required

by the Office of Management and Budget (OMB) guidance. The OMB requires Centers of Excellence to

provide Federal agencies with an independent audit report in accordance with the American Institute of

Certified Public Accountants’ (AICPA) Statement of Auditing Standards (SAS) 70.

The Department’s report summarizes the results of a review of system security controls over the DOT

Enterprise Service Center’s (service center) Delphi Financial Management System. The Delphi Financial

Management System performs accounting and financial management functions for DOT and other

Federal agencies. It is maintained by Federal Aviation Administration employees at the Mike Monroney

Aeronautical Center in Oklahoma City, Oklahoma, under the direction of the departmental Chief

Financial Officer.

The service center is one of four Centers of Excellence designated by the OMB to provide financial

management information system services to other Federal agencies. To date, the service center supports

one other Federal agency, the National Endowment for the Arts.

Clifton Gunderson, LLP, an independent auditor, of Calverton, Maryland, completed the review. The OIG

performed a quality control review of Gunderson’s audit work to ensure that it complied with applicable

auditing standards Generally Accepted Government Auditing Standards and the AICPA’s SAS-70.

The Gunderson audit report concluded that management’s description of controls for the Delphi Financial

Management System presents fairly, in all material respects, the controls that had been placed in operation

as of June 30, 2005. In addition, Gunderson concluded that controls, as described, are suitably designed to

provide reasonable assurance that 8 of the 10 specified control objectives would be achieved, if these

controls were complied satisfactorily. Gunderson’s testing found that controls were operating effectively to

provide reasonable assurance that 7 of the 10 control objectives were achieved during the period from

October 1, 2004 to May 31, 2005.

Since September 2003, DOT management implemented more disciplined security administration and

oversight of Delphi operations, strengthened controls over access to the General Ledger module to ensure

the integrity of financial statement compilation in Delphi, and installed an enclosed area in the computer

center to better protect Delphi servers. In addition, management enhanced controls over changes to

Delphi production programs and tested the contingency plan to ensure continuity of Delphi operations in

case of emergency.

IMPROPER PAYMENTS PROGRAM FOR FY 2005 AND PLANS FOR FUTURE YEARS

In FY 2005, the Department engaged AOC Solutions, Inc. to conduct an improper payments review of

FY 2004 payments in ten programs for compliance with the Improper Payments Information Act of 2002

(IPIA). The objectives of this review were to (1) assess the amount and causes of improper payments, (2)

identify programs with significant improper payments, and (3) identify action plans for reducing improper

payments in programs identified as high risk.

Management’s Discussion and Analysis 31
32 FY 2005 Performance and Accountability Report

The following programs were reviewed by AOC Solutions, Inc.

• Department of Transportation Payroll

• Office of the Secretary of Transportation—Working Capital Fund

• Federal Railroad Administration—Grant Program

• Federal Highway Administration—Federal Aid Grant Program*

• FHWA—Federal Lands

• Federal Transit Administration—Formula Grant Program*

• FTA—Capital Investment Grant Program*

• Federal Aviation Administration—Airport Improvement Program*

• FAA—Operations (excluding Payroll)

• FAA—Facilities and Equipment

* Identified in Section 57 of OMB A-11

During the review, AOC Solutions, Inc. found no significant improper payments which would result in a

program exceeding 2.5% and $10 million of the total expenditures for the fiscal year. In total, eight

improper payments were found, resulting in a projected amount of improper payment to be $8,125.

Additionally, the Department was able to improve its processes over last year. In the previous PAR it was

reported that FAA was not able to provide sufficient data or answers to many outstanding questions.

During the review this year, FAA was able to provide sufficient information for all questions, and had no

questionable payments.

As noted in last year’s PAR, another constraint was the limited amount grant data available. During our

review this year, test procedures applied covered payments made by DOT to grantee entities. However, test

procedures did not address subsequent flow down payments made by grantees to vendors. States and other

non-Federal entities administer these grant programs and, accordingly, much of the activity subject to

testing for improper payments is accounted for at these entities.

To address the limitation, DOT devised an innovative research and development (R&D) strategy that was

implemented at the Federal Highway Administration’s Highway and Construction grant program. The

R&D project strategy; was to develop and test a methodology for implementing the IPIA requirements at

the grantee level.

The development phase of this study involved meeting with State transportation and audit officials to

document the processes used in administering the Federal Highway Planning and Construction Program.

This resulted in a comprehensive document that described the planning and construction phases of

projects and a methodology for determining whether goods and services received were in accordance with

contractual terms and conditions, including Federal requirements. Payments for goods and services that

did not comply with contractual terms and conditions represented an improper payment.

For testing, two project sites were selected to test the methodology. The tests involved a sample value of

$21,269,706 from a population value of $26,056,918 for the first project and a sample value of $6,741,482

from a population value of $8,450,999 for the second project.
The tests disclosed three underpayments, one of which (from project one) was statistically insignificant

and an extrapolation of the other two to the population of payments for the project (project two) in which

they occurred resulted in an improper payment estimate of $111,671.

DOT completed the project successfully in the summer of 2005 and is in the process of extending the

methodology nationwide.

In 2006 and 2007 the Department has several goals for the improper payments program. First, the

Department will continue its recovery audit work, which has been conducted since 2002. While there have

been no significant findings, the Department has found it to be very beneficial.

Secondly, DOT will continue to expand the methodology from the R&D project. Work has begun to

develop a similar methodology in the Department’s remaining OMB A-11, Section 57 grant programs. To

help facilitate the expansion of this methodology the Department has put together the following plans.

In 2006, the Department will begin testing the four Section 57 grant programs for improper payments in a

concentrated area. DOT has spent millions of dollars on relief efforts to repair damage from Hurricanes

Katrina and Rita. Depending on supplemental appropriations, DOT expects to spend billions of dollars to

rebuild the transportation infrastructure in Alabama, Louisiana, Texas, and Mississippi.

By testing for improper payments in this region, DOT will be able to focus on inherently high risk

projects, based on the dollar amount and the speed at which money is being spent. This will allow for

further refining of our improper payment methodology and contribute to the oversight of these regions.

As a result of the testing, DOT will be able to test and establish new controls for emergency projects.

Concurrently, DOT will work with the FAA, FTA, and FHWA grant programs to implement the

methodology into their normal grant processes. By having the improper payment methodology worked

into the normal grant procedures, the Department will have nationwide testing beginning in FY 2007.

SCORECARD ON THE PRESIDENT’S MANAGEMENT AGENDA

Human Capital Initiative

Develop a Department-wide human capital workforce strategy to address future workforce gaps, eliminate

skill gaps in critical occupations, develop performance-based incentives for the workforce, ensure

citizen-centered, delayered, and mission-focused organizations; strengthen leadership skills, and ensure a

robust leadership pipeline; improve the measurement and evaluation of human capital strategies; and

integrate E-Government and Competitive Sourcing strategies.

FY 2005 Status  GREEN

Progress  GREEN

Management’s Discussion and Analysis 33
34 FY 2005 Performance and Accountability Report

HOW DOT IS MEETING PMA CHALLENGES. DOT’s Human Capital Plan is aligned with the President's

Management Agenda and the OPM/OMB Standards for Success. During this fiscal year, the Department:

• Completed FAA’s Air Traffic Controller staffing plan to ensure that there will be adequate prepared

controllers to accommodate a retirement surge and increasing workloads;

• Steadily improved annual workforce planning and analysis, integrating competitive sourcing, and

acquiring a new forecasting tool;

• Achieved provisional certification of the SES performance management system, developed SES pay for

performance policies, and instituted a centralized executive coaching program for new SES hires;

• Acquired, automated, and piloted a model for measurement and management of leadership

competencies, and developed a GS-15 Executive Pipeline forum series;

• Began systematic measurement and target-setting for mission-critical competencies;

• Instituted a Career Residents program to hire and develop promising graduates into mission critical

occupations;

• Eliminated pass-fail performance management systems, replacing them with systems that link to

strategic goals and make performance distinctions, and set new requirements for the training and

evaluation of leaders;

• Developed new policies to improve the strategic use of probationary periods for new supervisors and

managers and for employees;

• Conducted gap analysis for IT competencies and set targets for closing gaps;

• Decreased the time-to-fill for SES and GS positions, and

• Assessed Department-level accountability system, and began documentation and review of

accountability measures and practices at the OA level in all areas of human capital management.

Competitive Sourcing Initiative

Improved consistency for defining commercial and inherently governmental inventories across the

Department. Identified commercial competable activities, provided strategic direction for competitive

sourcing and human capital initiatives, and developed and shared high-quality intellectual capital with

staffs at OPM and OMB.

FY 2005 Status  GREEN

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES. In FY 2005, DOT maintained its green status on the President's

Management Agenda scorecard for competitive sourcing.

During 2005, DOT completed one standard and six streamlined competitions including the largest and

most complex competition conducted to date under OMB Circular A-76 for FAA's automated flight

service stations. To date, DOT has completed 20 competitions for over 2,889 full time equivalent positions

with anticipated savings of over $2.0 billion over the performance periods.
DOT initiated an Executive Steering Committee for competitive sourcing which evaluates the opportunity

for cross organizational competitions throughout the Department and brings more consistency to DOT's

competitive sourcing efforts.

DOT requires OAs develop their competitive sourcing plans in conjunction with their workforce planning

efforts to ensure human capital solution strategies include public-private competition.

E-Government Initiative

Better justify and track costs and performance of information technology projects, as well as participate in

government-wide initiatives that automate and simplify how the public deals with the government and

reduce redundancies and increase efficiencies government-wide.

FY 2005 Status  GREEN

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES: Capital Planning. Participation in capital planning process expanded

across all Operating Administrations. DOT Departmental Investment Review Board (IRB) reviewed and

approved the FY 2007 IT portfolio in support of the budget and Department mission and goals. IRB

conducted quarterly reviews of high risk major projects. Updated Capital Planning and Investment

Control and Enterprise Architecture (EA) policy and governance structure to ensure alignment between

the two areas. Achieved 100% acceptable business cases for the FY 2006 budget.

IT Security. DOT has certified and accredited 85% of all IT systems. DOT continues to conduct weekly

vulnerability scanning of all public facing and e-Government Web servers. Expanded the vulnerability

scanning to internal servers as well as part of a quarterly compliance review process.

Enterprise Architecture (EA). Released an updated iteration of DOT’s Modernization Blueprint including

As-Is and To-Be architecture for the DOT common IT infrastructure. The EA Framework and Reference

Models are aligned with the OMB Federal Enterprise Architecture Program Management Office

Framework. OAs continue to make progress maturing their EAs for their unique business/mission areas.

Government-wide Initiatives. DOT participates in 24 e-Government initiatives that span all four

categories. The e-Government project managers work closely with Managing Partners in the

implementation of these initiatives. The Office of the Chief Information Officer monitors initiative

progress against milestones in the OMB approved e-Gov Implementation Plan. Major schedule and

performance issues are brought to the IRB for review and action. DOT completed the migration to a new

payroll provider except for FAA who will migrate in October 2005. DOT completed the implementation of

a Department-wide Learning Management System except for OIG who will migrate in the first quarter of

FY 2006. DOT will complete the implementation of e-Authentication for the SAFER system in October

2005.

Budget and Performance Integration Initiative

Better integrate budget and performance functions by integrating respective staff work; developing plans

and budget with outcome goals, output targets, and resources requested in the context of past results;

charging full budgetary costs of programs; and documenting program effectiveness.

Management’s Discussion and Analysis 35
36 FY 2005 Performance and Accountability Report

FY 2005 Status  GREEN

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES. In FY 2005, DOT achieved its goals in this area and earned a green

score on the scorecard by completing the following:

• DOT identified efficiency measures for all programs that have been scored by the Program Assessment

Rating Tool (PART).

• All DOT modes provided marginal cost of performance information in their budget submissions for at

least one of their performance goals.

• Recognized as a leader in marginal cost within the Federal government, DOT presented its marginal

cost of performance approach to other Federal agencies at an OMB sponsored seminar on improving

marginal cost methods and practices.

DOT Performance Plan and Reports. DOT's Performance and Accountability Report has consistently

garnered a high standing from George Mason University's Mercatus Center, scoring within the top three

across government for the fifth year in a row.

Improved Financial Management Initiative

Develop financial management systems capable of producing more timely and accurate information, and

maintain a record of unqualified opinions on our financial statements.

FY 2005 Status  RED

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES

• DOT received its fifth consecutive unqualified audit opinion.

• DOT produced its FY 2005 financial statements on target and met the November 15, 2005 deadline for

audit completion and submission of this year’s Performance and Accountability Report.

• DOT put into production a DASHboard. The DASHboard provides up-to-date financial and

performance information to program managers. DOT is developing a plan to expand the use of the

DASHboard to incorporate additional program performance information and financial data.

• Financial data from Delphi is available on demand to 3,500 users and is being used throughout the

Department to help manage programs on a daily basis.

• DOT was named a Center of Excellence for Financial Systems and Services. DOT has one external

customer, the National Endowment for the Arts, in production since October 2004. In addition, DOT

has signed two new customers: the Commodity Futures Trading Commission and the Institute for

Museum and Library Services, which will be implemented on DOT’s Delphi financial management
system in FY 2006 and will also be using accounting services from DOT’s Center of Excellence. DOT

has competitively selected a private sector business partner to help market to implement new

customers on our Delphi Financial Management System (Oracle Federal Financials).

Research and Development Initiative

Apply the Research and Development (R&D) Investment Criteria of relevance, quality, and performance

and continuously improve management of research programs.

FY 2005 Status  GREEN

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES. In FY 2005, DOT achieved its goals in this area and earned a green

score on the scorecard by completing the following:

• DOT established the Research and Innovative Technology Administration (RITA) to guide the

coordination and management of R&D activities across the Department. The creation of RITA

instituted an integrated planning process to ensure that RD&T investments are effective and aligned

with Departmental goals. The process has three elements: multiyear strategic planning, annual

program planning, and budget and performance planning.

• DOT also established two executive-level bodies: the RD&T Planning Council composed of Operating

Administrators and Assistant Secretaries, and the RD&T Planning Team, which includes modal RD&T

program managers at the Associate Administrator level. These bodies ensure the collaboration and

coordination of RD&T both within DOT and with external entities.

• In 2005, the RD&T Planning Council and Planning Team led DOT in the setting of agency-wide

priorities for the FY 2007 RD&T budget. They also provided guidance for annual program reviews, at

which the Operating Administrations presented their RD&T programs’ mission and goals, research

focus, and use of the R&D investment criteria.

• DOT also issued the annual RD&T Plan and the RITA Report to Congress on the Department’s

research priorities. Both reports were developed through extensive cross-modal planning and

coordination.

Real Property Asset Management Initiative

Uses sound real property management of real property resources for diverse transportation missions,

maintaining the quality of real property assets managed, and disposing of no longer required assets.

FY 2005 Status  RED

Progress  GREEN

Management’s Discussion and Analysis 37
38 FY 2005 Performance and Accountability Report

HOW DOT IS MEETING PMA CHALLENGES. DOT continues to make progress under this initiative. The 2005

status of the PMA initiative is RED due to the amount of work required to create an accurate inventory of

all real property assets throughout the Department. However, OMB rated the Department GREEN in

progress in recognition of the significant advances made in the fourth quarter of FY 2005 in accomplishing

the goals set forth in this PMA initiative.

The Federal Aviation Administration owns approximately 69,500 of the roughly 70,000 assets in the

Department and has continued to lead in managing the inventory databases and applications.

DOT is aggressively pursuing a status upgrade to yellow in the first quarter of FY 2006:

• DOT will complete the Asset Management Plan (AMP) for OMB approval

• DOT will implement the AMP

• DOT will capture Federal Real Property Council established performance measure data for successful

inventory reporting December 15th to GSA

DOT’s two chartered committees will establish decision making guidelines for acquisition, disposition,

capital funding, and a three year timeline of initiatives.

Improper Payments Initiative

Develop financial management systems capable of producing more timely and accurate information, and

maintain a record of unqualified opinions on our financial statements.

FY 2005 Status  RED

Progress  GREEN

HOW DOT IS MEETING PMA CHALLENGES. In FY 2005, the Department took several steps towards eliminating

improper payments.

• Tested the Department’s Top Ten Program for improper payments and found little to no erroneous

payments.

• Conducted Recovery Audits in all Operating Administrations finding a very small number of

overpayments.

• Developed and tested an innovative solution for determining the level of improper payments in

grantees and sub-grantees.
Hurricane Recovery Efforts

In support of the Federal response to hurricane relief efforts, DOT is requiring all of its Operating

Administrations to report their obligations and expenditures hurricane-related costs. DOT is coordinating

all parties involved in the transportation related response and relief efforts. Federal, State, and local

governments are working side-by-side to deliver relief to the areas physically damaged by Hurricane

Katrina and to communities across the South that have been affected by the storm. Efforts and resources

are focused on proving transport and logistics to support long-term recovery. The Department has made

available the latest information from its agencies on the operational status of airports, roads and highways,

rail lines, transit systems, ports and pipelines in the tri-state area affected by Hurricane Katrina.

Coordination with Department of Homeland Security (DHS)

DOT is coordinating with the Department of Homeland Security (DHS) on transportation security related

matters. This year, DOT is working with DHS’ emergency response staff on the hurricane relief efforts.

Numerous DOT offices have ongoing projects related to the Patriot Act compliance for HAZMAT

endorsement background checks, and HAZMAT tracking projects. DOT and DHS have an advanced

traveler systems work for helping mobility and the flow of traffic during rush hours. FTA has a transit

security training project with DHS. The lessons learned from recent National disasters such as Hurricane

Katrina and Hurricane Rita are guiding the Department's responses to future natural and man-made

disasters.

Management’s Discussion and Analysis 39

Possible future effects of existing

events and conditions
40 FY 2005 Performance and Accountability Report

FIVE-YEAR FINANCIAL MANAGEMENT PLAN: Progress report to meet dot’s

financial management goals

Goals of Financial Management Plan:

PRODUCE ACCURATE AND TIMELY FINANCIAL INFORMATION.

MANAGEMENT’S USE OF THE INFORMATION TO DRIVE DECISIONS AND RESULTS.

DOT continually seeks to expand the use of financial and performance information to ensure that DOT

program managers have all the information they need to drive results in their organizations. Through

enhanced decision making, the Department can more effectively and efficiently manage tax payers’ dollars.

At the forefront of our efforts is the Federal Aviation Administration’s Air Traffic Organization (ATO),

which has developed key cost metrics for each of its major functions. With accurate financial information,

tied with ATO performance information, ATO is increasingly able to make better informed decisions on

how to improve the ATO Line of Business. Several other OAs are making similar progress for their

program managers.

DOT is expanding our support for providing information to managers through our Delphi DASHboard

project. On May 16, 2005, DOT moved its first Delphi DASHboard pilot into production. Using Oracle’s

Web Portal and Balanced Scorecard tools, DOT managers are using the Delphi DASHboard to track their

progress on OMB’s Financial Performance Metrics and the DOT’s own CFO Internal Scorecard, as well as

to check the status of the funds under their control.

IMPLEMENT A PLAN TO EXPAND THE SCOPE OF ROUTINE DATA USE TO INFORM MANAGEMENT.

Piloting the Delphi DASHboard has been a valuable learning experience for the Department. Through this

effort, DOT is identifying more and more of the Department’s data needs and is also identifying the

Department’s data strengths, i.e., data sources that are already available. The OAs have a wealth of financial

and program data for many of their programs and projects. Our DASHboard pilot proved that a

Web-enabled dashboard is the best way to present and continue to expand the use of data to make

management decisions.

Additionally, DOT will continue working to improve internal controls and overall financial management

of the Department’s programs and operations, including the centralization of accounting functions at the

DOT Financial Management Center of Excellence in Oklahoma City. DOT will also work to improve on

the CFO Council’s Performance Metrics.

other management information,

initiatives, and issues
With all this data readily available, the DOT will be reviewing the most efficient and cost effective way to

combine and clearly present financial and performance information. For the Fall of FY 2006, DOT has

committed to re-examine its methods and tools for meeting its DASHboard and business intelligence

needs. Oracle’s Balanced Scorecard has proved to be a useful tool, but some of the OAs see value in other

solutions. Using input and expertise from the OAs and from our Financial Management Center of

Excellence, DOT will determine the most efficient and cost effective Web-enabled solution for flexibly

presenting financial and performance data to DOT managers.

RECEIVE AN UNQUALIFIED AUDIT OPINION.

Since early in 2005, DOT has been working hard to receive an unqualified audit opinion on its FY 2005

financial statements. DOT earned an unqualified audit opinion for each of the previous four years.

MEET FINANCIAL STATEMENT REPORTING DEADLINES.

In 2004 the Department met the accelerated November 15 reporting deadline by working closely with each

of DOT’s financial statement auditors. With upgrades to DOT’s Delphi financial system, we are now

delivering monthly and year-end financial statements for each OA overnight. This new capability will save

us precious time, especially at year-end; previously preparing statements took several days.

SYSTEMS ARE IN COMPLIANCE WITH THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA).

With the conversion of the FAA to Delphi on November 10, 2003, DOT completed converting all its OAs

to a state-of-the-art, COTS-based, JFMIP-certified, Standard General Ledger (SGL) compliant financial

management system. DOT is the first cabinet-level agency to complete this conversion and have all its

operating elements in production on a cost-effective single instance of the Oracle Federal Financials

application software. To take advantage of all new system capabilities as they become available, we

upgraded Delphi to release 11.5.9 in May 2004 and to the 9i Oracle database technology in August 2004.

The next upgrade is scheduled for the Winter of FY 2006. DOT is continuing centralization of accounting

operations at the DOT Financial Management Center of Excellence in Oklahoma City.

HAS NO MATERIAL:

• AUDITOR-REPORTED INTERNAL CONTROL WEAKNESSES;

• NONCOMPLIANCE WITH LAWS OR REGULATIONS; OR

• WEAKNESSES OR NONCONFORMANCES REPORTED UNDER SECTIONS 2 & 4 OF FMFIA

DOT has been working diligently with our OAs to resolve all material internal control weaknesses

reported by our auditors in previous years or at least sufficiently addressed for them to be downgraded to a

reportable condition. DOT has made significant progress in this area and will continue to be vigilant in

FY 2006 to ensure that we have no material auditor-reported internal control weaknesses.

DOT has alos been working closely with our Operating Administrations to ensure that we have no

material noncompliance with laws or regulations and will continue these efforts in FY 2006.

DOT has been working closely with each Operating Administration to correct all material weaknesses and

nonconformances reported under Section 2 and Section 4 of the Federal Managers’ Financial Integrity Act

that impact the agency’s internal control over financial reporting or financial systems. We will continue

these efforts throughout FY 2006.

Management’s Discussion and Analysis 41
42 FY 2005 Performance and Accountability Report

Implementing A-123

Appendix A

During FY 2005, DOT moved aggressively to address the requirements of Appendix A, beginning with the

establishment of an distinct organizational structure to oversee the implementation of this initiative. An

Internal Controls Senior Advisory Team (ICSAT), headed by the CFO, was established with senior-level

representation from each of DOT’s Operating Administrations. The ICSAT meets on a monthly basis to

review progress and to actively engage in all decisions relating to approach and the prioritization of issues.

A working group consisting of representatives was also established to complement the ICSAT and to carry

out the decisions at the working level across the Department. DOT has also engaged the services of a

contractor to participate in both the planning and testing phases of this initiative.

DOT’s plan for approaching Appendix A was submitted to OMB in August and received favorable

feedback. Since then, considerable progress has been made in implementing this plan, including the

identification and documentation of key business processes and controls, determination of materiality, and

the establishment of a testing approach. The DOT ICSAT recognizes that the implementation of all aspects

of Appendix A will require a multi-year approach. During FY 2006, initial testing will be based upon

assessment of risk and availability of resources. A similar approach will be applied to addressing follow-on

work in FY 2007 and 2008.

Appendix B

In anticipation of the issuance of Appendix B, DOT proactively worked these new requirements into the

re-competition of our task orders with our bank providers. As a result, DOT is well-positioned to

implement these requirements in FY 2006 with minimal cost and disruption of resources.

On the travel card side, for example, DOT arranged for the creditworthiness requirement to be managed

by the vendor at no cost to the Government. We have also established a salary offset program in the FAA

which covers the vast majority of DOT credit card holders. Preliminary technical work has also been

initiated to implement split disbursement for the reimbursement of travel expenses. We have been

coordinating the introduction of split pay with our e-Travel provider and will work with them to introduce

this enhancement to our travelers in FY 2006.

MANAGERIAL COST ACCOUNTING

Managerial cost accounting identifies, tracks, and analyzes the total cost attributable to a particular task,

job, or program. The purpose of managerial cost accounting is to provide program managers the cost

information required to accurately report program efficiency and development of a program’s future

budget. DOT policy requires that OAs accumulate, distribute, monitor, and evaluate cost information

during each accounting period.

All DOT OAs have implemented the Department’s financial management system, Delphi, but it will be

several years before cost-accounting data systems are fully mature and include historical data that will

allow DOT managers to integrate performance and accounting data. In the meantime, DOT must be able

to tie resources to results.
DOT, therefore, has decided to focus during the FY 2007 budget cycle on the linkage between funding and

agency level outcomes and outputs and draw a comparison between the marginal benefits and the

marginal cost associated with additional funds or reduced funding as recommended in section 51.2 of

OMB Circular A-11. To accomplish this, the DOT OAs will be requested to provide the following in their

FY 2007 budgets for at least one performance measure.

• Current services funding;

• Requested increase or decrease to funding;

• Associated agency-level performance measure for the activity in question;

• Baseline performance targets associated with the current services funding;

• New targets associated with changes in funding; and

• Discussion of how agency level results contribute to DOT level strategic outcomes.

This will be an interim step in tying resources to results until cost accounting data is more widely available

throughout the Department. This approach does the following:

• Introduces a new conceptual framework for budget-building;

• Builds a more visible logic model showing the tie between agency funding and Departmental

outcomes;

• Requires more rigorous target-setting methods from the OAs; and

• Helps the OAs articulate more clearly the impact of funding changes.

INSPECTOR GENERAL’S TOP MANAGEMENT CHALLENGES Reported from

FY 2002–FY 2005

The Department recognizes that Management Challenges are not issues that are easily solved. In many

cases they require investments or upgrades to technology or substantial changes in long-standing

procedures or program activities. As a result, to completely address a Management Challenge may take

more than one fiscal year. In an effort to provide some context to the Management Challenges, we have

listed information on the year that the challenge was first reported. DOT hopes to begin to collect

information to that will supply perspective overtime on the Department’s progress towards resolving the

challenges.

1. Challenge: Aviation Safety

The U.S. aviation industry continues to be the safest in the world. However, FAA must adjust its safety

oversight to emerging trends in the aviation industry and changing economic conditions. While air

carriers have turned increasingly to outside, contracted repair stations, FAA continues to focus its

inspection resources on air carriers’ in-house maintenance work. The IG recommended that FAA

strengthen its oversight procedures of foreign aviation authorities conducting inspections on its behalf.

Since the OIG’s Report was released, there was real progress on runway incursions (potential collisions on

the ground), but operational errors (when air traffic controllers allow planes to come too close together in

the air) continue to increase. Corrective actions are imperative to address this ongoing safety problem.

Management’s Discussion and Analysis 43
44 FY 2005 Performance and Accountability Report

REPORTED: FY 2002

RESOLVED: This item is has not been resolved.

FAA ACTIONS TAKEN TO RESOLVE CHALLENGE:

ADJUST SAFETY OVERSIGHT TO ADDRESS INCREASED MAINTENANCE OUTSOURCING.

To address challenges at air carrier repair stations, FAA formed a Risk Assessment work group, which is

developing a repair station prototype program. This program will bring together a team representing all

the areas of expertise to oversee aviation certificate holders of large repair stations or companies that own

multiple repair stations and satellite repair stations.

The work group is developing guidance materials for inspectors and information databases to improve

FAA oversight of repair stations. The work group has also developed a comprehensive surveillance

program, which requires repair stations to use elements of a system-safety approach such as risk

assessment and risk management tools. FAA has revised its guidance and anticipates training for the

inspector workforce to begin in November 2005.

Additionally, FAA is revising its Flight Standards Handbook Bulletin for Airworthiness (14 CFR Part

43.17) to incorporate the pending Bilateral Aviation Safety Agreement with associated Maintenance

Implementation Procedures (BASA/MIP) with Canada to ensure the standardization of maintenance on

U.S. certified aircraft repaired in Canada. There are no FAA certificated repair stations in Canada. In lieu

of FAA certificated repair stations, the Handbook states that the United States accepts the work and return

to service of U.S.-registered aircraft and components that are located in Canada by a properly Transport

Canada Civil Aviation (TCCA) certificated entity.

Finally, FAA is negotiating a BASA/MIP with the European Union that will be used to continuously verify

European member states conducting surveillance/certification activities on behalf of the FAA. FAA hopes

to finish negotiations and implement the agreement by 2008.

REDUCE OPERATIONAL ERRORS AND RUNWAY INCURSIONS AS TRAFFIC REBOUNDS.

Reducing operational errors and runway incursions as traffic continues to increase is a shared

responsibility among pilots, air traffic controllers, and vehicle drivers. To address this challenge, the FAA

focused on outreach, awareness, improved procedures and infrastructure, and technology.

Progress was made in reducing the severity, number and rate of pilot deviations—the most common type

of runway incursion. To enhance pilot situational awareness, the FAA released a new pilot guide and DVD

that highlighted communication procedures for safe surface operations. In collaboration with industry, the

FAA also created an online course that educates general aviation pilots on runway safety.

To enhance air traffic supervisor and controller discussion of serious events during team briefings, the

FAA developed a safety awareness campaign designed to help controllers visualize an event that actually

happened and aid the development of strategies based on intuitive and experiential expertise for use in

similar situations. Additionally, the agency has developed an operational error database to support

identification of trends from which error reduction initiatives will be developed.
IMPROVE OPERATIONAL ERROR REPORTING FROM TOWER AND TERMINAL RADAR APPROACH CONTROL (TRACON) FACILITIES.

In July 2005, the FAA issued a general notice (GENOT) instructing all air traffic control facilities to

establish a facility audit process by September 1, 2005. This audit process allows for random reviews of Air

Traffic Services using playback tools to identify operational errors and operational deviations, and

provides greater assurance that operational errors and operational deviations are being reported.

In addition to the facility audit process conducted each month, the agency identified select facilities based

on trends, analysis, intelligence, complaints and statistics, and required them to review data. The FAA

reviewed the same data from these select facilities and addressed the issue by training or decertifying

controllers, as appropriate. The agency’s findings and supporting data are retained at the headquarters’

level for two and one half years.

2. Challenge: Motor Vehicle Safety

In its 2005 update on DOT’s management challenges, the IG made four findings related to motor vehicle

safety: (1) Overcoming obstacles to increasing safety belt usage; (2) Addressing SUV rollover issues; (3)

Pursuing laws to discourage alcohol-impaired driving; and (4) Spotting vehicle defects.

REPORTED: FY 2002

RESOLVED: FY 2004.

RE-REPORTED IN FY 2005

ACTIONS TAKEN TO RESOLVE CHALLENGE:

To improve defect investigations, the routine submission of additional manufacturer data, pursuant to the

requirements of the Transportation Recall Enhancement, Accountability and Documentation (TREAD)

Act, allows NHTSA access to a substantially increased amount of early-warning data that can be analyzed

to determine whether a potential safety-related problem exists, giving the agency the ability to report any

defects to the public in a more-timely manner.

SAFETY BELT USE—Safety belt use in 2005 increased to 82%, an all-time high. NHTSA is continuing to

implement strategies from its 2003 integrated project team (IPT) report on increasing safety belt usage, to

include an added emphasis on high-risk groups such as minorities, younger drivers, rural populations,

pick-up truck occupants, 8–15 year-old passengers, part-time safety belt users, and motor vehicle

occupants in States with secondary safety belt use laws. In addition to an occupant protection IPT, NHTSA

also had an IPT on vehicle rollover. The agency is continuing to implement strategies and activities from

the report to include necessary safety standard requirements to reduce rollover events and minimize

injuries when such events occur.

DRUG-IMPAIRED DRIVING—To reduce alcohol-impaired driving, NHTSA made available more than $29.9

million in alcohol-impaired driving countermeasure incentive grants to 34 States having alcohol-impaired

driving laws such as open container and repeat offender laws.

Management’s Discussion and Analysis 45
46 FY 2005 Performance and Accountability Report

3. Challenge: The Future of Intercity Passenger Rail

DOT should continue to work with the Congress to break the cycle of appropriations without

authorization for Amtrak and to realign the size, operations, and governance of the intercity passenger rail

system to match the levels of funding available from all sources.

REPORTED: FY 2002

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

FRA, together with the Office of the Secretary, has been heavily engaged in promoting a reauthorization of

Amtrak that would address many issues surrounding intercity passenger rail. These issues include but are

not limited to size, operations and governance of the Nation's passenger rail systems. Through the annual

grants to Amtrak, in particular the capital grant, and the Department's presence on the Amtrak Board of

Directors, FRA has been able to assure that capital investments address the company's highest priorities,

and are consistent with the funding available. FRA recognizes that the need for work in this area is

ongoing, particularly in addressing Amtrak's operating accounts and the services it provides such as food

and beverage and first class services.

4. Challenge: Information Technology Management

DOT has one of the largest IT investment portfolios among the civilian agencies. DOT IT systems support

air traffic control and distribute billions of dollars in Federal grants for transportation improvements.

Security breaches against these systems could have far-reaching effects on the Nation’s transportation

system and economy.

DOT enhanced its defense against Internet intrusions and developed a more reliable inventory of systems.

DOT, however, must further protect critical IT systems (especially air traffic control systems) against

attack and enhance contingency planning to ensure business continuity in an emergency.

REPORTED: FY 2002

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

In FY 2005, DOT revised its Departmental Information Resources Management Manual (DIRMM), and

updated policies and practices specific to Information Technology Capital Planning, IT Security, and

Enterprise Architecture. This will ensure that:

• DOT is in compliance with legal and OMB requirements;

• Operating Administrations manage their portfolios of investments in a like manner; there is a

consistent approach in security and the development of a “Federated” Enterprise Architecture; and,

• As a result of a consistent approach for enterprise architecture, DOT reduces redundant systems,

promotes data sharing, component re-use, and collaborative efforts within DOT and with external

partners.
DOT revised its Capital Planning and Investment Control Guide clearly defining, through detailed

criteria, how DOT will identify high-risk agency IT projects for review. The revised guidance also includes

process changes specific to earned value management, which DOT will use to identify high risk projects

that exceed established variance levels.

DOT issued new, specific guidance on reporting project cost, schedule and performance variance. Project

reports are provided to the CIO on a quarterly basis, but include monthly data.

FAA SECURING CRITICAL COMPUTER SYSTEMS:

Because FAA’s IT portfolio constitutes a significant portion of the entire DOT portfolio, it was critical to

the Departmental effort that FAA also takes specific steps to strengthen its oversight of IT investment.

Accordingly, in FY 2005, FAA:

• Built on an already-strong Exhibit 300 training, development, and approval process, resulting in

significant improvement to its initial passback scores over the previous year.

• Implemented a process to evaluate adherence to cost and schedule projections on all major projects,

regularly monitor cost, schedule, and performance variances, and institutionalized the use of

Corrective Action Plans for investments with variances greater than negative 10 percent.

• Achieved one of the highest scores of any agency on the GAO IT Investment Management Model

(ITIM) scorecard, and adopted GAO’s recommendations to move the agency to level 3 compliance with

GAO’s model. In FY 2005, FAA implemented 79% of ITIM stage two practices.

• Improved processes and capabilities for acquiring software intensive systems.

• Instituted changes to the overall acquisition management system, including the use of Exhibit 300s as

the core investment decision document.

The Department's Transportation Cyber Incident Response Center (TCIRC) serves as the focal point for

monitoring and protecting the Department's critical IT assets. Using a wide variety of tools, the TCIRC

continuously monitors and scans the Department's IT infrastructure and looks for vulnerabilities. The

Office of the CIO has also established a robust continuity of operations plan that provides for the quick

reconstitution of critical IT services in the event of a prolonged disruption.

The FAA made significant progress toward improving information systems security for all FAA systems in

FY 2005 and increased monitoring of its information systems through additional intrusion detection

systems. The FAA Computer Security Incident Response Center also monitors the DOT system after

normal working hours and on weekends and holidays thus providing DOT continual coverage.

INVESTMENTS: In FY 2005, DOT continued to expand and enhance the role of the Departmental Investment

Review Board (IRB). The IRB, which is chaired by the Deputy Secretary, and consists of the CIO, Chief

Financial Officer, General Counsel, Under Secretary for Policy, Assistant Secretary for Administration, and

four Operating Administrators, has the authority to approve, modify, or terminate major IT investments.

To ensure that the IRB can improve the cost-effectiveness of DOT’s $2.6 billion annual IT investment, it

needs to:

• play a more proactive role in identifying high-risk modal administration IT projects for review;

• ensure that OAs conduct effective and detailed reviews of their portfolios; 

Management’s Discussion and Analysis 47
48 FY 2005 Performance and Accountability Report

• require the modal administrations to share more timely information on proposed IT projects; and

• perform more in-depth reviews of the data.

5. Challenge: Holding the Line on Programs Conducive to Fraud

For the Department of Transportation, fraud has the serious potential for diverting critical funds from

infrastructure programs, subverting the efforts of safety regulators and undermining the integrity of

important public policy. The Office of Inspector General (OIG) has identified three areas where fraud has

a particularly damaging effect on the Department’s mission: (1) Federal Highway Administration (FHWA)

and Federal Transit Administration (FTA) programs involving highway and transit infrastructure, (2)

Federal Motor Carrier Safety Administration’s (FMCSA) program related to commercial driver’s licenses,

and (3) DOT’s Disadvantaged Business Enterprise Program.

REPORTED: FY 2002

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

HIGHWAY AND TRANSIT INFRASTRUCTURE PROJECTS. FHWA continues to stress the use of fraud indicators and

reporting procedures and is working with the transportation and highway industry to include the DOT

OIG as a resource for reporting allegations of fraud, waste, and abuse on Federal-aid infrastructure

construction projects. The FHWA and the Internal Revenue Service have jointly developed an

enforcement strategy to strengthen tax evasion enforcement. FHWA identified opportunities to fortify

deterrence strategies by increasing both, failure to register penalties and failure to report penalties from

$50 to $10,000 per occurrence. In July 2005, FHWA changed the requirement that heavy vehicle use tax

(HVUT) be paid quarterly to an annual payment to match the vehicle registration payment cycle. Finally,

they developed temporary regulations for the tamper-proof dye injectors, which became effective October

2005.

Going forward FHWA and the Internal Revenue Service (IRS) will implement the provisions from Safe,

Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) and the

American Jobs Creation Act of 2004. As each of the new provisions is applied over the next few years, the

enforcement program will become more comprehensive. The IRS will be able to identify where evasion is

occurring and target resources in those areas. For instance, enforcement efforts will be focused through a

National fuel tax territory. The territory will work as one unit focusing on specific areas where evasion

problems have been identified.

FTA initiated a risk management program which consists of planning, assessment activities, mitigation

strategies for risk, and monitoring. This program creates a level of confidence in the project budget and

schedule and enables FTA and the grantee to proactively manage the project.

MONITORING COMMERCIAL DRIVER’S LICENSES. To combat fraud in licensing for commercial motor vehicles,

FMCSA:

• Distributed more than $28 million in grants to States for Commercial Driver’s License (CDL) fraud

prevention, covert monitoring of the CDL process, and support of CDL improvement projects;
• Developed a fraud emergency warning system to notify States of acts of fraud and theft of documents,

identification production equipment etc;

• Developed the Commercial Skills Test Information Management System, a Web-based system to assist

States in administering and providing oversight of third-party skill testers; and

• Conducted 13 CDL Compliance Reviews to check State implementation of the CDL program.

DISADVANTAGED BUSINESS ENTERPRISE (DBE) PROGRAM

FAA took a number of actions in FY 2005 to strengthen oversight of the DBE program. The agency

conducted limited reviews of basic DBE compliance activities at airports and developed a standard

methodology for conducting DBE self-assessments and compliance reviews. FAA developed a Web-based

system for airports to report their DBE accomplishments. This system will enable the agency to conduct

trend analyses of the data received. The agency issued a revised regulation for airport concessions, which

contains items to assist in the prevention of DBE fraud, such as a personal net worth cap, required

eligibility reviews, and increased emphasis on monitoring and compliance by airports.

6. Challenge: Improved Fiscal Disciplines at FAA

As FAA increasingly turns to the General Fund to make up for revenue shortfalls in the Aviation Trust

Fund, the agency will be competing with other critical Federal programs for funds during a period of fixed

budgets.

Compounding the budget challenges it faces, FAA estimates that nearly half the controller workforce will

leave the FAA between FY 2005 and FY 2012. To hire and train that many controllers within a severely

constrained operating budget, FAA must identify ways to make every stage of its process for hiring,

placing, and training new controllers more efficient and cost effective.

FAA also faces significant challenges with respect to its major acquisition programs. The Agency will need

to gain control of existing projects, determine what the Agency’s priorities are, and improve the overall

management of its major acquisitions in a constrained budget environment.

REPORTED: FY 2002

RESOLVED: This item has not been resolved.

FAA ACTIONS TAKEN TO RESOLVE CHALLENGE:

In June 2005, an FAA/DOT team drafted an alternative financing options report on the aviation trust fund

as part of a broader effort that will take place on developing a reauthorization proposal for FAA programs.

This options report will continue to be updated through the end of FY 2005 and into FY 2006 to reflect the

final recommendations from FAA and DOT officials and will provide the basis for reauthorization

legislation.

On December 21, 2004, the FAA announced its 10-year Air Traffic Controller Staffing Plan. Over the next

10 years, the agency will hire and train 12,500 controllers to backfill projected total retirement and

non-retirement controller losses. The Air Traffic Controller Staffing Plan is currently being updated, with

the second version to be released in December 2005.

Management’s Discussion and Analysis 49
50 FY 2005 Performance and Accountability Report

FAA is making significant strides in improving its capital investment acquisition and procurement

oversight:

• By the end of FY 2005, there were 105 certified program managers for projects greater than $50

million;

• Large and complex investments were segmented into phases to improve oversight and control; 

• In developing the capital budget, the agency prioritized programs and allocated resources using criteria

such as strategic relevance, cost reduction and productivity increases, benefits and risk; and

• The newly formed Capital Investment Team, which provides an independent and objective review of

costs and benefits of investments, reviewed 79 programs, recommending the re-structuring of 15 and

termination of two.

7. Challenge: Improving Aviation System Capacity

After a few years of relative reprieve from aviation congestion, traffic and delays are once again returning.

The Department of Transportation’s challenge is determining how and where traffic is likely to grow over

the next decade and planning for adequate investment in facilities, technology and operational

improvements to address both long-range and short-term needs.

REPORTED: FY 2002

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

DETERMINE HOW AND WHERE TRAFFIC IS LIKELY TO GROW OVER THE NEXT DECADE. In FY 2004, FAA completed a study

analyzing system capacity, taking into account the socioeconomic and demographic trends expected to

occur in the United States through 2020. This study expanded the focus of the 35 major airports and

evaluated nearly 300 commercial service airports nationwide. The study identified the airports that need

additional capacity and the constraints to enhancing capacity. In FY 2005, FAA began a second phase of

this study that will take a more detailed look at airports other than those in major metropolitan areas and

will begin to identify possible solutions to increase long-term capacity.

In the meantime, FAA is increasing short-term capacity by working with airports and local communities

to build new runways. While there are no new runways opening in FY 2005, six runways are under

construction with four of the runways opening in FY 2006. This will provide the potential to

accommodate an additional 665,000 annual operations. Two additional projects, a runway extension and a

runway/taxiway relocation, are expected to begin construction in FY 2006. In addition, there are

9 projects, including 3 new airports, in the planning or environmental assessment stages that could

provide significant capacity benefits through FY 2015.

NEW RUNWAYS AND AIRSPACE REDESIGN INITIATIVES. Improving the efficiency of existing airport capacity by

redesigning airspace is critical for taking full advantage of new runways and enhancing the flow of air

travel around existing runways and airports.
The New York/New Jersey/Philadelphia Airspace Redesign project is on schedule to publish a draft

Environmental Impact Statement in Fall 2005. This is a critical step in moving to a final decision, after

which airspace redesign may begin.

Chicago’s O’Hare airport is one of the busiest in the Nation; capacity problems at this airport can quickly

cascade throughout the NAS. To address this critical hub in the aviation system, FAA is engaged in two

separate, but related activities: the Chicago O’Hare Modernization Project and the Midwest Airspace

Enhancement project. These projects will add and modify sectors and routes to increase traffic flow

efficiencies in the Midwest by FY 2007.

Along the west coast, a series of advanced navigation routes was implemented in FY 2005 to reduce the

miles flown between Seattle and San Francisco or Los Angeles. The routes utilize the navigational

capabilities of advances avionics aboard the aircraft, permitting operations along the shortest path between

the airports rather than flying over ground-based navigation aids.

POTENTIAL MARKET-BASED INITIATIVES TO MORE EFFICIENTLY ALLOCATE EXISTING CAPACITY. FAA has conducted detailed

simulation exercises in the last year to examine the effects of market-based alternatives like congestion

pricing and slot auctions (of arrivals and departures) on airlines and airport operations. These simulations

have provided stakeholders an opportunity to comment on these potential tools for managing congestion.

FAA is committed to continue working toward a market-based solution for congested airports and is

investigating these options for potential use at New York’s LaGuardia Airport.

8. Challenge: Getting the Most Value From Investments in Highway and Transit

Infrastructure Projects

With fewer resources to fund transportation projects, it is important to ensure that infrastructure

improvements are delivered on time and within budgets. In addition, the Department needs to ensure that

taxpayer investments yield the greatest benefits for the given costs.

REPORTED: FY 2003

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

In a 2003 Report to Congress, the FHWA outlined its efforts to develop a more multi-disciplinary

approach towards project management and oversight activities. During the past two years, the Agency has

addressed four key areas outlined in the Report:

• Optimizing the use of internal staffing;

• Effective recruitment of project managers;

• Increased training for existing and new staff; and 

• Implementing specific stewardship and oversight initiatives, including the development of Project

Management Plans and an Agency-wide risk management approach.

Management’s Discussion and Analysis 51
52 FY 2005 Performance and Accountability Report

In FY 2005, the FHWA continued a program to transition Agency employees from the traditional role of

reviewing and approving highway engineering project level actions to a new role of ensuring the

effectiveness of state department of transportation processes in areas that are major project drivers, such as

financing, controlling project level costs, schedule performance, transportation planning, maintaining

funds accountability, and providing greater oversight of higher level management and financial issues. The

majority of the positions filled in the Agency’s Professional Development Program were by individuals

from disciplines other than civil engineering, which is the traditional background. A series of

multidisciplinary workshops were held for headquarters and field supervisors and managers. The FHWA

implemented training that focused on the development of project oversight and financial management,

delivered over 30 sessions of a workshop that focuses on process review procedures, and delivered Web

conference seminars in the financial management area.

The responsibility for oversight includes monitoring and tracking the cost and schedule elements of a

project, as defined in the environmental process, from the design phase to construction completion. The

FHWA began monitoring project cost and schedules on projects exceeding $1 billion in costs, called Major

projects, in 2000. FHWA is presently monitoring 12 projects that have reached the Initial Financial Plan

milestone. As of June 2005, 9 of the projects were within the established budget variance, ranging from

8.24 percent above the base cost estimate to 16.2 percent below. All 10 of the projects are expected to be

finished within the variance range of the estimated completion date.

Beginning in 2002, the FHWA began monitoring total cost growth on all large projects, exceeding

$10 million in size. Data has been accumulated on projects authorized from FY 2000 through FY 2004.

The data indicates that construction projects are generally awarded at a level below the Engineer’s Estimate

and show a relatively small increase as the projects move to completion. It is not anticipated that the total

growth for all projects in this category will increase much beyond 5 percent. The projects authorized in

FY 2000 have been underway for 4 to 5 construction seasons; most costs are known by this point. In fact,

the growth for projects initiated between FY 2000 and FY 2002 has only risen about 2 percent.

Early in 2005, both the Government Accountability Office (GAO) and the Office of the Inspector General

(OIG) raised additional concerns about the Federal Highway Administration (FHWA) oversight of cost

and schedule issues on projects funded with Federal-aid resources.1 While FHWA did agree, in part, with

some of the recommendations, the Agency did not agree with the recommendation to convert its Fiscal

Management Information System (FMIS) into a Project Management Tracking System. The FMIS is used

to track obligations and expenditures on projects or project phases when a State Transportation Agency

(STA) elects to use Federal funds as part of the funding package.

To address some of these continuing concerns and take advantage of existing STA project systems, FHWA

initiated an effort in June 2005 to develop a more formal, documented approach to Project Delivery

Oversight. Each Division Office was directed to survey their respective data systems that contain the

1 See GAO Report, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to Improving Project Oversight,

GAO-05-173, January 2005; and the OIG Report, FHWA Needs to Capture Basic Aggregate Cost and Schedule Data to

Improve Its Oversight of Federal-Aid Funds, No. MH-2005-0046, February 2005.
project cost and schedule management elements. In particular, the Division Offices will assess whether the

STA have the needed information for the Agency to perform periodic projects reviews and evaluations on

these areas. The results will give FHWA the assurance that future program reviews can access the

appropriate project information to effectively monitor project elements using Federal funds.

The FHWA’s stewardship and oversight role is strengthened in SAFETEA-LU. The Transportation

Secretary is required to establish an oversight program to monitor the effective and efficient use of Federal

aid funds. The legislation requires the FHWA conduct an annual review of the State department of

transportation financial management systems and project delivery systems, develop minimum standards

for estimating project costs and periodically evaluate State practices in these areas. It also places

requirements for a Project Management Plan and Financial Plan on all Major projects of $500 million or

more, and requires each State to provide a value engineering analysis on each Federal aid project with a

total cost of $25 million or more, a bridge project of $20 million or more, and other designated projects.

9. Challenge: Oversight of the MARAD title XI Loan Guarantee Program

The Maritime Administration (MARAD) needs to continue work on implementing the recommendations

made on how to best minimize potential financial loss to the $3.8 billion Title XI Loan Guarantee

Program.

REPORTED: FY 2003

RESOLVED: This item resolved in FY 2005.

MARAD ACTIONS TAKEN TO RESOLVE CHALLENGE:

MARAD and IG staffs have worked closely together to address the issues raised in the audit. These

activities have included the development of procedures to monitor the financial condition of borrowers

and the assets they finance under the Title XI program. For example, MARAD has developed a Credit

Watch Report to more closely monitor and report on the financial condition of Title XI companies that

may experience financial difficulties. MARAD has also obligated $2 million for the development of a

computer based portfolio monitoring system. Due to these and other efforts undertaken by MARAD, the

IG staff has indicated that the recommendations in their audit have been resolved.

10. Challenge: Strengthening Financial Management and Accountability

While a lot of work has been accomplished to strengthen financial management, there are still several key

areas that the Department needs to continue to improve. Particularly: freeing up dollars in idle funds to be

used more productively on active projects, exercising greater stewardship over the $35 billion awarded

annually on highway and transit projects, consolidating or replacing fragmented financial systems, and

implementing cost accounting systems to help improve operations.

FAA has pledged to have a fully operational cost accounting system and labor distribution system in place

by the end of Calendar Year 2005. The agency, however, faces several challenges in reaching that goal: it

must revamp the system to account for recent significant organizational changes; deploy the system to new

business units; begin associating actual labor costs and other unassigned service costs to specific facilities

and activities; and implement financial and performance measures for activities, which are critical to

achieving performance efficiencies and cost savings.

Management’s Discussion and Analysis 53
54 FY 2005 Performance and Accountability Report

REPORTED: FY 2003

RESOLVED: This item has not been resolved.

ACTIONS TAKEN TO RESOLVE CHALLENGE:

The fiscal year 2004 audit of the Highway Trust Fund (HTF) identified grants financial management

oversight as a material weakness. It had previously been reported as a reportable condition in the FY 2003

audit. FHWA’s current Financial Management Improvement Program requires division offices to identify

areas needing improvement and then work with the States to make the improvements. The HTF audit

stated that the required financial management risk assessment and associated reviews of grantees were not

performed in 41 of 45 projects sampled.

In response to the FY 2004 audit findings, the FHWA introduced the Financial Integrity Review and

Evaluation (FIRE) Program in April. This program consolidates current financial oversight responsibilities

of the Federal-aid division offices into a single directive. It incorporates current requirements to perform a

financial management process review, review inactive projects, follow up on audit findings, assure

compliance with the Single Audit Act (see below), and assess the accounting and internal controls relating

to administrative funds. It also includes new requirements to review a sample of Federal-aid billing

transactions and administrative transactions. As a result, Division offices performed the required reviews

and analyses, identify areas needing improvements, implement the improvements, report the results

annually to the Administrator, and maintain sufficient documentation to support the division office’s

conclusions and actions taken. Based on the results of the FIRE requirements, the Division Administrator

will certify the results of these activities as part of the annual, year-end Section 2 and 4 certification

required by the Federal Managers’ Financial Integrity Act. Division Offices also completed a risk

assessment on the identified financial payment processes but will not be required to perform a grant

financial management process review. However, the full requirements of the Order will be in effect during

FY 2006.

In compliance with the Single Audit Act, States are required to conduct annual audits of sample grant

amounts in excess of $300 thousand dollars to ensure that appropriate controls are in place to identify any

payment that should not have been made or that was made for an incorrect amount under statutory,

contractual, administrative, or other legally applicable requirements, or to an ineligible recipient. The

Single Audit Act requirements, and supporting OMB regulations that States comply with, are insufficient

to address and identify improper payments. As a result, the DOT and OMB agreed to better define the

criteria that State auditors use to evaluate improper payments and engage State DOT auditors to test the

criteria. The results of this research project will be a refinement of OMB’s expectations/regulations under

the Single Audit Act for use by all State DOT auditors, including possibly the expansion of the definition of

an improper payment to include “quality” issues such as “did the design achieve intended results,” “did the

specifications result in a road condition that will last for X years.”

A consulting firm was engaged to conduct this study and the Tennessee DOT is the test State. During

March 2005, representatives from OST, FHWA, and the State DOT identified the different phases of a

highway project and developed the test criteria specifically for each phase, with emphasis on the

construction phase. A Special Advisory Group was established to oversee this research project, which

includes the includes DOT Deputy Chief Financial Officer, FHWA Chief Financial Officer, OMB

representatives, and the Inspector Generals from the Departments of Labor and Education.
FAA ACTIONS FOR IMPLEMENTING COST ACCOUNTING SYSTEMS:

In January 2006, FAA will complete the work to revamp the Cost Accounting System to account for a

recent significant organizational change. The system will replace labor assignment business rules with

actual labor costs from the Labor Distribution System. This improvement will provide more accurate labor

costs using actual time spent to maintain the National Airspace System equipment instead of using current

allocation rules based on staffing standards.

FAA plans to implement cost accounting for the Airports and Aviation Safety business units by the end of

June 2006. This will complete the implementation of cost accounting for the entire FAA organization.

As part of its cost accounting efforts, FAA will implement financial and performance measures to achieve

performance efficiencies and cost savings.

OTHER REPORTS AND EMERGING ISSUES

EMERGING ISSUE— STRATEGIC HUMAN CAPITAL PLANNING

EMERGING ISSUE: GAO has stated that the entire Federal Government faces an impending wave of

retirements of long-service, highly competent Federal employees. National demographic projections show

the retirement wave will coincide with a reduced labor pool. These circumstances create a large-scale

strategic human resource planning challenge. While the exodus of talent will not happen overnight, DOT

is planning and acting now to ensure a highly competent, diverse, well-led, and productive workforce at all

levels, now and into the future.

While the Inspector General did not cite human capital as a FY 2005 management challenge, he did

identify “Meeting Human Resource Needs” as an “emerging issue,” citing specific challenges facing FAA’s

controller workforce, and the need for the Federal Highway Administration to balance its changing skill

mix.

GAO REPORT—IMPROVED PROGRAM MANAGEMENT NEEDED TO ADDRESS TIMELY DISPOSAL OF OBSOLETE SHIPS

GAO: The Maritime Administration has more than 100 obsolete and deteriorating ships awaiting disposal

that pose potentially costly environmental threats to the waterways near where they are stored. Congress,

in 2000, mandated that MARAD dispose of them by September 30, 2006. While MARAD has various

disposal options available, each option is complicated by legal, financial and regulatory factors.

GAO Report 05-264 had three recommendations for executive action to improve MARAD’s ship disposal

program:

1) Develop a comprehensive approach to manage MARAD’s ship disposal program that would:

• identify a strategy and an implementation plan to dispose of all existing obsolete ships and future

transfers in a timely manner; maximizing the use of all available disposal methods;

• determine the needed resources, the associated funding plan, and specific milestones for this

disposal;

mANAGEMENT’S dISCUSSION AND ANALYSIS 55
56 FY 2005 Performance and Accountability Report

• establish a framework for decision making that would delineate roles and responsibilities and

establish guidance and procedures;

• identify external factors that could impede program success and develop plans to mitigate them; and

• evaluate annually results and implement corrective actions

2) Regularly communicate MARAD’s plan, required resources, and any impediments that require

congressional assistance in the mandated reports to Congress.

3) MARAD should change its contracting approach for acquiring ship scrapping services from the use of

Program Research and Development Announcements (PRDAs) to an appropriate method.

MARAD ACTIONS:

MARAD has already taken action on all three recommendations. A Ship Disposal Comprehensive

Management Plan (CMP) that addresses the items in the first recommendation is in the final stages of

development and will be finalized in first quarter of FY 2006. Upon approval of this CMP, MARAD will be

able to proceed further with the second recommendation. MARAD continues to communicate its disposal

plan and impediments to the Congress most recently in the

mandated reports dated April 2005 and October 2005.

Also, if the CMP becomes a mandated requirement

through enactment of the House National Defense

Authorization Act for FY 2006, the CMP will serve as

additional regular communication with the Congress.

Finally, MARAD has ceased using PRDAs as a method for

acquiring ship scrapping services. Since January 2005,

MARAD has been using the Federal Acquisition

Regulation (FAR) Test Program for Certain Commercial

Items “Standing Quotations.” The use of Standing

Quotations is a simplified acquisition procedure for the

competitive procurement of commercial services.

© AP/Wide World Photos/Adrin Snyder
Performance

Report

Introduction

Department of Transportation’s overarching mission is:

Everything we do at DOT is aimed toward meeting this mission statement and making measurable

improvements in our transportation system, the security of our Nation, and the quality of American life.

In the Performance and Accountability Report we hold ourselves accountable to the public for effectively

bringing to bear the Department’s energy and resources in improving the Nation’s transportation system.

We use these results to improve our strategies and resource decisions.

DOT’s performance framework is as follows:

• The DOT Strategic Plan provides a comprehensive vision for improving the Nation’s complex and

vital transportation system. DOT’s 2003-2008 Strategic Plan outlines five strategic objectives in the

areas of safety, mobility, global connectivity, security and the environment that articulate the longer

term focus of the Department. In addition to the broad objectives; the plan targets specific outcomes

we want to achieve, and identifies key challenges.

• The DOT Performance Budget operationalizes the Strategic Plan, and provides direct linkages

between DOT’s budget request and the results the public can expect for programs within each of our

Operating Administrations. The performance budget defines the performance goals and measures

used to manage progress toward our strategic objectives. It describes in detail one fiscal year’s

resources and programmatic effort within a strategic context. The performance budget also aligns

each dollar requested to one of our strategic objectives.

• This DOT Performance and Accountability Report provides a public accounting of our FY 2005

performance results.

Performance accountability for DOT organizations, executives, and employees embed the philosophy of

managing for performance into the Department’s culture and daily practices. Performance accountability

within the Department is accomplished through the following mechanisms:

Organizational Accountability Contracts—Prepared at the beginning of each fiscal year, these agreements

between the Secretary of Transportation and each modal Administrator document expected levels of

organizational performance for the upcoming year.

59

To develop and administer policies and programs that

contribute to providing fast, safe, efficient, and convenient

transportation at the lowest cost consistent with the

National objectives of general welfare, economic growth

and stability, the National security, and the efficient use

and conservation of the resources of the United States.

Performance Framework
60 FY 2005 Performance and Accountability Report

DOT Organizational Assessments of Performance—A review of each Operating Administration’s

performance is done at the end of the fiscal year to assess the organization’s success in the following areas:

meeting Department-wide performance targets; results of Office of Management and Budget Program

Assessments using the Program Assessment Rating Tool; President’s Management Agenda initiative

ratings; and efforts associated with addressing any management challenges or material weaknesses

identified by DOT’s Office of Inspector General. The results of these assessments are then factored in to

the personal performance evaluations of our senior executives.

Employee Performance Plans—Prepared early in the fiscal year, these plans document expected levels of

employee performance that clearly link to our strategic objectives through the performance framework.

The following graphic describes how DOT plans, measures, manages, and reports on performance:

DOT Strategic Objectives

Employee Performance Plans

Organizational Performance Assessments

Organizational Accountability Contracts

Supplementary Operating Administration

Goals & Measures

DOT Department-wide Performance

Goals & Measures
Performance Framework 61

How DOTWorks To Achieve Its Strategic Objectives And Performance Goals

The Department achieves its goals through its leadership role in U.S. transportation policy, operations,

investment, and research. To influence results, DOT programs rely on a number of common interventions

and actions. These include:

• Direct operations and investment in DOT capital assets that provide capability, such as air traffic

control and the St. Lawrence Seaway operations.

• Infrastructure investments and other grants, such as investment in highway, rail, transit, airport, and

Amtrak capital infrastructure, and grants for safety, job access, or other important transportation

programs.

• Innovative financial tools and credit programs, such as those provided for by the Transportation

Infrastructure Finance and Innovation Act, and the Railroad Rehabilitation and Improvement

Financing Program.

• Rulemaking, in areas such as equipment, vehicle, or operator standards; for improving safety; and for

fostering competition in the transportation sector of the U.S. economy.

• State/local organizational capacity building, through training, best practices, peer-to-peer exchangs

and other activities that strengthen the capability of State Departments of Transportation,

Metropolitan Planning Organizations, and local governments to play their essential front-line role in

planning, investing in, and operating highway and transit systems.

• Enforcement to ensure compliance, including inspections, investigations, and penalty action.

• Research and technology development and application, such as fostering new materials and

technologies in transportation, and transportation related research.

• Education and outreach, such as consumer awareness, and campaigns to influence personal behavior.

• Public Information, such as that provided by the Bureau of Transportation Statistics, and each DOT

Operating Administration, so that States, localities, regions, and private sector entities can better plan

their activities.

Some of these interventions and actions reside entirely within the Federal Government, but most involve

significant partnering with State and local authorities and with the transportation industry. These are the

broad areas of action that DOT—and State and local governments—commonly use to bring about desired

results.

63

Our FY 2005 Results: A Readers Guide

The performance section of this report is composed of chapters for each strategic objective identified in

the DOT Strategic Plan. The Organizational Excellence section of the report focuses on overall DOT

efforts to achieve our part of the President’s Management Agenda, ensuring that we are a citizen-centered,

results-oriented Cabinet agency, depending on market-based transportation solutions.

For each strategic objective, we present four increasingly detailed levels of information, which together

help the reader understand the breadth of the Department’s activities.

• The first level, which consists of the strategic objective, strategic outcome, and annual

resources, provides a summary-level view of how the Department is engaged in a

National priority like transportation mobility.

• The second level, the performance goal, focuses on a particular aspect of the priority

being discussed.

• The performance measure, at the third level, shows the reader how we measure our

progress toward the performance goal, the target we set for ourselves, and our success in

reaching it.

• The narrative in the fourth level provides the reader details about our accomplishments

or the challenges we faced, along with a forecast of our ability to meet the next year’s

target.

Terminology

We use the following terminology throughout the report:

Strategic Objective—statement from the DOT Strategic Plan, outlining the

desired long-term end-state.

Strategic Outcome—statement from the DOT Strategic Plan, outlining nearerterm objectives.

Performance Goal—a performance objective, connecting effects created by

departmental activities and programs, and the resulting influence on strategic

outcomes.

Performance Measure—a measurable indicator of progress toward a

performance goal, with annual targets.

Performance Report

The graphic on the following page shows the different levels of information and how they are presented.
64

STRATEGIC OUTCOMES: PERFORMANCE MEASURES:

• Improved infrastructure in all modes • Percentage of travel on the NHS .. 

• Reduced congestion in all modes • Percent of total annual urban .......

• Increased reliability throughout the system • Average percent change in transit ..

• Increased access for all Americans • Percent bus fleets that are ADA ....

FHWA continued to develop and promote innovative technologies that improve pavement durability, extend the

service life, reduce costs, and help mitigate congestion and work zone duration.

.

MOBILITY STRATEGIC OBJECTIVE

Advance accessible, efficient, intermodal transportation for the movement of people and goods.

Performance measure:

Percentage of travel on the NHS meeting pavement performance standards

for "good" ride.

2002 2003 2004 2005

Target N/A N/A 53.0 54.0

Actual 50.0 (r) 52.0 (r) 53.2 # 54.6 #

(r) Revised; # Projection from trends

Strategic Outcomes: 

Nearer-term objectives

Performance Measure:

Progress toward performance goal

Strategic Objective:

Desired long-term end state

Planned performance

Performance results 

This section describes accomplishments

and challenges

Forecast for

FY 2006

L

E

V

E

L

2

L

E

V

E

L

4

L

E

V

E

L

1

L

E

V

E

L

3

HIGHWAY INFRASTRUCTURE CONDITION

Performance Goal:

Connection between departmental activities

and the strategic objective

2005 Results. FHWA has redefined the pavement

condition performance measure from adequate ride

to a higher standard of good ride......

FY 2006 Performance Forecast. DOT expects to

meet the target in FY 2006

FY 2005 Performance and Accountability Report

Annual resources dedicated to

the strategic objective
The relationship between DOT’s activities and observed results—The relationship between resources and

results can be complex, and a mix of current and prior-year resources and activity almost always influences

any performance result. For example, direct service program results such as FAA air traffic control

operations are influenced both by external forces and prior-year acquisition activities. Other results, such

as highway congestion or transit ridership, are predominately influenced by prior-year funding.

Data completeness—An exhaustive assessment of the completeness and reliability of our performance

data and detailed information on the source, scope, and limitations for the performance data in this report

are provided at: www.bts.gov/programs/statistical_policy_and_research/source_and_accuracy_compendium/index.html.

In that website, we also provide information to resolve the inadequacies that exist in our performance data.

Preliminary vs. final results—Reporting FY 2005 results by November 2005 has been challenging where

we rely on third party reporting. Often we have only preliminary or estimated results based on partial-year

data and must wait for final data to properly verify and validate our results. In some cases where data is

provided solely as an annual value and is not available in time for this report, we rely on historical trend

information and program expertise to generate a projected result. We have been careful to point out where

we have assessed our performance on a preliminary or projected basis. Preliminary estimates or projected

results will be adjusted after final compilation or verification and validation. In all cases where results have

changed from last year’s report, we indicate that by placing an (r) with the number, indicating a revision.

DOT contributions to common governmental outcomes—DOT’s performance is aligned with its

legislative mandates, but in some cases there are no “bright lines” separating DOT from other agencies. For

instance, in DOT’s Security Strategic Goal or Objective, we make very important contributions in

accordance with our mandates and appropriations, but we do so alongside the Departments of Defense,

Homeland Security, State, Justice, Commerce, and Energy. Similarly, other agencies make significant

contributions to the nation’s transportation system.

Management challenges—The DOT Inspector General and the Government Accountability Office publish

reports describing a number of problems and challenges facing the Department. We take these issues

seriously, and have folded our approach to meeting these challenges into our general efforts to achieve

good performance outcomes. We have placed a description of each management challenge and the

Department’s response in Management’s Discussion and Analysis near the front of this report.

Summary performance table—One of the ways that DOT interprets its progress towards achieving its

strategic objectives is to compare single year results to historical trends. We have provided a tabular

summary of long-term performance for each of the Strategic Objectives to provide context for the FY 2005

achievements.

Performance Report 65
66 FY 2005 Performance and Accountability Report

Summary Performance Tables

Performance Measure 1999 2000 2001 2002 2003 2004 2005

Actual

2005

Target

Met /

Not Met

Highway fatalities per 100 million

vehicle-miles traveled (VMT) 1.55 1.53 1.51 1.51 1.48 1.46 (r) 1.43* 1.38 

Fatalities involving large trucks per

100 million truck VMT 2.65 (r) 2.57 (r) 2.45 2.30 2.33 (r) 2.34 (r) 2.35* 1.96 

U.S. commercial fatal aviation

accidents per 100,000 departures

(Last 3-year average)

0.051 0.037 0.037 0.026 0.024 0.021 * 0.017 * 0.023 

Number of fatal general aviation

accidents 364 341 359 348 360 (r) 340 * 350 * 343 

Rail-related accidents and incidents

per million train miles (measure

revised in FY 2004)

23.92 (r) 22.84 (r) 23.44 (r) 20.04 (r) 19.33 (r) 18.73 (r) 16.79* 17.14 

Transit fatalities per 100 million

passenger-miles traveled 0.530 0.499 0.482 0.473 0.461 0.359 * 0.492 * 0.482 

Number of incidents for natural gas

and hazardous liquid pipelines 339 (r) 380 (r) 341(r) 330 (r) 369 429 (r) 396 * 295 

Number of serious hazardous

materials transportation incidents 544 576 598 480 (r) 473 (r) 509 (r) 408 * 503 

Safety Performance Summary

FY 2004 - Percentage of Performance Targets 

Met

Met

71%

Not Met

29%

FY 2005 - Percentage of Performance Targets 

Met

Not Met

31%

Met

69%

(r) Revised; * Preliminary estimate; Met;  Not Met

overall dot performance summary
Performance Report 67

Performance Measure 1999 2000 2001 2002 2003 2004 2005 2005

Target

Met /

Not Met

Percentage of travel on the National

Highway System (NHS) meeting

pavement performance standards for

“good” rated ride 2

46.0 (r) 48.0 (r) 49.0 (r) 50.0 (r) 52.0 (r) 53.2 # 54.6 # 54.0 

Percent of total annual urban-area

travel occurring in congested

conditions

29.1 (r) 29.6 (r) 30.6 (r) 30.7 (r) 31.0 (r) 31.6 (r) 32.1 # 33.0 

Average percent change in transit

boardings per transit market (150

largest transit agencies), adjusted for

changes in employment levels

5.0 5.0 4.3 0.2 0.7 0.7 1.4 1.0 (r) 

Percent bus fleets compliant with the

ADA 77 80 85 90 93 95 97 * 95 

Percent of key rail stations compliant

with the ADA 49 52 67 77 82 82 91 * 84 (r) 

Number of employment sites (in

thousands) that are made accessible

by Job Access and Reverse Commute

transportation services

1.7 17.0 28.4 52.1 73.7 (r) 82.8 (r) * 82.1 # 50 

Percent of all flights arriving within 15

minutes of schedule at the 35

Operational Evolution Plan airports

due to NAS-related delays

76.0 74.9 76.5 (r) 82.2 82.3 79.07 (r) 88.1 * 87.4 

Mobility Performance Summary

2 Starting in FY 2005, measure was redefined to measure “good” rated pavement versus “acceptable” rated pavement. Results for FY 1999

through FY 2004 have been adjusted accordingly.

(r) Revised; * Preliminary estimate; ADA — Americans with Disabilities Act; Met;  Not Met
68 FY 2005 Performance and Accountability Report

Performance Measure 1999 2000 2001 2002 2003 2004 2005 2005

Target

Met /

Not Met

Percent share of the total dollar value

of DOT direct contracts that are

awarded to women-owned businesses

4.1 4.5 3.7 3.8 4.2 3.0 (r) 6.4 * 5.1 

Percent share of the total dollar value

of DOT direct contracts that are

awarded to small disadvantaged

businesses

17.9 17.7 17.4 16.2 15.8 12.3 (r) 15.1 * 14.5 

Percent of days in shipping season

that the U.S. portion of the St.

Lawrence Seaway is available

98.9 99.2 98.1 (r) 98.7 98.9 99.1 99.7 99.0 

Number of new or expanded bilateral

and multilateral agreements

completed (new measure in FY 2004)

N/A N/A N/A N/A N/A 3 2 2 

Number of potential air transportation

consumers (in billions) in international

markets traveling between the U. S.

and countries with open skies and

open transborder aviation agreements

(revised measure)

N/A N/A N/A N/A 1.48 1.72 2.97 1.53 

Number of international negotiations

conducted annually to remove

barriers to trade in air transportation

(new measure in FY 2005)

N/A N/A N/A N/A N/A N/A 25 10 

Global Connectivity Performance Summary

(r) Revised; * Preliminary estimate; Met;  Not Met
Performance Report 69

Performance Measure 1999 2000 2001 2002 2003 2004 2005 2005

Target

Met /

Not Met

Percentage of DOD-required shipping

capacity complete with crews

available within mobilization timelines

97 92 97 94 96 94 95 94 

Percentage of DOD-designated

commercial ports available for military

use within DOD established readiness

timelines

93 93 92 92 86 93 87 93 

Transportation Capability Assessment

for Readiness Index Score (New

Measure)

N/A N/A N/A N/A 59 67 65 71 

Security Performance Summary

Performance Measure 1999 2000 2001 2002 2003 2004 2005 2005

Target

Met /

Not Met

Ratio of wetlands replaced for every

acre affected by Federal-aid highway

projects

2.3 3.8 2.1 2.7 2.7 2.1 2.4 1.5 

Percent DOT facilities characterized as

No Further Remedial Action under the

Superfund Amendments and

Reauthorization Act

90 90 91 91 94 93 92 93 

12-month moving average number of

area transportation emissions

conformity lapses

N/A 6.0 6.0 6.0 6.0 6.0 6.0 6.0 

Tons of hazardous liquid materials

spilled per million ton-miles shipped

by pipeline

0.0184 (r) 0.0083 (r) 0.0026 (r) 0.0057 (r) 0.0071 (r) 0.0102 0.0097 * 0.0064 

Percent reduction in the number of

people in the U. S. who are exposed to

significant aircraft noise levels (revised

measure)

N/A N/A N/A N/A -15% -27% (r) -27% # -3% 

Environmental Stewardship Performance Summary

(r) Revised; * Preliminary estimate; # Projection from trends; Met;  Not Met

(r) Revised; * Preliminary estimate; Met;  Not Met
70 FY 2005 Performance and Accountability Report

Performance Measure 1999 2000 2001 2002 2003 2004 2005 2005

Target

Met /

Not Met

For major DOT systems , percentage of

cost goals established in the

acquisition project baselines that are

met 3

N/A N/A N/A 89.5 88 100 97 80 

For major DOT systems, percentage of

scheduled milestones established in

acquisition project baselines that are

met 4

N/A N/A N/A 74 78 92 92 80 

For major Federally funded

infrastructure projects, percentage

that meet schedule milestones

established in project or contract

agreements, or miss them by less than

10 percent

N/A N/A N/A 85 88 95 95 95 

For major Federally funded

infrastructure projects, percentage

that meet cost estimates established

in project or contract agreements, or

miss them by less than 10 percent

N/A N/A N/A 85 88 74 79 95 

Percentage of transit grants obligated

within 60 days after submission of a

completed application

N/A 21 51 67 83 91 91 80 

Number of environmental justice (EJ)

cases that remain unresolved after one

year

29 56 39 65 76 73 45 35 

Organizational Excellence Performance Summary

3 & 4 This measure was combined in FY 2004 to include both cost goals and schedule milestones; Met;  Not Met
71

STRATEGIC OUTCOMES

• Reduction in Transportation-Related Deaths

• Reduction in Transportation-Related Injuries

SAFETY STRATEGIC OBJECTIVE

PROMOTE THE PUBLIC HEALTH AND SAFETY BY WORKING TOWARD THE ELIMINATION OF

TRANSPORTATION-RELATED DEATHS AND INJURIES

PERFORMANCE MEASURES

• Highway fatalities per 100 million vehicle miles traveled

(VMT).

• Fatalities involving large trucks per 100 million truck

VMT.

• U.S. commercial fatal aviation accidents per 100,000

departures (Last 3 year average).

• Number of fatal general aviation accidents.

• Rail-related accidents and incidents per million train

miles (measure revised in FY 2004).

• Transit fatalities per 100 million passenger-miles traveled.

• Number of incidents for natural gas and hazardous liquid

pipelines.

• Number of serious hazardous materials transportation

incidents.

SAFETY 

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

PHMSA, $100 NHTSA, $428

FMCSA, $407

FRA, $205 RITA, $1

FHWA, $3,721

OST, $3,725

FTA, $11

FAA, $9,713
72 FY 2005 Performance and Accountability Report

Improving the safety of the Nation’s transportation system is the top priority of Secretary Mineta. DOT’s

central strategies for reducing fatalities and injuries on the Nation’s highways are to reduce alcoholimpaired driving, increase safety belt use and improve the safety of commercial vehicle operations. Three

Operating Administrations are the key contributors to the Highway Safety goal: the National Highway

Traffic Safety Administration (NHTSA), the Federal Highway Administration (FHWA) and the Federal

Motor Carrier Safety Administration (FMCSA).

NHTSA. Highway crashes cause 95% of all transportation-related fatalities and 99% of transportation

injuries, and are the leading cause of death for Americans age 3 through 33. Alcohol is still the single

biggest contributing factor in fatal crashes. While declining for the second year in a row (-2.4% ), fatalities

in alcohol-related crashes still claimed 16,694 lives in 2004, falling below 17,000 fatalities for the first time

in five years. In 2004, approximately 12% of all people killed in motor vehicle incidents were involved in a

crash with a large truck, yet trucks represented less than 4% of registered vehicles and approximately 8% of

the vehicle miles of travel. Eighteen percent of Americans still do not use safety belts all of the time when

driving motor vehicles. The large number of crashes has placed a considerable burden on the Nation's

health care system and has had significant economic effects. The cost to the economy of all motor vehicle

crashes is approximately $230.6 billion, or 2.3% of the U.S. gross domestic product.

FHWA. The FHWA safety-related programs yielded multiple benefits for communities across the United

States, including a reduction in the number of specific types of crashes and improvements in system

conditions and operations. Highway construction programs contributed to safety by improving unsafe

roadway design and operations, improving the condition of bridges, and removing roadway hazards. The

continued use of Road Safety Audits assisted communities with safety improvements during the

construction of new roadways and reconstruction of existing roadways. FHWA influenced decisions to

increase staffing, funding, and coalition partnerships for safety initiatives in Maine, Illinois, Minnesota,

and States along the I-95 corridor.

FMCSA. Based on preliminary estimates for FY 2005, the number of deaths in crashes involving large

trucks decreased by almost 21% from its all-time high in 1979. Additional long-term accomplishments

include:

• The rate for large truck fatalities involving alcohol has declined by more than two thirds over the last

decade.

• Six states, Alabama, Connecticut, Maine, New Jersey, Utah, and Washington currently meet the

FY 2008 target fatalities per 100 million Truck Vehicle-Miles Traveled (TVMT).

While these long-term accomplishments are significant, FMCSA needs to continue to work towards

achieving its performance targets. To that end, FMCSA initiated the Comprehensive Safety Analysis (CSA)

2010 project, to reach the next level of safety. The CSA 2010 project is examining the foundation of all of

FMCSA’s safety programs, exploring new enforcement regimes, and revisiting many existing practices and

procedures to increase and sharpen the agency’s focus on improving safety.

Highway Safety
2005 Results. DOT did not meet the highway

fatality rate. However, as a direct result of

DOT’s programs, motor vehicle travel has

become significantly safer. The overall fatality

rate declined from 3.35 in 1980 to a revised

1.46 fatalities per hundred million vehicle

miles traveled in 2004—the lowest fatality

rate in our Nation’s history. DOT projects

that in 2005, the fatality rate dropped even

further—to 1.43. Final figures for FY 2005

will be reported in next year’s report.

Early estimates for roadway departure fatalities, which include run-off-the-road and head-on fatalities, are

24,848 fatalities in FY 2004, a slight reduction from FY 2003. Preliminary fatalities for intersection-related

fatal crashes are 8,887 and 4,641 for pedestrian-related fatalities. These estimates also represent slight

reductions from FY 2003.

FY 2006 Performance Forecast. The Department will likely fall short of the Administrator’s goal of

1.38 fatalities per 100 million VMT in 2006 if the trends remain the same.

2005 Results. Preliminary estimates for

FY 2005 indicate fatalities increased from a

rate of 2.34 per 100 million Truck VehicleMiles of Travel (TVMT) in 2004 to a rate of

2.35 per 100 million TVMT in FY 2005, and

as a result FMCSA will not meet its annual

target. FMCSA and its State partners have

made, over the long run, solid progress in

reducing both the number and rate of

fatalities involving large trucks despite yearly

increases in both TVMT and the number of vehicles traveling our Nation’s roads,. These latest trends

indicate that after years of steady progress in reducing large truck-related fatality rates, FMCSA may have

achieved most of the safety improvements it can expect using current operational practices and

procedures. In response, FMCSA in FY 2005 initiated the Comprehensive Safety Analysis (CSA)

2010 project to reach the next level of safety.

FY 2006 Performance Forecast. FMCSA does not anticipate meeting its FY 2006 target but is working to

reduce the rate of fatalities involving large trucks.

Performance Report—safety strategic objective 73

Performance Measure

Highway fatalities per 100 million vehicle-miles traveled (VMT).

2002 2003 2004 2005

Target 1.4 1.4 1.38 1.38

Actual 1.51 1.48 1.46 (r) 1.43 *

(r) Revised; * Preliminary estimate

Performance Measure

Fatalities involving large trucks per 100 million truck VMT.

2002 2003 2004 2005

Target 2.32 2.19 2.07 1.96

Actual 2.30 2.33 (r) 2.34 (r) 2.35 *

(r) Revised; * Preliminary estimate
74 FY 2005 Performance and Accountability Report

NHTSA

Using a performance-based management process, NHTSA awarded $115.3 million in State and

community highway safety formula grants. States used this and their own funds to:

• reduce speed-related fatalities;

• encourage proper use of occupant protection devices;

• reduce alcohol and drug impaired driving;

• reduce crashes between motorcycles and other vehicles;

• reduce school bus crashes;

• improve police traffic services;

• improve emergency medical services and trauma care systems;

• increase pedestrian and bicyclist safety; and

• improve traffic record systems.

The grants also provided support for State data collection and reporting of traffic deaths and injuries.

SAFETY BELTS

In the past four years, safety belt use has increased steadily from

71% in FY 2000 to 82% in FY 2005. The 82% safety belt usage will

save 15,700 lives and $67 billion in economic costs associated with

traffic-related crashes, injuries, and deaths every year. Belt use is

statistically higher in states with primary belt enforcement laws

than in states with secondary laws, and higher in urban or

suburban areas than in rural areas. In FY 2005, states that allowed

more stringent enforcement of their belt use laws (“primary” states)

reached a milestone of 85% belt use. Primary enforcement allows

law enforcement officers to issue a citation any time they observe

an unbelted driver or passenger. Secondary enforcement only

allows officers to issue a safety belt citation if the officer has

stopped the vehicle for some other reason.

Fatalities of unrestrained passenger vehicle occupants declined by 3.4%, which may reflect the increasing

use of safety belts, and contribute to the overall reduction in passenger vehicle occupant fatalities.

However, in FY 2004, 55% of those killed in passenger vehicles were still not wearing safety belts. Many

times passenger vehicle occupants are killed in motor vehicle crashes when they are unbelted and ejected

from the vehicle during a rollover event. In FY 2004, rollover deaths among passenger vehicle occupants

increased 1.1% from 10,442 to 10,553.

In May 2005, NHTSA conducted a National Click It or Ticket campaign, while encouraging States to

continue to conduct periodic high-visibility safety belt law enforcement mobilizations, during the ensuing

summer months. The agency published new strategies and best practices from demonstration grants,

included in the FY 2003 Occupant Protection Integrated Project Team report, which focuses on high-risk

groups such as minorities, younger drivers, rural populations, pick-up truck occupants, 8-15 year old

passengers, part-time safety belt users, and motor vehicle occupants in states with secondary safety belt

In-Depth Accomplishments Promoting Highway Safety

© AP/Wide World Photos/Jim Cole
laws. Likewise, NHTSA reached out to new partners representing these populations to try to raise their

lower-than-average safety belt use rates. In addition, NHTSA intensified media strategies through

partnerships with the Ad Council and other outlets to develop messages to increase booster seat use

among the 4 to 8 year-old age group.

IMPAIRED DRIVERS

While alcohol-related fatalities declined for the second year in a row (-2.4% in FY 2005), alcohol-related

crashes and their related mortality tolls continued to pose a significant public health challenge throughout

the country. Alcohol-related crashes claimed 16,694 lives in 2004, falling below 17,000 fatalities for the first

time in five years. In addition, fatalities declined by 1.8% in crashes where the highest blood alcohol

concentration (BAC) was 0.08 grams per deciliter or greater. In continuing to combat this problem,

NHTSA further enhanced its impaired driving prevention program, with continued emphasis on assisting

high-risk populations (e.g., underage drinkers, 21 to 34 year-olds, individuals with high BAC or repeat

offenders) in order to continue the current declining trend.

NHTSA made available more than $29.9 million to 34 States having alcohol-impaired driving

countermeasure laws or programs, such as administrative license revocation laws and graduated licensing

programs. Technical and program support was provided to ten States receiving Highway Safety program

grants to conduct comprehensive impaired driving program assessments, countermeasure implementation

and evaluation. Additionally, 49 States, the District of Columbia, and Puerto Rico received $61.3 million in

incentive grants for lowering the legal threshold for impaired driving to .08 BAC. With Minnesota’s

.08 BAC legislation taking effect in August 2005, now all 50 States, the District of Columbia, and Puerto

Rico have enacted .08 BAC laws.

SAFER VEHICLES

To improve tire safety, NHTSA published the final rule for Tire Pressure Monitoring Systems to begin

phase-in of new requirements with 2006 model year vehicles. By 2008, all new 4-wheeled vehicles

weighing 10,000 pounds or less must be equipped with a monitoring system that meets the new

requirements. NHTSA estimates that about 120 lives a year will be saved when all new vehicles are

equipped with the tire pressure monitoring systems. Under the New Car Assessment Program, NHTSA

conducted and released results of its frontal and side crash tests, rollover ratings, child safety seat ease-ofuse results, and information for consumers on vehicle safety features available as standard or optional

equipment. The agency re-issued its warning to users of 15-passenger vans because of an increased

rollover risk under certain conditions. In a new research report related to improper tire maintenance on

15-passenger vans, the NHTSA study found that 74% of all 15-passenger vans had significantly misinflated tires. NHTSA research has consistently shown that improperly inflated tires can change handling

characteristics, increasing the prospect of a rollover crash in 15-passenger vans.

Similar warnings were issued in 2001, 2002, and 2004. The public is responding to safety information

about 15-passenger vans. Fatalities from 15-passenger van rollover crashes have declined 35% since

advisories began in 2001.

From Calendar Year (CY) 2001 through May 2005, there were 1,801 recalls for safety-related defects and

435 of these recalls—representing about 41.8 million vehicles and 337,000 equipment items—were

influenced by NHTSA investigations. During this same period, there were 381 recalls to correct

noncompliances with Federal motor vehicle safety standards. In 2003, NHTSA established a separate

Performance Report—safety strategic objective 75
76 FY 2005 Performance and Accountability Report

category for child safety seat recalls. Formerly, these were shown as equipment recalls. From CY 2001

through May 2005, there were four NHTSA-influenced child safety seat recalls that involved nearly

5 million seats, and one NHTSA-influenced tire recall that involved 2.8 million tires. Information on

NHTSA’s rollover ratings, five star crash tests, defect investigations and safety recalls can be found on the

agency’s newly redesigned Web site, www.safercar.gov, which was reconstructed to be more

consumer-friendly.

FHWA

ROADWAY DEPARTURE AND INTERSECTION SAFETY

FHWA pursued improved roadway departure safety through improvements in engineering, education, and

enforcement. As part of its comprehensive safety program, FHWA engineers worked closely with State

highway engineers and law enforcement officials to identify appropriate engineering safety

countermeasures for high-risk locations and new roads. For instance, they worked on promoting greater

use of roadway improvements such as, upgraded guardrails and rumble strips, encouraging greater use of

retro reflective signage and improved markings, and removing of roadside hazards. FHWA worked with

industry partners to promote a National Agenda for Intersection Safety, which includes a number of

solutions and strategies, such as: engineering and technology improvements, intersection safety audits,

red-light cameras, training for local safety professionals, and increasing public awareness.

The Intelligent Transportation Systems (ITS) Program continued to develop technology-based systems

that could significantly reduce intersection crashes. At the new intersection safety test facility, FHWA is

developing an Intersection Collision Avoidance System to help drivers avoid crashes at intersections.

Pedestrian fatalities are also a significant issue. FHWA targeted the cause of crashes in major urban areas

and select rural locations and facilitated community-based programs that fully and safely accommodated

pedestrians.

HIGHWAY SAFETY PLANNING

FHWA, the American Association of State Highway and Transportation Officials (AASHTO) and other

National organizations jointly hosted a National Safety Leadership Forum to advance the Lead States

initiative and strategic safety plans. FHWA continues to promote the AASHTO Strategic Highway Safety

Plan, which includes an outreach program to encourage lead states to develop strategic highway safety

plans. Effective plans include strong crash data systems, a statewide goal for reducing deaths within a set

period of time, and stakeholder safety teams dedicated to supporting the effort. Twenty states currently

have statewide strategic highway safety plans and 11 more are actively developing plans.

FMCSA

COMPLIANCE AND ENFORCEMENT

Regulatory standards continue to provide the cornerstones of FMCSA’s compliance and enforcement

mission. In 2005, the Agency issued rules concerning: hours of service, Title VI regulations for financial

assistance, rules of practice, transportation of household goods, and, parts and accessories necessary for
safe operation. In addition to providing technical assistance to industry and the public, FMCSA has

processed in excess of 1,000 e-mails and over 35,000 phone calls concerning safety regulations.

Additionally, FMCSA processed through the Internet Web site www.pay.gov:

• 7,721 operating authority applications;

• 3,703 reinstatements of operating authority;

• 471 voluntary revocations;

• 21,173 new MCS-150 (Motor Carrier Identification Report) applications;

• 25,205 MCS-150 updates; 

• 27 cargo tank facility manufactures’ applications; and, 

• 159 cargo tank updates.

During FY 2005, FMCSA continued to place a high priority on enforcement and compliance operational

activities. FMCSA obligated $100 million to States for motor carrier compliance and enforcement activities

to complement Federal operations. Working closely with its State partners in coordination with the OIG,

FMCSA initiated five strike force operations in targeting household goods carriers (HHG) and conducted

its first ever roadside inspections of HHG Commercial Motor

Vehicles (CMVs), resulting in the initiation of two enforcement

cases. FMCSA completed 380 commercial investigations and

continues to focus on and increase enforcement actions against

unscrupulous HHG movers, with the addition of three

positions dedicated to HHG activities. Additionally, FMCSA

completed the second year of a two-year study of HHG dispute

settlement programs. During FY 2005, Federal and State safety

enforcement operations to ensure compliance with Federal

motor carrier safety regulations included:

• 978 border safety audits;

• 3,196 conditional carrier reviews;

• 33,925 new entrant safety audits;

• 12,449 safety compliance reviews;

• 353,357 border inspections; and

• 2,941,231 roadside inspections.

In FY 2005, the number of States participating in the Performance and Registration Information Safety

Management system, an initiative that links the safety records of motor carriers with their ability to

register their vehicles, increased by 5 to a total of 42; and, enforcement operations resulted in FMCSA

initiating 4,164 enforcement cases.

EDUCATION AND OUTREACH

As of June 2005, FMCSA provided commercial motor vehicle (CMV) safety training for over 5,890 State

and local law enforcement personnel.

Performance Report—safety strategic objective 77

© AP/Wide World Photos/The Tennessean/Jae S. Lee
78 FY 2005 Performance and Accountability Report

FMCSA continues to focus on increasing CMV driver safety belt usage through increased partnering

activities, research, education and outreach materials and enforcement. FMCSA has been working closely

with NHTSA to increase safety belt use among CMV drivers and has transferred funds to conduct two

CMV safety belt studies. Also, FMCSA funded a study conducted by the Transportation Research Board

on industry practices and motivational factors for CMV safety belt use.

FMCSA is piloting an education/enforcement program aimed at eliminating aggressive driving behaviors

around large trucks and passenger cars, which will result in the reduction of large truck crash fatalities and

injuries. FMCSA has also implemented a Passenger Carrier Safety Program to reduce fatalities, injuries,

and crashes. Additionally, FMCSA has developed several brochures for the passenger motor coach

industry and has implemented a Web-based information source for safe interstate passenger

transportation to help consumers consider safety issues when selecting a passenger transportation

company.

DRIVER IDENTIFICATION AND QUALIFICATION

Medical qualifications of CMV drivers remain an area of focus. As of June 2005, FMCSA completed a draft

Charter for the Medical Review Board, reviewed over 693 applications for vision exemptions and 57

applications for diabetes exemptions, and, amended medical standards by publishing new Blood Pressure

Guidelines.

RESEARCH, TECHNOLOGY AND SAFETY INFORMATION

FMCSA’s research and technology (R&T) programs provide advances and innovations to improve CMV

safety. The agency completed the pilot testing of the Commercial Truck Simulator Validation (Sim Val)

Study and completed updates for the following reports:

• Estimates of the prevalence and risk of fatigue in fatal crashes, 

• Comparison of the 10- and 11-hours of driving critical incident data, and 

• Measuring sleep quantity using actigraphy data.

FMCSA also completed the Safety Belt Best Practices Synthesis Report, provided research support to the

Secretary of Transportation’s Safety Belt initiative; and published reports on:

• CMV driver fatigue and driver health;

• CMV driver safety belt usage;

• Hours of service and fatigue management techniques;

• Individual differences and the “high risk” driver;

• Sleep apnea crash risk study; and

• Pilot test of fatigue management technologies.

Better understanding of the factors contributing to large truck and motor coach crashes is critical to

developing agency programs, policies and safety interventions. In FY 2005, FMCSA continued to provide

technical support to States to deploy Commercial Motor Vehicle Information Systems and Networks and

completed statistical analysis of the Large Truck Causation Study.
FMCSA initiated Comprehensive Safety Analysis (CSA) 2010, an ambitious program to realign,

strengthen, consolidate where possible, and focus its safety programs and enforcement operations. The

results of the analysis will be used to assist the Agency in refocusing existing and developing new analytic

techniques and methods to identify potentially unsafe drivers. When fully implemented, CSA 2010 will

provide FMCSA a new operational model that will greatly enhance the Agency’s safety performance by

significantly expanding its ability to reach and thoroughly evaluate a significantly larger portion of the

regulated population, both carriers and drivers.

Performance Report—safety strategic objective 79
80 FY 2005 Performance and Accountability Report

Aviation Safety

Commercial aviation is one of the safest forms of transportation. While rare, aviation accidents can have

catastrophic consequences, with large loss of life; as a result, the public demands a high standard of safety

and expects continued improvement.

FAA’s role in commercial aviation is well known, less known is the fact

that it also oversees the safety of almost 300,000 general aviation

aircraft in the United States. These aircraft include single-seat homebuilt airplanes, rotorcraft, balloons, and highly sophisticated extendedrange turbojets. General aviation activities include student training,

crop dusting, fire fighting, law enforcement, news coverage,

sightseeing, industrial work, on-demand air taxi service, corporate

transportation, as well as personal use and recreational flying. The

majority of aviation fatalities have occurred in this segment of aviation.

Since 1988, there has been a gradual trend downward in the number of

general aviation accidents, but progress has not been steady.

2005 Results. Based on the preliminary

estimate, DOT met the commercial aviation

fatal accident rate. This is one of the safest

periods in aviation history. The National

Airspace System operates 32,000 scheduled

commercial flights daily. Based on the

preliminary estimate, FAA exceeded its

FY 2005 goal of reducing the airline fatal

accident rate to a three-year rolling average

rate of 0.023 per 100,000 departures. The

actual figure of 0.017 fatal accidents per

100,000 departures translates to about one fatal accident per 5.9 million departures. Since the last fatal jet

airliner accident involving passengers in November 2001, over two billion airline passengers have safely

reached their destination.

FY 2006 Performance Forecast. FAA is on track to meet the performance target in FY 2006.

2005 Results. Based on the preliminary

estimate, DOT failed to meet the general

aviation fatal accident target. FAA was

challenged to meet the target this year for

reducing General Aviation (GA) fatal

accidents. GA fatal accidents ran higher each

month than the previous year. The agency

believes that increased flight activity, the

increased use of turbine aircraft, and pilots

exceeding their limitations were leading

factors.

FY 2006 Performance Forecast. FAA may not meet the performance target in FY 2006.

Performance Measure

U.S. commercial fatal aviation accidents per 100,000 departures

(Last 3-years’ average).

2002 2003 2004 2005

Target .038 .033 .028 .023

Actual .026 .024 .021 * .017 *

* Preliminary estimate

Performance Measure

Number of fatal general aviation accidents.

2002 2003 2004 2005

Target 379 374 349 343

Actual 348 360 (r) 340 * 350 *

(r) Revised; * Preliminary estimate

© Department of Transportation
81

Commercial Air Carrier Safety. While maintaining its regulatory and enforcement role, FAA continues to

partner with the aviation community in improving safety, which is reflected in three basic long-term

strategies:

• prevent accidents by addressing recurrent causes;

• improve certification and surveillance; and

• share safety data and information with aviation partners.

These strategies are at the heart of most of FAA’s significant and long-term safety programs.

FAA also worked in FY 2005 to increase aviation safety by preventing fuel tank explosions. The agency

submitted a Notice of Proposed Rulemaking for inerting flammable fuel vapors. This process involves

reducing levels of flammable vapors in fuel tanks to meet the level achieved when fuel tanks are made

chemically unreactive. This rule would apply to current aircraft in service, new production aircraft, and

new kinds of aircraft designs in the transport category.

FAA continued efforts to improve use of onboard technology that can enable pilots to navigate aircraft to

any point in the world using only geographical coordinates. Required Navigation Performance (RNP) is an

important step in moving the United States from an exclusively ground-based navigation system to one

located within the aircraft itself. By providing pilots precise guidance to all runways, RNP can help prevent

two major types of accidents—controlled flight into terrain and accidents that occur during the approach

and landing phase of flight. In addition, RNP will enable pilots to land in weather conditions that would

ordinarily require diversion to alternate airports. FAA continued its emphasis on improving Runway Safety

Areas (RSAs). In FY 2005, FAA exceeded its goal of improving 41 RSAs by completing improvements to

50 RSAs.

In addition to these safety initiatives, FAA also engaged in hands-on preventative measures in FY 2005,

such as increased security screening of cargo to root out fireworks and other hazardous materials. Those

efforts aided in the detection of many undeclared hazardous materials, allowing FAA to safeguard airline

passengers through increased investigation of violations of hazardous materials regulations.

General Aviation Safety. To improve safety awareness and training, the FAA works collaboratively with the

General Aviation community, while continuing to enhance the Aviation Safety Program. The General

Aviation Joint Steering Committee, a partnership of the FAA and major general aviation associations,

recently created a turbine operations subgroup. The group identified actions to encourage charter and

corporate operators to adopt safety management systems. In addition, the JSC continues its work to

improve safety for operators of single-engine airplanes.

Reducing Precursors. FAA has identified runway incursions and operational errors as significant

precursors to fatal accidents in both commercial and general aviation. Reducing these incidents is critical

to reducing fatalities in aviation.

Runway Safety. A runway incursion is any occurrence at an airport involving an aircraft, vehicle, person, or

object on the ground that creates a collision hazard or results in a loss of separation with an aircraft taking

off, intending to take off, landing, or intending to land. Reducing runway incursions lessens the probability

of accidents that potentially involve fatalities, injuries, and significant property damage.

In-Depth Accomplishments Promoting Aviation Safety

Performance Report—safety strategic objective
82 FY 2005 Performance and Accountability Report

For the third year in a row, serious runway incursions are down. The number of the most serious types of

runway incursions is projected at 29, which is lower than the FAA’s performance limit of 36 for FY 2005.

The agency continues to develop and coordinate efforts to improve runway safety including a variety of

education and awareness materials focused on air traffic controllers, pilots and airport drivers to help

reduce the number of serious runway incursion incidents. Other tools, such as air traffic control memory

aids, better airport surface markers, and public service announcements, have contributed to the reduction

in incursions.

A new runway technology system was deployed in FY 2004 to reduce the potential for runway collisions at

major U.S. airports. Airport Surface Detection Equipment, Model X (ASDE-X) was first commissioned at

General Mitchell International Airport in Milwaukee, WI. This equipment maps moving objects on the

airport grounds or those approaching by air, which helps controllers detect potential runway collisions. In

FY 2005, FAA deployed ASDE-X at three additional locations. The agency expects to install this

equipment at 14 additional U.S. airports by FY 2009.

Operational Errors. One of the fundamental principles of aviation safety is separation—the need to

maintain a safe distance from other aircraft, terrain, obstructions, and restricted airspace. Air traffic

controllers employ rules and procedures that define separation standards for this environment. An

operational error occurs when controllers fail to apply or follow these procedures that enforce separation

and allow aircraft to end up too close to each other or an obstruction.

The FAA estimates that it will exceed the FY 2005 performance limit of 637 most serious operational

errors by more than 6% (680 operational errors). Although FAA did not meet its target, it has instituted

performance management and communication initiatives in FY 2005 that are already helping to make

improvements, some of which are identified below:

• Certification skills checks, focusing on operational error causal factors, were conducted on all

control room personnel;

• FAA began conducting regular quality assurance teleconferences with air traffic facilities and

producing a regular newsletter for controllers to highlight causal factors, trends solutions,

procedures, and training;

• Two Air Traffic Organization units, En Route and Oceanic Services and Terminal Services,

have worked with the Controller Training Division to improve training content and identify

simulation solutions to enhance the performance of developmental air traffic control

specialists and the current full-performance level workforce.

In FY 2006, FAA will continue its performance management and communications initiatives, refine the

operational error severity classification process to ensure an accurate identification of the risk posed by an

operational incident, and review a procedural change for aircraft operating on crossing and diverging

courses to provide additional operational efficiency while maintaining safety.
83

Chief among the many achievements during FY 2005 was the

unveiling by Secretary Mineta of the National Rail Safety Action

Plan. The plan will help prevent train accidents caused by

human error, improve the safety of HAZMAT shipments,

minimize the dangers of crew fatigue, deploy state-of-the-art

technologies to detect track defects, and focus inspectors on

safety trouble spots. To accomplish this, Federal Railroad

Administration will accelerate its research into tank-car

structural integrity for increased crash survivability; help ensure

that emergency responders have accurate and timely access to

consist information following a train accident involving hazmat;

and identify promising technologies to reduce the risk of train

accidents in territory without signals where hazmat are transported.

2005 Results. For the 10-month period

October 2004–July 2005, total rail-related

accidents fell 8.4%, from 11,944 to 10,943,

while total casualties (fatalities and injuries)

declined 6.5%, from 8,288 to 7,749. These

dramatic reductions accompanied a modest

3.0% drop in train accidents, from 2,667 to

2,586. A primary reason for the reductions

was a greater emphasis by the railroad

industry on reducing employee-on-duty

casualties, particularly within rail yards. FRA has worked extensively with the industry over the past two

years to better protect the activities of rail employees involved in dangerous switching operations.

As mentioned in the FY 2004 PAR, the measure was revised to capture an expanded universe of data. FAR

reviewed the data on-hand has provided updated historical data to include the new categories now

factored into the measure. Previously, FRA had reported that they met the performance target for FY 2004;

however the preliminary estimate was based on six months of data. Once the final data was received FRA

found that in some cases initial reports from railroads either under reported its data, or reports were

revised to reflect the final numbers which had increased.

FY 2006 Performance Forecast. Based on current projections, FRA should meet the FY 2006 target for the

rail-related accidents rate.

Performance Measure

Rail-related accidents and incidents per million train miles.

2002 2003 2004 2005

Target N/A N/A 17.49 17.14

Actual 20.04 (r) 19.33 (r) 18.73 (r) 16.79 *

(r) Revised; * Preliminary estimate

© AP/World Wide Photos/Troy Maben

Rail Safety

Performance Report—safety strategic objective
84 FY 2005 Performance and Accountability Report

Public transit provides a flexible alternative to traveling by automobile, offering a higher degree of safety as

well. Currently, transit is one of the safest modes of travel per passenger-mile traveled. According to the

National Safety Council, riding the bus is 47 times safer than traveling by car. The challenge is to further

reduce the rate of fatalities and injuries even as the total number of people using transit increases.

2005 Results. Although preliminary estimates suggest DOT will not meet the target for FY 2005, initial

data does not include all data sources. Historical trends indicate that this number will be reduced once the

data is finalized.

FY 2006 Performance Forecast. DOT will

meet the FY 2006 target.

In 2005, FTA’s strategy for further reducing

the low rate of transit fatalities included:

• Continued investment in new, safer bus

and rail vehicles, and improvements to

track and transit facility conditions.

• Continued safety design consideration for new projects from project inception.

• Safety technical assistance to improve technology and training programs and compliance with

the Americans with Disabilities Act’s safety requirements by providing FTA planning and

research funds to assist States, local transit authorities, and the transit industry.

• Continued support of the Transportation Safety Institute’s (TSI) safety and security training

program, which provided 29 safety and security training courses to over 4,900 transit

employees. Training courses included accident prevention and investigation, emergency

management, industrial safety, alternative fuels, bus operator safety, and fatigue awareness.

• Continued oversight of the States’ programs for Safety Oversight of Rail Systems to ensure they

are in compliance with the requirements of the State Safety Oversight Rule for Rail Fixed

Guide way Systems.

• Worked with partners—the American Public Transportation Association (APTA), the

Community Transportation Association of America (CTAA), and the American Association of

State Highway and Transportation Officials (AASHTO)—to implement and promote the

Model Transit Bus Safety and Security Program. This included developing technical assistance

documents for small/rural, medium, and large transit agencies on security, driver selection and

training, vehicle maintenance, and drug and alcohol abuse programs.

In-Depth Accomplishments Promoting Transit Safety

Performance Measure

Transit fatalities per 100 million passenger-miles traveled.

2002 2003 2004 2005

Target .492 .492 487 482

Actual .473 .461 359 * 492 *

* Preliminary estimate

Transit Safety
85

While pipelines are among the safest modes for transporting hazardous liquids and natural gases, the

nature of their cargo is inherently dangerous, and pipeline failures can pose an immediate threat to people

and communities.

Excavation damage during construction causes 30% of pipeline

failures for all types of pipelines, corrosion causes another 18%

of failures, and natural forces such as earthquakes cause 9% of

failures. Incorrect operation, construction/material defects,

equipment malfunction, failed pipes, and other miscellaneous

causes account for the remaining 43% of pipeline failures.

PHMSA is closely monitoring the number of incidents in gas

transmission and gas distribution lines which were increased

in the past two years. PHMSA is also evaluating whether a

substantial increase in natural gas prices in the past two years

contributed to the increase in the number of reportable

incidents in natural gas pipeline systems (a reportable incident

involves either a death or injury or at least $50,000 of property damage, which includes value of product

lost). In the past 10 years, there have been 22 fatalities annually related to natural gas or hazardous liquid

pipeline failures.

The Pipeline Safety Improvement Act of 2002 reinforced and strengthened PHMSA programs to assure the

long-term integrity and security of existing pipelines. The Act improved the tools available to address the

causes of pipeline failure. The Act required integrity management programs for gas transmission pipelines,

enhanced pipeline safety research, added better means to evaluate operator qualification, strengthened the

oversight role of the States, and increased PHMSA’s enforcement authority.

2005 Results. Based on the preliminary data

for FY 2005, PHMSA expects to miss the

FY 2005 performance target. The pipeline

industry continues to face challenges due to

an expanding economy that brings an

increase in new housing and commercial

construction as well as an increase in

pipeline mileage. The construction activity

adds more risk of pipeline excavation

damage, especially in gas transmission and

gas distribution lines.

In 2003 and 2004, pipeline incidents reflected the impact of economic activities as incidents increased due

to excavation damages to gas distribution and transmission lines increased. The extrapolation for FY 2004

was based on January-June data available during the time of reporting. The second half of FY 2004,

however, showed a steep increase in incidents.

Performance Measure

Number of incidents for natural gas and hazardous liquid pipelines.

2002 2003 2004 2005

Target 343 326 310 295

Actual 330 (r) 369 429 (r) 396 *

(r) Revised; * Preliminary estimate

© AP/World Wide Photos/Al Grillo

Pipeline Safety

Performance Report—safety strategic objective
Based on the first six months’ incident reports in FY 2005, continuing construction expansion in

commercial and housing markets, and steadily increased gas distribution mileage, PHMSA expects that

pipeline incidents will continue to increase. A preliminary analysis of incident reports from Texas,

Louisiana, Alabama and Mississippi, which were hit by Hurricanes Katrina and Rita, indicate the number

of incidents is two or three times higher than past years due to the hurricanes.

The performance goal is to reduce all pipeline incidents by 5% per year, from 381 in FY 2000 to 280 in

FY 2006. PHMSA is considering changing the incident reporting threshold to reflect the increased cost of

gas.

FY 2006 Performance Forecast. Based on the preliminary data for FY 2005 and the reasons explained

above, PHMSA expects to miss the FY 2006 performance targets.

PHMSA is closely monitoring the upward movement of gas distribution and transmission incidents in the

past two years (2003 and 2004) and is assessing strategies to achieve the targets previously set. PHMSA is

aware that the preliminary estimate of the number of pipeline incidents may be underestimated at this

point given the impact of Hurricanes Katrina and Rita on U.S. infrastructure. There could be a significant

increase in the number of incidents in the August and September reports.

PHMSA has the following strategies for reducing natural gas and hazardous liquid pipeline incidents:

• Advancing the Integrity Management Program concepts throughout the entire system;

• Advancing damage prevention, particularly through enforcement efforts;

• Advancing public education—one initiative is the recently established nationwide three-digit telephone

number for one-call centers to provide timely and consistent information on the location of

underground utilities;

• Investing in technologies for better detection of defects and strengthening materials for repair; and

• Strengthening PHMSA’s enforcement program through improved Federal/State Partnerships.

PHMSA’s Integrity Management Program (IMP) started with hazardous liquid pipes and was extended to

gas transmission lines. The IMP improves pipeline safety by:

• Accelerating assessments of pipelines in high consequence areas;

• Improving integrity management systems within companies;

• Improving the government’s role in reviewing the adequacy of integrity programs and plans; and,

• Providing increased public assurance in pipeline safety.

In-Depth Accomplishments Promoting Pipeline Safety

86 FY 2005 Performance and Accountability Report
87

Many of the materials used in manufacturing and many of the retail products people buy include

hazardous materials (HAZMAT). There are over 800,000 HAZMAT shipments each day in the United

States. These range from flammable materials and explosives to radioactive materials, poisons and

corrosives. Release of these materials during transportation could result in serious injury or death, or

harm to the environment.

PHMSA issues hazardous materials regulations in coordination with other parts of DOT and shares

enforcement responsibility with FAA, FMCSA, and FRA, as well as the Department of Homeland

Security’s U.S. Coast Guard.

2005 Results. Based on preliminary

estimates, DOT will meet the performance

target. Road accidents leading to HAZMAT

releases continue to dominate overall serious

hazardous materials incident statistics,

constituting 77% of total serious incidents in

FY 2005. Serious rail incidents accounted for

approximately 19% of the total. Serious air

and water incidents accounted for the

remaining 4%.

FY 2006 Performance Forecast. DOT expects to meet its rebaselined, more ambitious target in FY 2006.

DOT has six long-term strategies for reducing serious hazardous materials transportation incidents:

• Develop and maintain National standards for the safe, secure transportation of hazardous materials; 

• Obtain compliance with these standards through formal training, and by development and distribution

of education materials on specific Hazardous Materials Regulation (HMR) requirements to shippers,

carriers, enforcement personnel and the public; 

• With nearly 200,000 commercial motor vehicle (CMV) inspections per year, implement a National

safety inspection and enforcement program to determine compliance with the HMR;

• Provide funds to States for planning and training to minimize hazardous materials incident

consequences; 

• Publish and distribute the Emergency Response Guidebook, the principal source document used by

State and local response personnel and industry to handle hazardous material incidents; and,

• Conduct research and development to analyze and monitor hazardous materials transportation safety

issues.

Performance Report—safety strategic objective

Hazardous Materials Safety

Performance Measure

Number of serious hazardous materials transportation incidents.

2002 2003 2004 2005

Target 523 515 509 503

Actual 480 (r) 473 (r) 509 (r) 408 *

(r) Revised; * Preliminary estimate

In-Depth Accomplishments Promoting Hazmat Safety
As part of the effort to increase HAZMAT safety FAA implemented a prioritized risk-based shipper

inspection plan. This plan incorporates HAZMAT information electronically shared with other Operating

Administrations and deployed as a searchable database for field agents.

The majority of serious hazardous material incidents that occur on our Nation's roads involve commercial

motor vehicles (CMV). In 2004, FMCSA and its Federal and State partners minimized serious HAZMAT

incidents involving CMVs to 375, exceeding its stated limit of 419 incidents. This was the result of better

training of hazmat carrier employees and better-targeted enforcement activities.

Compliance with Regulations

In January 2005, FMCSA’s final rule on Hazardous Materials Safety Permitting, establishing standards and

procedures for motor carriers of specific high-hazard materials, became effective. FMCSA’s safety

enforcement operations conducted in FY 2005 to ensure compliance with Federal Hazardous Materials

Regulations (HMR) include:

• 97 cargo tank facility reviews;

• 385 hazardous materials shipper reviews;

• 3,902 hazardous materials compliance reviews

• 7,474 hazardous materials package inspections; and,

• 186,871 hazardous materials vehicle inspections.

Safety Information and Technology

FMCSA is developing a hazardous material shipper prioritization algorithm to identify high-risk

HAZMAT carriers, to better focus limited enforcement resources. FMCSA also completed identification

and analysis of factors affecting cargo tank stability. The analysis will be used to evaluate the need for new

technology requirements to stabilize cargo tanks, modifications to some high-risk intersections to reduce

the likelihood of rollovers, and enhanced driver training.

FRA continues work to increase the safety of HAZMAT shipments. In FY 2005, FRA has continued work

on many initiatives in the HAZMAT area. This includes but is not limited to:

• focusing enforcement efforts;

• visiting shippers with the highest number of incidents over the six-year period;

• tracking Hazardous Materials Incident Reports; and,

• tracking how many times FRA inspectors investigate an incident.

FRA continues to work with the Transportation Security Administration (TSA) to address security, and

developed and implemented Administrative Guidelines to enhance inspection data quality and promote

uniformity throughout all railroads. FRA reviewed all Class 1 railroad security plans (a Class 1 railroad is a

carrier having revenue of $277,700,000 or more) and many regional and short-line railroads to ensure

compliance with the current security related regulations. FRA continues to investigate concerns about

HAZMAT tank cars, resulting in improved quality procedures at the impacted facilities, and perhaps

leading to the recall of additional tank cars for further review.

88 FY 2005 Performance and Accountability Report
89

mobility STRATEGIC OBJECTIVE

advance accessible, efficient, intermodal transportation for the movement

of people and goods

STRATEGIC OUTCOMES

• Improved infrastructure in all modes

• Reduced congestion in all modes

• Increased reliability throughout the system

• Increased access for all Americans

PERFORMANCE MEASURES

• Percentage of travel on the National Highway System

(NHS) meeting pavement performance standards for

good rated ride. 5

• Percent of total annual urban-area travel occurring in

congested conditions.

• Average percent change in transit boardings per transit

market (150 largest transit agencies), adjusted for changes

in employment levels.

• Percent bus fleets compliant with the ADA.

• Percent of key rail stations compliant with the ADA.

• Number of employment sites (in thousands) that are

made accessible by Job Access and Reverse Commute

transportation services.

• Percent of all flights arriving within 15 minutes of

schedule at the 35 Operational Evolution Plan airports

due to NAS-related delays.

5 Starting in FY 2005, measure was redefined to measure “good” rated pavement versus “acceptable rated pavement. Results for FY 1999

through FY 2004 have been adjusted accordingly.

MOBILITY 

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

FAA, $3,168

FTA, $7,336 OST, $103

FHWA, $30,016

STB, $11

FRA, $1,217 FMCSA, $3

MARAD, $15
90 FY 2005 Performance and Accountability Report

FHWA continued to develop and promote innovative technologies that improve pavement durability,

extend the service life, reduce costs, and help mitigate congestion and work zone duration.

FHWA initiated a series of pavement smoothness workshops focusing on key States that can most affect

the pavement condition target. Research and development on advancing pavement materials testing,

performance prediction, analysis, and recycling continued through cooperative agreements with the

American Concrete Institute, the Asphalt Institute, the Silica Fume Association, and a consortium of

universities.

FHWA made significant progress toward the implementation of high-performance materials to ensure

more durable bridges with a longer design life. Forty-two States are using high-performance steel and all

States now use high-performance concrete in their bridges. FHWA assisted the States in implementing the

Load and Resistance Factor Design (LRFD), which provides a more reliable and uniform level of safety for

bridges. The LRFD Specification for bridges was fully implemented in at least 16 States, and partially

implemented in 35 additional States.

The revised National Bridge Inspection Standards (NBIS) regulation, last updated in 1988, was published

and implemented by the States. The revision incorporates advances in inspection practices, and makes the

regulations easier to read and understand for field inspectors and administrators of highway bridge

inspection programs.

The FHWA completed a manual for using public-private partnerships on highway projects, compiling all

of the innovative techniques that make it easier for the private sector to enter into a partnership with the

public sector to build roads. This information is targeted towards State decision-makers that are: 1)

considering enacting new or modifying existing enabling legislation; or 2) entering into public-private

partnerships under existing authority.

FHWA is cooperating with its partners to advance asset management techniques, as States and local

entities face increasing demands on their aging infrastructure with limited resources available. Decisionmakers use the principles of asset management, applied to economic analysis, to identify the best

alternatives for capital improvement programs, system preservation projects, and operations. To date,

FHWA has deployed over 15 custom workshops to States and other partners who are implementing asset

management, and provided focused resources and technical assistance to practitioners utilizing economic

analysis and evaluation tools.

2005 Results. FHWA has redefined the

pavement condition performance measure

from “adequate” ride to a higher standard of

“good” ride. An International Roughness

Index (IRI) of less than 95 inches per mile is

representative of the level of roughness that is

widely perceived by the driving public as of

good or very good quality, whereas an IRI of

170 inches per mile used previously is

generally considered the breakpoint between

fair and poor quality.

Performance Measure

Percentage of travel on the National Highway System (NHS)

meeting pavement performance standards for “good” rated ride.

2002 2003 2004 2005

Target N/A N/A 53.0 (r) 54.0

Actual 50.0 (r) 52.0 (r) 53.2 # 54.6 #

(r) Revised; # Projection from trends

Highway Infrasturcture Condition
The goal is to reach a target of 58.5% of vehicle-miles traveled on National Highway System (NHS)

pavements with good ride quality by FY 2008. The actual value for good ride in FY 2003 was 52.0% and

the projected results are 53.2 and 54.6% for FY 2004 and FY 2005, respectively. If these projections hold,

the targets will be met.

FY 2006 Performance Forecast. DOT expects to meet the target in FY 2006.

Intelligent Transportation Systems (ITS) encompass a broad range of wireless and wire line

communications-based information and electronics technologies. To ensure that ITS technologies can

work together smoothly and effectively to relieve congestion and improve safety, FHWA continued to

focus on establishing the technical and institutional framework needed for deployment of the Nation’s ITS

infrastructure. FHWA supported the completion of 238 regional ITS architectures, as well as provided

training and technical assistance to partner agencies to help them develop regional ITS architectures and

understand how to properly use and maintain them once developed.

FHWA continued to support the deployment of 511 Traveler Telephone Information Service. The 511

service is a National travel information telephone number that, when fully deployed, will provide easy

access to information on local travel conditions anytime, anywhere, across America. As of August 2005,

the 511 Service was accessible to about 28% of the Nation’s population. To provide travelers with

information to make better decisions, FHWA continued to promote improved motorist information

messages conveyed by electronic dynamic message signs (DMS). An interactive workshop allowed

practitioners to exchange information on techniques for providing travel time messages on DMS. The

number of locations providing travel time messages increased from 12 to 20 in 2005.

The FHWA also focused on poor or out-of-date traffic signal timing, which is one of the key causes of

recurring traffic congestion. FHWA sponsored the development of a traffic signal operations

self-assessment tool and the National Traffic Signal Report Card, in partnership with the National

Transportation Operations Coalition. This effort, which received a very positive media response, called for

increased investment in traffic signal operations by State and local transportation agencies.

To focus on mitigating non-recurring congestion, FHWA continued to assist State DOTs in evaluating

their work zone management practices. The States conducted a work zone self-assessment and the results

allowed States to compare their current State work zone management practices and implementation to

other States. The results provided key information to States for improving their methods, as well as to

FHWA for refining its work zone program.

FHWA continued its efforts to assist States in improving their Traffic Incident Management (TIM)

programs. Similar to the Work Zone Self Assessment, selected metropolitan areas assessed their programs

with respect to program and institutional issues (i.e., multi-agency strategic program planning, mutual

agreements, program performance measurement), on-scene operational issues (i.e., incident clearance,

responder safety, traffic control, incident command), and communications and technology (i.e., integrated

communications systems to provide two-way voice, video and data information exchange, ITS solutions

for traffic management and incident-specific traveler information). FHWA initiated demonstration

projects in Detroit, Tucson, and Portland (Oregon) to focus on regional transportation operations

Performance Report— mobility strategic objective 91

Highway Congestion
92 FY 2005 Performance and Accountability Report

collaboration and coordination. Similar to work zones and traffic incident management, FHWA supported

government officials in the 75 largest metropolitan areas in conducting self-assessments as a way to gauge

regional progress in addressing traffic congestion.

2005 Results. The percent of daily-congested

travel nationwide is an indicator of overall

system performance. The measure is an

estimate of the percent of daily traffic in

approximately 400 urbanized areas moving at

less than free-flow speeds. The early estimate

of the percent of congested travel is 31.6% in

2004, a figure below the anticipated increase

to 32.3 percent. The result was 0.6% higher

than in FY 2003, but below the anticipated

increase for the third straight year. The

projected result for FY 2005 is 32.1 percent.

FY 2006 Performance Forecast. The target of 33.7% in 2006 will likely be met. The results for the period

from 2002–2005 suggest that the overall rate of growth in traffic congestion nationwide is slowing, and is

much less than recently projected increases of 0.7% annually.

Transit is one of the safest ways of traveling, it relieves road congestion, and it reduces air pollution. The

Federal investments in transit, combined with State and private sector funds, make public transportation

possible for millions of Americans every day.

Traffic congestion now costs motorists in our Nation’s top urban areas about $68 billion a year in wasted

time and fuel. Without transit, the additional congestion would cost another $19 billion.

Many of the 37 million Americans who live below the poverty line rely on transit as their only means of

transportation. As former welfare recipients move from welfare to jobs, transit offers the critical link that

makes employment possible and the American workforce stronger.

Accessible public transportation is also important to 24 million Americans with disabilities who can use

public transportation, and the increasing elderly population who can no longer drive.

2005 Results. DOT met the performance

target. FTA adopted a new ridership target in

2005 of 1.0%, that was based on monthly

transit boarding data that FTA began

collecting in January 2002 from the largest

150 transit operators. Collectively, the top

150 operators represent about 95% of transit

ridership nationwide. The new database

provided the opportunity to report data that

is consistent across transit systems and time

Performance Measure

Percentage of total annual urban-area travel occurring in

congested conditions.

2002 2003 2004 2005

Target 30.9 31.6 32.3 33.0

Actual 30.7 (r) 31.0 (r) 31.6 (r) 32.1 #

(r) Revised; # Projection from trends

Performance Measure

Average percent change in transit boardings per transit market (150

largest transit agencies), adjusted for changes in employment levels.

2002 2003 2004 2005

Target 3.5 2.0 2.0 1.0 (r)

Actual 0.2 0.7 0.7 1.4

(r) Revised

Transit Ridership
periods. The methodology was changed to capture the average change per market (instead of the total

average change) to reflect FTA’s goal of increasing ridership in every transit market, not in just a handful of

large transit markets. In addition, based on a number of research studies that documented the effect of

employment changes on transit ridership, FTA began to account for changes in employment by market,

utilizing the Department of Labor’s quarterly employment reports. The revised FY 2005 goal of 1.0% is

based on the results of two years of data (FY 2003 and FY 2004).

FY 2006 Performance Forecast. DOT expects to meet the transit ridership target for FY 2006.

To support this goal, FTA continued to invest in the Nation’s transit infrastructure to ensure transit is as

safe, efficient and cost-effective as possible, thus attracting new riders. FTA also implemented several new

initiatives to promote ridership, and recognized transit agencies

that developed innovative and successful programs to increase

ridership. Some of the FTA ridership accomplishments include

the following:

• Individualized Marketing Demonstration Program—FTA

partnered with four communities (Bellingham, Washington;

Sacramento, California; Columbus, Ohio; and Durham,

North Carolina) to test an innovative travel behavior

modification program through personalized marketing. The

program encouraged individuals to choose alternatives to

single occupancy vehicle travel, such as transit, cycling,

carpooling or walking. Each demonstration includes a

“before and after” survey, with a control group, to determine

the impact of the program on travel behavior.

• Market-Based Ridership Strategies—FTA developed a two-day National Transit Institute course to

assist transit operators in learning about and implementing market-based strategies to increase transit

ridership.

• United We Ride—FTA launched the United We Ride initiative to improve accessibility to

transportation for individuals with disabilities, older adults, and people with lower incomes.

• A Ridership Tool Kit (a compendium of best practices that have been effective in promoting ridership)

was distributed to the general managers of all U.S. transit systems.

• FTA assembled two ridership teams to work with transit systems that have had declines in ridership

during the past two years. By FY 2006, FTA assembled two ridership teams to make recommendations

to increase ridership.

• FTA is working with the Transit Cooperative Research Program on a study, Determining the Elements

Needed to Create High Ridership Transit Systems, which is expected to be completed by the end of

calendar year 2005.

Performance Report— mobility strategic objective 93

In-Depth Accomplishments Promoting transit ridership

© AP/World Wide Photos/David Zalubowski
94 FY 2005 Performance and Accountability Report

• FTA launched a new Web site dedicated to ridership best practices from the transit industry. The site is

updated regularly to include successful approaches used by transit agencies to increase ridership.

Transportation is vital to maintaining independence and mobility for people with disabilities, and to

linking them to employment, health care, and the community. Access to transportation is the key to

making the transition from welfare to work.

2005 Results. DOT met the bus target for

compliance with the Americans with

Disabilities Act (ADA). The bus fleet

continues to become more accessible as older

vehicles are replaced with those that are liftequipped or have low floors to accommodate

wheel chairs. The overall rate of increase in

bus accessibility has slowed somewhat since

many of the buses replaced were already

lift-equipped. While all new buses are

lift-equipped or have low floors, it will be difficult to reach 100% compliance because many transit

operators retain buses for more than twenty years.

FY 2006 Performance Forecast. DOT expects to meet the accessibility target for FY 2006.

2005 Results. DOT met the key rail station

target for compliance with the Americans

with Disabilities Act (ADA). Currently, there

are 138 stations under FTA approved time

extensions, and these stations are not

included in the goal. Although transit

operators have made significant progress in

meeting the goal, the remaining stations tend

to be those that require the most significant

amount of work. Many of these operators are

discovering that the scope of work that is needed to comply with the ADA exceeds their original

projections. As a result, more time will be required to complete the necessary modifications. The virtually

flat level of growth in the percentage of key stations made accessible between 2003 and 2004 reflected these

realities and led FTA to lower its previous target for achieving full key station accessibility beyond

FY 2004.

For FY 2005, preliminary data indicates that 91% of key rail stations are ADA compliant, which is higher

than anticipated. Aggressive monitoring, follow-up, and a continuation of the ADA key rail station

compliance assessment process have all been vital to the success. Since 1995, FTA has conducted more

than 700 assessments or follow-up assessments to track progress towards ADA compliance. Quarterly rail

station status reports and key rail station assessments have helped to significantly increase the number of

Performance Measure

Percent of bus fleets compliant with the ADA.

2002 2003 2004 2005

Target 86 89 92 95

Actual 90 93 95 97 *

* Preliminary estimate

Performance Measure

Percent of key rail stations compliant with the ADA.

2002 2003 2004 2005

Target 68 79 89 84 (r)

Actual 77 82 82 91 *

(r) Revised; * Preliminary estimate

Transportation Accessibility
key rail stations that have come into compliance. FTA is providing the necessary technical assistance to its

grantees as the parties work together to achieve the goals. FTA will continue efforts to encourage transit

agencies to meet the accessibility goal for key rail stations.

FY 2006 Performance Forecast. DOT expects to meet the accessibility target for FY 2006.

Job Access and Reverse Commute services (JARC)

In areas that receive JARC funds, the program successfully meets the transportation needs of low-income

individuals seeking reliable transportation to employment and related support services. Grantees have

used JARC funds for a wide variety of services, ranging from expansion of fixed route bus systems, and

demand responsive services, to the provision of customer information. In each community that received a

grant, JARC transportation services have reached new employment sites, making thousands of entry-level

jobs and employers accessible for the program’s target populations. New stops have also increased access to

critical employment support sites, particularly childcare and job training facilities.

2005 Results. FTA conducted an evaluation

of the data collection and verification process

for JARC data collected in FY 2003 and 2004.

The accessible number of employment sites

in FY 2003 has been revised to 73,700 and

the FY 2004 revised estimate is 82,800. The

FY 2004 verified data and percentage change

in JARC funds for FY 2005 were used to

project FY 2005 performance.

Riders have reported that JARC services have

played an important role in their lives by

making jobs accessible. An overwhelming majority (93%) of passengers surveyed in 2002 indicated that

JARC services were either “very important” (81%) or “important” (12%) to them. Two-thirds (66%) of the

respondents indicated that they would not have been able to access their destination without the JARC

service. JARC services are used most frequently to travel to and from a work site, approximately 62.5% of

all trips. Nearly one out of every three JARC respondents did not work prior to using the services.

FY 2006 Performance Forecast. DOT will meet the accessibility targets for FY 2006.

Aviation Delay

Recent forecasts indicate that commercial aviation is rebounding. By 2007, air carrier, commuter, and air

taxi operations are anticipated to increase approximately 12% from 2004. In order to accommodate this

growth, the capacity of the National Airspace System (NAS) must be used more efficiently without

compromising the safety of flight. To respond to an increase in delays, FAA continued to focus on easing

congestion in eight metropolitan areas; improving overall capacity at the Nation's top 35 airports; building

new runways; enhancing access to reliever airports for general aviation operations; and increasing traffic

coordination and communication by using new technologies.

Performance Report— mobility strategic objective 95

Performance Measure

Number of employement sites (in thousands) that are made

accessible by Job Access and Reverse Commute (JARC)

transportation services.

2002 2003 2004 2005

Target 20.4 23.5 50.0 50.0

Actual 52.1 73.7 (r) 82.8 (r) * 82.1 #

(r) Revised; * Preliminary estimate; # Projection
96 FY 2005 Performance and Accountability Report

2005 Results. The FY 2005 NAS On-Time

Arrivals Target of 87.4% was met;

preliminary data shows that we will achieve

88.1%.

FAA employees at the Air Traffic Control

System Command Center confer daily with

airline industry representatives to coordinate

traffic nationwide around factors that could

potentially cause delays. By planning before

the day begins, FAA and industry work

together to ensure that aircraft land on time. This daily collaboration to manage aviation congestion is

complemented by FAA programs and initiatives such as new runway construction, airspace redesign,

revised air traffic control procedures, and the introduction of new technology, all of which address

short-term and long-term capacity needs.

Note. This measure was redefined in FY 2005 to adjust for delays beyond FAA’s control, such as those

caused by severe weather, decisions made by the air carrier, and security delays. Targets and results

through FY 2004 are for the unadjusted measure.

FY 2006 Performance Forecast. FAA expects to meet the target for FY 2006.

Since FY 2000, eight new runways have been commissioned in metropolitan areas providing these airports

with the potential to accommodate almost 1 million more annual operations. In order to maximize the

capacity of the new runways, FAA redesigned the surrounding airspace. These changes include new fixes

to routes and sector structure to allow aircraft to use the new runways. Airspace redesign effort included

the Las Vegas Redesign, Great Lakes Integrated Design Plan Short-term Initiatives, and National Choke

Points Initiative. The airspace changes reduced delays and flight distances. Departure delays for several

Great Lakes corridor airports, including Cleveland and Detroit, were significantly reduced, contributing to

overall improvements in on-time performance. In Southern California, revised departure routes and climb

procedures, coupled with airspace changes, provided more fuel-efficient departures and increased the

number of aircraft allowed to climb without restrictions by 70%.

FAA continues to develop criteria and guidance materials that

will be used for new Area Navigation (RNAV) and required

navigation performance (RNP) routes and procedures. Use of

RNP permits greater flexibility and standardizes airspace

performance requirements. By adopting RNAV and RNP and

leveraging existing and emerging cockpit capabilities, the FAA

in collaboration with the aviation community will be able to

improve airspace and procedures design, leading to increased

capacity and improved efficiency. FAA published the first public

RNP procedure in the world at Washington Reagan National

Airport in September 2005. FAA implemented 58 RNAV arrival

and departure procedures, including major implementations at

In-Depth Accomplishments reducing aviation delays

© Department of Transportation

Performance Measure

Percent of all flights arriving within 15 minutes of schedule at the 35

Operational Evolution Plan airports due to NAS-related delays.

2002 2003 2004 2005

Target 77.2 78.2 82.1 87.4

Actual 82.2 82.3 79.07 (r) 88.1 *

(r) Revised; * Preliminary estimate
Atlanta Hartsfield Airport and Dallas-Fort Worth. FAA also implemented 24 RNAV routes during

FY 2005, including 20 high altitude and four low-altitude routes which provided flexibility and efficiency

in the National Airspace System.

DAILY AIRPORT CAPACITY

In FY 2005, the Agency’s airport capacity measure was modified to include both arrival and departure

capacity, replacing the daily arrival capacity measure and arrival efficiency rate used previously. Using the

new metric, FAA’s FY 2005 target was 99,892 flights. Preliminary data shows that the average for the year

was 101,200 flights, exceeding the target.

FHWA’s Emergency Relief Program —Gulf Coast Highway Reconstruction

The Emergency Relief Program provides funds for the repair or reconstruction of Federal-aid highways

and roads on Federal lands which have suffered serious damage as a result of (1) natural disasters or (2)

catastrophic failures from an external cause. This program, commonly referred to as the emergency relief

or ER program, supplements the commitment of resources by States, their political subdivisions, or other

Federal agencies to help pay for unusually heavy expenses resulting from extraordinary conditions.

In mid-September, Secretary Mineta presented $10 million to Mississippi

and Louisiana to begin repairing roads and bridges that were ravaged by

Hurricane Katrina. This is the first installment of emergency relief funds to

be used to reconstruct US-90 across the Gulf Coast in Mississippi and

reestablish the I-10 corridor across Mississippi into New Orleans including

the Twin Span Bridge across Lake Pontchartrain at Slidell, LA. As the flood

waters on portions of I-10 and US-90 in the New Orleans area recede,

additional funds will be provided to Alabama, Mississippi, and Louisiana to

assess, repair, or possibly replace, roads and bridges that were heavily

damaged by the hurricane and subsequent flooding.

In the Fall of 2004, the FHWA worked closely with its State transportation

partners and law enforcement agencies, particularly the Florida

Department of Transportation, to provide immediate emergency relief

funds for necessary repairs, most importantly, to restore two-way traffic on

I-10 across the Escambia Bay east of Pensacola, FL following damage from

Hurricane Ivan. After four hurricanes struck Florida and the southeastern

States, Congress passed a supplemental hurricane relief bill in October 2004 that provided $1.202 billion to

repair and reconstruct highways damaged by hurricanes in Florida and other eastern States.

Through the FHWA’s emergency relief program, more than $740 million was provided additionally to

34 States and U.S. territories in FY 2005. The monies were used to repair highway and bridge damage from

flooding, earthquakes, mudslides, and natural disasters such as hurricanes Ivan and Katrina.

Performance Report— mobility strategic objective 97

© AP/World Wide Photos/Peter Cosgrove

99

global connectivity STRATEGIC OBJECTIVE

facilitate a more efficient domestic and global transportation system that

enables economic growth and development

STRATEGIC OUTCOMES

• Reduced barriers to trade in transportation goods and

services

• More efficient movement of cargo throughout the

supply chain

• Enhanced international competitiveness of the U.S.

transport providers and manufacturers

• Harmonized and standardized regulatory and

facilitation requirements

• The most competitive, cost effective and efficient

environment for passenger travel

• Expanded opportunities for all businesses, especially

small, women-owned and disadvantaged businesses

PERFORMANCE MEASURES

• Percent share of the total dollar value of DOT direct

contracts that are awarded to women-owned businesses.

• Percent share of the total dollar value of DOT direct

contracts that are awarded to small disadvantaged

businesses.

• Percent of days in shipping season that the U.S. portion

of the St. Lawrence Seaway is available.

• Number of new or expanded bilateral and multilateral

agreements completed (new measure in FY 2004).

• Number of potential air transportation consumers (in

billions) in international markets traveling between the

U. S. and countries with open skies and open transborder

aviation agreements (revised measure).

• Number of international negotiations conducted

annually to remove market distorting barriers to trade in

air transportation (new measure in FY 2005).

GLOBAL CONNECTIVITY

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

FAA, $27 FTA, $1

OST, $30

FHWA, $125

SLSDC, $16

MARAD, $10
100 FY 2005 Performance and Accountability Report

The women-owned business goal continues to be a challenge for the Department given that we have no

prescribed Federal Acquisition Regulation (FAR) set-aside authority which would allow us to achieve the

procurement target. In addition, DOT’s ability to achieve the women-owned business goals, without a

prescribed set-aside, has also been affected by a new preference category (Small Disabled Veteran-Owned

Small Business), which established a set-aside and sole source mechanism with a prescribed statutory goal

of 3% of total Government procurement.

The Office of Small and Disadvantaged Business Utilization (OSDBU) is working closely with the

Department’s Senior Procurement Executive in order to develop a set of new acquisition directives and

comment mechanisms, which will help determine how best to allocate the contract opportunities among

the various preference categories. The Department is reviewing its internal policies as a component of a

more proactive approach to attain the goals set out by legislation. Part of the review also includes an

assessment of each operating administration’s subcontracting program with more emphasis on

subcontracting as a means of increasing opportunities for small businesses; especially in the

women-owned business preference group.

2005 Results. Preliminary data indicates that

DOT met the targets for women-owned

businesses (WOB) and small disadvantaged

businesses (SDB). In FY 2004, the

preliminary data estimated that the target for

SDB would be met. However, once the final

data was analyzed, the target was not

achieved. This is shown by the revised

FY 2004 actual value displayed above.

In order to reach the WOB goal, the OSDBU

and Minority Resource Center have

developed small business training for the

Department’s contracting officers and

developed policy directives on small business

contracting. These efforts have increased the

participation by the OAs in developing a

proactive solution to meeting and exceeding

the current performance.

FY 2006 Performance Forecast. DOT expects

to meet the WOB target and the SDB target in FY 2006.

Performance Measure

Percent share of the total dollar value of DOT direct contracts

that are awarded to women-owned businesses.

2002 2003 2004 2005

Target 5.1 5.1 5.1 5.1

Actual 3.8 4.2 3.0 (r) 6.4 *

(r) Revised; * Preliminary estimate

Performance Measure

Percent share of the total dollar value of DOT direct contracts

that are awarded to small disadvanted businesses.

2002 2003 2004 2005

Target 14.5 14.5 14.5 14.5

Actual 16.2 15.8 12.3 (r) 15.1 *

(r) Revised; * Preliminary estimate

small disadvantaged and women–owned business contracts
More than 2 billion tons of freight worth $1 trillion moves annually through U.S. ports and waterways.

The St. Lawrence Seaway is the international shipping gateway to the Great Lakes, offering access and

competitive costs with other routes and modes to the interior of the country. Commercial trade on the

Great Lakes Seaway System annually generates more than 150,000 U.S. jobs, $4.3 billion in personal

income, $3.4 billion in transportation-related business revenue, and $1.3 billion in Federal, State, and local

taxes.

2005 Results. For FY 2005, DOT’s Saint

Lawrence Seaway Development Corporation

(SLSDC) met the performance target. An

analysis of system non-availability during

FY 2005 indicates that the most common

causes were weather and vessel

accidents/incidents.

Weather-related delays caused 10 hours,

11 minutes of the total 19 hours, 15 minutes of delays (or 53%). These weather delays usually occur at the

beginning and end of each navigation season, and are caused by poor visibility, high winds, ice, blizzards,

and dense fog. Vessel incidents in FY 2005 accounted for 1 hour, 29 minutes of delays (or 8 percent). Vessel

incidents involve ship operations, and are usually caused by human error on the part of a vessel’s crew.

Incidents also include vessel breakdowns that are caused by mechanical problems with a vessel.

While none of these factors is directly under the control of the SLSDC, the agency is taking steps to

address them. For example, since 1997, the SLSDC has joined with its Canadian counterpart, the

St. Lawrence Seaway Management Corporation as well as the U.S. and Canadian Coast Guards, to institute

a joint boarding program for the foreign vessels that use the Seaway. In FY 2005, the SLSDC continued this

program by inspecting 100% of all ocean vessels in Montreal. This improved inspection regime has saved

vessels, on average, four hours per transit and ensured that any safety, security, or environmental issues are

addressed prior to entering U.S. waters. As a result, delays were reduced and ocean carriers using the

Seaway saved more than $500,000 in operating costs during FY 2005.

In addition, the U.S. and Canadian Seaway agencies began

enforcing mandatory Automatic Identification System (AIS) use

on commercial vessels entering the waterway beginning in 2003.

AIS technology uses data from ship-to-ship, ship-to-shore, and

shore-to-ship, thereby enabling a constant two-way

communication between mariners and the three Seaway vessel

traffic control centers. Originally developed primarily for safety

reasons, AIS has become increasingly of interest to maritime

security officials in the post 9/11 environment as it offers them the

ability to track with precision any vessel carrying the transponder.

Of the remaining factors that cause system non-availability, the

Corporation has the most control over the proper functioning of

its lock equipment. During FY 2005, there were 7 hours,

Performance Report— mobility strategic objective 101

Performance Measure

Percent of days in the shipping season that the U.S. portion of

the St. Lawrence Seaway system is available.

2002 2003 2004 2005

Target 99.0 99.0 99.0 99.0

Actual 98.7 98.9 99.1 99.7

© Department of Transportation

maritime navigation
102 FY 2005 Performance and Accountability Report

35 minutes of delays, or 39%, related to two lock equipment malfunctioning incidents, which represented

1/10 of 1% of the navigation time during the fiscal year. These were the first delays due to lock equipment

malfunctions since the 2003 navigation season.

The SLSDC performs an aggressive infrastructure winter maintenance program each year focusing on

inspections, preventative maintenance, concrete rehabilitation and repairs to lock equipment and parts.

This program has been instrumental in the SLSDC’s long-term success in providing a safe, efficient, and

reliable commercial waterway.

FY 2006 Performance Forecast. DOT expects to meet the FY 2006 target.

A Bilateral Aviation Safety Agreement (BASA) promotes aviation safety and environmental quality,

enhances cooperation and increases efficiency in matters related to civil aviation. The agreements are

based on recognition of comparability of the U.S. and foreign systems for approval and surveillance of

aviation industry. Through these means, FAA increases aviation safety globally by building a network of

competent civil aviation authorities and concluding agreements with additional countries and/or regional

authorities.

Improved global understanding of U.S. safety regulations, processes, and procedures leads to better

international regulatory oversight. The BASAs allow the FAA to focus on U.S. safety priorities by relying

upon capabilities and technical expertise of other civil aviation authorities, in particular areas of aviation

safety and minimizing duplication of efforts.

2005 Results. DOT met the FY 2005 goal to

conclude two new bilateral agreements

recognizing safety certification and approval

systems with two key countries or regional

authorities. FAA concluded a BASA with

Australia and one with China. Several other

agreements are in the negotiation stage, most

significantly negotiations with the European

Community. These bilateral agreements

promote a safer aviation environment for

U.S. travelers.

FY 2006 Performance Forecast. DOT expects to achieve the target in FY 2006.

Performance Measure

Number of Bilateral and Multilateral agreements completed.

2002 2003 2004 2005

Target N/A N/A 2 2

Actual N/A N/A 3 2

harmonizing international aviation standards
Since the 1940s, international air transportation has been subject to restrictive bilateral agreements that

limit price and service options and artificially suppress aviation growth. DOT’s policy is to negotiate

bilateral agreements to open international air travel to market forces, thereby removing limitations on the

freedom of U.S. and foreign airlines to increase service, lower fares, and promote economic growth. These

“open skies” agreements have made it possible for the airline industry to provide the opportunity for better

quality, lower priced, more competitive air service in thousands of international city-pairs to an increasing

portion of the world’s population.

2005 Results. DOT exceeded the performance

target by negotiating new open skies

agreements with the following six countries

during FY 2005: Ethiopia, India, Maldives,

Paraguay, Thailand and Uruguay. These new

agreements increased the number of bilateral

open skies agreements to 69 thus providing

unrestricted air transportation opportunities

and economic benefits to countries with a

total population of 2.97 billion people.

Note. This measure replaces Number of passengers (in millions) in international markets with open skies

aviation agreements and more accurately gauges the potential impact of liberalized agreements on the air

transportation market.

FY 2006 Performance Forecast. DOT expects to achieve the FY 2006 target.

DOT’s policy is to negotiate liberalized bilateral aviation agreements to open international air travel to

market forces resulting in increased services, lower fares, and economic growth. These negotiations

require DOT to arrange, conduct and fully participate in a number of formal international meetings with

the goal of achieving less restrictive agreements and ultimately “open skies” agreements with foreign

countries or associations of foreign countries (such as the European Union).

2005 Results. DOT exceeded the performance

target by conducting 25 rounds of

negotiations, some of which resulted in new

open skies agreements with the following six

countries during FY 2005: Ethiopia, India,

Maldives, Paraguay, Thailand and Uruguay.

Through FY 2005, DOT has negotiated

bilateral open skies agreements with

69 countries. There are also liberalized (but

not open skies) agreements with 19 countries.

FY 2006 Performance Forecast. DOT anticipates completing the target number of planned negotiations.

Performance Report— mobility strategic objective 103

Performance Measure

Number of international negotiations conducted annually to

remove market-distorting barriers to trade in air transportation.

2002 2003 2004 2005

Target N/A N/A N/A 10

Actual N/A N/A N/A 25

Performance Measure

Number of potential air transportation consumers (in billions) in

international markets traveling between the U.S. and countries

with open skies and open transborder aviation agreements.

2002 2003 2004 2005

Target N/A N/A 1.51 1.53

Actual N/A 1.48 1.72 2.97

open skies aviation agreements

international negotiations
104 FY 2005 Performance and Accountability Report

Significant volumes of freight move through key corridors and border crossings of our transportation

network. As a result, keeping our corridors and land border crossings as free flowing as possible, is vital to

our Nation’s economy. With the assistance of industry partners, the FHWA has collected data and refined

two performance measures for travel time reliability on freight

significant corridors and at land border crossings. The FHWA

measured average travel rates in five interstate highway

corridors to calculate a preliminary Travel Time Index (TTI)

and Buffer Time Index (BTI). The TTI, which ranged from 1.08

on I-65 (from Mobile, AL to Chicago) to 1.24 on I-5 (along the

west coast States from the Mexican border to the Canadian

border), is a measure of reliability expressed as the ratio of the

observed average travel time to free flow travel time estimated

at 60 miles per hour. The BTI, which ranged from 4.48 on I-45

(from Galveston, TX to Dallas) to 24.85 on I-10 (from Los

Angeles to Jacksonville, FL), represents how much extra buffer

time must be allowed to account for variations in the system.

FHWA expects to have a full year of data in FY 2006 to establish baselines for this measure. The FHWA

also initiated a project using Geographical Positioning Systems in commercial trucks to collect border

crossing and delay times at high volume U.S.-Canada land border crossings. A full year of data will be

available in 2006; a baseline for the measure will also be established.

© AP/World Wide Photos/Chris Carlson

measures under development—freight travel
105

security STRATEGIC OBJECTIVE

balance homeland and national security transportation requirements with

the mobility needs of the nation for personal travel and commerce

SECURITY

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

FTA, $39 FAA, $114

OST, $8

FHWA, $23

FRA, $1 FMCSA, $8

MARAD, $256

STRATEGIC OUTCOMES

• All modes have implemented steps that would prepare

them for a rapid recovery of transportation from

international harm and natural disasters

• The U.S. transportation system meets National security

requirements

PERFORMANCE MEASURES

• Percentage of DoD-required shipping capacity complete

with crews available within mobilization timelines.

• Percentage of DoD-designated commercial ports

available for military use within DoD established

readiness timelines.

• Transportation Capability Assessment for Readiness

Index Score (New Measure).
106 FY 2005 Performance and Accountability Report

During FY 2005, MARAD maintained the enrollment of 47 ships in the Maritime Security Program,

which provides U.S. Flag Ships and U.S. crews for DoD use; and 121 ships in the Voluntary Intermodal

Sealift Agreement (VISA) program. The VISA program is used by DoD to pre-plan the availability of

militarily useful vessels for DoD use in times of emergency. A total of 60 VISA ships were used during

FY 2005 to support Operation Iraqi Freedom or Operation Enduring Freedom (OIF/OEF).

The Ready Reserve Force (RRF) is a fleet of 58 government-owned, militarily useful cargo ships available

to DoD to support the rapid, massive movement of military unit equipment and supplies in times of

emergency or war. The RRF ships were heavily involved in OIF/OEF during FY 2005. Six RRF ships

continued operations from FY 2004 and 18 new ships were activated to support the mission. Once

activated, the vessels maintained 99% operational reliability. On average for FY 2005, 84% of the RRF was

available for use by DoD.

MARAD-supported mariner training programs produced 589 new, licensed merchant mariners during

2005. These new mariners graduated from the United States Merchant Marine Academy and from the six

State Maritime Schools. Of these graduates, 248 have an obligation to serve in the U.S. Navy

Reserve/Merchant Marine Reserve for a period of six years. These graduates help to replenish the ‘pool’ of

mariners available to crew the RRF in times of need.

During most of FY 2005, 13 of the 15 DoD-Designated Strategic Ports had acceptable facilities available for

military use within DoD established readiness timelines. DoD, in conjunction with MARAD, negotiates a

Port Planning Order with each strategic port, specifying which facilities will be needed to conduct a

military deployment. The port is expected to be able to make these facilities available to the military within

48 hours of notification. If a port forecasts that it will be unable to provide the specific facilities, it will

report that it is not available. In some cases, the port cannot be available as quickly as required or it cannot

provide the specific facilities that meet the military’s requirements.

2005 Results. DOT met the performance

target. In FY 2005, the shipping capacity was

achieved primarily as a result of the excellent

record of performance of the RRF. The RRF

logged 99% reliability as a result of the strong

partnership between MARAD, the RRF

commercial ship managers, the sea-going

labor unions, and the U.S. ship repair

industry.

FY 2006 Performance Forecast. DOT expects to meet the FY 2006 target.

Performance Measure

Percentage of DoD-required shipping capacity complete with

crews available within mobilization timelines.

2002 2003 2004 2005

Target 93 94 94 94

Actual 94 96 94 95

strategic mobility
2005 Results. DOT did not meet the

performance target. Commercial cargo

congestion at two of the strategic ports

prevented them from having the necessary

facilities, or an alternative, available within

the readiness timelines. This is a measure of

availability, particularly of time, but also of

certain facilities. Although the specified

facilities were not available, military cargoes

were not delayed. However, the FY 2005

results support the need for a thorough review of the strategic port system.

FY 2006 Performance Forecast. DOT expects to meet the FY 2006 target. During FY 2006, a requirements

validation will be underway and consideration will be given to prioritizing ports in conjunction with an

evolving National military strategy.

The Office of Intelligence, Security, and Emergency Response (OISER) measures the Department’s internal

preparation for disasters or other situations which may cause a disruption in the transportation system

with the Transportation Capability Assessment for Readiness (TCAR) score. It assesses six functional areas

to obtain the TCAR score; monitoring operations, emergency preparedness, continuity of operations and

continuity of government; and coordinating recovery assistance after disasters.

2005 Results. The TCAR measure is a new

measure in FY 2005. Although DOT had

significant accomplishments in this area, we

did not meet the target for this performance

measure. Resource constraints limited our

ability to train State and local response teams

as planned. Also, our alternate work site to

maintain continuity of operations in the

event of an emergency has some identified

deficiencies that have not been resolved, thus lowering our score.

FY 2006 Performance Forecast. DOT anticipates meeting the performance target in FY 2006.

OISER provided monitoring operations through the Secretary’s Crisis Management Center (CMC),

24 hours a day, 7 days a week. The CMC analyzes the effect of transportation incidents, infrastructure

problems, disasters and crises on the transportation needs of citizens and the movement of goods so that

officials at the Federal, State and local levels and industry can make immediate, proactive, and educated

decisions on how to best respond.

Performance Report— security strategic objective 107

In-Depth Accomplishments for transportation readiness

Performance Measure

Transportation Capability Assesment for Readiness Index Score.

2002 2003 2004 2005

Target N/A N/A N/A 71

Actual N/A 59 67 65

transportation readiness

Performance Measure

Percentage of DoD-required commercial parts available for

military use within DoD established readiness timelines.

2002 2003 2004 2005

Target 92 92 92 93

Actual 92 86 93 87
108 FY 2005 Performance and Accountability Report

To have adequate functioning transportation systems that can aid people and property during natural

disasters and National security crises, OISER regularly and continuously coordinates State and local

planning, training and exercises which prepare for disasters and crises.

Various exercises were performed in FY 2005 in support of

Homeland Security Presidential Directive 8 on National

Preparedness. For example, to ensure that senior staff is prepared

for natural disasters or terrorist events OISER conducted tabletop,

command post, and situational exercises at the National, regional,

and local levels.

OISER met implementation training and certification requirements

for the National Incident Management System. This included

providing required training to headquarters and field staff and

reviewing and revising all emergency plans, directives and

operations orders.

If DOT’s headquarters building becomes unavailable during crisis events, OISER ensures that essential

Secretarial functions continue operations at an alternate site. Also, OISER makes certain that essential

Presidential DOT functions continue at a secure location during National security emergencies.

(Note: This is a classified Continuity of Government program.) OISER maintained and staffed a

Continuity of Government site and provided staff training to enhance expertise through a formal training

program.

In support of the recovery efforts after hurricanes Katrina and Rita, OISER coordinated the DOT efforts at

the National Response Coordination Center, and the DOT Crisis Management Center in Washington, DC;

and the Emergency Transportation Center in Atlanta, GA, Regional Response Coordination Centers, and

Emergency Operations Centers and mobilization centers throughout the Gulf Coast.

We organized the largest civilian airlift in history, of evacuees from the Superdome, and again from the

Astrodome in Houston. We managed a bus fleet of over 1100 buses in Louisiana, to transport both

evacuees and responders. In addition, DOT transported supplies and equipment in preparation for and

following Hurricanes Katrina and Rita, including over 38 million pounds of ice, 22 million meals,

9 million gallons of water, and a thousand mobile homes to date.

© AP/World Wide Photos/Teru Iwakasi
109

eNVIRONMENTAL STEWARDSHIP STRATEGIC OBJECTIVE

PROMOTE TRANSPORTATION SOLUTIONS THAT ENHANCE COMMUNITIES AND PROTECT

THE NATURAL AND BUILT ENVIRONMENT

ENVIRONMENTAL STEWARDSHIP

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

FAA, $419 FTA, $236

OST, $5

FHWA, $3,138

FRA, $1

PHMSA, $22

MARAD, $23

STRATEGIC OUTCOMES

• Reduce pollution and other adverse environmental

effects of transportation and transportation facilities

• Streamlined environmental review of transportation

infrastructure projects

PERFORMANCE MEASURES

• Ratio of wetlands replaced for every acre affected by

Federal-aid highway projects.

• Percent DOT facilities characterized as No Further

Remedial Action under the Superfund Amendments and

Reauthorization Act.

• 12-month moving average number of area transportation

emissions conformity lapses.

• Tons of hazardous liquid materials spilled per million

ton-miles shipped by pipelines.

• Percent reduction in the number of people within the

U.S. who are exposed to significant aircraft noise levels

(revised measure).
110 FY 2005 Performance and Accountability Report

Wetlands are important natural ecosystems that filter pollutants and minimize potential floodwater

damage. Before their value was fully recognized, many of the Nation’s wetlands were adversely affected or

lost in the development of transportation and other infrastructure facilities. In 1996, FHWA established a

National policy on wetland protection that called for a net gain of wetlands in Federally assisted projects.

The FHWA continued to coordinate wetlands programs and research initiatives with other Federal

agencies including the Environmental Protection Agency (EPA) and the Department of the Interior. The

FHWA, EPA, and the Army Corps of Engineers implemented guidance for the use of mitigation banks

under the Clean Water Act permitting process, one of the first actions completed under the National

Wetlands Mitigation Action Plan.

2005 Results. DOT met the performance

target. Federal-aid projects nationwide

annually impacted 745 acres of wetlands

and provided 1,814 acres of compensatory

mitigation; a ratio of 2.4 acres of

compensatory wetland mitigation for

every acre of impact.

An Exemplary Ecosystem Initiative (EEI) is

an action or measure that will help sustain or

restore natural systems and their functions and values, using an ecosystem or landscape context. Examples

include mitigation projects that support wildlife movement and habitat connectivity, the development of

watershed-based environmental assessment and mitigation approaches, the use of wetland banking, and

the use of special measures to prevent invasive species along highway rights-of-way. The FHWA

recognized eight new EEIs, exceeding the target of designating additional initiatives and bringing the total

number that FHWA has designated thus far to twenty-three.

FY 2006 Performance Forecast. The FHWA expects to meet the FY 2006 target for wetlands mitigation and

exemplary ecosystems.

DOT has a special responsibility to ensure that its own facilities are compliant with environmental laws

and regulations. The Department does this through restoration, compliance, and pollution prevention.

Restoration activities involve identifying, investigating, and cleaning up contaminated sites. Compliance

includes the operation of facilities, equipment, and vessels in accordance with environmental

requirements. The Department reduces the possibility of future cleanup activities by avoiding the

generation of pollutants in its operations and facilities.

MARAD is the Government’s disposal agent for merchant-type vessels weighing 1,500 gross tons or more,

and is required by law to dispose of all obsolete ships in the National Defense Reserve Fleet by the end of

FY 2006. Due to the presence of hazardous substances such as asbestos and solid and liquid

polychlorinated biphenyls (PCBs) and concerns raised by the EPA about the export of PCBs, sales for

overseas disposal were halted in 1995. Additional ships will be added to the disposal inventory as other

merchant type Federal vessels become obsolete.

Performance Measure

Ratio of wetlands replaced for every acre affected by Federal-aid

Highway projects.

2002 2003 2004 2005

Target 1.5 1.5 1.5 1.5

Actual 2.7 2.7 2.1 2.4

wetland protection and recovery

DOT facility cleanup
2005 Results. DOT did not meet the target.

The facility cleanup complied with the

Superfund Amendments and

Reauthorization Act (SARA) process and

with the National Oil and Hazardous

Substances Pollution Contingency Plan.

Working with States, local governments, and

the EPA, DOT used a “worst first”

prioritization system to attack the overall

problem presented by DOT facilities where

significant pollution problems present themselves.

FAA continued work under State agreements at several facilities and at the six facilities which EPA has

identified as needing further evaluation, including the Omaha Air Force Station in Nebraska, which was

added to the docket in FY 2005. To reduce the likelihood of petroleum contamination from mission

critical equipment, FAA meets current EPA requirements for fuel storage tanks; continues to replace

outdated fuel storage tanks at the end of their normal life cycle to prevent leakage; tests in-service tanks;

and will investigate, remove or clean tanks at decommissioned facilities.

FY 2006 Performance Forecast. DOT expects to meet the FY 2006 target.

Ship Disposal

During FY 2005, MARAD removed 18 obsolete ships from three

National Defense Reserve Fleet sites that posed potential

environmental hazards. This included 16 high and moderate priority

vessels. All of the removals were the result of dismantling/recycling

contracts with domestic ship disposal companies. Depending on the

characteristics of each vessel and the capability of each contractor, it

may take from several months to over a year to dismantle a ship

once it has arrived at a disposal facility. Dismantling was completed

on 13 ships during 2005; two less than anticipated. These ships were

removed from the fleet sites during FY 2004 and FY 2005.

Dismantling is dependent on a number of external factors, including

weather and the contractor’s ability to quickly and properly arrange for disposal of hazardous materials.

During FY 2005, MARAD also entered into additional disposal contracts that will result in the

dismantling/recycling of 20 additional ships in subsequent years, five more than the target.

As a result of MARAD’s ‘worst first’ policy on ship disposals, where the ships in the worst condition are

given removal priority, all but five of MARAD’s high priority ships have now been awarded in disposal

contracts. The inventory of remaining moderate priority obsolete ships poses less of a risk to the

environment, and the remaining low priority vessels pose no more of a risk than fully operational ships.

MARAD can work pro-actively to dispose of the remaining ships before the situation becomes critical.

Performance Report— environmental stewardship strategic objective 111

Performance Measure

Percent DOT facilities characterized as No Further Remedial Action under

the Superfund Admendments and Reauthorization Act.

2002 2003 2004 2005

Target 91 92 92 93

Actual 91 94 93 92

© AP/World Wide Photos/Fred Hoffman
112 FY 2005 Performance and Accountability Report

The National Ambient Air Quality Standards (NAAQS) target six major pollutants as among the most

serious airborne threats to human health. Transportation is a major contributor to some of the pollutants,

particularly ozone, carbon monoxide and particulate matter. About two-thirds of transportation-related

emissions come from on-road motor vehicles. The quality of our

air is a public good, and the cost of these pollutants is not

captured in the marketplace. For this reason, the Government

works to mitigate this negative impact.

Areas throughout the United States with a non-attainment or

maintenance designation are required to meet transportation

conformity requirements in the Clean Air Act. Transportation

conformity ensures that emissions from planned transportation

activities are consistent with clean air goals of the area, and will

not create new violations of the NAAQS, increase the frequency

or severity of existing violations, or delay the attainment of the

NAAQS in designated non-attainment or maintenance areas.

Following the release of the final Conformity Rule Amendments to address the new 8-hour ozone and

particulate matter (PM 2.5) standards, Federal Highway Administration (FHWA) has worked with EPA

and Federal Transit Administration (FTA) on several companion guidance documents to clarify the new

conformity requirements.

FHWA continued to work with the EPA and FTA to finalize an additional rule to specifically address

conformity hot-spot requirements of the new PM 2.5 standard. A final rule is expected in March 2006.

FHWA also worked closely with State and local agencies as well as our Federal partners to implement of

the transportation conformity regulations, especially in the areas not attaining the new 8-hour ozone and

PM 2.5 standards.

2005 Results. The performance target was met

in FY 2005.

FY 2006 Performance Forecast. DOT expects

to meet the performance target in FY 2006.

While there are multiple causes for a

transportation lapse, such as new conformity

requirements for the new fine particulate

matter (PM 2.5) air quality standard, the

FHWA will continue to monitor the number

of lapses as an early indicator of progress contributing to emissions reductions.

Performance Measure

12-month moving average number of area transportation

emissions conformity lapses.

2002 2003 2004 2005

Target 6 6 6 6

Actual 6 6 6 6

© AP/World Wide Photos/John Partipilo

mobile source emissions
Performance Report— environmental stewardship strategic objective 113

PHMSA is expanding its damage prevention and integrity management program initiatives to diminish

risks of environmental harm from pipeline spills. Because of the volume of liquid materials moved by

pipelines, any spill into the environment is potentially a significant one.

PHMSA follows several strategies to reduce the amount of hazardous liquid materials spilled per ton-miles

shipped by pipeline:

• Advance the Integrity Management Program concepts throughout the entire system;

• Advance damage prevention;

• Advance public education—one initiative is the recently established nationwide three-digit telephone

number for one-call centers to provide timely and consistent information on the location of

underground utilities;

• Invest in technologies to better detect defects and strengthen materials for repair; and

• Strengthen PHMSA’s enforcement program through improved Federal/State partnerships.

PHMSA’s long-term strategies for reducing environmental damage, property damage and economic

disruption resulting from oil spills is essentially the same as it is for gas pipelines. The agency requires

pipeline operators to have the ability to clean up significant spills (those that involve either a death or

injury, at least $50,000 of property damage, or more than 50 barrels of spillage). PHMSA implements the

Oil Pollution Act of 1990 provisions for onshore oil pipelines by making pipeline oil spills less likely,

diminishing the spills’ threats to people and the environment, and strengthening the response to spills in

accordance existing regulation. PHMSA oversees this requirement by:

• reviewing and approving operators’ spill response plans for onshore oil pipelines; 

• overseeing field and table-top exercises to strengthen operator readiness to respond to oil spills from

pipelines;

• monitoring major spills and clean-up efforts; and 

• identifying and providing access to information on the location of unusually sensitive ecological areas.

2005 Results. Although the downward trend

continues, based on the preliminary data for

FY 2005, PHMSA expects to miss the

FY 2005 performance target. Performance in

this area has not been consistent; PHMSA

has met its target in some years and missed it

in others. The agency continues to reevaluate the targets based on the trend line.

The calculation is influenced by the volume

of shipments in each year of net tons lost as a

percentage of total volume shipped. Therefore, as total volume shipped decreased since 2000 (the baseline

year) due to a slow down in the economy, the resulting net loss calculation is magnified.

Performance Measure

Tons of hazardous liquid materials spilled per million ton-miles

shipped by pipelines.

2002 2003 2004 2005

Target .0077 .0073 .0068 .0064

Actual .0057 (r) .0071 (r) .0102 .0097 *

(r) Revised; * Preliminary estimate

Pipeline hazmat spills
114 FY 2005 Performance and Accountability Report

However, gross volume spills for all hazardous liquid is following a

decreasing trend over time. The decrease in total volume could be a

function of PHMSA-required pressure reduction on many liquid

pipelines to provide a margin of safety. The preliminary analysis of

accident reports received to date indicates that the accidents

frequencies in four States, Texas, Louisiana, Alabama, and

Mississippi due to natural force damages during Hurricanes Katrina

and Rita are three times higher than the past three year’s experience

with the number of incidents in those States. This may increase the

preliminary estimates of tons of hazardous liquid spilled per million

ton-miles for 2005 significantly.

Prior to the Pipeline Safety Improvement Act of 2002, PHMSA began to improve environmental

protection through several initiatives. For example, PHMSA adopted the Hazardous Liquid Integrity

Management Program (IMP) to assess, evaluate, and repair the integrity of hazardous liquid pipeline

segments that, in the event of a leak or failure, could affect populated areas, areas unusually sensitive to

environmental damage and commercially navigable waterways. The IMP regulations which were adopted

for all hazardous liquid operators during 2001–2003, resulting in programs with a 7-year test cycle.

Operations are just past the midpoint. The programs have resulted in assessment of about 50% of the

regulated pipelines in high consequence areas (HCAs). The IMP approach is a risk-based analysis that

targets potentially high risk incidents by evaluating the integrity of the pipeline. The pipeline is evaluated

for the potential for all threats, potential impacts of a release to an HCA (e.g., drinking water intake) and

operators are required to prevent and mitigate risks to pipeline integrity. The expected safety benefits of

the IMP approach in terms of reduction in number and consequences of hazardous liquid accidents in

HCAs should be more apparent over time. Preliminary information indicates that over 20,000 defects have

been found and repaired due to IMP.

FY 2006 Performance Forecast. Based on the decrease in the volume shipped, PHMSA expects that the

FY 2006 target of 0.0060 tons of liquid materials spilled per million ton-miles shipped by pipelines will not

be met.

Public concern and sensitivity to aircraft noise around airports is high. In recent years, noise complaints

have increased even while quieter aircraft technology has been introduced. Aircraft noise is an undesired

by-product of mobility, and the Government acts to reduce the public’s exposure to unreasonable noise

levels. In the past decade, the phase-out of noisier commercial aircraft was principally responsible for the

reduction in the number of people exposed to high levels of aircraft noise, although its efforts were

complemented by noise compatibility projects funded under the Airport Improvement Program (AIP).

While the new international aircraft noise standard will encourage the introduction of quieter aircraft into

operations, AIP-funded noise compatibility projects will be the principal means employed by the

Government to mitigate significant aircraft noise exposure in the near future.

© AP/World Wide Photos/Seanna OSullivan

aircraft noise exposure
2005 Results. Based on projected trend

analysis, DOT met the performance target.

DOT pursues a program of aircraft noise

control in cooperation with the aviation

community through development and

adoption of quieter aircraft, soundproofing

and buyouts of buildings near airports,

operational flight control measures such as

preferential runways, and land-use planning

strategies.

The significant performance improvement over the targeted goals in noise reduction grew out of a

confluence of a number of external factors: the economic downturn, the long-term impact of the events of

September 11th on the industry, and the severe acute respiratory syndrome (SARS) outbreak. These

factors produced a dramatic downturn in operations as well as a large-scale premature retirement of older

Stage Three aircraft (B-727s, DC-9s, and MD-80s). This combination of lower operations and the rapid

reduction of the average age of the fleets operating produced the dramatic improvements in the noise

exposure environment.

Operational levels began to recover in 2004 and continue to recover in 2005. Taking into account the Next

Generation Air Transportation System goal of increasing capacity threefold, and the related rise in aviation

noise that will follow, the dramatic level of improvements witnessed over the last two years will not persist.

Note. FAA improved its noise exposure model and redefined the measure. The rate of change in noise

exposure is more programmatically useful than the number of people affected.

FY 2006 Performance Forecast. DOT will meet the target in FY 2006.

115

Performance Measure

Percent reduction in the number of people in the U.S. who are

expected to significant aircraft noise levels.

2002 2003 2004 2005

Target N/A -1% -2% -3%

Actual N/A -15% -27% (r) -27% #

(r) Revised; # Projection from trends

Performance Report— environmental stewardship strategic objective

117

Organizational excellence STRATEGIC OBJECTIVE

advance the department’s ability to manage for results and achieve the

goals of the president’s management agenda

ORGANIZATIONAL EXCELLENCE

FY 2005 Enacted Funding by Operating Administration 

 (Dollars in Millions)

MARAD, $1

RITA, $3 FMCSA, $25

FRA, $2 PHMSA, $4

FHWA, $72

OST, $133

FTA, $22

FAA, $417

OIG, $58 STB, $11

STRATEGIC OUTCOMES

• Strategic management of human capital

• Competitive sourcing

• Improved financial management

• Expanded E-Government

• Budget and performance integration

PERFORMANCE MEASURES

• For major DOT systems, percentage of cost goals

established in the acquisition project baselines that are

met.

• For major DOT systems, percentage of scheduled

milestones established in acquisition project baselines

that are met.

• For major Federally funded infrastructure projects,

percentage that meet schedule milestones established in

project or contract agreements, or miss them by less than

10 percent.

• For major Federally funded infrastructure projects,

percentage that meet cost estimates established in project

or contract agreements, or miss them by less than 10

percent.

• Percentage of transit grants obligated within 60 days after

submission of a completed application.

• Number of environmental justice (EJ) cases that remain

unresolved after one year.
118 FY 2005 Performance and Accountability Report

Secretary Mineta's central management strategy for achieving organizational improvement is full

implementation of the PMA. The PMA contains five core, mutually reinforcing goals that the DOT Team

is integrating into its corporate culture in striving for continuous management improvement. In

implementing the President’s Management Agenda in DOT, our objective is to achieve the following

organizational excellence outcomes:

• Achieved strategic management of human capital

• Achieved competitive sourcing goals

• Achieved financial performance goals

• Achieved budget and performance integration goals

• Achieved e-government goals

Strategic Management of Human Capital

President Bush’s management agenda focuses on long-term management of the Federal workforce and

fostering a citizen-centered, results-based government that is organized to be agile, lean, and capable of

making timely decisions. As we determine our human capital requirements, DOT will thoughtfully

restructure our organization.

FY 2005 Accomplishments

The current DOT Human Capital Plan contains approved goals and milestones to guide our efforts

through the third quarter of FY 2006, and is fully aligned with the President’s Management Agenda and

standards developed by the Office of Management and Budget, Office of Personnel Management, and

Government Accountability Office. These standards promote the use of strategic alignment and

accountability strategies to accomplish measurable improvements in the three primary human capital

drivers of organizational performance: leadership and knowledge management, performance culture, and

talent. DOT’s plan is focused on efforts to strengthen critical competencies, with particular emphasis on

leadership, to improve the way performance is measured and managed, and to upgrade the metrics used to

monitor all aspects of employee performance.

With continued strong Departmental leadership and support from the Operating Administrations, DOT

maintained its “green” status in Human Capital, counting among its accomplishments:

• Provisional certification for the SES Performance Plan, and an SES pay plan that links pay decisions to

organizational performance and need;

• Migration of all employee performance plans to multi-level systems that make distinctions among

levels of performance;

• An electronic learning management system (eLMS), with training, a users’ guide, and strong

promotional activities;

• Reduced hiring timeframes;

• A development program for GS-15 employees to improve succession pipelines; and

President’s Management Agenda
• Analysis of results from the Federal Human Capital Survey for every DOT organization, and

communication and improvement efforts.

As the Department addressed these cross-cutting human capital issues, the Operating Administrations

also examined their unique human capital challenges. As organizations identified competency and/or

succession gaps, they used flexibilities such as voluntary early retirement (VERA) and voluntary

separation incentives (VSIP) to restructure jobs. Among the many other accomplishments at the operating

administration level:

• FAA developed a comprehensive workforce plan for its Air Traffic Controllers to ensure that adequate

controller staffing levels are available through this decade and beyond. The plan addresses the hiring,

training, and deployment of 12,500 controllers over 10 years, and ensures an appropriate ratio between

developmental and fully certified controllers. It also addresses cost-containment strategies and

efficiency measures to reduce required staffing levels.

• FHWA’s continued improvements in workforce analysis and planning have allowed it to decrease

numerical gaps between needed and on-board strength, restructure the skills mix in mission-critical

occupations, and identify and address under-representation of Hispanic employees.

• The Maritime Administration’s Human Capital Council has used the Payroll Management Information

System (PMIS) as a tool to make strategic decisions about the use of vacancies for maximum program

performance within a constrained resource environment. MARAD used the PMIS to make a

determination on how to schedule its recent early out/buy out request to maximize the financial

savings while minimizing the effect on any one program area.

• The Federal Aviation Administration has achieved millions of dollars of cost containment through

restructuring of its workers’ compensation program.

The FHWA has developed a proactive Workforce-Human Capital Plan that focuses on creating a

multidisciplinary workforce to deliver the Federal-aid Highway Program. With increasing numbers of

employees retiring and up to 37% of FHWA’s workforce eligible to retire in the next five years, the Agency

will need to recruit a staff with diverse skills and build the competencies of employees in areas such as

program and project oversight, effective financial management, implementation of internal controls, and

procurement integrity.

In FY 2005, internal teams examined and inventoried the competencies and staffing levels needed for

various disciplines across the organization. The FHWA identified existing skill gaps in its mission-critical

occupations including transportation planners, environmental protection specialists, civil engineers,

financial managers and specialists, engineering technicians, realty specialists, and transportation

specialists.

Competitive Sourcing

DOT uses competitive sourcing as a key tool for efficiently getting commercial-type work done. By doing

so, we can ensure that we are providing the highest quality and the most economical service to Americans.

FY 2005 Accomplishments

In FY 2005, DOT maintained its green status on the President's Management Agenda scorecard for

competitive sourcing. During 2005, DOT completed one standard and six streamlined competitions,

including the largest and most complex competition conducted to date under OMB Circular A-76 for

FAA's Automated Flight Service Stations.

Performance Report— Organizational excellence strategic objective 119
120 FY 2005 Performance and Accountability Report

To date, DOT has completed 19 competitions for over 2,800 full time equivalent positions with anticipated

savings of over $2.2 billion from the inception of the study through all of the performance periods. DOT

initiated an Executive Steering Committee for competitive sourcing, which evaluates the opportunity for

cross organizational competitions throughout the Department and brings more consistency to DOT's

competitive sourcing efforts. DOT requires the Operating Administrations to develop their competitive

sourcing plans in conjunction with their workforce planning efforts to ensure that human capital solution

strategies include public-private competition.

Improved Financial Performance

Improved financial performance is a key aspect of improving the Government’s overall performance.

Knowing the full cost of DOT’s programs and services is a critical element of good program management.

Good financial stewardship, excellent financial and acquisition systems, and improved performance on

DOT’s financial metrics guides DOT financial performance. In recent years, the Government

Accountability Office and the DOT Office of Inspector General have aggressively recommended that DOT

financial management focus on needed improvements. DOT has responded with several efforts that have

improved financial performance throughout the Operating Administrations and the Department.

FY 2005 Accomplishments

In May 2005, DOT moved its financial management tool Delphi DASHboard pilot into production. The

Delphi DASHboard provides managers with key financial information and is being enhanced to provide

program performance information as well. The combination of financial and program information

provides DOT managers with a more complete program picture and enables them to make cogent business

decisions.

Currently included on the DASHboard are the Office of Management and Budget’s financial performance

metrics (broken out by operating administration), DOT’s internal scorecard on financial improvement

initiatives, and accounting status reports derived directly from DOT’s Delphi financial management

system.

Additionally, DOT has been centralizing operating administration accounting operations at the

Department’s Financial Management Center of Excellence in Oklahoma City, which is one of four such

Centers designated by OMB in the President’s Budget in February 2005. With the cost of the Centers

shared among the other Departments who use the Center’s services, tax payers benefit from the costsavings achieved by eliminating redundant operations.

With DOT’s successful phase one conversion to the Department of Interior’s Federal Personnel and Payroll

system during 2005, DOT is also moving ahead to retire three major legacy payroll and Human Resources

systems in March 2006. DOT closed out its legacy accounting system in March 2004 and is shutting down

its travel management systems as we implement the new GovTrip system under the e-Travel program.

Expanded Electronic Government

President Bush has called for an expanded electronic government that improves service to individuals,

businesses, and State and local governments through the use of information technologies. DOT is

committed to improving transportation through market-based policies that foster competition by using
electronic government resources, and increasing the range of transportation choices available to travelers

and shippers. DOT is also committed to a more efficient use of information technology to create faster and

easier ways for citizens to transact their business with DOT.

FY 2005 Accomplishments

The Department continues to participate actively in many of the Administration's government-wide EGovernment initiatives, such as online rulemaking, business gateway, e-learning, e-travel, e-grants and

others. The results allow the general public and the regulated community easier access to their

government. For example, DOT:

• made a large number of OMB forms available to citizens through the Business Gateway PMA EGovernment Web site;

• increased public access to and awareness of DOT grant opportunities; and

• expanded the use of consolidated automated staffing functions, using Quick Hire software for all of

DOT.

During FY 2005, the Department maintained a “green” rating in the E-Government portion of the

President’s Management Agenda; indicating DOT met established requirements and made further

improvements in capital planning, security and enterprise architecture issues. In FY 2005, 85% of

operational Information Technology (IT) systems have current certification and accreditation. In addition,

100% of DOT's FY 2006 business cases were determined by OMB to be IT acceptable. DOT continued to

update and refine enterprise architecture artifacts and plans that focus IT investment business functions.

DOT also reduced cost, schedule and performance overruns and shortfalls for major projects to less than

10%.

To identify potential IT security weaknesses and opportunities for consolidation for more efficient

operations, each of DOT’s IT systems undergoes a rigorous security certification and accreditation

process. Results of these certifications and accreditations are used to identify system weaknesses and

provide corrective actions. DOT implemented a quarterly compliance review process to go beyond the

C&A process, and reviewed DOT-wide efforts to comply with the Privacy Act and the Americans with

Disabilities Act (ADA) accessibility requirements. By implementing systems Department-wide, the

Department will gain consistency in its corrective efforts as well as provide cost-savings for IT security

solutions. Certification and accreditation provides DOT management the assurance that IT assets are able

to provide greater system security for services delivered to the public.

In FY 2005, the Department’s Investment Review Board (IRB) focused on management of the

Department’s information technology portfolio, DOT Operating Administration IT investment strategies,

and project management practices. Through greater IRB involvement, senior managers from across the

Department have assumed an expanded role in the oversight of high risk projects.

Performance Report— Organizational excellence strategic objective 121
122 FY 2005 Performance and Accountability Report

Budget and Performance Integration

Regular, systematic measurement and accountability for program performance compared to predetermined goals will be the means to improve DOT management. The President’s Management Agenda

stresses a change of direction in Federal management—that of changing yearly budgetary and resource

decisions from the “increment” to the “base”, and through the focus of accountability for programmatic

results.

FY 2005 Accomplishments

DOT continues to be recognized as a leader in Budget and Performance Integration and made significant

strides in FY 2005 to further improve the link between performance results and resource decisions, and to

hold executives and managers accountable for those results. To make financial and performance

information more readily available to executives and managers, the Department began implementation of

the Automated Dashboard Desktop User Interface (DASHboard). When fully deployed, this system will

bring financial and performance information to the desktops of executives and managers, thereby

improving oversight of the Department’s programs.

DOT has also fully incorporated results from OMB’s Program Assessment Rating Tool (PART) into the

resource decision-making process. PART results are presented to the Secretary of Transportation and his

staff during the budget preparation process in order to better link resource allocation decisions to program

results. Since the OMB began assessing the Department’s programs using PART, DOT program managers

have had to justify their budget requests based on actual performance results and address OMB’s

recommendations for program improvement. PART results and performance measures are also

documented in the final budget documents that are submitted to the OMB and to the Congress.

For the FY 2006 budget cycle, DOT took performance budgeting to the next level by estimating the

marginal cost of performance (what results can be achieved at different levels of funding) for selected

programs. This approach was expanded to all Operating Administrations and for the FY 2007 budget

cycle, all DOT agencies will provide marginal cost information for at least one of their performance goals.

Recognized as a government leader in marginal cost methodologies, the Department presented its

marginal cost approach and processes at a Government-wide marginal cost seminar to assist other Federal

agencies in improving their marginal cost capabilities.

Research, development, and technology (RD&T)

DOT established a new organization to focus the research and development planning processes across

DOT, the Research and Innovative Technology Administration (RITA). RITA will enable the Department

to more effectively coordinate and manage the Department's research portfolio and expedite

implementation of cross-cutting innovative technologies.

Under the reorganization, RITA's resources will be used to:

• coordinate and advance transportation research efforts within DOT;

• support transportation professionals in their research efforts through grants and consulting services, as

well as professional development through training centers; and
• inform transportation decision-makers on intermodal and multi-modal transportation topics through

the release of statistics, research reports, and a variety of information products via the internet,

publications, and in-person venues such as conferences.

To assist with RD&T planning, the Department recently established two internal bodies: the RD&T

Planning Team and the RD&T Planning Council. At the working level, the Planning Team develops

recommendations for DOT-wide RD&T priorities; at the leadership level, the Planning Council reviews

and approves the priorities. Upon such approval, it is expected that within each Operating Administration,

those leaders will steer more of the available research resources toward those RD&T priorities, as is

appropriate for their agencies’ missions.

Through the RD&T Planning Council and Team, the Department also ensures the effectiveness of RD&T.

In particular, DOT conducts annual RD&T program reviews to assess Operating Administrations’

implementation of the Administration’s R&D Investment Criteria.

In addition to the President’s Management Agenda, DOT also manages for results, by tracking our

progress in acquisition management, financial stewardship and environmental justice. Through these

measures, DOT endeavors to improve organizational performance and productivity.

Acquisition Management

Lifecycle acquisition management is built around a logical sequence of phases and decision points. DOT

uses these phases and decision points to determine and prioritize its needs, make sound investment

decisions, implement solutions efficiently, and manage services and assets over their lifecycle. The

overarching goal is continuous improvement in the delivery of safe, secure, and efficient services over

time. DOT ensures that taxpayer dollars spent through DOT’s acquisition programs achieve performance

outcomes required by tracking, cost and schedule milestones.

2005 Results. DOT met both performance

measures. Thirty-five critical acquisition

programs are tracked against these

performance measures and they have met

targets for both cost and schedule variance in

FY 2005. Staying on schedule and within

budget is critical to updating the air traffic

system. In the last three years FAA has

implemented processes for tracking and

reporting variance, which have strengthened

control over major acquisitions and resulted

in significant performance gains.

FY 2006 Performance Forecast. DOT

anticipates meeting the new performance

targets in FY 2006.

Performance Report— Organizational excellence strategic objective 123

Organizational Excellence Performance Goals

Performance Measure

For major DOT systems, percentage of cost goals established in

the acquisition project baselines that are met.

2002 2003 2004 2005

Target 80 80 80 80

Actual 89.5 88 100 97

Performance Measure

For major DOT systems, percentage of scheduled milestones

established in acquisition project baselines that are met.

2002 2003 2004 2005

Target 90 80 80 80

Actual 74 78 92 92
124 FY 2005 Performance and Accountability Report

Financial Stewardship

With fewer resources to fund important transportation projects, DOT needs to ensure that infrastructure

improvements are delivered on time and within budget, and that taxpayer investments are those that yield

the greatest benefits for the given costs. Infrastructure projects are not static, at any point in the process

conditions may change which impact either the cost of the project or the delivery date. Monitoring cost,

schedule and performance of infrastructure projects are critical to identify problems and initiate action to

mitigate risks.

FTA

FTA initiated a risk management program for its major capital projects. FTA’s risk management is a

continuous process that includes a formal planning activity, assessment activities (identification and

analysis) to estimate the likelihood and predict the impact on the project, a mitigation strategy for selected

risks, and monitoring the progress in reducing the selected risks to the desired level. The risk assessment

for project cost and schedule is performed by FTA’s Project Management Oversight contractor and

identifies and ranks the highest areas of risk. The report is then used as a guide to establish a risk

mitigation plan to monitor risk through the completion of the project. This risk management program

creates a confidence level for the project budget and schedule, and enables FTA and the grantee to

proactively manage the project.

FHWA

FHWA issued guidance defining the content and format of the financial plans for major projects, which

are generally defined as projects at the $1 billion dollar and larger level. A financial plan provides a

comprehensive view of the total cost of the project and reasonable assurances that there will be sufficient

financial resources to complete the project as planned. Cost containment strategies are also identified in

the financial plan, as well as an implementation schedule for completing the project.

Both the Government Accountability Office and the Office of Inspector General raised additional

concerns about agency oversight of cost and schedule for projects funded with Federal-aid funds. To

address some of these continuing concerns and lay the groundwork for building a new project

management tracking system, the agency initiated an effort to develop a more formal, documented

approach to project delivery oversight.

As part of its efforts to support effective program management, the Transportation Infrastructure Finance

and Innovation Act (TIFIA) credit program developed formal guidance for project oversight and credit

monitoring. The guidance is intended to assist the DOT and its Operating Administrations in carrying out

oversight responsibilities for TIFIA-funded projects by providing a consistent approach to monitoring

projects through a project’s life cycle.
2005 Results. DOT met the performance

target for keeping major infrastructure

projects on schedule, but not the

performance target for keeping projects

within budget.

FHWA has approved financial plans or their

annual updates for 12 major projects. Of the

12 projects that have reached the financial

plan stage, 92% are within the forecasted

schedule completion variance, and 75% are

currently on or within allowable budget

variances.

FHWA issued guidance in FY 2004 to help

States improve upon their initial project

estimates and has actively promoted better

financial and project management practices

since then. However, the initial project cost

estimates for projects such as the Katy (TX)

Freeway Reconstruction Project, the

Oakland Bay Bridge, and the New Haven (CT) Harbor Crossing Improvement Project predate the issuance

of this guidance.

All three major FAA runway projects, St. Louis, Seattle-Tacoma, and Atlanta, continue on time with

Seattle-Tacoma and Atlanta also within budget. Costs for the St. Louis runway rose above thresholds due

to complex land acquisition and construction issues. In FY 2004, the FAA issued an amendment to the city

of St. Louis to help offset the cost increases. New runways at Atlanta Hartsfield-Jackson International and

Lambert St. Louis International are on schedule to open in 2006, while the new runway at Seattle-Tacoma

International is on schedule to open in 2008.

All four FTA mega transit projects (active New Starts projects with Full Funding Grant Agreements

(FFGA) that exceed $1 billion) are within 10% of the cost estimate of their current FFGA agreements. The

four projects are: New Jersey Hudson-Bergen—MOS II Light Rail; San Juan Tren Urbano Heavy Rail;

Denver Southeast Corridor Project; and, Seattle Central Link Light Rail. The FFGA for the San Juan Tren

Urbano project has been amended to reflect the increased cost to complete. FTA has also been aggressively

working with this grantee to ensure closeout activities such as safety and security certification are complete

in accordance to FTA standards and managing the project cost and schedule to the current projected

figures. FTA’s four mega projects are also within 10% of the schedule milestones of the current FFGA

agreements.

FY 2006 Performance Forecast. DOT expects to meet the target for major infrastructure projects that stay

on schedule, but it anticipates continued difficulty in attaining the target for major infrastructure projects

staying within budget.

Performance Report— Organizational excellence strategic objective 125

Performance Measure

For major Federally funded infrastructure projects, percentage

that meet schedule milestones established in project or contract

agreements or miss them by less than 10 percent.

2002 2003 2004 2005

Target 95 95 95 95

Actual 85 88 95 95

Performance Measure

For major Federally funded infrastructure projects, percentage

that meet cost estimates established in project or contract

agreements, or misss them by less than 10 percent.

2002 2003 2004 2005

Target 95 95 95 95

Actual 85 88 74 79
2005 Results. DOT met its performance

target for grant processing.

As of September 2005, 91% of the 2,047

grants were processed and obligated in

60 days or less. FTA implemented several key

activities essential to improve processing

time, including:

• Implemented the electronic Grants

Notification System for grants that are over $1 million and processed for release to congress by the

Office of the Secretary;

• Opened the Transportation Electronic Award and Management (TEAM) system for grant obligation

earlier in FY 2005 as a result of monthly reconciliation of TEAM data during FY 2004;

• Worked with the Department of Labor (DOL) to develop a streamlined procedure for certifying grants

in each grant amendment adding incremental funding;

• Expedited notification of certification by the DOL; and

• Resolved mid-year problems with electronic notification to DOL resulting from new computer security

firewall protections.

FY 2006 Performance Forecast. DOT will meet the target for FY 2006.

Environmental Justice

DOT strives to ensure that transportation projects are accomplished even-handedly, so that no community

or group bears a disproportionate burden. As a result, DOT has chosen to highlight Departmental Office

of Civil Rights’ (DOCR) Environmental Justice activities. DOCR monitors the investigation of civil rights

complaints alleging that transportation programs, policies, or activities have had a disproportionately high

and adverse human health or environmental effect on minority or low-income populations.

2005 Results. DOT did not meet the

performance target. Environmental Justice

complaints are processed by the DOCR and

investigated by the relevant operating

administration. Environmental justice

complaints are very complex, and therefore

time-consuming, compared to other external

civil rights complaints. Several factors

contribute to the complexity of the cases; for

instance, environmental justice complaints

always involve classes and not single individuals; complaints almost always involve controversies relating

to unsettled areas of the law; and they often involve time-consuming and legally difficult jurisdictional

determinations. A few complaints involve projects in the planning stages that may or may not be funded.

Some of the complaints involve longstanding controversies in local land use and may result in serious and

fundamental community debates. For many of these complaints, DOT is considering Alternative Dispute

Resolution.

Performance Measure

Percent of Environmental Justice cases that remain unresolved

after one year.

2002 2003 2004 2005

Target 40 35 35 35

Actual 65 76 73 45

126 FY 2005 Performance and Accountability Report

Performance Measure

Percentage of transit grants obligated within 60 days after

submission of a completed application.

2002 2003 2004 2005

Target 60 80 80 80

Actual 67 83 91 91
The DOCR is working on a Complaint Resolution Manual to help the Operating Administrations resolve

complaints more effectively and expeditiously. The manual will outline the expected steps for processing,

investigating, and resolving a discrimination complaint, with the goal of promoting a more uniform

approach to complaints across the Department.

FY 2006 Performance Forecast. DOT does not expect to meet the target in FY 2006.

Performance Report— Organizational excellence strategic objective 127

Performance measurement is dependent on the availability of useful data that will indicate level of

performance and helps progress toward organizational goals. Because all data are imperfect in some

fashion, pursuing perfect data may consume public resources without creating appreciable value. For this

reason, there must be an approach that provides sufficient accuracy and timeliness but at a reasonable cost.

This section of the report provides information on how DOT uses performance data, assesses limitations

of the data, and plans to improve DOT's data.

In General

In an attempt to bring consistency and quality to its performance reporting, DOT has implemented some

general rules regarding the data it uses and how it is evaluated.

Annual Data—Whenever available, the data in this document are reported on a Federal Government fiscal

year basis. However, there are instances where fiscal year data are not available so calendar year data are

used instead. This often occurs when data are collected and reported to DOT by external sources and a

calendar year reporting requirement is specified in the implementing regulation.

Completeness of Data for Annual Results—If available, the results for the most recent year in the report

are listed as Actual in the shaded box for each performance measure. However, given the November 15

deadline for submission of the Performance and Accountability Report, not all data have been compiled

and finalized for the entire year. When an actual value is not available for the current year, either an

estimate or a projection is provided instead. In general, estimates are based on partial-year data that are

extrapolated to cover a full 12-month period. Historical trend information, supplemented by program

expertise, is then applied to estimate the remaining months of performance for which actual data is

unavailable. The result is identified as a preliminary estimate in the report. If partial-year data are not

available, then past trend information is analyzed and supplemented by program knowledge to develop a

projected value for the annual performance measure. The result is identified as a projection in the report.

As data are finalized, the projections and preliminary estimates are replaced by actual results, with

resulting changes denoted by an (r). Results are also amended as errors and omissions are identified in the

data verification process, as updated information is provided by the reporting sources, or because of legal

or other action that changes a previously-reported value.

Reliability of Measurement Data—DOT performance data are generally reliable (useful to program

managers and policy makers). But because performance results in a given year are influenced by multiple

factors, some of which are beyond DOT's control, and some of which are due to random chance, there may

be considerable variation from year to year. A better “picture” of performance may be gained by looking at

results over time to determine if there is a trend.

Virtually all data have errors. We have compiled Source and Accuracy Statements for each of the DOT data

programs used in this report, which can be found at

http://www.bts.gov/programs/statistical_policy_and_research/source_and_accuracy_compendium/index.html.

The Source and Accuracy Statements give more detail on the methods used to collect the data, sources of

variation and bias in the data, and methods used to verify and validate the data.

129

Performance data completeness and reliability
130 FY 2005 Performance and Accountability Report

Assessing and, where possible, eliminating sources of error in DOT data collection programs has always

been an important task for data program managers. As part of their ongoing work, managers of

departmental data programs use quality control techniques to identify where errors can be introduced into

the data collection system. Program managers also use computerized edit checks and range checks to

minimize errors that may be introduced into the data of their respective programs. In addition, quality

measurement techniques are employed to measure the effects of unanticipated errors. These include

verification of data collection and coding, as well as coverage, response and non-response error studies to

measure the extent of human error affecting the data. As sources of error are identified, data collection is

improved.

The data used in measuring performance come from a wide variety of sources. Much of it originates from

sources outside the Department and, therefore, outside the direct control of the Department. The data

often come from administrative records or from sample surveys. While DOT may not have a strong voice

in improving the quality of outside data, the Department takes all available information about the

limitations and known biases in outside data into account when using the data.

To help the OAs address these issues, the Bureau of Transportation Statistics (BTS) is developing a

statistical policy framework where the OAs will work together to identify and implement the current

statistical best practices in all aspects of their data collection programs. This project is consistent with the

data capacity discussions found in the DOT Strategic Plan.

See Other Accompanying Information in the Financial Report for detailed explanations of completeness

and reliability for each performance measure.

Data Limitations

DOT Data Source Limitations—Timeliness is the most significant limitation for DOT performance

measurement data. Some DOT data are not collected annually. For example, the National Household

Travel Survey and the Commodity Flow Survey each collect data every five years. Data that are collected

each year (or more frequently) require time to analyze, confirm and report results. For example, Highway

Performance Monitoring System vehicle-miles traveled (VMT) data require several months of

post-collection processing, making final results unavailable for this performance report.

Other performance measurement data limitations are identified in the previously mentioned Source and

Accuracy Statements for DOT data programs. These statements contain descriptions of data collection

program design, estimates of sampling errors (if applicable), and discussions of non-sampling errors.

Non-sampling errors include under-coverage, item and unit non-response, interviewer and respondent

response errors, processing errors, and errors made in data analysis.

Estimating and Projection Techniques Used—As discussed under completeness, most of the FY 2005

measures must be projected from either partial-year data or historical trends. The projections based on

partial-year data from FY 2005 are more likely to reflect changes effected by current DOT policies and

programs. The measures projected from FY 2004 and prior historical data reflect continuing trends from

ongoing programs, but do not reflect the effects of changes implemented in FY 2005.
External Data Source LimitationsData that originates from external or third-party sources are not directly

controlled by DOT. These data often come from administrative records or from sample surveys.

Timeliness is also a significant limitation. For example, many DOT internal data programs rely on data

provided by State DOTs. DOT partners closely with the States, but does not have direct control over these

programs.

performance data completeness and Reliability 131

Performance measures show if intended outcomes are occurring and assess any trends. Program

evaluation uses analytic techniques to assess the extent to which our programs are contributing to those

outcomes and trends. As required by Government Performance and Results Act of 1993, the Department's

FY 2003–2008 Strategic Plan included an initial list of new program evaluations planned for those fiscal

years. This section provides a summary of DOT's program evaluation efforts scheduled for completion in

FY 2005. In addition, updates of FY 2004 evaluations that were not completed when last year’s PAR went

to press are also included to maintain continuity across fiscal years.

Types of Program Evaluations

Program evaluation is an assessment, through objective measurement and systematic analysis, of the

manner and extent to which programs achieve intended outcomes. Evaluations are of the following types:

• Impact Evaluations use empirical data to compare measurable program outcomes with what would

have happened in the absence of the program. These represent the highest standard of program

evaluations and are often the most difficult and expensive to construct and interpret.

• Outcome Evaluations assess the extent to which programs achieve their outcome-oriented objectives.

Outcome evaluations will use quantitative methods to assess program effectiveness, but fall short of the

rigorous causal analysis of impact evaluations.

• Process Evaluations assess the extent to which a program is operating as intended. While a true process

evaluation will use objective measurement and analysis, it falls short of assessing the causal links

between intervention and outcome.

• Cost-Benefit and Cost-Effectiveness Analyses compare a program's outputs or outcomes with the costs to

produce them. This type of analysis conforms with program evaluation when applied systematically to

existing programs and when measurable outputs and outcomes are monetized.

Program Evaluation Management

DOT staff, contractors, academic institutions, the Office of Inspector General (OIG), or the Government

Accountability Office (GAO) may conduct program evaluations. Program evaluation efforts are designed

to ensure that the finished evaluations are useful regardless of who conducts the evaluation or the

methodology used.

The programs selected for evaluations are vetted through the Department’s strategic planning process.

Each modal administration nominates programs that are then reviewed by a strategic planning executive

committee to ensure two things: 1) adequate breadth of program evaluations across modal

administrations; and 2) alignment to the strategic objectives developed through the planning process. The

OIG and the GAO conduct their own program evaluations independent of this schedule, as appropriate.

133

DOT Program Evaluations
134 FY 2005 Performance and Accountability Report

A summary of DOT program evaluations scheduled for completion in FY 2005 follows.

Evaluation of Federal Motor Carrier Safety Administration’s (FMCSA’s)

Compliance Review (CR) Impact Assessment Model

FMCSA's CR program is a nationwide program in which FMCSA and State inspectors conduct on-site

reviews of motor carrier compliance with Federal Motor Carrier Safety Regulations (FMSCRs). FMCSA

expects that through enforcement of the FMCSR, and promotion of safety requirements, motor carriers

will improve the safety of their operations and reduce their chances of being involved in crashes.

RELATED STRATEGIC OBJECTIVE: SAFETY

The purpose of this impact evaluation is to measure the effectiveness of FMCSA's CR program in terms of

crashes avoided, injuries avoided, and lives saved. The objective of conducting this evaluation is to provide

FMCSA management and State safety partners with a quantitative basis for optimizing the allocation of

resources dedicated to the improvement of commercial motor vehicle safety. The Volpe National

Transportation Systems Center conducted this evaluation.

The scope of this evaluation is the safety impact of all CRs performed by FMCSA and its State partners. In

2002, Federal and State enforcement personnel conducted 13,430 CRs. The model used to evaluate the

impact of these CRs is designed to measure the direct impact of CRs on carrier safety. It is not designed to

measure indirect aspects such as deterrence (i.e., the threat of having a CR).

The methodology used to conduct this impact evaluation is an analytic program evaluation model called

the CR Effectiveness Model, which FMCSA developed in cooperation with the Volpe National

Transportation Systems Center. The model is based on the individual and cumulative “before and after”

changes in the safety performance of carriers that received CRs. The model compares a motor carrier's

crash rate in a time period after a CR to its crash rate prior to that review. To make this comparison, the

model uses crash and power unit data from the Motor Carrier Management Information System (MCMIS)

snapshots taken before and after the CR.

The results of this evaluation are as follows:

Compliance Review Program Effectiveness

1999–2004

1999 2000 2001 2002 2003 2004 #

Crashes

Avoided 1,200 2,200 1,600 1,656 1,462 2,242

Injuries

Avoided 822 1,395 1,105 1,261 1,087 1,624

Lives

Saved 51 91 67 70 62 86

# FY 2004 data are preliminary projections

FY 2005 Program Evaluation Summaries
The latest available data from 2003 and 2004 projected results are provided in the table above. The data

trend over the last four years continues to remain positive as more crashes and injuries are avoided and the

number of lives saved increases. FMCSA's plan is to continue to conduct this evaluation of the CR

Program on an annual basis in order to monitor the effectiveness of the agency's CR program. Completion

of this evaluation is set as an annual agency milestone.

Evaluation of FMCSA Roadside Inspection/Traffic Enforcement

Roadside inspection and traffic enforcement (RI/TE) are two of the Federal Motor Carrier Safety

Administration's (FMCSA) key safety programs. The roadside inspection program consists of roadside

inspections of vehicle and driver safety performed by qualified safety inspectors. The traffic enforcement

program is based on the enforcement of 21 moving violations noted in conjunction with a roadside

inspection. State RI/TE activities are funded through FMCSA's Motor Carrier Safety Assistance Program.

RELATED STRATEGIC OBJECTIVE: SAFETY

The purpose of the evaluation is to measure the impact of the RI/TE program in terms of crashes avoided,

injuries avoided, and lives saved. The objective of conducting this evaluation is to provide FMCSA

management and State safety partners with a quantitative basis for optimizing the allocation of resources

dedicated to the improvement of commercial motor vehicle safety. FMCSA expects that vehicle and/or

driver defects discovered, and then corrected as the result of RI/TE interventions, will reduce the

probability that these vehicles/drivers will be involved in subsequent crashes, which will reduce overall

crash rates. The Volpe National Transportation Systems Center conducted this evaluation.

The scope of this evaluation includes all RI/TEs funded by the FMCSA. In 2002, approximately 3.0 million

RI/TEs were conducted. The model which is used to conduct this evaluation is designed to measure both

the direct and indirect impact of RI/TEs on improving safety, (i.e., crashes avoided, injuries avoided, and

lives saved).

The methodology used to conduct this impact evaluation is an analytic program evaluation model called

the Intervention Model, which FMCSA developed in cooperation with the Volpe National Transportation

Systems Center. The Intervention Model is based on the premise that the two programs, roadside

inspection and traffic enforcement, directly and indirectly contribute to the reduction of crashes. The

model includes two sub-models that are used for measuring these both direct and indirect effects:

• Direct effects are based on the assumption that vehicle and/or driver defects discovered and then

corrected as the result of interventions reduce the probability that these vehicles/drivers will be

involved in subsequent crashes. The model calculates direct-effect, prevented crashes according to the

number and type of violations detected and corrected during an intervention.

• Indirect effects are the byproducts of the carriers' increased awareness of FMCSA’s programs and the

potential consequences that the programs could impose if steps were not taken to ensure and/or

maintain higher levels of safety. In order to measure indirect effects, which are essentially changes in

behavior involving driver preparation and practices and vehicle maintenance, the model calculates

responses to the programs and the resulting reduction in potentially crash-causing violations.

DOT Program Evaluations 135
136 FY 2005 Performance and Accountability Report

The results of this annual evaluation are as follows:

The latest available data from 2004 are provided in the table above. Although crashes and injuries avoided

continue their positive trend, lives saved have stayed relatively flat over the four year period. FMCSA's plan

is to continue to conduct this evaluation on an annual basis in order to monitor the effectiveness of the

agency's RI/TE program. Completion of this evaluation is set as an annual agency milestone.

Hazardous Materials Air Transportation Evaluation

Both air carriers and passengers play a critical role in the transportation of hazardous materials by air. Air

carriers (including shippers and repair stations that ship hazardous materials) are required to transport the

material in accordance with the existing Federal Regulations. Passengers are prevented from carrying

unauthorized hazardous materials on to scheduled commercial flights if discovered during the security

screening. To ensure compliance, Special Agents periodically inspect and conduct investigations of

violations by air carriers, shippers, and repair stations that ship by air. These hazardous materials

regulations are promulgated by DOT’s Pipelines and Hazardous Materials Safety Administration

(PHMSA). The regulations are inter-modal, applying to ground, sea, rail, and air transportation.

RELATED STRATEGIC OBJECTIVE: SAFETY

DOT’s OIG conducted an independent evaluation to assess the management of FAA’s Hazardous Materials

Air Transportation program and its effectiveness in ensuring compliance with existing hazardous materials

regulations. The OIG found that since the transfer of this program from the Transportation Security

Administration (TSA) to the FAA, the FAA has made considerable progress in reestablishing it as a bona

fide program for overseeing and enforcing industry’s compliance with hazardous material regulations.

Since October 2002, FAA has realigned the Program’s organizational structure, hired and trained new

members of its workforce, developed and implemented guidance and work plans for conducting

inspections and investigations, and created an automated system for collecting and reporting the results of

inspection and enforcement activities. Nevertheless, the current situation is far from an “end state” for

ensuring the safety of hazardous material shipments by air, and new approaches are needed in managing

the program.

To improve the management of this effort, the OIG recommendations included the following:

Program Effectiveness

2001–2004

2001 2002 2003 2004

Crashes

Avoided 15,138 16,387 17,151 18,673

Injuries

Avoided 11,646 12,716 13,062 13,615

Lives

Saved 738 781 722 722
• Institute guidelines and timeframes for conducting hazardous materials investigations, conducting

legal reviews, and issuing Notices of Proposed Civil Penalties through the coordinated efforts of the

Hazardous Materials Division and the FAA’s Office of the Chief Counsel.

• Develop and implement alternate means of administering hazardous materials enforcement cases, such

as the ticketing system used by Pipeline and Hazardous Materials Safety Administration (PHMSA).

• Finalize and implement the FAA voluntary disclosure reporting program. FAA needs to take a

systematic approach in effectively managing the program, to include disseminating all useful

information to the air carriers, hazardous material shippers, and DOT Operating Administrations with

hazardous materials oversight and enforcement responsibilities.

• Implement a pilot project with the TSA and one or more air carriers to determine the effectiveness and

cost of an automated operating system to record and process violations of hazardous materials

regulations discovered during screening of the passenger's carry-on and checked baggage. In the

interim, collaborate with TSA to implement procedures for notifying FAA of hazardous materials

incidents associated with passengers' carry-on baggage.

• Issue an Advisory Circular notifying all air carriers that they must report to FAA all unauthorized

hazardous materials found in passengers' checked baggage and take enforcement actions against those

air carriers not complying with the reporting requirements.

In response to the OIG recommendations, the following actions have been taken:

• FAA has issued written field guidance on the timeliness of civil penalty cases that reduces the time

allowed for civil penalty enforcement investigative reports to be submitted for legal review from 120 to

90 days. In addition, the FAA’s Chief Counsel's Office expects to revise Order 2150.3A by December

2005 that will also provide more consistent guidance to all FAA inspectors.

• The FAA expects to publish an initial notice in the Federal Register by March 30, 2006, that will

implement a notice of violation process similar to both the Pipelines and Hazardous Materials Safety

Administration "ticketing" process and the process previously used by FAA to administer certain

aviation security violations.

• FAA, in cooperation with its Chief Counsel's Office completed a review of the draft Voluntary

Disclosure Advisory Circular for certain hazardous materials violations. The draft Voluntary

Disclosure Advisory Circular has been circulated for notice to, and comment from, air carrier

associations. FAA expects to publish this Advisory Circular by December 2005.

• FAA has developed and is using a department-wide intermodal shipper database that contains the

Department's hazardous materials inspections, penalties, incidents, exemptions and registrations

information. The system will help set shipper inspection priorities based on prior penalties and

incidents on record.

• The FAA has made arrangements with the Air Transport Association to provide its member air carriers

with summary results of FAA hazardous materials inspections of their operations. The FAA has

conducted over 3,000 outreach visits to hazardous materials shippers in the last twelve months and

FAA field agents will provide a summary of a shipper's prior incident records to the shipper during

inspections. Finally, the FAA has provided its inspection and penalty records for the intermodal

database system so they are available for the OAs.

The FAA has drafted a revision to its Memorandum of Agreement (MOA) with the TSA. This revised

MOA will be the basis for a mechanism to share TSA data on security checkpoint seizures of hazardous

materials with the FAA. The FAA will evaluate and prioritize the information in terms of the risks posed

DOT Program Evaluations 137
138 FY 2005 Performance and Accountability Report

by the abandoned hazardous materials. Lower risk items will be entered into the FAA's system to generate

an automated outreach notification to the relevant passenger, higher risk items will forwarded to the

relevant FAA Regional Office for investigation. Concerning unauthorized hazardous materials discovered

during checked baggage screening, the TSA Standard Operating Procedure advises screeners to refer their

discoveries to the air carrier that checked the bag. The air carrier would have to notify the FAA. The FAA

initiated its system to generate automated outreach notices in January 2005. The system of collaboration

between FAA, TSA and the air carriers themselves, has resulted in the mailing of over 4,000 notices to

passengers.

Evaluation of Automobile Side Impact Protection

Side impacts rank second only to frontal impacts as a cause of occupant fatalities in cars, light trucks and

vans. Federal Motor Vehicle Safety Standard 214 sets minimum performance requirements in side impacts.

The requirements were phased into passenger cars during model years 1994 to 1997 and extended to light

trucks and vans in model year 1999.

RELATED STRATEGIC OBJECTIVE: SAFETY

In 1997 NHTSA began testing vehicle performance at higher speeds and publishing the results through the

New Car Assessment Program (NCAP). Initially, manufacturers upgraded side structures and affixed

padding to meet Standard 214. In 1996 and later years, they installed two types of side air bags—torso bags

and head air bags—that substantially improved side impact performance on the NCAP tests.

NHTSA originally planned to evaluate only the initial upgrades to structure and padding and complete the

study by 2005, with a separate evaluation of side air bags at a later date. But, side air bags have become an

integral part of the occupant protection system in much of the vehicle fleet (30% of new cars by 2002).

Consumers and manufacturers want to know as soon as possible about the effectiveness of side air bags.

To expedite the impact evaluation of side air bags, NHTSA is combining it with the study of structures and

padding. To ensure the statistics are more meaningful, on this relatively new technology, 2004 Fatality

Analysis Reporting System and General Estimates System crash data are being included. These data are

just now becoming available. NHTSA anticipates completing the report, sending it for peer review outside

the agency, and publishing it in FY 2006.

Large Truck Crash Causation Study

There is no National database that provides information on the causes of, or factors contributing to, large

truck crashes. FMCSA recognizes the importance of having this information and began investigating

methods to collect it several years ago. The Government Accountability Office and the Department of

Transportation’s Inspector General stated in separate reports in 1999 that the lack of large truck crash

causation data hampers FMCSA program effectiveness. In addition, the Motor Carrier Safety

Improvement Act of 1999 authorized funding for a study of the causes of commercial vehicle crashes. In

response, in cooperation with the National Highway Traffic Safety Administration (NHTSA), FMCSA

initiated the Large Truck Crash Causation Study (LTCCS); the first-ever National study of the causes of

crashes involving large trucks. Nationally representative data on the primary and secondary causes of

serious large truck crashes were collected by teams of trained investigators from NHTSA’s National

Automotive Sampling System and FMCSA-funded State truck inspectors.
RELATED STRATEGIC OBJECTIVE: SAFETY

The goal of the LTCCS is to determine the reasons for, and factors contributing to, serious large truck

crashes, so FMCSA can take the results of this process evaluation and implement the most effective

countermeasures to reduce crash occurrence and severity.

The LTCCS collected data on crashes in 24 sites in 17 States from 2000 through 2003. Each crash involved

at least one large truck with a gross vehicle weight rating of more than 10,000 pounds, and resulted in at

least one fatality or at least one incapacitating or non-incapacitating but evident injury. To get the highest

quality data possible, the on-site investigations began as soon as possible after crashes occurred. Data

collection was performed at each crash site by a two-person team consisting of a trained researcher and a

State truck inspector. Researchers collected data at crash scenes through driver, passenger, and witness

interviews.

Most of the crashes involved collisions with another motor vehicle, usually a passenger vehicle. About twothirds of the trucks involved in the crashes were truck tractors pulling a single semi-trailer. Preliminary

findings to date indicate the immediate reason for large truck crashes in an overwhelming majority of the

cases was an action by the driver of the truck or the other vehicle involved. Driver recognition and

decision errors were coded most often for drivers of both trucks and passenger vehicles. Truck drivers,

however, were in better condition to drive and made fewer driving performance errors than passenger

vehicle drivers.

All of the crash data has been collected and encoded into a database. An initial release of data from the

study to Congress and the public is scheduled for the first quarter of FY 2006.

Bus Crash Causation Study

There is no National database that provides information on the causes of, or factors contributing to, bus

crashes. In 2004, in cooperation with the National Highway Traffic Safety Administration (NHTSA),

FMCSA initiated the Bus Crash Causation Study (BCCS) as a complementary and follow-on effort to the

Large Truck Crash Causation Study (LTCCS). The purpose of the BCCS is to analyze the causes of crashes

involving buses.

RELATED STATEGIC OBJECTIVE: SAFETY

The goal of the BCCS is to determine the reasons for, and factors contributing to, serious bus crashes, so

FMCSA can take the results of this process evaluation and implement the most effective countermeasures

to reduce crash occurrence and severity. The BCCS will use the same methodology as followed in the

LTCCS. Data collection was initiated in 2004 and will continue through 2006, with a release of initial data

and findings to Congress and the public scheduled for FY 2007.

Evaluation of FMCSA Commercial Drivers License (CDL) Program

The Commercial Drivers License (CDL) program is one of the Federal Motor Carrier Safety

Administration’s (FMCSA’s) most important safety programs. Since the first CDL was granted in 1989,

over 11 million have been issued and approximately 40,000 new CDLs are issued every month. Congress

passed the Commercial Motor Vehicle Safety Act of 1986 (CMVSA) (Public Law 99–570, 100 Stat.

3207–170, 49 U.S.C. 31301), which established the CDL program. CMVSA made it illegal for drivers to

DOT Program Evaluations 139
140 FY 2005 Performance and Accountability Report

hold more than one license and required States to adopt testing and licensing standards for truck and bus

drivers to check a person's ability to operate the type of vehicle he/she plans to operate. The goal of the

CDL program is to improve highway safety by ensuring that drivers of large trucks and buses are qualified

to operate those vehicles and to remove unsafe and unqualified drivers from the highways.

RELATED STRATEGIC OBJECTIVE: SAFETY

The objective of this evaluation is to determine whether the CDL program is meeting its goal of removing

unsafe and unqualified drivers from the highways. More specifically, this evaluation will focus on assessing

the effectiveness of State systems and procedures to identify and take action against unsafe CDL holders.

This outcome evaluation is being conducted with support from the U.S. Department of Energy’s Oak

Ridge National Laboratories (ORNL). This is a two-phase evaluation. Phase I of this evaluation was

completed in July 2005. Phase I focused on analyzing results of the CDL Reviews conducted on State CDL

programs by FMCSA. ORNL analyzed these CDL reviews and recommended actions to strengthen the

program’s ability to foster the removal of unsafe and unqualified drivers from the highways. Under

Phase II of this evaluation, ORNL will perform a more in-depth statistical analysis of the effectiveness of

systems and procedures to identify and take action against unsafe CDL holders. Phase II is expected to be

completed by December 2005.

Rail Grade Crossing Warning Device Installation Study

This study will evaluate the effectiveness of the various types of warning devices used to control traffic at

highway-rail grade crossings in preventing grade crossing collisions. The purpose of the evaluation is to

provide traffic engineers, and others involved in the selection of warning devices at highway-rail grade

crossings, with information on the type of warning devices that provide the greatest safety improvement

for crossings.

RELATED STRATEGIC OBJECTIVE: SAFETY

FRA has not performed this study for several reasons. First, the purpose of the study, to provide

information to aid in the selection of appropriate warning devices, was achieved in a separate DOT effort.

In November 2002, DOT published the Guidance on Traffic Control Devices at Highway-Rail Grade

Crossings document. This is a guidance document for users who understand general engineering and

operational concepts of highway-rail grade crossings and are involved in the selection of traffic control

devices. The Guide serves as a reference to aid in decisions to install traffic control devices or otherwise

improve such crossings. A traffic control device selection procedure and extensive list of quantitative

guidance are the specific products of this document.

Secondly, there were several other studies initiated that cover the subject. The Volpe National Transportation

Systems Center is currently conducting an analysis to determine the various factors during the last ten years

that have led to an almost 50% reduction in the number of fatalities resulting from crossing collisions. This

study is looking into the effectiveness of the various types of warning devices at the crossings as part of the

study. Volpe is also conducting an evaluation of safety measures implemented on the North Carolina

Sealed Corridor. A third evaluation that studies the effectiveness of educational and law enforcement

efforts in Arlington Heights, Illinois is also nearing completion.
In June 2004, the Department released the Secretary’s Action Plan for Highway-Rail Crossing Safety and

Trespass Prevention. One of the specific actions to be undertaken in the plan is an evaluation of current

safety efforts to determine the effectiveness of the principal grade crossing collision mitigation methods.

FRA’s actions will include the following:

• Use the results from these three studies to evaluate the effectiveness of current safety efforts. This will

include both engineering and non-engineering safety treatments.

• Issue a report on the current status of crossing safety efforts.

FRA anticipates that this report will be issued by the end of December 2006. The report will provide

guidance to those who are involved in determining the appropriate traffic control device that should be

installed at highway-rail grade crossings. It also will provide information on non-engineering efforts that

can be made to improve crossing safety.

Evaluation of Intelligent Transportation System (ITS) Operations Investments

by Local Governments

Intelligent transportation systems (ITS) improve transportation safety and mobility through the use of

advanced communications technologies. ITS encompasses a broad range of wireless and wire line

communications-based information and electronics technologies. When integrated into the transportation

system's infrastructure, and in vehicles themselves, these technologies relieve congestion, improve safety

and enhance efficiency.

RELATED STRATEGIC OBJECTIVES: SAFETY & MOBILITY

In 2002, the Federal Highway Administration (FHWA) sponsored a program evaluation to determine to

what extent Federal funding is being used at the local level to fund operations. The evaluation included a

survey of 267 people from 141 agencies (including 125 officials representing 67 municipalities or county

organizations). Among other findings, the survey revealed that ITS and operations investments are

difficult to ascertain because they are usually included as part of larger capital infrastructure investments,

or are not typically undertaken with Federal funds because local governments lack operations expertise

and have few incentives to undertake investments in operations vis-à-vis larger capital investments. As a

result of this finding, a new evaluation in FY 2005 was not undertaken.

The FY 2002 program evaluation, however, included four key recommendations and the FHWA has

responded to each. For example, in FY 2004, FHWA commissioned an effort to provide agencies with

more outcome-oriented information regarding the benefits of using ITS and operations solutions for

tackling surface transportation problems. FHWA estimated the benefits that might be derived from the full

deployment of ITS technologies and operational strategies in medium and large metropolitan areas. The

study revealed that total congestion-related delay could be reduced by up to 27%, fuel consumption by up

to 24%, and emission of harmful pollutants by up to 25% from current levels. Widespread deployment of

ITS technologies and operational strategies not only relieves congestion, but also makes travel on the

highway system more reliable and predictable.

DOT Program Evaluations 141
142 FY 2005 Performance and Accountability Report

Alternate Dispute Resolution Process Evaluation

Experience in both the public and private sectors shows that alternative dispute resolution (ADR) can

improve communication and achieve mutually acceptable solutions more effectively than traditional, noncollaborative processes. Established in May of 2003, the U.S. Department of Transportation’s Center for

Alternative Dispute Resolution works with DOT organizations, its management teams, and employees to

increase knowledge, quality, and use of ADR. The Center serves as an information resource to both DOT

ADR providers and users, and advises senior DOT officials on procedural approaches to resolving disputes

having significant impact on National transportation policy.

RELATED STRATEGIC OBJECTIVE: ORGANIZATIONAL EXCELLENCE

The Center, staffed by one full-time and one part-time employee, partners with the Office of the Dispute

Resolution Specialist at the Department of Health and Human Services to offer conflict managementrelated informational and skill based training courses. From 2003–2005, the Center trained over 650 DOT

employees, mediated approximately 16 cases, facilitated 4 office interventions, helped DOT organizations

establish and support two workplace ADR programs and one civil penalties arbitration program, provided

support for both court-ordered and party-agreed-upon mediation of complex cases, and incorporated

ADR into DOT’s procurement disputes process.

The goal of this process evaluation was to determine service quality, growth in use of alternative dispute

resolution process, and cost-effectiveness throughout DOT and to gain information for improving ADR

services and programs.

The evaluation results show an increase in knowledge and use of ADR across DOT. In addition, the

Center’s training program has received high marks from customers. The evaluation also made the

following recommendations. The Center should:

• Follow a co-mediation model to increase available number of mediators.

• Conduct a survey to determine what percentages of employees are aware of available ADR services;

• Market its program using positive employee comments;

• Conduct post-mediation and facilitation surveys; and

• Survey mediation and training participants to see whether relationships have improved.

Beginning in FY 2006, the Center will implement the recommendations as follows:

• Use employees trained in Basic Mediation Skills as co-mediators;

• Survey all mediation and facilitation participants; and

• Design and implement an evaluation tool to determine any effect of Conflict Management Skills for

Managers training on targeted participants. Final analysis would be completed in FY 2008.
Evaluation of the Title VI Complaints Process

The Departmental Office of Civil Rights (DOCR) oversees external complaints processed in accordance

with Title VI of the Civil Rights Act of 1964. Title VI prohibits discrimination on the basis of race, color,

and National origin in programs and activities receiving Federal financial assistance. DOT Order 1000.12,

Implementation of the DOT Title VI Program, provides guidance and procedural instructions for all

modal administrations on processing Title VI complaints. The Operating Administrations (OAs) use the

procedures set forth in the Order to investigate external complaints, filed in accordance with Title VI, that

are directly related to their mode of transportation. Both DOCR and the OAs use the Order to define the

shared responsibility for collecting, accepting and dismissing external complaints. The Order also supports

the OA's responsibility for collecting complaint related information. This information is used by DOT to

provide its customers with the status of individual complaints and the status of the Title VI complaints

program in its entirety.

RELATED STRATEGIC OBJECTIVE: ORGANIZATIONAL EXCELLENCE

This process evaluation was conducted by the DOCR Information Technology and Program Evaluation

Division (S-31). The techniques employed for this evaluation were in accordance with generally accepted

program evaluation methods and the Generally Accepted Government Audit Standards (GAGAS).6

The evaluation identified several strengths in DOT’s Title VI civil rights process:

• The Department has people with expert knowledge of the Title VI requirements as they relate to each

mode of transportation;

• DOCR and the OAs have established effective partnerships that informally support information

dissemination methods;

• DOT’s decentralized structure allows for timely intake of complaints; and,

• Decentralized investigations also enable the Department to obtain program specific expertise, which

can provide for more effective investigations.

Conversely, the evaluation identified several factors that contribute to untimely complaint processing:

• DOT has not formalized a strategic commitment to early Title VI complaint intervention;

• Despite providing billions of dollars toward transportation services, the Department of Transportation

has not reduced Title VI resource inefficiencies within DOCR and the OAs;

• Outdated guidance and standards inhibit DOT’s ability to collect complete and accurate Title VI

complaint information;

• Annually scheduled formal training has been unavailable to employees with complaints intake and

investigation responsibilities;

• Formal information dissemination methods have not been established, which prevents knowledge

sharing; and,

• Ineffective complaint tracking and administrative automated tools do not supply functions required to

process complaints expeditiously and are not useful for providing the status of individual cases, or the

status of the DOT program in its entirety.

DOT Program Evaluations 143

6 U.S. Government Accountability Office, Government Auditing Standard (2003 revision). GAO-03-673G.
144 FY 2005 Performance and Accountability Report

Prior to this evaluation, the DOT began taking actions to improve civil rights programs and their

respective products and services. The DOCR, the OAs’ civil rights offices, and other DOT partners are

reviewing the composition and organizational structure of their civil rights programs to ensure quality and

timely services are provided to customers. In support of this review, a series of streamlining proposals are

being discussed for the Title VI and Title VII programs that will improve complaints processing. Also, the

DOCR External Policy and Program Development Division has drafted a complaints investigation

manual, which will establish a standardized method for investigating complaints filed under Title VI and

other nondiscrimination statutes. The document is expected to be approved and its processes

implemented by the first quarter of FY 2006.

Nevertheless, the DOT must take additional actions to improve its Title VI program. The following actions

are being recommended to improve timely complaint processing and program efficiency for DOT’s Title

VI civil rights program:

1. Establish a committee to review the allocation of resources to implement complaint avoidance

methods, ensure program compliance, and process/investigate cases;

2. Revise DOT Order 1000.12 and all supplemental guidance to ensure that external civil rights

complaints are processed using similar, if not standard, Title VI procedures. The Order must clearly

outline procedures for data entry and tracking complaint activity;

3. Establish a formal training program that periodically certifies DOT personnel responsible for

processing complaints under Title VI;

4. Establish quarterly knowledge sharing sessions to ensure that DOT personnel, who support Title VI

requirements, are knowledgeable of DOT processes and Federal changes impacting Title VI complaint

processing procedures;

5. Expand the existing External Civil Rights Task Force initiative to include defining requirements for a

Departmental Title VI Civil Rights complaint tracking system;

6. Establish a uniform intake process that ensures all Title VI complaints filed with the DOT are

identified and accounted for to provide sufficient detail to meet external reporting requirements;

7. Identify personnel within each OA who is responsible for ensuring that information resources used to

create formal electronic records are complete and accurate;

8. Provide each OA with access to quarterly reports that identify the status and processing times of

complaints filed in accordance with Title VI of the Civil Rights Act of 1964; and,

9. Establish a Title VI complaint early resolution intervention program that utilizes mediation as a means

of resolving complaints filed against DOT in accordance with Title VI of the Civil Rights Act of 1964.

Data Quality Reviews

The Research and Innovative Technology Administration’s (RITA’s) Bureau of Transportation Statistics

(BTS) employs the statistical expertise of its workforce to conduct reviews of data programs and provide

recommendations for data quality improvements.
RELATED STRATEGIC OBJECTIVE: ORGANIZATIONAL EXCELLENCE

The purpose of the data quality reviews is to assess the data systems and methodologies that support data

production and maintenance. By strengthening the underlying systems and methodologies, agencies can

improve the performance of their data programs and increase the cost-effectiveness of their budgetary

investment in such programs.

In recent years, the focus of data quality reviews has been internal to BTS’s own data programs. In

particular, various aspects of the Airline Statistics program have been the subjects of review. During

FY 2005, four aspects of the airline data program underwent some level of review including the Airline

On-Time Performance data, Foreign Air Carrier Traffic data, Airline Financial data and study by the

Airline Data Total Quality Management Group. In addition, a review of the National Household Travel

Survey was initiated. None of these reviews were completed due to reprioritization of statistical program

activities following the creation of the RITA and BTS’s relocation to the new agency.

As necessary, BTS may be called upon to perform this function; however, there are no further reviews

scheduled.

DOT Research & Development Strategic Plan Process Evaluation

Research and technology innovation is critical to advancing the priorities of DOT and in completing the

strategic objectives of the Department. Recognizing the need to improve planning and coordination of the

Department’s research and development activities, a reorganization was proposed and subsequently

approved when President Bush signed the Norman Y. Mineta Research and Special Programs

Improvement Act on November 30, 2004. The newly created Research and Innovative Technology

Administration (RITA) will be dedicated to the advancement of the Department’s priorities for innovation

and research in transportation technologies and concepts.

RELATED STRATEGIC OBJECTIVE: ORGANIZATIONAL EXCELLENCE

The scheduled program evaluation of the Department’s Research and Development Strategic Planning

Process was not conducted as planned in FY 2005 because it coincided with the creation of RITA and the

reorganization of the Department’s coordination, facilitation, and review of research activities. As a result,

the Department’s approach to research, development and technology (RD&T) program evaluation and

coordination was significantly strengthened. A new RD&T coordination and management process was

adopted through DOT Order 1120.39A, which established the RD&T Planning Council and Team. The

basic features of RD&T management and coordination include multiyear strategic planning, annual

budget and performance planning, and annual program planning. Early accomplishments were the

preparation and submittal to Congress of the mandated report on the Department’s research activities,

FY 2005 RD&T program reviews, FY 2007 RD&T budget priorities and cross-modal initiatives, and the

beginning of the transportation RD&T strategic plan.

The Department is implementing the coordination, facilitation and review of research activities according

to the process of DOT Order 1120.39A and as reported to Congress in March 2005. The strategic planning

process will be reviewed by the National Research Council (NRC), pending funding availability, in

FY 2006.

DOT Program Evaluations 145
Transportation Planning Capacity Building Program Evaluation

The Transportation Planning Capacity Building (TPCB) program provides information, training, and

technical assistance to help transportation professionals in State and local transportation agencies create

plans and programs that respond to the needs of the many users of their local transportation systems. The

program improves transportation planning to be more comprehensive, inclusive and efficient.

RELATED STRATEGIC OBJECTIVE: ORGANIZATIONAL EXCELLENCE

The TPCB program began as a pilot for metropolitan areas in 2000 and was expanded to include statewide,

rural and small communities, and Tribal transportation planning in 2001. The Federal Highway

Administration (FHWA) assesses program accomplishments, communicates the results to program

stakeholders, and adjusts the program as necessary to best meet its objectives with available resources. The

program consists of four key task areas or tracks: outreach and dissemination; peer programs; training;

and scans and research.

Because of the differences in work processes and products among the four tracks, FHWA applied the

following outcome and process evaluation techniques to evaluate the different tracks:

• Quantitative measures of geography and other audience factors were employed to assess the market

penetration of program materials; less formal qualitative feedback from meetings with stakeholders was

used to assess quality and usefulness of outreach and dissemination methods. The results are

summarized in annual reports.

• FHWA annually assesses information about participants such as agency type and location to assess

gaps in program coverage. After the first two years, the program surveyed a balanced sample of peer

program participants to assess the application of knowledge and skills gained in from participating in

the peer programs.

• Training delivered through the National Highway Institute and National Transit Institute includes a

pre- and post-evaluation of class participants to assess how course content and instructor ability affect

participant learning.

• Customer responsiveness is measured using an annual assessment of matching research to program

stakeholder topic area priorities, and the completion of research on time and on budget is monitored

on a monthly basis.

The FHWA annually adjusts the content and delivery methods of the program based on the evaluation

results. For example, based on the list of distributed booklets and Web site downloads, a CD-ROM was

developed containing the most requested documents. This reduced the cost of distributing booklets, while

increasing the types of media available to program audiences. In another instance, a review of 21 peer

events, which included participants from 34 States and the District of Columbia, revealed the need to

increase the diversity of participants. In FY 2004–2005, the program included participants from

12 additional States and increased diversity by including representatives from several different areas of

transportation and all levels of government.

146 FY 2005 Performance and Accountability Report
For those evaluations that were scheduled for completion in FY 2004 and did not have results available for

publication in the FY 2004 Performance and Accountability Report, an update is provided below.

Evaluation of FMCSA Compliance Review Phase II

The Federal Motor Carrier Safety Administration's (FMCSA) enforcement and compliance programs are

nationwide programs in which FMCSA and State partners conduct on-site compliance reviews (CR) and

roadside inspections (RI) of motor carrier compliance with the Federal Motor Carrier Safety Regulations

(FMCSR) and Federal Hazardous Materials Regulations (FHMR). FMCSA expects that through

enforcement of these regulations, and promotion of safety requirements, motor carriers will improve the

safety of their operations and reduce their chances of being involved in crashes.

RELATED STRATEGIC OBJECTIVE: SAFETY

This process evaluation is a management study conducted for the purpose of improving the effectiveness

of FMCSA's enforcement and compliance programs. A workgroup of FMCSA headquarters and field

personnel, with the support of the Volpe National Transportation Systems Center, conducted this

evaluation. This is the second phase of a two-phase study. Phase I focused on developing short-term

improvements to the existing CR process. The Phase II effort had the broader goal of developing longterm improvements to the agency's overall enforcement and compliance programs.

The scope of this evaluation was all aspects of FMCSA enforcement and compliance operations, which

account for the great majority of all agency activities and resources.

The methodology used for this evaluation was to gather data on existing FMCSA enforcement and

compliance operations, examine the current results of these operations, and assess the long-term efficacy

of the agency's current operational model. In making this analysis, the study also compared FMCSA

operations to those of similar operations of other Federal, State, and Canadian organizations.

Public listening sessions were conducted in San Diego, Atlanta, Dallas, Chicago, Falls Church, Virginia and

Springfield, Massachusetts. The listening sessions, conducted in September and October 2004, were

designed to collect public input regarding ways FMCSA can improve its process of monitoring and

assessing the safety performance of the commercial motor carrier industry. These sessions help support

the objective of obtaining input in advance so that formal proposals are crafted in a clear and concise

manner to facilitate future deliberations through the rulemaking or legislative process.

The Compliance Review Work Group issued a Phase II final report in February 2005, Proposed

Operational Model for FMCSA Compliance and Safety Program. The report concluded that FMCSA’s

existing compliance and safety programs are resource intensive and reach only a small portion of the

regulated community and that a new operational model for FMCSA was needed. As a result, the

Comprehensive Safety Analysis 2010 (CSA 2010) initiative was formed to implement the necessary

changes. The ultimate goal of CSA 2010 going forward is to develop an optimal operational model that will

assess the safety posture of the entire regulated industry. The Agency wants to be able to globally say, “This

is a safe operation,” for those motor carriers that are truly operating in a safe manner. Conversely, the

FMCSA wants to be able to focus its limited resources on monitoring and improving poor safety

performers.

DOT Program Evaluations 147

FY 2004 Program evaluation updates
148 FY 2005 Performance and Accountability Report

Evaluation of FHWA State Motor Fuel Data

This process evaluation set out to examine State motor-fuel data to reduce the risk of errors and increase

the reliability of the information used to distribute Federal highway program funds to the States. State

motor-fuel data reported to the Federal Highway Administration (FHWA) is used as an apportionment

factor in Federal-aid Highway funds distribution.

RELATED STRATEGIC OBJECTIVE: MOBILITY

A June 2000 Government Accountability Office (GAO) Study stated that there was little assurance that the

Federal-aid Highway funds distributed to the States were sufficiently accurate. The GAO made the

following recommendations to FHWA as a means of increasing accuracy:

• Perform detailed oversight verifications of motor fuel data used in process;

• Fully document the current methodology;

• Conduct an independent review;

• Evaluate the potential reliability of the Internal Revenue Service (IRS) Excise Files Information Retrieval

System (ExFIRS) data as a tool to verify validity of State data.

FHWA agreed with the above recommendations and set out an action plan to achieve the results.

The scope of the evaluation was comprehensive with every aspect of the motor fuel reporting and

attribution process in every State being evaluated. High-risk areas and FHWA internal processing were

given the highest priorities. Continuous process improvement model was the single most prominent

feature of the evaluation design. Other methods included zero defect processing, modeling, and

comparison of State data sets with Treasury results. FHWA found through a reassessment that its basic

attribution process was sound but in need of updating. It set out a multi-pronged action plan that included

outreach and data-provider training to improve accuracy.

With one exception, FHWA and GAO have agreed that all action plan items and milestones were met. The

exception concerns a comparison of Internal Revenue Service (IRS) ExFIRS data set with FHWA

State-reported data set. The Agency is currently working with the IRS to resolve this issue.

Evaluation of Federal Highway Administration (FHWA) Intelligent

Transportation Systems (ITS) Deployment

The ITS program oversees the deployment and use of ITS technology to improve transportation on

Federal, State and local highways, including private vehicular traffic as well as transit and commercial

vehicle operations.
RELATED STRATEGIC OBJECTIVE: MOBILITY

The ITS deployment tracking program is intended to track the integration of ITS technology in major

metropolitan areas. This is accomplished by tracking deployment outputs, including numbers of systems

deployed, percentage of roadway miles under instrumentation, and percentage of vehicle fleets

instrumented, as well as integration between key metropolitan agencies.

Data for the process evaluation are gathered through surveys of transportation agencies in the 75 largest

metropolitan areas. A score is assessed for each ITS deployment based on five key areas: freeway, arterial,

transit, public safety, and traveler information. An integration score is determined based on evaluation of

real-time integration between freeway, arterial, and transit agencies. The deployment and integration

rankings are combined into a single ranking of high, medium, or low for each metropolitan area. The

overall goal is for each of the 75 metropolitan areas to achieve a ranking of medium or high by CY 2005.

The most recent rankings report was published in December 2004. The FY 2004 survey results indicated

that a total of 62 areas achieved a medium or high level of deployment, six short of the 68 target. The final

2005 results will be published in May 2006.

In September 2005, the Government Accountability Office published report GAO-05-943, Intelligent

Transportation Systems’ Promise for Managing Congestion Falls Short, and DOT Could Better Facilitate

Their Strategic Use. The report found that progress has been made toward achieving DOT’s deployment

goal, but DOT’s goal and measures have limitations and fall short of capturing ITS’s impact on congestion.

In addition, the measures do not capture the extent to which deployed ITS technologies are effectively

operated. DOT noted in their response to this report that the recently passed SAFETEA-LU legislation

repealed the ITS integration deployment program. Therefore, DOT will no longer update ITS program

goals.

Evaluation of the Effectiveness of FHWA Design-Build Contracting

Design-build is an optional contracting mechanism that enables the design and construction of highway

projects to be let in a single contract to one vendor in order to save time and money on highway

construction. The Transportation Equity Act for the 21st Century (TEA-21) authorized the use of this

approach; a final rule was issued effective January 2003.

RELATED STRATEGIC OBJECTIVE: MOBILITY

TEA-21 required the FHWA to evaluate the suitability of this project procurement and delivery technique

for States engaged in highway capital projects. The FHWA examined highway and bridge capital projects,

particularly those involved in the Special Experimental Project No. 14 Innovative Contracting (SEP-14)

program; developed lessons learned from other types of capital projects, including other modes and

industries; and considered the perspectives of both project sponsors and stakeholders.

The objectives of the comprehensive National impact evaluation were to:

• Compare the effect of design-build contracting on project delivery vis-à-vis the traditional design-bidbuild approach;

• Determine the appropriate level of design for design-build procurements;

DOT Program Evaluations 149
150 FY 2005 Performance and Accountability Report

• Assess the impacts of design-build contracting on small business, particularly small contractors and

design firms;

• Assess the variation, use, and fairness of cost and non-cost factors used in the award of contracts; and

• Recommend concerning design-build contracting procedures and implementation approaches.

The FHWA prepared a draft Report to Congress on the Assessment of Design-Build Contracting in July

2005. The Report, which is under Departmental review, concludes that the design-build approach saves

time in the project delivery process. However, the results are inconclusive regarding cost savings. In

addition, there was no appreciable difference between design and construction quality between the

traditional design-bid-build method and the design–build method. The study also found that the

preliminary design included in the request-for-proposal document should be advanced to no more than a

30 percent design level to assure an efficient use of resources in the project delivery process. The impact of

design-build on small firms was inconclusive. Overall subcontracting levels were noted to be similar when

comparing design-bid-build with design-build. Cost and non-cost factors were increasingly being used in

the award of design-build contracts.

Evaluation of FHWA Innovative Bridge Research and Construction (IBRC)

Program

The Innovative Bridge Research and Construction (IBRC) Program was authorized under TEA-21. The

legislation made funding available to the States for projects to demonstrate the application of innovative

materials relating to repair, rehabilitation, and construction of bridges and other highway structures. The

program has two main components:

• Funds for repair, rehabilitation, replacement or new construction of bridges and other highway

structures using innovative materials; and,

• Support for research and technology transfer activities related to the program's goals.

RELATED STRATEGIC OBJECTIVE: MOBILITY

The IBRC program is essentially a discretionary bridge construction grant program to the States. The

process evaluation examined the rate of usage by the States, the effectiveness of the program, and the

feasibility and desirability of continuing it in future legislation. A summary assessment of the IBRC

program was conducted in 2005, in accordance with the provisions of 23 U.S.C. 503(b).

This program was fully funded at $20 million for construction and $1 million for research during

1998–2005. Of the 92 proposals received in FY 2004, 60 projects were awarded totaling $18.8 million in

41 States, the District of Columbia, and the Commonwealth of Puerto Rico. The States must now execute

the contracts related to these project awards and report the results from their construction and in-service

performance monitoring programs. A total of 102 project proposals were received from 41 States and the

Commonwealth of Puerto Rico in FY 2005. The proposals are currently being reviewed.

The IBRC has been effective in developing and deploying new bridge technologies. Almost all States are

now using High Performance Concrete (HPC) regularly in projects. High performance steel technology

has also moved into conventional practice. Fiber reinforced polymer (FRP) composites are more popular

applications for bridge deck replacements. About 125 bridge projects have been built to date. The use of

FRP for repair and strengthening has been fully recognized. Thousands of pier columns were retrofitted
using the FRP technology in States located in high seismic zones. Stainless steel or galvanized steel

reinforcement is being employed for bridge deck construction. In 2004, the program was expanded to

include prefabricated bridges and few projects were selected to demonstrate its effectiveness on rural

bridges.

Funding for the IBRC was continued in SAFETEA-LU with a new set-aside for high performance concrete

bridge technology research. In addition, several new initiatives that address bridge life and performance

were funded including Long-term Bridge Performance, High Performing Steel Bridge Research and

Technology Transfer, and Steel Bridge Testing.

FHWA's Evaluation of the Nation's Highways, Bridges and Transit (Condition

and Performance Report)

The Conditions and Performance (C&P) Report provides Congress and other decision makers with an

appraisal of highway, bridge and transit physical conditions, operational performance, financing

mechanisms, and future investment requirements.

RELATED STRATEGIC OBJECTIVES: SAFETY, MOBILITY, ENVIRONMENT, GLOBAL CONNECTIVITY, SECURITY, &

ORGANIZATIONAL EXCELLENCE

Executive Order 12893, Principles for Federal Infrastructure Investments (January 1994), directs each

Executive Department and Agency with infrastructure responsibilities to base investments on systematic

analysis of expected benefits and costs, including both quantitative and qualitative measures. The C&P

Report consolidates conditions, performance, and finance data provided by States, local governments, and

transit operators to provide a National summary. The highway investment requirements in the C&P Report

are developed in part from the Highway Economic Requirements System (HERS), which quantifies user,

agency and societal costs for various types and combinations of improvements including travel time,

vehicle operating, safety, capital, maintenance, and emissions costs. The National Bridge Investment

Analysis System uses engineering and benefit/cost analysis. Transit investment analysis is based on the

Transit Economic Requirements Model (TERM), which consolidates engineering and cost/benefit analysis.

TERM identifies the investments needed to replace and rehabilitate existing assets, improves operating

performance, and expands transit systems to address the growth in travel demand and evaluates these

needs to select future investments. The 2004 version of the C&P Report was completed in December 2004.

The DOT will release it upon review and approval by the Office of Management and Budget.

Evaluation of MARAD's Ship Disposal Program

The Maritime Administration (MARAD) has more than 100 obsolete and deteriorating ships awaiting

disposal that pose potentially costly environmental threats to the waterways near where they are stored.

Congress, in 2000, mandated that MARAD dispose of them by September 30, 2006. While MARAD has

various disposal options available, each option is complicated by legal, financial, and regulatory factors.

RELATED STRATEGIC OBJECTIVE: ENVIRONMENTAL STEWARDSHIP

MARAD’s ship disposal evaluation, originally scheduled for completion in FY 2004, was re-scheduled for

FY 2005. However, the planned DOT evaluation yielded to an evaluation that was being conducted by the

GAO on the same ship disposal effort. GAO reviewed the ship disposal program and published a report on

March 7, 2005 titled Maritime Administration: Improved Program Management Needed to Address Timely

Disposal of Obsolete Ships, report number: GAO-05-264.

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152 FY 2005 Performance and Accountability Report

The GAO study concluded that MARAD is unlikely to meet its statutory deadline of September 30, 2006.

As of September 2004, MARAD had disposed of 18 ships from its inventory, with over 100 ships left to

dispose of by the deadline. MARAD's slow progress is due to not having a comprehensive management

approach, which could address the myriad of environmental, legal, and regulatory challenges that the

program faces. MARAD's approach lacks an integrated strategy with goals, milestones, performance

measures, and a mitigation plan for overcoming anticipated impediments. In the absence of this

comprehensive approach, MARAD's ship disposal program lacks the vision needed to sustain a long-term

effort. Consequently, MARAD has not been able to assure Congress that it can dispose of these ships in a

timely manner to reduce the threat of a costly environmental event, nor has it clearly articulated what

additional congressional assistance, such as funding, may be needed.

In addition the study found that since FY 2002, MARAD had relied on an inappropriate procurement

method—Program Research and Development Announcements (PRDAs)—to acquire ship scrapping

services. Federal acquisition regulations dictate that PRDAs may only be used for contracting for research

or development efforts.

To address the GAO findings, MARAD has taken the following steps:

• To improve program management, MARAD has developed and implemented additional performance

measures that more completely cover all aspects of the program; and,

• MARAD has ceased using PRDAs as a contract procurement method for ship disposal efforts and has

developed a draft Ship Disposal Comprehensive Management Plan (CMP) that will be finalized in the

first quarter of FY 2006.

Further follow-up efforts by MARAD will be evaluated by OMB in FY 2006 when the program is

scheduled to undergo a Program Assessment Rating Tool (PART) evaluation.
financial

Report
154 FY 2005 Performance and Accountability Report

CONSOLIDATED FINANCIAL

STATEMENTS FOR 

FISCAL YEARS 2005 AND 2004 

Department of Transportation 

Report Number: FI-2006-014

Date Issued: November 15, 2005 
U.S. Department of 

Memorandum

Transportation

Office of the Secretary 

of Transportation

Office of Inspector General 

Subject: ACTION: Report on Consolidated Financial 

Statements for Fiscal Years 2005 and 2004, DOT 

Date: November 15, 2005 

FI-2006-014 

From: Kenneth M. Mead 

Inspector General 

Reply to 

Attn. of: JA-20 

To: The Secretary 

I respectfully submit the Office of Inspector General report on the Department of

Transportation (DOT) Consolidated Financial Statements for Fiscal Years (FY) 

2005 and 2004 (see attachment). This is the fifth year in a row that the 

Department has received an unqualified, or clean, opinion. The clean opinion 

signals to financial statement users that they can rely on the information presented, 

including the use of appropriated funds, the amount of outstanding obligations, 

expenditures made during the year, and costs by major program. It signals to the 

public that the Department can properly account for its revenues, expenditures, 

assets, and liabilities. Under contract to us and under our supervision, KPMG LLP 

also audited the Federal Aviation Administration’s (FAA) financial statements and 

Clifton Gunderson LLP audited the Highway Trust Fund (HTF) financial 

statements. Their audit reports also expressed clean opinions. 

The Department’s ability to provide audited financial statements in time to meet 

the Office of Management and Budget’s accelerated deadlines and get a clean 

opinion would not have occurred without your emphasis and commitment to 

improving financial management practices, along with that of the Operating 

Administrators and your senior leadership team. Your attention to this area from 

day one has moved the Department from the days of an obsolete accounting 

system and disclaimed or qualified audit opinions, to a modern Department-wide 

financial management system and the unqualified opinion in the attached report. 

Generating timely, reliable, and useful financial information is no small task 

because DOT is a complex organization that is accountable for substantial 

resources. DOT’s FY 2005 Financial Statements show assets of $66 billion, 

liabilities of $13 billion, program costs of $57 billion, and available financial 

financial report 155
156 FY 2005 Performance and Accountability Report

2

resources of $114 billion. In FY 2005, DOT received appropriations (revenue) of about 

$62 billion. About $49 billion, or about 79 percent of DOT’s revenue, came from two 

trust funds, the HTF and the Airport and Airway (Aviation) Trust Fund, which are 

supported by passenger, fuel, and user taxes. 

To put the size of our organization into perspective, DOT would rank among the top 20 

corporations in America, based on revenues. In 2004, Bank of America ranked number

18 among U.S. corporations, with revenues of $63 billion, and State Farm Insurance 

Companies ranked number 19, with revenues of $59 billion. Other corporations of 

similar size include J.P Morgan Chase, Kroger, and Pfizer. As for assets, DOT would 

also rank among the top 20 corporations but for the fact that other than the Air Traffic 

Control system, DOT assets do not include the billions of dollars we spend each year on

highways, bridges, and airports. Those assets do not show up on our books because 

they are grants to states and municipalities, but we nonetheless remain accountable for

those investments. 

In addition to ensuring that DOT’s books balance at the end of the year, our audit also

looks at management and financial controls. These controls are important not just to

balance the books on time, but also to improve management’s ability to deliver the best 

value with the resources entrusted to the Department. The Operating Administrations

have also made substantial progress in strengthening management controls and 

providing better oversight of resources. However, our audit shows that they still have a 

way to go to measure up to what is expected at large publicly held corporations—

especially following implementation of the Sarbanes/Oxley Act. 

In this regard, our report identifies three financial management matters that KPMG,

Clifton Gunderson, and we consider material and several other reportable matters that 

are significant but not material. The material matters are that (1) FAA needs to process

transactions and reconcile its accounts in a more timely manner; (2) the Federal 

Highway Administration (FHWA) needs better processes to support management’s 

preparation of reliable financial statements during the year and at year-end; and (3) 

FHWA needs to strengthen its grants management and oversight practices, particularly 

at the Division Administrator and state DOT levels. 

We believe FHWA and FAA have plans underway that, if implemented on a sustained 

basis during FY 2006, will result in these areas not being material next year. 

Addressing each area will position the Department to do the following: 

 Reauthorize aviation programs. A central issue in the upcoming reauthorization is

certain to be FAA finances, including who should pay for the services FAA provides

and in what amounts, what the next generation air traffic control system will consist 

of, and how much it will cost. The ability to generate timely, reliable, and detailed

financial information will be important to track the actual costs of providing services 

and to allocate these costs by unit of services delivered. 
3

 Address highway and aviation trust fund revenue shortfalls. FAA faces 

financial challenges in the near term and FHWA faces financial challenges in the 

longer term, as revenues fail to keep up with growing demands for transportation 

investments. Better financial information can help DOT and the Congress better 

anticipate and deal with funding shortfalls. 

 Oversee transportation projects. The Department, and FHWA in particular, has a

responsibility to ensure that we get the best return on transportation investments, 

including preventing losses to fraud, waste, and abuse, and detecting them when

they do occur. Improved FHWA processes, especially at the Division Office level, 

are important to provide assurance that the states are adequately overseeing federal 

aid projects. 

Set forth below are the three areas we consider material and for which the Operating 

Administrations plan corrective actions: 

 Process transactions and reconcile accounts at FAA in a timely manner.

Problems implementing Delphi and a new procurement system adversely affected

FAA’s ability to process transactions and reconcile account balances in a timely

manner. As a result, FAA needed to make adjustments totaling over $2 billion to 

make its year-end financial statements reliable. FAA needs to address this issue so

that it can make maximum use of its new cost accounting system, on which it has 

made significant progress this year. Detailed facility-level cost accounting 

information will also provide an important tool that managers can use to control 

operating and capital investment costs. 

Further, the Air Traffic Organization will need to interface more effectively with the 

FAA Chief Financial Officer during the year, since much of the delay in processing 

transactions was the responsibility of Air Traffic Organization officials. To 

illustrate, because Air Traffic officials did not properly record assets when they were 

placed into service during the year, FAA’s Chief Financial Officer had to make 

about $1.3 billion in adjustments at the end of the year. 

 Improve financial accounting processes at FHWA. Since FY 2003, we have 

reported that material deficiencies existed in internal controls over financial 

management and reporting activities in the HTF agencies. FHWA leadership 

deserves a great deal of credit, in response to your emphasis on this area, for 

initiating improvements in FY 2005. However, largely because many improvements 

were initiated late in the year (July 2005), they were not in effect for enough time to

overcome the accounting problems. 

As a result, FHWA officials had to undertake extraordinary efforts to prepare 

reliable financial statements at the end of the year. Some adjustments should be

expected to any year-end statements, but in this case, FHWA needed to make over 

$16 billion in audit adjustments to make the financial statements reliable. A closely

financial report 157
158 FY 2005 Performance and Accountability Report

4

related matter was that FHWA needed to make many of those adjustments to make

sure that costs were properly allocated to the various FHWA programs. However, I

want to emphasize that this process went much more smoothly this year and 

necessary adjustments were far fewer than what was required last year. 

 Improve FHWA grants oversight practices. Last year, we reported that FHWA 

needed to establish stronger financial and cost controls to ensure that grant funds are 

used effectively and are protected from fraud, waste, and abuse. To strengthen its

oversight, in April 2005, FHWA initiated the Financial Integrity Review and 

Evaluation (FIRE) program. FIRE requires each FHWA Division Office to establish 

a comprehensive oversight program to include reviews of state grants management

processes, Federal-aid billings, inactive obligations, and administrative processes.

However, largely due to the late start, the FIRE program was not in place long 

enough to be substantially implemented by the end of the year, and FHWA’s own 

implementation schedule calls for the program to be fully implemented in FY 2006. 

We believe the FIRE program is both sound and comprehensive. To illustrate its 

potential to improve FHWA oversight, this year for the first time, FHWA was able 

to free hundreds of millions of dollars that have sat idle for years on completed, 

canceled, or modified highway projects. This year, we estimated that about $660

million in unneeded obligations could be freed and used on active projects. FHWA 

Division Offices, under the FIRE program, identified and deobligated over $750 

million by the end of the year. The single most important key to success for the 

FIRE program will be ensuring that Division Administrators in the field implement 

the program in accordance with FHWA’s schedule. While progress with FIRE can 

be monitored and overseen by Headquarters here in Washington, the fact is that the 

work must actually be done in the field and at state DOTs and that is why the

Division Administrators will be the key to FHWA’s success. 

We provided a draft of this report to the DOT Assistant Secretary for Programs and

Budget/Chief Financial Officer, who concurred with its findings and agreed to

implement its recommendations. We appreciate the cooperation and assistance of DOT,

KPMG, and Clifton Gunderson representatives. If we can answer any questions, please 

call me at (202) 366-1959 or Ted Alves, Principal Assistant Inspector General for 

Auditing and Evaluation, at (202) 366-1992. 

Attachment 
1

DEPARTMENT OF TRANSPORTATION 

INSPECTOR GENERAL’S INDEPENDENT AUDIT REPORT 

ON THE DEPARTMENT OF TRANSPORTATION 

CONSOLIDATED FINANCIAL STATEMENTS 

FOR FISCAL YEARS 2005 AND 2004

To the Secretary 

The Department of Transportation (DOT), Office of Inspector General (OIG), 

audited the DOT Consolidated Financial Statements for the years ended

September 30, 2005, and September 30, 2004. In our audit, “DOT Consolidated 

Financial Statements for Fiscal Years 2005 and 2004,” we found: 

 Financial statements that are fairly presented, in all material respects, in 

conformity with generally accepted accounting principles. 

 Three material internal control weaknesses: timely processing of transactions

and reconciliation of accounts for the Federal Aviation Administration (FAA), 

financial management and reporting for Highway Trust Fund agencies,1

 and 

financial oversight of highway grants; and six reportable conditions: 

reconciling intragovernmental transactions, financial system controls, DOT’s 

information security program, the Maritime Administration’s (MARAD) 

oversight of Title XI loan guarantees, FAA contract management, and FAA

grants management. 

 Instances of noncompliance with the Federal Financial Management 

Improvement Act of 1996, the Anti-Deficiency Act, the Federal Managers’ 

Financial Integrity Act, the Government Performance and Results Act, and the 

FAA Franchise Fund Enabling Legislation. 

 Financial information in the Management Discussion and Analysis was 

materially consistent with the financial statements. 

 Supplementary and stewardship information was consistent with management 

representations and the financial statements. 

We performed our work in accordance with Generally Accepted Government

Auditing Standards and Office of Management and Budget (OMB) Bulletin 01-02, 

“Audit Requirements for Federal Financial Statements.” The following sections

discuss these conclusions. Our audit objectives, scope, and methodology can be 

1 Federal Highway Administration, National Highway Traffic Safety Administration, Federal Transit Administration, 

Federal Railroad Administration, and Federal Motor Carrier Safety Administration.

financial report 159
160 FY 2005 Performance and Accountability Report

2

found in Exhibit A. We believe that our audit provides a reasonable basis for our 

opinion. 

A. UNQUALIFIED OPINION ON FINANCIAL

STATEMENTS 

In our opinion, the consolidated financial statements, including the accompanying 

notes, present fairly, in all material respects, in conformity with generally accepted 

accounting principles, the DOT assets, liabilities, and net position; net costs; 

changes in net position; budgetary resources; and reconciliation of net costs to 

budgetary obligations as of September 30, 2005, and September 30, 2004, and for

the years then ended. 

Under contract with OIG and under our supervision, KPMG LLP audited the 

financial statements of FAA as of and for the years ended September 30, 2005, 

and September 30, 2004. KPMG rendered an unqualified opinion on the FAA 

financial statements. Also under contract with OIG and under our supervision, 

Clifton Gunderson, LLP audited the financial statements of the Highway Trust 

Fund (HTF) as of and for the years ended September 30, 2005, and 

September 30, 2004. Clifton Gunderson rendered an unqualified opinion on the

HTF financial statements. In addition, under contract with OIG and under our 

supervision, Williams, Adley & Company, LLP audited the Balance Sheets of the 

Office of the Secretary Working Capital Fund (WCF) and the Volpe National 

Transportation Systems Center as of September 30, 2005. Williams Adley 

rendered an unqualified opinion on the WCF and Volpe Balance Sheets. We 

performed a quality control review of the work performed by KPMG and Clifton 

Gunderson, and relied on their results in performing our work on the FYs 2005

and 2004 DOT Consolidated Financial Statements. 

As discussed in note 18, the accompanying financial statements reflect actual 

excise tax revenues deposited in the HTF and the Airport and Airways Trust Fund 

through March 31, 2005, and excise tax receipts estimated by the Department of 

the Treasury Office of Tax Analysis for the two quarters ended June 30, 2005, and 

September 30, 2005. 

As discussed in note 19, DOT restated the FY 2004 Statement of Budgetary 

Resources to properly report its FY 2004 budget authority for the Highway Trust 

Fund and the FHWA Transportation Infrastructure Finance and Innovation Act. 

We audited these adjustments and concluded that they were appropriate and 

properly applied. 
3

B. CONSIDERATION OF INTERNAL CONTROLS 

In planning and performing our audit, we considered DOT’s internal controls over 

financial reporting and compliance with laws and regulations. We do not express 

an opinion on internal controls and compliance because the purpose of our work

was to determine our procedures for auditing the financial statements and to 

comply with OMB Bulletin 01-02 audit guidance, not to express an opinion on 

internal controls. 

For the controls we tested, we found three material weaknesses. A material 

weakness is a reportable condition in which the design or operation of one or more 

of the internal control components does not reduce, to a relatively low level, the 

risk that errors, fraud, or noncompliance that would be material to the financial 

statements, may occur and not be detected promptly by employees in the normal 

course of performing their duties. 

Our work identified six reportable conditions in internal controls. Reportable 

conditions in internal controls, although not considered material weaknesses, 

represent significant deficiencies in the design and operation of internal controls

that could adversely affect the amounts reported in the DOT Consolidated 

Financial Statements. Our internal control work would not necessarily disclose all

material weaknesses or reportable conditions. 

MATERIAL WEAKNESSES 

The following sections describe the material weaknesses that we identified. 

Timely Processing of FAA Transactions and Reconciliation of 

Accounts

Last year, FAA faced problems implementing Delphi and a new procurement 

system, but its financial managers were able to isolate and keep the problems 

contained. During FY 2005, the problems became more severe and adversely 

affected FAA’s ability to process transactions and reconcile accounting balances 

in a timely manner. FAA needs to improve processes and controls to ensure that

property plant and equipment is consistently and accurately capitalized, 

obligations are recorded in a timely manner, advances and prepayments are 

supported, suspense accounts are cleared in a timely manner, abnormal balances in 

budgetary to proprietary account relationships are investigated, and subsidiary 

systems and supporting documentation are reconciled to general ledger balances. 

Consequently, FAA’s interim financial statements were not reliable and FAA 

needed to make adjustments totaling more than $2.0 billion to the draft FY 2005 

financial report 161
162 FY 2005 Performance and Accountability Report

4

financial statements in order to make them reliable. FAA officials have 

committed to correct the problems during FY 2006. 

Capitalizing Property Plant and Equipment. FAA did not have effective 

processes to capitalize headquarters-based projects in a timely manner. KPMG

found that 131 of 142 property items tested (92 percent) were not capitalized 

within 30 days after the item was placed in service. Property placed in service 

during the year remained classified as “construction in process” in the accounting

records, causing errors in the financial statements, including an understatement of

depreciation expense of $83 million. To correct the problem for year-end 

reporting, FAA capitalized about $1.1 billion during September and another 

$180 million in October. 

Recording Obligations. FAA Southern Region procured services from a 

contractor related to hurricane disaster mission assignments received from FEMA, 

and did not record the obligation and did not confirm that funding was available. 

Obligations totaling more than $222 million were not recorded at year-end, of 

which funding was available for only $60 million, but the FAA and DOT Counsels 

determined that FAA did not violate the Anti-Deficiency Act. 

Supporting Advances and Prepayments. FAA had advances and prepayments 

of $24.8 million related to activity prior to October 2003 that was unsupported. 

Clearing Suspense Accounts. FAA did not clear transactions held in suspense 

until after year-end. KPMG reported that the FAA suspense account balance was 

$235.2 million at June 30, 2005; and 347.8 million at August 31, 2005, of which 

$193.8 million was more than 60 days old. 

Reconciling Budgetary to Proprietary Accounts. FAA has not established 

effective processes to investigate the cause of abnormal balances and budgetary to

proprietary account discrepancies. In March 2005, FAA identified discrepancies 

in excess of $600 million between certain proprietary and budgetary accounts, and 

these discrepancies existed throughout the year. FAA did not take action to fix 

these discrepancies until October 2005, and the resolution required substantial 

manual effort during the yearend closing process. In addition, FAA did not link

the cause to a Delphi transaction posting error until after yearend, more than 

9 months after they discovered the out-of balance condition. 

Reconciling Subsidiary Systems General Ledger Balances. FAA did not

perform timely reconciliations of subsidiary systems and supporting records to the 

Delphi general ledger balances. Consequently, FAA’s financial statements were 

not accurately and completely supported by detailed records during the year. For 

example, five of the seven subsidiary reconciliations that should have been 
5

performed were not completed by June 30, 2005, 9 months after the beginning of

the fiscal year. The differences were as much as $122 million during the year. 

Consequently, FAA was unable to prepare reliable financial statements in a timely

manner during the year and at yearend. After material adjustments to year-end 

balances totaling more than $2.0 billion, complete and accurate financial 

statements were not available until late October, or 4 weeks after the end of the 

fiscal year. Due to the requirement to submit audited financial statements 45 days

after year-end, FAA’s ability to meet this deadline in future years is questionable 

without substantial changes to FAA’s processes and controls over recording 

transactions and reconciling accounts throughout the year.

KPMG made a series of recommendations to FAA to improve the processing of 

transactions and reconciliation of accounts in its financial statement audit report, 

dated November 8, 2005. FAA agreed to implement the recommendations, so we 

are not making additional recommendations in this report.

HTF Agencies’ Financial Management and Reporting Activities 

Since the audit of the FY 2003 HTF financial statements, we have reported that 

material deficiencies existed in internal controls over financial management and 

reporting activities in the HTF agencies. While FHWA began making 

organizational and procedural improvements during FY 2005, many of the

improvements were initiated too late in the year and were not in effect for 

sufficient time to overcome the accounting problems that existed in prior years. In 

addition, extraordinary efforts were again needed to prepare the HTF financial 

statements during the year and at September 30, 2005. The remaining deficiencies 

to be overcome include (1) financial statement preparation and analysis, 

(2) resolving reconciliation differences during the year, (3) implementing 

managerial cost accounting, (4) tracking intragovernmental transactions, and 

(5) linking the FACTS II (Federal Agencies Centralized Trial-Balance System) 

reporting to the financial statement preparation process. 

Clifton Gunderson reported that during FY 2005, FHWA began to reorganize and 

refocus its accounting functions at the management and staff levels. Clifton 

Gunderson commended FHWA for the improvements made during FY 2005 and 

their commitment to continue to improve the accuracy and timeliness of financial 

reporting. Some of the improvements made by FHWA during FY 2005 include

(1) the automation of the Statement of Budgetary Resources and Statement of 

Financing, (2) expanded monitoring of the Treasury Statement of Differences, 

(3) expanded review and analysis of the September 30, 2005 financial statements, 

including involvement of program and division office personnel, (4) correcting 

child allocation accounts and transactions in the general ledger in September 2005, 

financial report 163
164 FY 2005 Performance and Accountability Report

6

(5) refining the grants reconciliation processes and reducing the differences 

between the subsidiary and general ledgers, and (6) involving budget personnel in 

the preparation of the Statement of Budgetary Resources. 

However, Clifton Gunderson reported that deficiencies continued to exist in the 

internal control structure in the HTF agencies that ultimately prevented 

management from preparing accurate and timely financial statements during 

FY 2005. Certain components of the financial statements prepared during the

year were not reliable, many matters were not resolved until the end of the year, 

and account discrepancies remained at September 30, 2005. The resolution of

these discrepancies during the audit process resulted in material adjustments to the 

draft financial statements provided for audit in October 2005. Clifton Gunderson 

reported that improvements are need in the following areas. 

Financial Statement Preparation and Analysis. HTF agencies’ financial 

statement preparation and analysis process continued to be manually intensive 

because of the top-side non-standard journal entries needed to correct data in the 

accounting system. During FY 2005, HTF agencies posted hundreds of

adjustments with an absolute value of $425 billion, several of which were posted

in the fourth quarter. The volume and amount of these adjustments suggest that 

the system is not working properly to accurately capture financial events at the 

transaction level at the time the transaction occurs. This manually intensive

process has a high risk of error, is time consuming, and utilizes resources that 

should be spent on the analysis of the financial statements. In addition, the 

analysis of the HTF financial statements through June 30, 2005 was inadequate,

and the relationships between proprietary and budgetary accounts were not

adequately analyzed during the year or at year-end. Audit adjustments exceeding 

$16 billion were made to the draft financial statements provided for audit. 

Resolving Reconciliation Differences. While Clifton Gunderson reported 

improvements since last year, certain reconciliation differences were not resolved 

in a timely manner. Several deficiencies continued with the Fund Balance With 

Treasury, including reconciliations of parent and child allocation accounts, and 

aging, supporting, and reporting suspense account balances. The absolute value of

the suspense accounts was $467 million at September 30, 2005. Unreconciled 

differences continued between the grants subsidiary ledger and the general ledger 

by as much as $578 million in absolute value. Finally, the HTF agencies recorded 

a significant number of adjustments in net position and budgetary accounts during 

the year resulting from nonexpenditure transfers and budgetary account 

reconciliations. 

Implementing Managerial Cost Accounting. The HTF agencies did not have a 

cost accounting system in place to allocate costs to their programs. As a result, the 
financial report 165

7

HTF agencies could not prepare a Statement of Net Cost or corresponding 

footnote in accordance with OMB requirements. 

Tracking Intragovernmental Transactions. The HTF agencies did not 

consistently reconcile and eliminate intragovernmental transactions during 

FY 2005, and could not adequately support the Trading Partner schedule included 

in the HTF financial statements. 

Linking FACTS II Reporting to the Financial Statements. The HTF agencies 

did not have a system in place to ensure that erroneous accounts are reviewed and 

corrected prior to the preparation of draft the financial statements. 

Clifton Gunderson made a series of recommendations to improve financial 

management and reporting activities in its financial statement audit report, dated

November 8, 2005. The DOT CFO agreed with the recommendations. Therefore, 

we are not making additional recommendations in this report.

Financial Oversight of Highway Grants

Last year, we reported that FHWA and the Federal Transit Administration (FTA) 

needed to establish stronger financial and cost controls to better ensure that grant 

funds are protected from fraud, waste, and abuse. FHWA and FTA have both 

implemented improved procedures and controls over grants during FY 2005. For 

example, FHWA initiated the Financial Integrity Review and Evaluation (FIRE) 

program in March 2005, and FTA instituted sufficient improvements in its 

oversight of transit grants to not to be included in the material weakness this year. 

However, FHWA needs to continue to improve its financial oversight of highway 

grants. 

FHWA announced and started implementing its FIRE program in April 2005. 

FIRE requires each FHWA Division Office to establish a comprehensive oversight 

review program to include reviews of state grant management processes, Federalaid billings, inactive obligations, and administrative processes. Partial FIRE 

reviews were to be completed for FY 2005, and FY 2006 will be the first complete 

year reviewed. During the FY 2005 audit, Clifton Gunderson reported that FHWA 

had not fully developed a mechanism to determine whether the Division Offices 

are consistently following the FIRE requirements, and controls to monitor, assess, 

and validate the Division Offices’ implementation of FIRE. FHWA developed a 

timeline to fully implement FIRE by September 30, 2006. 

Clifton Gunderson also reported that FHWA may still have a number of inactive 

grant projects as of September 30, 2005. They reported that FHWA had 

1,542 undelivered orders more than a year old at a total value of $42.2 billion. 

However, our review of inactive obligations in 14 states during FY 2005 
166 FY 2005 Performance and Accountability Report

8

concluded that FHWA had made significant progress in freeing up idle funds for 

other transportation projects. While we reported that an estimated $661 million in

idle funds existed nationwide, in commenting on our draft report, FHWA

informed us that $757 million would be deobligated nationwide. We commended 

FHWA for working aggressively with the states to provide more effective 

oversight of Federal funds, but reminded FHWA they needed to continue working 

with the states to institutionalize the processes to identify and release unneeded 

funds. 

Clifton Gunderson made a series of recommendations to improve financial 

oversight of highway grants in its financial statement audit report dated 

November 8, 2005. The DOT CFO agreed with the recommendations. Therefore, 

we are not making additional recommendations in this report.

REPORTABLE CONDITIONS 

Reportable conditions, although not considered material weaknesses, represent 

significant deficiencies in the design or operation of internal controls that could 

adversely affect the DOT consolidated financial statements. 

Intragovernmental Transactions 

Since the audit of the FY 2003 DOT Consolidated Financial Statements, we have

reported a material weakness in the DOT processes and procedures to reconcile 

transactions among its Operating Administrations, and its transactions with other 

Federal agencies. Last year we reported that while DOT had made progress 

during FY 2004, DOT did not have an effective process for reconciling 

transactions with other Federal agencies and among its Operating Administrations.

DOT made significant progress during FY 2005 in reconciling its 

intragovernmental transactions with its trading partners, but additional efforts are 

still needed. This issue is being downgraded from a material weakness to a 

reportable condition in FY 2005. 

While DOT established a new reimbursable agreement reconciliation process in 

FY 2005, DOT did not fully eliminate its intragovernmental activity within DOT

in the FY 2005 DOT Consolidated Financial Statements. We found intra DOT 

activity of $402 million ($293 million in assets and $109 million in nonexchange 

revenue) that was not eliminated in the DOT Consolidated Financial Statements. 

The DOT CFO has advised that the Office of Financial Management will continue 

working with the Operating Administrations to implement new processes and 

procedures, and anticipates completing all corrective actions during FY 2006. 

Therefore, we are not making additional recommendations in this report.
financial report 167

9

Financial System Controls 

Last year, we reported a material weakness in DOT financial system controls. 

This included weaknesses in Delphi computer controls and computer security

deficiencies in several FAA, FHWA, and FTA systems that provide financial data 

to Delphi. In FY 2005, DOT made significant progress in improving controls over 

its financial systems; we therefore believe that its financial control weaknesses 

should be downgraded to a reportable condition. 

While noting progress, however, both independent auditors—KPMG and Clifton 

Gunderson—found areas needing further oversight. For example, they found that 

continued management oversight is needed to correct weaknesses in FAA and 

HTF subsidiary financial systems. According to KPMG, four FAA financial 

applications had potentially high-risk combinations of duties in which individuals

could exceed or abuse their assigned authorities. They also found poor user 

administration, inadequate system configuration management, outdated change

request process documentation, and inadequate system change documentation. In 

addition, financial application servers were not configured as securely as they 

should have been. 

According to Clifton Gunderson, systems that track HTF grants, which feed 

information to the Department-wide Delphi financial management system, had 

weaknesses that could have a material effect on HTF’s financial statements. 

Control weaknesses identified in FHWA and/or FTA financial systems included 

poor security program planning and management, inadequate program change 

control, weak logical access controls, lack of business security plans, and 

inadequate application controls. 

KPMG’s and Clifton Gunderson’s financial statement audit reports, dated 

November 8, 2005, included recommendations to improve financial system 

controls. The DOT CFO agreed with the recommendations; therefore, we are not 

making any additional recommendations. 

DOT Information Security Program 

Last year, we reported that DOT had made significant progress in its information 

technology security program, yet it was still considered a reportable condition. In 

our fifth annual report on DOT’s Information Security Program, issued in October 

2005, we reported that while the quality of security certification reviews had 

improved, the Department still faced a challenge in recertifying systems security 

while enhancing certification quality. During FY 2005, about 15 percent of DOT 

systems were overdue for recertification. 
168 FY 2005 Performance and Accountability Report

10

DOT also needed to better manage correction of systems security deficiencies: it 

had about 3,000 weaknesses awaiting correction, but management could not

effectively prioritize them because the importance of over half—1,600—had not 

been assessed. Further, DOT needed to enforce implementation of its security 

configuration policy, ensure that computer network vulnerabilities are corrected in 

a timely manner, complete deployment of the intrusion-detection system at one

Internet connection point, and test contingency plans. 

Further, FAA did not take aggressive action to enhance air traffic control systems 

security. While it committed to completing security reviews of all operational air 

traffic control systems—at en route, approach control, and airport terminal 

facilities—within 3 years, and to identifying a cost-effective alternative to 

restoring essential air service in the event of prolonged service disruption at an en

route facility, the agency nonetheless made only limited progress during FY 2005 

in fulfilling these commitments. 

Finally, we reported that departmental oversight of major systems investments 

needed to be enhanced; the Department’s Investment Review Board needed to 

perform more substantive and proactive reviews of information technology (IT)

investments managed by individual operating administrations. This remains a

challenge, especially for air traffic control modernization projects, which account

for over 80 percent of the Department’s IT budget. This year, the Board reviewed

investment projects managed by various Operatring Administrations, including 

FAA. While projects managed by most Operating Administrations have benefited 

from this oversight, the Board has had little impact on complicated air traffic 

control projects, which are still experiencing significant cost increases and 

schedule delays. 

We believe that DOT’s information security program should remain a reportable 

condition. We made a series of recommendations to improve the information 

technology security program, and the Chief Information Officer (CIO) agreed with 

them. Therefore, we are not making additional recommendations in this report. 

MARAD Oversight of Title XI Loan Guarantees 

Last year, we reported that (1) the Maritime Administration (MARAD) needed to 

enforce the requirements that borrowers establish and maintain specified financial 

reserves to mitigate the risks of noncompliant loans, (2) it lacked the expertise or 

resolve to effectively address troubled loans, and that (3) its rudimentary financial 

monitoring system was not adequate to effectively manage its $3.2 billion loan 

portfolio. Further, this year, our Top Management Challenges report reiterated the 

importance of implementing reforms, including development of a computerized 

database to assess the financial conditions of companies in its portfolio. 
financial report 169

11

MARAD’s loan guarantees are designed to assist private companies in obtaining 

financing for the construction of ships or the modernization of U.S. shipyards—

with the Government holding a mortgage on the equipment or facilities financed. 

Over 25 percent ($800 million) of the portfolio remains on “Credit Watch,” 

meaning that it is at an elevated risk of default. MARAD has, however, reduced 

the proportion of its high-risk loans from 15 percent of total loan value at the end 

of FY 2004 to 4 percent at the end of FY 2005. 

The reforms that we have recommended—timely financial monitoring and 

tracking of the portfolio and seeking compensating measures to address the 

increased risk associated with waivers or modifications—are fundamental to

proper management and oversight of any credit program. While MARAD has

made progress in these areas, it must remain vigilant and continue to closely 

monitor and manage its loan portfolio through completion of the computerized 

tracking system, enforcing reserve requirements, and pursuing remedies for any 

defaults. 

FAA Contract Management 

According to KPMG, FAA has weaknesses in the management and oversight of 

cost-reimbursable and support services contracts, two significant vehicles used by

the agency to support its National Airspace System (NAS). Specifically, FAA (1) 

has a backlog of $318 million in completed contracts awaiting closeout, (2) lacks 

an adequate tracking system to identify and monitor cost-reimbursable contracts, 

(3) has not formally analyzed the results of Defense Contract Audit Agency 

(DCAA) contract audits, and (4) has not consistently followed its own contract 

administration and procurement policies by awarding some support services 

contracts with little or no competition. 

This situation exists because FAA fell seriously behind more than 5 years ago in 

its closeout of cost-reimbursable contracts, due to inadequate policies and 

procedures governing contract management. In fact, in FY 2001, FAA had more 

than $6 billion in backlogged contracts awaiting closeout. Since that time, through 

the use of DCAA and a renewed emphasis on decreasing the contract closeout

backlog, FAA has made significant progress—reducing the backlog some

95 percent.

However, according to FAA’s own review of the management of its support 

services contracts, valued at $1.3 billion, weaknesses exist in its controls to 

prevent waste, fraud, and abuse. Poor contract management processes increase the 

risk of undetected violations of appropriations laws, contract clauses, and 

mismanagement of funds, which could lead to inaccurate financial reporting by the 

FAA. 
170 FY 2005 Performance and Accountability Report

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KPMG has made recommendations to improve contract management activities, 

which FAA has agreed to implement. Therefore, we are not making any 

additional recommendations. 

FAA Grants Management 

FAA is responsible for establishing and maintaining accounting and internal 

controls over expenditures related to the Airport Improvement Program (AIP). 

The program’s size, availability of resources, and reliance on sponsors, among 

other risks, led to the potential for waste, fraud, and abuse of Federal funds,

especially within the oversight and monitoring phases of the grants management 

process. 

The DOT OIG has issued ten reports since 2003 detailing revenue diversion,

embezzlement, and other malfeasance committed by grant sponsors and related 

contractors, citing the actual or possible misuse of about $314 million in airports

revenue and funding. 

According to KPMG, FAA’s specific internal control weaknesses in grants 

management include (1) lack of an effective, risk-based approach to oversight and 

monitoring of AIP grant sponsorship activities; (2) inadequate policies and 

procedures describing the roles and responsibilities of regional managers; and (3) 

disproportionate reliance on OMB Circular A–133, Single Audit Act, for 

assurances that grant recipients are administering Federal funds properly and have 

sufficient internal controls. More reliable grants administration and monitoring 

processes feature preventive front-end and early-detection controls. 

These weaknesses arose from factors including the discretion of regional FAA

project managers in determining their level of involvement and oversight. 

Elements contributing to such decisions include personnel availability, project 

proximity and complexity, and whether it is considered high profile. Over time,

FAA has increased its potentially dangerous reliance on sponsors to provide 

oversight (“self-certification”), including inspection and fiscal compliance. The 

agency has, in effect, relegated reliance on internal controls to project sponsors, 

making them responsible for fiscal integrity and adherence to laws and 

regulations. Another factor contributing to this trend has been an expansion of

AIP without a concomitant increase in regional administrative resources. 

KPMG has made recommendations to improve grants management activities, 

which FAA has agreed to implement. Therefore, we are not making any 

additional recommendations. 
financial report 171

13

C. COMPLIANCE WITH LAWS AND REGULATIONS 

In planning and conducting our audit, we performed limited tests of DOT’s 

compliance with laws and regulations, as required by OMB guidance. It was not

our objective to express, and we do not express, an opinion on compliance with

laws and regulations. Our work was limited to testing selected provisions of laws 

and regulations that would be reportable under Generally Accepted Government

Auditing Standards or under OMB guidance. Our work disclosed the following 

instances of noncompliance with laws and regulations. 

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT 

OF 1996 (FFMIA) 

Under FFMIA, we must report whether DOT’s financial management system

substantially complies with Federal requirements and standards in three specific 

areas. FFMIA requires agencies to produce timely, auditable financial statements 

based on data from the agency’s financial system. KPMG concluded that FAA 

was not in substantial compliance for the year ended September 30, 2005, because 

five of its seven key financial systems—which support data entered into Delphi—

do not substantially comply with FFMIA compliance categories listed in OMB 

Circular A–127, section 7. For example, four of the five key FAA systems lacked 

adequate internal controls. 

KPMG recommended that FAA resolve the weaknesses noted in the key financial 

systems used to compile financial statements for FAA. 

Given the difficulties that HTF Agencies encountered in generating reliable 

financial statements in a timely manner, Clifton Gunderson concluded that the 

systems used by HTF Agencies did not substantially comply with Federal 

financial management systems requirements, Federal Accounting Standards, and 

the Standard General Ledger at the transaction level. 

ANTI-DEFICIENCY ACT 

Title 31, United States Code, Section 1517, provides that an officer or employee of 

the U.S Government may not make or authorize an expenditure or obligation 

exceeding an amount available in an allotment. In our report on the FY 2004 

DOT Financial Statements, we reported that FHWA was reviewing four potential 

violations, in which obligations may have exceeded budget authority by about 

$600,000 as of September 30, 2004. We also reported two additional violations 
172 FY 2005 Performance and Accountability Report

14

($495 million for FHWA and $77 million for FTA), first reported in 2003 had not 

been fully resolved. 

During FY 2005, Clifton Gunderson reported that all potential violations had been 

resolved as of September 30, 2005, except the $5 million violation attributed to 

FHWA. KPMG reported that FAA had a $1.9 million violation associated with 

the Small Community Air Service Development Program. The violation first 

occurred in FY 2004, was not detected by FAA until FY 2005, and FAA was in

the process of reporting the violation to the President and Congress. 

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT (FMFIA) 

During FY 2004, Clifton Gunderson reported that the HTF agencies, except the 

Federal Motor Carrier Safety Administration (FMCSA), had not formalized 

procedures to identify, assess, and monitor management controls. In addition, we 

found that two other DOT agencies, the Office of the Secretary and the Research 

and Special Projects Administration (RSPA), likewise had not fully assessed the 

effectiveness of their management controls under FMFIA. 

Clifton Gunderson again reported that during FY 2005, no HTF agencies except

FMCSA had formalized procedures to monitor management controls. And again, 

we found that the Office of the Secretary and the Research and Innovative 

Technology Administration (RSPA’s new entity) had not fully assessed the 

effectiveness of their FMFIA management controls. 

GOVERNMENT PERFORMANCE AND RESULTS ACT (GPRA) 

GPRA requires agencies to manage their programs efficiently and effectively, 

based on reliable financial and performance information. To comply, agencies

need systems to track costs and allocate them among individual activities, thereby 

allowing them to measure efficiency and effectiveness. According to Clifton 

Gunderson, because HTF agencies have not fully implemented managerial cost 

accounting systems, they could not present the full cost of each program in the 

Statement of Net Cost for FY 2005. Further, because DOT does not have systems 

in place to allocate costs by major program, performance measures did not provide 

cost-effectiveness data and were not linked to the cost of achieving targeted 

results. 
financial report 173

15

FAA FRANCHISE FUND ENABLING LEGISLATION 

The Department of Transportation and Related Agencies Appropriations Act, 1997 

requires the FAA Administrative Services Franchise Fund to be paid in advance 

by its customers, prior to the performance of services. KPMG reported that the 

FAA Franchise Fund routinely performed work for its customers without being

paid in advance. KPMG reported that of the seven lines of business, only the 

Logistics Center consistently received advanced funding from its customers, and 

as much as 40 percent of the Franchise Fund work in FY 2005 was performed 

without advances from their customers. KPMG made recommendations to correct 

this noncompliance in its financial statement audit report, dated 

November 8, 2005. FAA agreed to implement the recommendations. Therefore,

we are not making additional recommendations in this report. 

D. CONSISTENCY OF OTHER INFORMATION 

The Management Discussion and Analysis, required supplementary information

(including stewardship information), and other accompanying information contain 

a wide range of data, some of which are not directly related to the financial 

statements. We are not required to, and we do not, express an opinion on this 

information. As required by OMB guidance, we compared this information for 

consistency with the DOT Consolidated Financial Statements and discussed the

methods of measurement and presentation with DOT officials. Based on this 

work, we found no material inconsistencies with the DOT Consolidated Financial 

Statements or nonconformance with OMB guidance. Further, because DOT does

not have systems in place to allocate costs by major program, the performance 

measures did not provide information about cost effectiveness and were not linked 

to the cost of achieving targeted results or to the Statement of Net Cost. 

E. PRIOR AUDIT COVERAGE 

Our report on the DOT Consolidated Financial Statements for FYs 2004 and 2003 

expressed an unqualified opinion and made no new recommendations. Our report

on the DOT consolidated financial statements for FY 2002 and FY 2001 made one

recommendation: that DOT confirm and reconcile intragovernmental balances

with trading partners. DOT needs to continue to work to improve the accounting 

for intragovernmental balances. Exhibit B displays the status of the prior year’s 

and new issues. 
174 FY 2005 Performance and Accountability Report

16

Since we issued our report on the DOT Consolidated Financial Statements for 

FYs 2004 and 2003, we issued 25 reports related to the DOT Consolidated 

Financial Statements. These reports are listed in Exhibit C.

The Assistant Secretary for Budget and Programs/Chief Financial Officer

provided comments on a draft of the report (see Appendix). The response agreed 

with the material weaknesses and reportable conditions in this report and stated 

that corrective actions have already been initiated. Management agreed to provide 

a detailed action plan addressing each finding by December 31, 2005. 

This report is intended for the information of and use by DOT, the Office of 

Management and Budget, the Government Accountability Office, and Congress. 

This report is a matter of public record, and its distribution is not limited. 

Kenneth M. Mead 

Inspector General 
financial report 175

17

EXHIBIT A. OBJECTIVES, SCOPE, AND METHODOLOGY 

Our audit objectives for the DOT Consolidated Financial Statements for FYs 2005 

and 2004 were to determine whether (1) principal DOT Consolidated Financial 

Statements and accompanying notes are presented fairly, in all material respects, 

in conformity with generally accepted accounting principles; (2) DOT has

adequate internal controls over financial reporting, including safeguarding assets; 

(3) DOT has complied with laws and regulations that could have a direct and 

material effect on the DOT Consolidated Financial Statements or that have been 

specified by OMB, including FFMIA; (4) financial information in the 

Management Discussion and Analysis is materially consistent with the 

information in the principal DOT Consolidated Financial Statements; (5) internal 

controls ensured the existence and completeness of reported data supporting 

performance measures; and (6) supplementary, stewardship, and other 

accompanying information is consistent with management representations and the 

DOT Consolidated Financial Statements. 

DOT is responsible for (1) preparing the DOT Consolidated Financial Statements 

for FYs 2005 and 2004 in conformity with generally accepted accounting 

principles; (2) establishing, maintaining, and assessing internal controls to provide 

reasonable assurance that broad control objectives of FMFIA are met; (3) ensuring 

that DOT financial management systems substantially comply with FFMIA 

requirements; and (4) complying with other applicable laws and regulations. 

The OIG is responsible for obtaining reasonable assurance that the DOT 

Consolidated Financial Statements for FY 2005 and FY 2004 are presented fairly, 

in all material respects, in conformity with generally accepted accounting 

principles. DOT is responsible for maintaining an effective system of internal 

controls. The objectives of these controls are explained below. 

 Financial reporting. Transactions are properly recorded, processed, and 

summarized to permit the preparation of financial statements and stewardship 

information in conformity with generally accepted accounting principles, and 

assets are safeguarded against loss from unauthorized acquisition, use, or 

disposition.

 Compliance with laws and regulations. Transactions are executed in 

accordance with laws governing the use of budget authority and with other 

laws and regulations that could have a direct and material effect on the 

financial statements and any other laws, regulations, and Government-wide 

policies identified by OMB audit guidance. 

Exhibit A. Objectives, Scope, and Methodology
176 FY 2005 Performance and Accountability Report

18

 Performance measures. Transactions and other supporting data are properly 

recorded and summarized. 

We are also responsible for (1) obtaining sufficient understanding of internal 

controls over financial reporting and compliance to plan the audit, (2) testing 

compliance with selected provisions of laws and regulations that have a direct and 

material effect on the financial statements and laws for which OMB audit

guidance requires testing, and (3) performing limited procedures with respect to 

certain other information appearing in the DOT Consolidated Financial Statements 

for FYs 2005 and 2004. 

To fulfill these responsibilities, we (1) examined, on a test basis, evidence 

supporting the amounts and disclosures in the financial statements; (2) assessed 

the accounting principles used and significant estimates made by management; (3) 

evaluated the overall presentation of the financial statements; (4) obtained an

understanding and performed limited tests of internal controls related to financial 

reporting, compliance with laws and regulations, and performance measures 

reported in the Management Discussion and Analysis; and (5) tested compliance 

with selected provisions of certain laws, including FFMIA. 

The Government Accountability Office performed agreed-upon procedures at the 

Internal Revenue Service on the excise taxes distributed to the HTF and the 

Airport and Airway Trust Fund during FY 2005. The Treasury Office of Inspector 

General reported on the effectiveness of controls placed in operation over the 

Bureau of Public Debt Trust Fund Management Branch and Federal Investments 

Branch for the period October 1, 2004, to July 31, 2005, and attained 

management’s assurance on the effectiveness of the controls through 

September 30, 2005. The Treasury Office of Inspector General also reported on 

selected schedules of assets and liabilities of the HTF and the Airport and Airway 

Trust Fund prepared by the Bureau of Public Debt Trust Fund Management 

Branch. 

We did not evaluate all internal controls relevant to operating objectives as 

broadly defined by FMFIA, such as those controls relevant to ensuring that 

programs achieve their intended results and that resources are used consistent with 

agency missions. We limited our internal control testing to controls over financial 

reporting and compliance. Because of inherent limitations in internal controls, 

misstatements due to error or fraud, losses, or noncompliance may nevertheless 

occur and not be detected. We also caution that our internal control testing may 

not be sufficient for other purposes and that projecting our evaluation to future 

periods is subject to the risk that controls may become inadequate because of 

changes in conditions or that compliance with controls may deteriorate. 

Exhibit A. Objectives, Scope, and Methodology
financial report 177

19

We did not test compliance with all laws and regulations applicable to DOT. We 

limited our tests of compliance to those laws and regulations required by OMB

audit guidance that we deemed applicable to the DOT Consolidated Financial 

Statements for the years ended September 30, 2005, and September 30, 2004. We 

caution that noncompliance may occur and not be detected by these tests and that 

such testing may not be sufficient for other purposes. 

The Chief Financial Officers of DOT and each Operating Administration have

been assigned the responsibility to address the weaknesses identified in this report. 

Management’s response to the findings and recommendations in this report is 

contained in the Appendix. 

We performed our work in accordance with Generally Accepted Government

Auditing Standards and OMB Bulletin 01-02, “Audit Requirements for Federal

Financial Statements.” 

Exhibit A. Objectives, Scope, and Methodology
178 FY 2005 Performance and Accountability Report

20

EXHIBIT B. STATUS OF PRIOR YEAR’S AND NEW ISSUES 

Prior Year Condition As Reported 9/30/2004 As Reported 9/30/2005 

FHWA/HTF: Financial Management and Reporting 

Material deficiencies in internal controls over financial

management and reporting activities in HTF agencies

resulted in the need for extraordinary efforts to prepare FY 

2005 financial statements. Progress has been made, yet 

remaining weaknesses exist in areas including 

reconciliation of differences, implementing managerial 

cost accounting, and tracking intragovernmental 

transactions.

Material Weakness Material Weakness 

FHWA: Financial Oversight of Highway Grants 

Stronger financial and cost controls were needed to better 

protect grant funds from fraud, waste, or abuse. Improved 

procedures and controls were instituted in FY 2005, 

including FHWA’s Financial Integrity Review and 

Evaluation (FIRE) program. It is not clear, however, 

whether Division Offices are consistently following FIRE 

requirements, and FHWA must continue to work with the 

states to institutionalize processes necessary to identify 

and release unneeded funds. 

Material Weakness Material Weakness 

Intragovernmental Transactions While progress has 

been apparent, DOT needs to continue implementing new 

processes for reconciling transactions among its 

Operating Administrations and with other Federal 

agencies. 

Material Weakness Reportable Condition 

DOT Financial System Controls In FY 2004 

deficiencies were noted in Delphi computer controls and in

computer security in several FAA, FHWA, and FTA 

systems from which Delphi receives financial data. Good 

progress has been made, yet better computer controls are 

needed for segregation of duties, user administration, and 

system configuration management. 

Material Weakness Reportable Condition 

FAA: Timely Transaction Processing and Accounts 

Reconciliation Problems in implementing Delphi and a 

new procurement system worsened in FY 2005, affecting 

FAA’s ability to process transactions and reconcile 

balances in a timely manner. 

Material Weakness 

DOT Information Security Program The quality of 

security certification reviews has improved, but DOT still 

faces the challenge of recertifying the security of hundreds

of systems while enhancing certification quality. Further, 

over 1,600 of 3,000 security deficiencies that await 

correction have not yet been prioritized. FAA has not 

fulfilled its commitment to enhance air traffic control 

systems security.

Reportable Condition Reportable Condition 

Exhibit B. Status of Prior Year’s and New Issues
financial report 179

21

MARAD Title XI Loan Guarantee Oversight MARAD’s 

financial monitoring system is not up to effectively 

managing its $3.2-million loan portfolio, and the agency 

needs to enforce the requirement that borrowers maintain 

specified financial reserves. Progress has been made, 

but more is needed. 

Reportable Condition Reportable Condition 

FAA Contract Management FAA’s controls over the 

management and oversight of cost-reimbursable and 

support services contracts are inadequate to prevent 

fraud, waste, or abuse. Issues include a closeout 

backlog, an ineffective tracking system, analysis of 

contracts performed by DCAA, and inconsistent 

adherence to its own contract administration and 

procurement policies.

Reportable Condition 

FAA Grants Management The program’s size, 

availability of resources, and over-reliance on sponsors 

has increased its risk of fraud, waste, and abuse. Since 

2003, the DOT OIG has cited actual or possible misuse of 

about $314 million in airports revenue and funding.

Reportable Condition 

Delphi Loans Delphi lacked a mechanism for recording 

anticipated loan repayments, and loans receivable were 

not reconciled between FHWA and FRA. In FY 2004 DOT

established a work group to address accounting for loan 

activity. 

Reportable Condition Management Lettera

a Issued by Clifton Gunderson LLP. 

Exhibit B. Status of Prior Year’s and New Issues
180 FY 2005 Performance and Accountability Report

22

 EXHIBIT C. FINANCIAL-RELATED REPORTS 

Subject Report Number Date Issued 

2003 Assessment of Federal Aviation

Administration Cost Accounting 

System and Practices 

FI-2005-010 November 17, 2004 

Special-Purpose Financial 

Statements for Fiscal Year 2004 

FI-2005-014 November 18, 2004 

Managing Risk in the Federal-Aid 

Highway Program 

MH-2005-012 November 19, 2004 

Terminal Modernization: FAA 

Needs to Address Its Small, 

Medium, and Large Sites Based on 

Cost, Time, and Capability 

AV-2005-016 November 23, 2004 

Agreed-Upon Procedures for 

Federal Intragovernmental Activity 

and Balances

FI-2005-017 December 2, 2004 

FAA Inactive Obligations FI-2005-044 January 31, 2005 

Accounting for FY 2004 Drug 

Control 

FI-2005-045 February 1, 2005 

FHWA Needs to Capture Basic 

Aggregate Cost and Schedule Data 

to Improve Its Oversight of Federalaid Funds 

MH-2005-046 February 15, 2005 

Office of the Chief Information 

Officer’s Budget 

FI-2005-055 March 31, 2005 

Status of FAA’s Major Acquisitions: 

Cost Growth and Schedule Delays 

Continue To Stall Air Traffic 

Modernization 

AV-2005-061 May 26, 2005 

Consolidation of DOT Accounting 

Functions 

FI-2005-064 June 17, 2005 

FAA’s En Route Modernization 

Program Is On Schedule but Steps 

Can Be Taken to Reduce Future 

Risks 

AV-2005-066 June 29, 2005 

Quality Control Review of the Report 

On Controls over the Delphi 

Financial Management System 

QC-2005-075 September 2, 2005 

Quality Control Review of KPMG’s 

Notice of Finding and 

Recommendation 

QC-2005-076 September 22, 2005 

Exhibit C. Financial-Related Reports

financial Report
financial report 181

23

Report on the Agreed-Upon 

Procedures: Selected PersonnelRelated Cost Items 

FI-2005-077 September 27, 2005 

Management of Land Acquired 

Under Airport Noise Compatibility 

Programs 

AV-2005-078 September 30, 2005 

Midway Atoll Cost Sharing FI-2005-079 September 30, 2005 

Actions to Prevent Fraud on 

Cooperative Agreements with 

Universities 

FI-2005-080 September 30, 2005 

DOT’s Information Security Program FI-2006-002 October 7, 2005 

Quality Control Review of Audited 

Financial Statements, FY 2005 and 

2004, for Saint Lawrence Seaway 

Development Corporation 

QC-2006-009 November 8, 2005 

Quality Control Review of Audited 

Financial Statements, FY 2005 and 

2004, for the Federal Aviation 

Administration 

QC-2006-010 November 14, 2005 

FHWA Inactive Obligations FI-2006-011 November 14, 2005 

Quality Control Review of Audited 

Financial Statements, FY 2005 and 

2004, for the Highway Trust Fund 

Agencies 

QC-2006-012 November 15, 2005 

Quality Control Review of Audited 

Balance Sheet, September 30, 

2005, FAA Franchise Fund 

QC-2006-013 November 15, 2005 

Top Management Challenges PT-2006-007 November 15, 2005 

Exhibit C. Financial-Related Reports
182 FY 2005 Performance and Accountability Report

24

APPENDIX. ASSISTANT SECRETARY FOR BUDGET AND 

PROGRAMS/CHIEF FINANCIAL OFFICER RESPONSE TO AUDIT 

REPORT 

MEMORANDUM TO: Kenneth M. Mead 

 Inspector General

FROM: Phyllis F. Scheinberg

 Assistant Secretary for Budget and Programs/CFO 

SUBJECT: Management Response – Report of the Inspector 

General (IG) on the Consolidated Financial 

Statements for Fiscal Years (FY) 2005 and 2004 

The Department is pleased to respond to your audit report on the Consolidated Financial 

Statements for FYs 2005 and 2004. For the fifth consecutive year we have achieved an 

unqualified audit on the Consolidated Financial Statements. 

We concur with the three material weaknesses and six reportable conditions contained in 

your report. Corrective actions have already been initiated to address several of these 

matters, especially in regards to financial management. The Department plans to submit 

a detailed Action Plan no later than December 31, 2005, to address the findings contained 

in your report. Our Action Plan will also address the findings contained in the Audits of 

the following entities listed below: 

 The Highway Trust Fund, 

 The Federal Aviation Administration (FAA), 

 The FAA Franchise Fund, 

 The Department’s Working Capital Fund, and 

 The Research and Innovative Technology Administration, 

John A. Volpe National Transportation Systems Center. 

We generally agree with the recommendations listed in these reports and will utilize them

to develop corrective action measures. 

The achievement of an unqualified audit opinion was accomplished through the joint 

efforts of your staff, contract auditors and the financial staffs of the Operating 

Administrations. We will work with our Operating Administrations and the various audit 

groups to ensure that the Department continues to take steps to improve Financial 

Management. 

I would like to express my appreciation for the cooperation and professionalism

displayed by your staff and your contractors during the course of the audit.

Appendix. Assistant Secretary for Budget and Programs/Chief

Financial Officer Response to Audit Report

184 FY 2005 Performance and Accountability Report

As of September 30, 2005 2004

Dollars in Thousands

ASSETS (Note 2)

Intragovernmental

Fund Balance with Treasury (Note 3) $ 29,140,842 $ 29,721,350

Investments (Note 4) 19,000,999 20,618,224

Accounts Receivable, Net (Note 5) 358,857 189,800

Other Assets (Note 6) 96,346 229,006

Total Intragovernmental Assets 48,597,044 50,758,380

Cash and Other Monetary Assets 40,573 26,995

Accounts Receivable, Net (Note 5) 144,567 339,052

Loans Receivable and Related Foreclosed Property, Net (Note 7) 760,448 604,087

Inventory and Related Property, Net (Note 8) 939,639 913,513

General Property, Plant & Equipment, Net (Note 9) 15,325,392 15,395,359

Other Assets (Note 6) 160,883 248,623

Total Assets $ 65,968,546 $ 68,286,009

LIABILITIES (Note 10)

Intragovernmental

Accounts Payable $ 182,710 $ 73,041

Debt (Note 11) 952,536 1,150,606

Other Intragovernmental Liabilities (Note 12) 3,378,564 3,668,305

Total Intragovernmental Liabilities 4,513,810 4,891,952

Accounts Payable 226,045 514,148

Loan Guarantees (Note 7) 393,451 378,612

Federal Employee and Veterans’ Benefits Payable 1,007,303 1,018,541

Environmental and Disposal Liabilities (Note 14) 1,003,585 1,135,163

Grant Accrual (Note 13) 4,086,728 4,180,440

Other Liabilities (Notes 12 & 15) 1,641,416 1,289,093

Total Liabilities $ 12,872,338 $ 13,407,949

Contingencies and Commitments (Note 15)

NET POSITION

Unexpended Appropriations $ 5,448,954 $ 5,284,601

Cumulative Results of Operations 47,647,254 49,593,459

Total Net Position 53,096,208 54,878,060

Total Liabilities and Net Position $ 65,968,546 $ 68,286,009

The accompanying notes are an integral part of this financial statement.

U.S. DEPARTMENT OF TRANSPORTATION

CONSOLIDATED BALANCE SHEET
financial report 185

For the Year Ended September 30, 2005 2004

Dollars in Thousands

PROGRAM COSTS (Notes 16 & 17)

SURFACE TRANSPORTATION

Intragovernmental Gross Costs $ 617,311 $ 579,829

Less: Intragovernmental Earned Revenue 51,294 48,265

Intragovernmental Net Costs 566,017 531,564

Gross Costs with the Public 41,902,606 41,070,515

Less: Earned Revenues from the Public 159,213 315,000

Net Costs with the Public 41,743,393 40,755,515

TOTAL NET COST $ 42,309,410 $ 41,287,079

AIR TRANSPORTATION

Intragovernmental Gross Costs $ 1,999,237 $ 2,380,081

Less: Intragovernmental Earned Revenue 133,073 84,246

Intragovernmental Net Costs 1,866,164 2,295,835

Gross Costs with the Public 12,619,722 10,126,861

Less: Earned Revenues with the Public 456,790 228,702

Net Costs with the Public 12,162,932 9,898,159

TOTAL NET COST $ 14,029,096 $ 12,193,994

MARITIME TRANSPORTATION

Intragovernmental Gross Costs $ 150,505 $ 22,047

Less: Intragovernmental Earned Revenue 448,796 260,710

Intragovernmental Net Costs (298,291) (238,663)

Gross Costs with the Public 584,710 477,002

Less: Earned Revenues with the Public 7,505 1,178

Net Costs with the Public 577,205 475,824

TOTAL NET COST $ 278,914 $ 237,161

COST-CUTTING PROGRAMS

Intragovernmental Gross Costs $ 37,492 $ 54,157

Less: Intragovernmental Earned Revenue 521,327 615,741

Intragovernmental Net Costs (483,835) (561,584)

Gross Costs with the Public 499,420 568,543

Less: Earned Revenues from the Public 6,857 6,213

Net Costs with the Public 492,563 562,330

TOTAL NET COST $ 8,728 $ 746

Costs Not Assigned To Programs 261,911 347,864

Less: Earned Revenues Not Attributed to Programs 25,165 12,631

NET COST OF CONTINUING OPERATIONS $ 56,862,894 $ 54,054,213

The accompanying notes are an integral part of this financial statement.

U.S. DEPARTMENT OF TRANSPORTATION

CONSOLIDATED STATEMENT OF NET COST
186 FY 2005 Performance and Accountability Report

For the Year Ended September 30, 2005 2004

Dollars in Thousands Cumulative

Results of

Operations

Unexpended

Appropriations

Cumulative

Results of

Operations

Unexpended

Appropriations

Beginning Balances $ 49,592,505 $ 5,284,364 $ 54,730,579 $ 3,654,525

Correction of Errors–Prior Period Adjustments (±) (Note 18) (34,827) 16,678 (794,425) 1,214

Beginning Balances, As Adjusted 49,557,678 5,301,042 53,936,154 3,655,739

Budgetary Financing Sources

Appropriations Received — 6,591,723 — 6,757,803

Appropriations Transferred-In / Out (±) — 13,497 — 34,544

Other Adjustments (Rescissions, etc.) (±) (165,954) (499,796) (338,428) (249,022)

Appropriations Used 6,000,797 (6,007,512) 5,028,427 (4,914,464)

Non-Exchange Revenue (Note 18) 48,602,831 44,397,375

Donations & Forfeitures of Cash & Cash Equivalents 2,504 1,718

Transfers-In / Out Without Reimbursement (±) 17,812 17,329

Other Budgetary Financing Sources (9,351) (420)

Other Financing Sources

Donations & Forfeitures of Property — (28,961)

Transfers-In / Out Without Reimbursement (58,866) (72,508)

Imputed Financing from Costs Absorbed by Others 554,579 735,625

Other (±) 8,118 (28,639)

Total Financing Sources 54,952,470 147,912 49,711,518 1,628,862

Net Cost of Operations (±) 56,862,894 54,054,213

Net Change (1,910,424) 147,912 (4,342,695) 1,628,862

ENDING BALANCES $ 47,647,254 $ 5,448,954 $ 49,593,459 $ 5,284,601

The accompanying notes are an integral part of this financial statement.

U.S. DEPARTMENT OF TRANSPORTATION

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION
financial report 187

The accompanying notes are an integral part of this financial statement.

For the Year Ended September 30, 2005 2004 (Restated)

Dollars in Thousands

Budgetary

Non-Budgetary

Financing

Accounts Budgetary

Non-Budgetary

Financing

Accounts

BUDGETARY RESOURCES (Note 19)

Budgetary Authority

Appropriations Received $ 61,516,780 $ — $ 58,421,517 $ —

Borrowing Authority 282,260 456,800 573,912 1,522,351

Contract Authority 50,427,292 — 46,231,541 —

Net Transfers (±) 23,799 — 25,235 —

Unobligated Balance

Beginning of Period 38,244,246 1,595,313 35,767,051 26,454

Net Transfers, Actual (±) 5,370 — 7,545 —

Spending Authority From Offsetting Collections

Earned

Collected 2,011,267 148,995 1,851,577 614,137

Receivable from Federal Sources 199,911 (5,713) 22,840 5,713

Change in Unfilled Customer Orders (±)

Advance Received 55,825 — 36,227 —

Without Advance from Federal Sources 684 32,780 155,008 —

Transfers from Trust Funds 7,711,917 — 6,868,941 —

Subtotal $ 9,979,604 $ 176,062 $ 8,934,593 $ 619,850

Recoveries of Prior Year Obligations 634,513 240,569 299,969 57,000

Temporarily Not Available Pursuant to Public Law (61,067) — (107,734) —

Permanently Not Available (47,818,493) (1,679,091) (44,766,843) (572,038)

TOTAL BUDGETARY RESOURCES $ 113,234,304 $ 789,653 $ 105,386,786 $ 1,653,617

STATUS OF BUDGETARY RESOURCES

Obligations Incurred

Direct $ 67,052,096 $ 330,863 $ 63,452,365 $ 339,088

Reimbursable 2,382,937 — 3,452,900 —

Subtotal $ 69,435,033 $ 330,863 $ 66,905,265 $ 339,088

Unobligated Balance

Apportioned 17,784,534 59,442 14,743,985 27,035

Exempt from Apportionment 190,273 — 311,529 132

Unobligated Balance Not Available 25,824,464 399,348 23,426,007 1,287,362

TOTAL STATUS OF BUDGETARY RESOURCES $ 113,234,304 $ 789,653 $ 105,386,786 $ 1,653,617

RELATIONSHIP OF OBLIGATIONS TO OUTLAYS

Obligated Balance, Net, As Of October 1 $ 67,849,718 $ 2,398,507 $ 65,501,865 $ 2,422,306

Obligated Balance, Net, End of Period

Accounts Receivable (512,900) (59) (321,686) (5,713)

Unfilled Customer Orders From Federal Sources (852,377) (196,088) (894,729) (155,879)

Undelivered Orders 65,744,226 2,337,764 63,932,011 2,475,311

Accounts Payable 5,076,087 1,454 5,344,729 39,558

Outlays

Disbursements 71,847,262 320,115 68,355,322 345,404

Collections (14,658,640) (148,996) (13,217,481) (614,137)

Subtotal $ 57,188,622 $ 171,119 $ 55,137,841 $ (268,733)

Less: Offsetting Receipts 61,990 36,395 662,178 94,685

NET OUTLAYS $ 57,126,632 $ 134,724 $ 54,475,663 $ (363,418)

U.S. DEPARTMENT OF TRANSPORTATION

COMBINED STATEMENT OF BUDGETARY RESOURCES
188 FY 2005 Performance and Accountability Report

U.S. DEPARTMENT OF TRANSPORTATION

CONSOLIDATED STATEMENT OF FINANCING

The accompanying notes are an integral part of this financial statement.

For the Year Ended September 30, 2005 2004

(Restated)

Dollars in Thousands

Resources Used To Finance Activities

Budgetary Resources Obligated

Obligations Incurred $ 69,765,896 $ 67,244,353

Less: Spending Authority From Offsetting Collections and Recoveries 11,030,748 9,911,412

Obligations Net Of Offsetting Collections and Recoveries 58,735,148 57,332,941

Less: Offsetting Receipts 98,385 756,863

Net Obligations 58,636,763 56,576,078

Other Resources

Donations and Forfeitures of Property — (28,961)

Transfers In / Out Without Reimbursement (58,866) (72,508)

Imputed Financing From Costs Absorbed by Others 554,579 735,625

Other Miscellaneous Resources 8,118 (28,639)

Net Other Resources Used To Finance Activities 503,831 605,517

Total Resources Used To Finance Activities $ 59,140,594 $ 57,181,595

Resources Used To Finance Items Not Part Of The Net Cost Of Operations

Change In Budgetary Resources Obligated For Goods, Services, and Benefits Ordered But Not Yet Provided $ 2,137,768 $ 1,562,362

Resources That Fund Expenses Recognized In Prior Periods 290,178 423,023

Budgetary Offsetting Collections And Receipts That Do Not Affect Net Cost of Operations

Credit Program Collections Which Increase Liabilities For Loan Guarantees or Allowances for Subsidy (19,281) (72,899)

Other 12,510 41,100

Resources That Finance the Acquisition of Assets or Liquidation of Liabilities (±) 1,570,399 2,187,920

Other Resources or Adjustments To Net Obligated Resources That Do Not Affect Net Cost of Operations (46,320) 807,781

Total Resources Used To Finance Items Not Part Of The Net Cost of Operations 3,945,254 4,949,287

Total Resources Used To Finance the Net Cost of Operations $ 55,195,340 $ 52,232,308

Components of the Net Cost of Operations That Will Not Require or Generate Resources in the Current Period

Components Requiring / Generating Resources In Future Periods

Increase in Annual Leave Liability $ 31,157 $ 123,231

Upward / Downward Reestimates of Credit Subsidy Expense 3,832 6,000

Increase in Exchange Revenue Receivable From The Public (23,891) (75,457)

Other

Increase in MARAD Liabilities 27,438 —

Increase in FAA Liabilities 196,698 —

Other Miscellaneous Increases 48,385 543,176

Total Components of Net Cost of Operations That Will Require or Generate Resources in Future Periods $ 283,619 $ 596,950

Components Not Requiring or Generating Resources

Depreciation and Amortization $ 1,278,650 $ 1,042,026

Revaluation of Assets or Liabilities 2,233 15,730

Other

Other WCF Components — 170,419

Other FAA Components 68,418 (8,605)

Other Miscellaneous Components 34,634 5,385

Total Components of Net Cost of Operations That Will Not Require or Generate Resources 1,383,935 1,224,955

Total Components of Net Cost of Operations That Will Not Require or Generate Resources In TheCurrent Period $ 1,667,554 $ 1,821,905

NET COST OF OPERATIONS $ 56,862,894 $ 54,054,213

The accompanying notes are an integral part of this financial statement.
financial report 189

A. Basis of Presentation

The Departmental consolidated financial statement has been prepared to report the financial position and

results from operations of the Department of Transportation (DOT), as required by the Chief Financial

Officers Act of 1990 (CFO Act), Title IV of the Government Management Reform Act of 1994 (GMRA).

The statement has been prepared from the books and records of DOT in accordance with Office of

Management and Budget (OMB) requirements for form and content for entity financial statements and

DOT’s accounting policies and procedures.

OMB Circular No. A-136, Financial Reporting Requirements, has been used to prepare the Balance Sheet,

Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of Financing.

They are different from the financial reports prepared pursuant to OMB directives that are used to

monitor and control the use of budgetary resources. Early implementation was not done for the Statement

of Net Cost. OMB Bulletin 01-09, Form and Content of Agency Financial Statements, has been used to

prepare the Statement of Net Cost.

The Balance Sheet presents agency assets and liabilities, and the difference between the two, which is the

agency net position. Agency assets include both entity assets—those which are available for use by the

agency—and non-entity assets—those which are managed by the agency but not available for use in its

operations. Agency liabilities include both those covered by budgetary resources (funded) and those not

covered by budgetary resources (unfunded).

The Statement of Net Cost presents the gross costs of programs less earned revenue to arrive at the net cost

of operations for both programs and for the agency as a whole.

The Statement of Changes in Net Position reports beginning balances, budgetary and other financing

sources, and net cost of operations, to arrive at ending balances.

The Statement of Budgetary Resources provides information about how budgetary resources were made

available as well as their status at the end of the period. Recognition and measurement of budgetary

information reported on this statement is based on budget terminology, definitions, and guidance in OMB

Circular No. A-11, Preparation, Submission, and Execution of the Budget, dated June 2005.

The Statement of Financing is intended to be a bridge between an entity’s budgetary and financial

(i.e., proprietary) accounting. The Statement of Financing illustrates the relationship between net

obligations derived from an entity’s budgetary accounts and net cost of operations derived from an entity’s

proprietary accounts by identifying and explaining key differences between the two numbers. Since DOT

custodial activity is incidental to Departmental operations and not material, a Statement of Custodial

Activity was not prepared. However, sources and dispositions of collections have been disclosed in Note 20

to the financial statements.

The Department is required to be in substantial compliance with all applicable accounting principles and

standards established, issued, and implemented by the Federal Accounting Standards Advisory Board

(FASAB), which is recognized by the American Institute of Certified Public Accountants (AICPA) as the

entity to establish Generally Accepted Accounting Principles (GAAP) for the Federal Government. The

Note 1. Summary of Significant Accounting Policies
190 FY 2005 Performance and Accountability Report

Federal Financial Management Improvement Act (FFMIA) of 1996 requires the Department to comply

substantially with (1) Federal financial management systems requirements, (2) applicable Federal

accounting standards, and (3) the U.S. Government Standard General Ledger at the transaction level.

B. Reporting Entity

The Department serves as the focal point in the Federal Government for the Coordinated National

Transportation Policy. It is responsible for ensuring the safety of all forms of transportation; protecting the

interests of consumers; international transportation agreements; conducting planning and research for the

future; and helping cities and States meet their local transportation needs through financial and technical

assistance.

The Department of Transportation is comprised of the Office of the Secretary and the DOT Operating

Administrations, each having its own management and organizational structure and collectively providing

the necessary services and oversight to ensure the best transportation system possible. The Departmental

consolidated financial statement represents the financial data, including various trust funds, revolving

funds, appropriations, and special funds of the following organizations.

• Office of the Secretary (OST—includes OST Working Capital Fund)

• Federal Aviation Administration (FAA)

• Federal Highway Administration (FHWA)

• Federal Motor Carrier Safety Administration (FMCSA)

• Federal Railroad Administration (FRA)

• Federal Transit Administration (FTA)

• Maritime Administration (MARAD)

• National Highway Traffic Safety Administration (NHTSA)

• Office of Inspector General (OIG)

• Pipeline and Hazardous Materials Safety Administration (PHMSA)

• Research and Innovative Technology Administration (RITA—includes Volpe National Transportation System Center)

• Surface Transportation Board (STB)

In November 2004, President Bush signed into law the Norman Y. Mineta Research and Special Program

Improvement Act to be enacted in February 2005. This new law split Research and Special Programs

Administration (RSPA) who ceases to exist into two different entities, Research and Innovative Technology

Administration (RITA) and Pipeline and Hazardous Materials Safety Administration (PHMSA).

The Saint Lawrence Seaway Development Corporation (SLSDC) is also an entity of DOT. However, since it

is subject to separate reporting under the Government Corporation Control Act and the dollar value of its

activities is not material to Departmental totals, SLSDC’s financial data have not been consolidated in the

DOT financial statements. However, condensed information about SLSDC’s financial position is included

in Note 21.

C. Budgets and Budgetary Accounting

The Department of Transportation follows standard Federal budgetary accounting policies and practices

in accordance with OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget, dated

June 2005. Budgetary accounting facilitates compliance with legal constraints and controls over the use of

Federal funds. Each year, Congress provides each Operating Administration within the Department

appropriations to incur obligations in support of agency programs. For FY 2005 the Department was
financial report 191

accountable for trust fund appropriations, general fund appropriations, revolving funds, and borrowing

authority. The Department recognizes budgetary resources as assets when cash (funds held by Treasury) is

made available through warrants and trust fund transfers.

D. Basis of Accounting

Transactions are generally recorded on an accrual accounting basis and a budgetary basis. Under the

accrual method, revenues are recognized when earned, and expenses are recognized with a liability is

incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with

legal constraints and controls over the use of Federal funds.

E. Revenues and Other Financing Sources

The Department receives the majority of the funding needed to support all of its programs through

appropriations. The Highway Trust Fund, Airport and Airway Trust Fund, and the Treasury General Fund

fund some of these appropriations. DOT receives annual, multi-year and no-year appropriations that may

be used, within statutory limits, for operating and capital expenditures. Additional amounts are obtained

from offsetting collections and user fees (e.g., landing and registry fees) and through reimbursable

agreements for services performed for domestic and foreign governmental entities. Additional revenue is

earned from gifts from donors, sales of goods and services to other agencies and the public, the collection

of fees and fines, interest and dividends on invested funds, and loans and cash disbursements to banks.

Interest income received is recognized as revenue on the accrual basis. Appropriations are recognized as

revenues as the related program or administrative expenses are incurred.

F. Funds with the U.S. Treasury and Cash

The Department does not generally maintain cash in commercial bank accounts. Cash receipts and

disbursements are processed by the U.S. Treasury. The funds with the U.S. Treasury are appropriated,

revolving, and trust funds that are available to pay current liabilities and finance authorized purchases.

DOT has substantially reduced the number of petty cash (imprest) funds outside the U.S. Treasury to

reduce the amount of cash paid outside of Treasury. This reduces the amount of interest that must be paid

to borrow funds. Lockboxes have been established with financial institutions to collect payments, and

these funds are transferred directly to Treasury on a daily (business day) basis. The Department does not

maintain any balances of foreign currencies.

G. Receivables

Accounts receivable consist of amounts owed to the Department by other Federal agencies and the public.

Federal accounts receivable are generally the result of the provision of goods and services to other Federal

agencies and, with the exception of occasional billing disputes, are considered to be fully collectible. Public

accounts receivable are generally the result of the provision of goods and services or the levy of fines and

penalties from the Department’s regulatory activities. Amounts due from the public are presented net of an

allowance for loss on uncollectible accounts, which is based on historical collection experience and/or an

analysis of the individual receivables.

Loans are accounted for as receivables after funds have been disbursed. For loans obligated prior to

October 1, 1991, loan principal, interest, and penalties receivable are reduced by an allowance for

estimated uncollectible amounts. The allowance is estimated based on past experience, present market

conditions, and an analysis of outstanding balances. Loans obligated after September 30, 1991 are reduced

by an allowance equal to the present value of the subsidy costs associated with these loans, due to the

interest rate differential between the loans and Treasury borrowing, the estimated delinquencies and

defaults net of recoveries, the offset from fees, and other estimated cash flows.
192 FY 2005 Performance and Accountability Report

H. Inventory and Operating Materials and Supplies

Inventory primarily consists of supplies that are for sale or used in the production of goods for sale.

Operating materials and supplies primarily consist of unissued supplies that will be consumed in future

operations. Valuation methods for supplies on hand at year-end include historical cost, last acquisition

price, standard price/specific identification, standard repair cost, weighted average, and moving average.

Expenditures or expenses are recorded when the materials and supplies are consumed or sold.

Adjustments for the proper valuation of repairable, excess, obsolete, and unserviceable items are made to

appropriate allowance accounts.

I. Investments in U.S. Government Securities

Investments that consist of U.S. Government securities are reported at cost or amortized cost net of

premiums or discounts. Premiums or discounts are amortized into interest income over the term of the

investment using the interest or straight-line method. The Department’s intent is to hold investments to

maturity, unless they are needed to cover losses on loan guarantees, finance programs, or otherwise sustain

the operation of the organization. Investments, redemptions, and reinvestments are controlled and

processed by the Department of the Treasury.

J. Property and Equipment

DOT agencies have varying methods of determining the value of property and equipment and how it is

depreciated. The Department currently has a capitalization threshold of $200,000 for structures and

facilities and for internal use software, and $25,000 for other property, plant and equipment. Capitalization

at lesser amounts is permitted. Construction in progress is valued at direct (actual) costs plus applied

overhead and other indirect costs as accumulated by the regional project material system. The system

accumulates costs by project number assigned to the equipment or facility being constructed. The

straight-line method is generally used to depreciate capitalized assets.

FASAB standards require DOT stewardship assets to be omitted from the Balance Sheet. Information on

stewardship assets, as well as stewardship investments, is presented in the Required Supplementary

Stewardship Reporting section of this statement.

K. Prepaid and Deferred Charges

Payments in advance of the receipt of goods and services are recorded as prepaid charges at the time of

prepayment and recognized as expenses when the related goods and services are received.

L. Liabilities

Liabilities represent amounts expected to be paid as the result of a transaction or event that has already

occurred. Liabilities covered by budgetary resources are liabilities incurred that are covered by realized

budgetary resources as of the balance sheet data. Available budgetary resources include new budget

authority, spending authority from offsetting collections, recoveries of unexpired budget authority through

downward adjustments of prior year obligations, unobligated balances of budgetary resources at the

beginning of the year or net transfers of prior year balances during the year, and permanent indefinite

appropriations or borrowing authority. Unfunded liabilities are not considered to be covered by such

budgetary resources. An example of an unfunded liability is actuarial liabilities for future Federal

Employees’ Compensation Act payments. The Government, acting in its sovereign capacity, can abrogate

liabilities arising from other than contracts.
M. Contingencies

The criteria for recognizing contingencies for claims are

1. a past event or exchange transaction has occurred as of the date of the statements;

2. a future outflow or other sacrifice of resources is probable; and

3. the future outflow or sacrifice of resources is measurable (reasonably estimated).

DOT recognizes material contingent liabilities in the form of claims, legal action, administrative

proceedings and environmental suits that have been brought to the attention of legal counsel, some of

which will be paid by the Treasury Judgment Fund. It is the opinion of management and legal counsel that

the ultimate resolution of these proceedings, actions and claims, will not materially affect the financial

position or results of operations.

N. Annual, Sick, and Other Leave

Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. Accruals for other leave

(e.g., credit hours and compensatory leave) are also recorded in the financial statements. Under the OST

Working Capital Fund, the liability for accrued annual leave is a funded item. To the extent current or

prior year appropriations are not available to fund annual leave earned but not taken, funding will be

obtained from future financing sources. Sick leave and other types of non-vested leave are expended as

taken.

Air traffic controllers covered under the Federal Employees’ Retirement System (FERS) are eligible, upon

retirement, for a sick leave buy-back option. Under this option, an employee who attains the required

number of years of service for retirement shall receive a lump sum payment for forty percent of the value

of his or her accumulated sick leave as of the effective date of retirement.

O. Retirement Plan

For DOT employees who participate in the Civil Service Retirement System (CSRS), the Department

contributes a matching contribution equal to 7 percent of pay. On January 1, 1987, FERS went into effect

pursuant to Public Law 99-335. Most employees hired after December 31, 1983 are automatically covered

by FERS and Social Security. Employees hired prior to January 1, 1984 could elect to either join FERS and

Social Security or remain in CSRS. A primary feature of FERS is that it offers a savings plan to which the

Department automatically contributes 1 percent of pay and matches any employee contribution up to an

additional 4 percent of pay. For most employees hired since December 31, 1983, DOT also contributes the

employer’s matching share for Social Security.

Employing agencies are required to recognize pensions and other post-retirement benefits during the

employees’ active years of service. Reporting the assets and liabilities associated with such benefits is the

responsibility of the administering agency, the Office of Personnel Management. Therefore, DOT does not

report CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to

employees.

P. Comparative Data

Comparative data for the prior year have been presented for the principal financial statements and their

related notes.

financial report 193
194 FY 2005 Performance and Accountability Report

Q. Use of Estimates

Management has made certain estimates and assumptions when reporting assets, liabilities, revenue,

expenses, and in the note disclosures. Actual results could differ from these estimates. Significant estimates

underlying the accompanying financial statements include the allocation of trust fund receipts by the

Office of Treasury’s Assessment, year-end accruals of accounts and grants payable, accrued workers’

compensation, and allowance for doubtful accounts receivable. Acutal results may differ from these

estimates.

R. Reclassifications

Certain reclassifications were made to the FY 2004 financial statement presentation to conform with that

used in FY 2005.
financial report 195

As of September 30, 2005 2004

Intragovernmental

Fund Balance with Treasury $ 7,066 $ (20,029)

Accounts Receivable 2,931 —

Other — 104

Total Intragovernmental $ 9,997 $ (19,925)

Accounts Receivable 1,637 1,872

Total Non-Entity Assets $ 11,634 $ (18,053)

Total Entity Assets 65,956,912 68,304,062

Total Assets $ 65,968,546 $ 68,286,009

Note 2. Non-Entity Assets

Dollars in Thousands
196 FY 2005 Performance and Accountability Report

Fund Balances With Treasury are the aggregate amounts of the entity’s accounts with Treasury for which

the entity is authorized to make expenditures and pay liabilities. Other Fund Types include uncleared

Suspense Accounts, which temporarily hold collections pending clearance to the applicable account, and

Deposit Funds, which are established to record amounts held temporarily until ownership is determined.

As of September 30, 2005 2004

Fund Balances

Trust Funds $ 4,992,309 $ 5,641,157

Revolving Funds 609,041 565,957

Appropriated Funds 22,713,473 22,940,005

Other Fund Types 826,019 574,231

Total Fund Balances $ 29,140,842 $ 29,721,350

Status of Fund Balance With Treasury

Unobligated

Available $ 8,171,205 $ 7,919,946

Unavailable 1,461,669 1,192,028

Obligated Balance Not Yet Disbursed 19,145,967 20,609,376

Non-Budgetary Fund Balance With Treasury 362,001 —

Total Status of Fund Balance With Treasury $ 29,140,842 $ 29,721,350

Note 3. Fund Balance With Treasury

Dollars in Thousands
financial report 197

Note 4. Investments

Dollars in Thousands

As of September 30, 2005 Amortized Market

(Premium) Investments Other Value

Cost Discount (Net) Adjustments Disclosure

Intragovernmental Securities

Marketable $ 65,850 $ (799) $ 65,051 $ (635) $ 64,416

Non-Marketable

Par Value 18,318,001 — 18,318,001 — 18,318,001

Market-Based 528,116 (663) 527,453 — 527,453

Subtotal 18,911,967 (1,462) 18,910,505 (635) 18,909,870

Accrued Interest 91,129 — 91,129 — 91,129

Total Intragovernmental $ 19,003,096 $ (1,462) $ 19,001,634 $ (635) $ 19,000,999

As of September 30, 2004

Intragovernmental Securities

Marketable $ 88,269 $ (1,015) $ 87,254 $ 674 $ 87,928

Non-Marketable

Par Value 20,103,444 — 20,103,444 — 20,103,444

Market-Based 351,488 (342) 351,146 — 351,146

Subtotal 20,543,201 (1,357) 20,541,844 674 20,542,518

Accrued Interest 75,706 — 75,706 — 75,706

Total Intragovernmental $ 20,618,907 $ (1,357) $ 20,617,550 $ 674 $ 20,618,224

Investments in Federal securities include non-marketable par value Treasury securities, market-based

Treasury securities, marketable Treasury securities, and securities issued by other Federal entities.

Non-Federal securities include those issued by State and local governments, Government-sponsored

enterprises, and other private corporations.

Marketable Federal securities can be bought and sold on the open market. Non-marketable par value

Treasury securities are issued by the Bureau of Public Debt to Federal accounts and are purchased and

redeemed at par exclusively through Treasury’s Federal Investment Branch. Non-marketable market-based

Treasury securities are also issued by the Bureau of Public Debt to Federal accounts. They are not traded

on any securities exchange but mirror the prices of particular Treasury securities trading in the

Government securities market. Amortization is done using the interest or straight-line method.
198 FY 2005 Performance and Accountability Report

Allowance for Uncollectible Amounts is based on historical data or actual amounts that are determined to

be uncollectible based upon review of individual receivables. Accrued interest includes interest, penalties,

and other administrative charges pertaining to accounts receivable.

Note 5. Accounts Receivable

Dollars in Thousands

Gross

Amount

Due

Allowance for

Uncollectable

Amounts

FY 2005

Net Amount

Due

FY 2004

Net Amount

Due

Intragovernmental

Accounts Receivable $ 358,878 $ 21 $ 358,857 $ 189,800

Total Intragovernmental 358,878 21 358,857 189,800

Public

Accounts Receivable $ 222,861 $ 78,407 $ 144,454 $ 338,925

Accrued Interest 113 — 113 127

Total Public 222,974 78,407 144,567 339,052

Total Receivables $ 581,852 $ 78,428 $ 503,424 $ 528,852
financial report 199

FY 2005 FY 2004

Intragovernmental

Advances and Prepayments $ 95,627 $ 224,038

Undistributed Assets and Payments — 3,932

Other 719 1,036

Total Intragovernmental $ 96,346 $ 229,006

Public

Advances to the States $ 95,861 $ 98,557

Other Advances and Prepayments 62,486 149,397

Other 2,536 669

Total Public $ 160,883 $ 248,623

Intragovernmental Other Assets are comprised of advance payments to other Federal Government entities

for agency expenses not yet incurred and for goods or services not yet received and undistributed assets

and payments for which DOT is awaiting documentation. Public Other Assets are comprised of advances

to the States and advances to employees and contractors.

Note 6. Other assets

Dollars in Thousands
200 FY 2005 Performance and Accountability Report

DOT administers the following direct loan and/or loan guarantee programs:

1. Railroad Rehabilitation Improvement Program

2. Amtrak Loans

3. Transportation Infrastructure Finance Innovation Act (TIFIA) Loan

4. Federal Ship Financing Fund (Title XI)

5. OST Minority Business Resource Center Guaranteed Loan Program

6. Federal Ship Liquidating Fund (Title XI)

An analysis of loans receivable, allowance for subsidy costs, liability for loan guarantees, foreclosed

property, modifications, reestimates, and administrative costs associated with the direct loans and loan

guarantees is provided in the following sections.

Note 7. Direct Loans and Loan Guarantees, Non-Federal Borrowers

Dollars in Thousands

FY 2005 Value of

Loans Assets Related

Receivable, Interest Foreclosed Foreclosed to Loans

Gross Receivable Property Allowance Receivable

Direct Loan Programs

Prior to FY 1992 Allowance for Loss method

(1) Railroad Rehab. Improvement $ 26,078 $ — $ — $ — $ 26,078

Direct Loan Programs (After FY 1991)

(1) Railroad Rehab. Improvement $ 398,197 $ 6,453 $ — $ (10,242) $ 394,408

(3) TIFIA Loan 289,876 7,099 — (22,903) 274,072

Subtotal 688,073 13,552 — (33,145) 668,480

LOANS RECEIVABLE AND RELATED FORECLOSED PROPERTY, NET

FY 2004 Value of

Loans Assets Related

Receivable, Interest Foreclosed Foreclosed to Loans

Gross Receivable Property Allowance Receivable

Direct Loan Programs

Prior to FY 1992 Allowance for Loss method

(1) Railroad Rehab. Improvement $ 30,593 $ 981 $ — $ — $ 31,574

Direct Loan Programs (After FY 1991)

(1) Railroad Rehab. Improvement $ 333,873 $ 4,539 $ — $ (24,382) $ 314,030

(3) TIFIA Loan 190,162 7,738 — (9,114) 188,786

Subtotal 524,035 12,277 — (33,495) 502,816

Direct Loan Programs FY 2005 FY 2004

(1) Railroad Rehab. Improvement $ 85,808 $ 222,619

(3) TIFIA Loan 102,087 87,541

Subtotal $ 187,895 $ 310,160

TOTAL AMOUNT OF DIRECT LOANS DISBURSED (POST-1991)
financial report 201

FY 2005

Subsidy Expense for New Direct Loans Disbursed

Interest Fees & Other Modifications /

Differential Defaults Collections Re-Estimates Total

Direct Loan Programs

(1) Railroad Rehab. Improvement $ — $ — $ — $ 14,585 $ 14,585

(3) TIFIA Loans — 6,926 — 2,884 9,810

Subtotal $ — $ 6,926 $ — $ 17,469 $ 24,395

FY 2004

Direct Loan Programs

(1) Railroad Rehab. Improvement $ — $ — $ — $ (16,333) $ (16,333)

(3) TIFIA Loans — 462 — — 462

Subtotal $ — $ 462 $ — $ (16,333) $ (15,871)

SUBSIDY EXPENSE FOR DIRECT LOANS BY PROGRAM AND COMPONENT

FY 2005 Interest Fees & Other

Differential Defaults Collections Other Total

Direct Loan Programs

(1) Railroad Rehab. Improvement 0.00% 0.00% 0.00% 0.00% 0.00%

(3) TIFIA Loans 0.00% 5.51% 0.00% 0.00% 5.51%

Subtotal 0.00% 5.51% 0.00% 0.00% 5.51%

BUDGET SUBSIDY RATES FOR DIRECT LOANS FOR THE CURRENT YEAR COHORT

Beginning Balance, Changes, and Ending Balance FY 2005 FY 2004

Beginning Balance of the Subsidy Cost Allowance $ 33,496 $ (138,048)

Add: Subsidy Expense for Direct Loans Disbursed during the Reporting Years by Component

Fees and Other Collections (1,238) (18,333)

Other Subsidy Costs — 1,238

Total of the Above Subsidy Expense Components $ (1,238) $ (17,095)

Adjustments

Subsidy Allowance Amortization (15,650) 204,972

Ending Balance of the Subsidy Cost Allowance Before Reestimates $ 16,608 $ 49,829

Add or Subtract Subsidy Reestimates by Component

Interest Rate Reestimate 140 (16,333)

Technical/Default Reestimate 17,329 —

Total of the Above Reestimate Components $ 17,469 $ (16,333)

Ending Balance of the Subsidy Cost Allowance $ 34,077 $ 33,496

SCHEDULE FOR RECONCILING SUBSIDY COST ALLOWANCE BALANCES (POST-1991 DIRECT LOANS)

Note 7. direct loans and loan guarantees, non-federal borrowers (cont.)

Dollars in Thousands
202 FY 2005 Performance and Accountability Report

FY 2005 FY 2004

Loan Guarantee Programs

(4) Federal Ship Financing Fund (Title XI) $ 392,870 $ 378,061

(5) OST Minority Business Resource Center 581 551

Total $ 393,451 $ 378,612

TOTAL LIABILITIES FOR LOAN GUARANTEES (PRESENT VALUE METHOD)

Value of

Loans Assets Related

Receivable, Interest Foreclosed Foreclosed to Loans

FY 2005 Gross Receivable Property Allowance Receivable

(4) Federal Ship Financing Fund (Title XI) $ 87,357 $ 2,617 $ 19,004 $ (43,088) $ 65,890

FY 2004

(4) Federal Ship Financing Fund (Title XI) $ 431,967 $ 5,876 $ 7,000 $ (375,146) $ 69,697

DEFAULTED GUARANTEED LOANS FROM POST-1991 GUARANTEES

Outstanding Amount of

Principal of Outstanding

Guaranteed Loans, Principal

Face Value Guaranteed

(3) TIFIA Loans $ — $ —

(4) Federal Ship Financing Fund (Title XI) 3,107,642 3,107,642

(5) OST Minority Business Resource Center 8,600 6,450

(6) Federal Ship (Title XI) Liquidating Fund 13,302 13,302

Subtotal $ 3,129,544 $ 3,127,394

NEW GUARANTEED LOANS DISBURSED

FY 2005

(3) TIFIA Loans $ — $ —

(4) Federal Ship Financing Fund (Title XI) 11,969 11,969

(5) OST Minority Business Resource Center 6,200 4,650

Subtotal $ 18,169 $ 16,619

FY 2004

(3) TIFIA Loans $ — $ —

(4) Federal Ship Financing Fund (Title XI) 176,369 176,369

(5) OST Minority Business Resource Center 6,961 5,221

Subtotal $ 183,330 $ 181,590

GUARANTEED LOANS OUTSTANDING

Note 7. DirectLoans and Loan Guarantees,Non-FederalBorrowers (cont.)

Dollars in Thousands
financial Report 203

Subsidy Expense for New Loan Guarantees Disbursed

Defaults Fees & Other Other Modifications /

FY 2005 Net Collections Subsidy Costs Re-Estimates Total

(3) TIFIA Loans $ — $ — $ — $ — $ —

(4) Federal Ship Financing Fund (Title XI) (876) 5,793 9,582 — 14,499

(5) OST Minority Business Resource 131 — — (136) (5)

Subtotal $ (745) $ 5,793 $ 9,582 $ (136) $ 14,494

FY 2004

(3) TIFIA Loans $ — $ — $ — $ — $ —

(4) Federal Ship Financing Fund (Title XI) 3,690 (27,774) — (45,097) (69,181)

(5) OST Minority Business Resource (181) — — 166 (15)

Subtotal $ 3,509 $ (27,774) $ — $ (44,931) $ (69,196)

SUBSIDY EXPENSE FOR LOAN GUARANTEES BY PROGRAM AND COMPONENT

FY 2005

Interest Fees & Other

Differential Defaults Collections Other Total

Loan Guarantee Programs

(3) TIFIA Loans 0.00% 0.00% 0.00% 0.00% 0.00%

(4) Federal Ship Financing Fund (Title XI) 0.00% 5.00% 0.00% 0.00% 5.00%

(5) OST Minority Business Resource 0.00% 2.08% 0.00% 0.00% 2.08%

Subtotal 0.00% 7.08% 0.00% 0.00% 7.08%

BUDGET SUBSIDY RATES FOR LOAN GUARANTEES FOR THE CURRENT YEAR COHORT

Note 7. direct loans and loan guarantees, non-federal borrowers (cont.)

Dollars in Thousands
204 FY 2005 Performance and Accountability Report

The Federal Credit Reform Act of 1990 divides direct loans and loan guarantees into two groups: (1) Pre1992 means the direct loan obligations or loan guarantee commitments made prior to FY 1992 and the

resulting direct loan obligations or loan guarantees, and (2) Post-1991 means the direct loan obligations or

loan guarantee commitments made after FY 1991 and the resulting direct loans or loan guarantees.

The Act provides that, for direct loan obligations or loan guarantee commitments made after FY 1991, the

present value of the subsidy costs (which arises from interest rate differentials, interest subsidies,

delinquencies and defaults, fee offsets, and other cash flows) associated with direct loans and loan

guarantees be recognized as a cost in the year the direct or guaranteed loan is disbursed.

Direct loans are reported net of an allowance for subsidy at present value, and loan guarantee liabilities are

reported at present value. Foreclosed property is valued at the net realizable value. Loans receivable, net, or

their value of assets related to direct loans, is not the same as the proceeds that they would expect to

receive from selling their loans. DOT calculated the allowance for pre-1992 using the allowance for loss

method.

Administrative costs could not be determined and disclosed because DOT has not fully implemented cost

accounting Department-wide.

FY 2005 FY 2004

Beginning Balance of the Loan Guarantee Liability $ 378,612 $ 293,276

Add: Subsidy Expense for Guaranteed Loans Disbursed during the Reporting Years by Component

Default Costs (net of recoveries) (745) (3,509)

Fees and Other Collections 5,793 27,774

Other Subsidy Costs 9,582 —

Total of the Above Subsidy Expense Components $ 14,630 $ 24,265

Adjustments

Fees Received (6,068) —

Interest Supplements Paid (12,000) —

Interest Accumulation on the Liability Balance 18,413 16,140

Ending Balance of the Loan Guarantee Liability Before Reestimates $ 393,587 $ 333,681

Add or Subtract Subsidy Reestimates by Component

Technical/Default Reestimate (136) 44,931

Total of the Above Reestimate Components $ (136) $ 44,931

Ending Balance of the Loan Guarantee Liability $ 393,451 $ 378,612

SCHEDULE FOR RECONCILING LOAN GUARANTEE LIABILITY BALANCES (POST-1991 LOAN GUARANTEES)

Note 7. DirectLoans and Loan Guarantees,Non-FederalBorrowers (cont.)

Dollars in Thousands
financial Report 205

Note 8. Inventory and Related Property

Cost

Allowance

for Loss

FY 2005

Net

FY 2004

Dollars in Thousands Net

Inventory

Inventory Held for Current Sale $ 87,928 $ — $ 87,928 $ 78,396

Excess, Obsolete and Unserviceable Inventory 18,301 6,339 11,962 12,962

Inventory Held for Repair 414,809 86,148 328,661 321,511

Other 13,632 — 13,632 13,632

Total Inventory $ 534,670 $ 92,487 $ 442,183 $ 426,501

Operating Materials and Supplies

Items Held for Use $ 451,334 $ 21,295 $ 430,039 $ 403,634

Items Held for Reserve for Future Use 66,472 — 66,472 69,644

Excess, Obsolete and Unserviceable Items 71,862 71,862 — 11,619

Items Held for Repair 4,724 3,779 945 2,115

Total Operating Materials & Supplies $ 594,392 $ 96,936 $ 497,456 $ 487,012

Total Inventory and Related Property $ 939,639 $ 913,513

All DOT inventory is in FAA and the OST Working Capital Fund. Valuation methods used include

moving weighted average, standard price/specific identification, and last acquisition price.

DOT operating materials and supplies are in FAA and MARAD. Valuation methods used include

historical cost, last acquisition price, standard price/specific identification, standard repair cost, weighted

average, and moving weighted average. The only restriction on use is that FAA is not permitted to donate.
Note 9. General Property, Plant and Equipment

Dollars in Thousands

FY 2005 FY 2004

Service Acqusition Accumulated Net Book Net Book

Major Classes Life Value Depreciation Value Value

Land and Improvements $ 103,176 $ 294 $ 102,882 $ 97,332

Buildings and Structures Various 4,244,680 2,160,573 2,084,107 2,108,539

Furniture and Fixtures Various 124,981 84,243 40,738 28,656

Equipment Various 14,959,696 7,304,412 7,655,284 7,121,918

ADP Software Various 123,933 96,474 27,459 51,772

Electronics 6-10 years 738 730 8 14

Assets Under Capital Lease Various 125,923 80,732 45,191 54,116

Leasehold Improvements Various 55,014 23,441 31,573 33,874

Aircraft 11-20 years 401,614 263,143 138,471 150,309

Ships and Vessels Over 20 years 1,738,934 1,117,017 621,917 693,760

Small Boats Various 24,888 24,239 649 953

Other Vehicles 1-5 years 27 27 — —

Construction in Progress 4,565,239 — 4,565,239 5,037,358

Property Not in Use 7,706 3,006 4,700 11,335

Other Micellaneous Property 9,373 2,199 7,174 5,423

Total $ 26,485,922 $ 11,160,530 $ 15,325,392 $ 15,395,359

Depreciation is computed using the straight line method. Net book value of multi-use heritage assets is

now included in general property, plant and equipment, while “physical quantity” information is included

in the Heritage Assets section of Required Supplemental Stewardship Information.

206 FY 2005 Performance and Accountability Report
Note 10. Liabilities Not Covered By Budgetary Resources

Dollars in Thousands

financial report 207

FY 2005 FY 2004

Intragovernmental

Debt $ — $ 363,583

Other Liabilities 477,063 569,782

Total Intragovernmental $ 477,063 $ 933,365

Accounts Payable $ 44 $ 44

Federal Employee and Veterans’ Benefits Payable 1,007,303 1,018,541

Environmental and Disposal Liabilities 1,003,585 1,135,163

Other Liabilities 1,011,512 980,690

Total Liabilities Not Covered by Budgetary Resources $ 3,499,507 $ 4,067,803

Total Liabilities Covered by Budgetary Resources 9,372,831 9,340,146

Total Liabilities $ 12,872,338 $ 13,407,949
Note 11. Debt

Dollars in Thousands

Net Change

FY 2004 During FY 2005

Ending Balance Fiscal Year Ending Balance

Intragovernmental Debt

Debt to the Treasury $ 1,147,529 $ (197,876) $ 949,653

Debt to the Federal Financing Bank 3,077 (194) 2,883

Total Intragovernmental $ 1,150,606 $ (198,070) $ 952,536

Net Change During Fiscal Year includes new borrowing, repayments and net change in accrued payables.

Debt to the Treasury and to the Federal Financing Bank is for FRA direct loans to railroads, for FHWA

direct loans under the Transportation Infrastructure Finance and Innovation Act (TIFIA), for MARAD

Title XI guaranteed loans, and for the FAA Aircraft Purchase Loan Guarantee Program.

208 FY 2005 Performance and Accountability Report
Note 12. Other Liabilities

Dollars in Thousands

financial report 209

FY 2005

Non-Current Current FY 2005 Total

Intragovernmental

Advances and Prepayments $ — $ 2,689,272 $ 2,689,272

Accrued Pay and Benefits — 45,902 45,902

Undisbursed Loans 152,634 — 152,634

FECA Billings 118,311 92,178 210,489

Uncleared Disbursements and Collections — (35,698) (35,698)

Deposit Funds — 9,094 9,094

Other Accrued Liabilities 2,125 304,746 306,871

Total Intragovernmental $ 273,070 $ 3,105,494 $ 3,378,564

Public

Other Accrued Unbilled Payments $ — $ 81,143 $ 81,143

Accrued Pay and Benefits 134,055 721,692 855,747

Legal Claims 470 6,588 7,058

Deferred Credits 27,903 1,766 29,669

Capital Leases 42,597 8,193 50,790

Advances and Prepayments — 258,418 258,418

Uncleared Disbursements and Collections — (7,495) (7,495)

Deposit Funds (2) 2,145 2,143

Other Custodial Liability 231 8,457 8,688

Other Accrued Liabilities 331,577 23,678 355,255

Total Public $ 536,831 $ 1,104,585 $ 1,641,416

FY 2004

Non-Current Current FY 2004 Total

Intragovernmental

Advances and Prepayments $ 2,635,418 $ 238,309 $ 2,873,727

Accrued Pay and Benefits 1,243 40,112 41,355

Undisbursed Loans 166,915 148 167,063

FECA Billings 121,895 96,248 218,143

Uncleared Disbursements and Collections — 1,002 1,002

Deposit Funds — 6,233 6,233

Other Accrued Liabilities 356,460 4,322 360,782

Total Intragovernmental $ 3,281,931 $ 386,374 $ 3,668,305

Public

Other Accrued Unbilled Payments $ — $ 60,705 $ 60,705

Accrued Pay and Benefits 557,084 216,800 773,884

Legal Claims 215 26,190 26,405

Deferred Credits 51,518 — 51,518

Capital Leases 46,909 13,663 60,572

Advances and Prepayments 1,534 37,105 38,639

Uncleared Disbursements and Collections 229 (3,771) (3,542)

Deposit Funds — 16,933 16,933

Other Accrued Liabilities 144,347 119,632 263,979

Total Public $ 801,836 $ 487,257 $ 1,289,093

Accrued pay and benefits pertain to unpaid pay and benefits, and may be either current or non-current.

Agency expenses for payments made under the Federal Employees Compensation Act (FECA) are

forwarded to the Department of Labor (DOL). Funding for FECA is normally appropriated to agencies in

the fiscal year two years subsequent to the actual FECA billing from DOL.
Note 13. Grant Accrual

Dollars in Thousands

210 FY 2005 Performance and Accountability Report

FY 2005 FY 2004

Highway Trust Fund $ 2,274,780 $ 2,195,580

Federal Transit Administration 1,281,550 1,541,381

Federal Aviation Administration 507,590 435,879

Federal Highway Administration (non-trust fund) 17,908 —

Federal Railroad Administration 4,900 7,600

Total Grant Accrual $ 4,086,728 $ 4,180,440

Grant liabilities are accrued in two categories. The first category is grant related requests for payments that

had been billed to an agency as of September 30, but had not yet been paid. The second category is for the

grant related costs incurred, but not yet reported (IBNR). IBNR represents an estimate of amounts due to

grantees for their expenditures made through September 30, for which payment requests have not been

received from grantees as of September 30.

Grant accruals, by Operating Administration, at September 20, 2005 and 2004 are summarized as follows:
Note 14. Environmental and Disposal Liabilities

Dollars in Thousands

financial Report 211

FY 2005 FY 2004

Public

Environmental Cleanup Liabilities

FAA Environmental Remediation $ 596,536 $ 366,762

FAA Environmental Cleanup and Decommissioning — 239,499

MARAD Environmental Cleanup (PCB, Lead, Oil) 407,049 528,902

Total Public $ 1,003,585 $ 1,135,163

Environmental cleanup generally occurs under the Resource Conservation and Recovery Act of 1976

(RCRA), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA

or Superfund), or the Toxic Substances Control Act (TSCA). Environmental remediation includes the fuel

storage tank program, fuels, solvents, industrial, and chemicals, and other environmental cleanup

associated with normal operations or as a result of an accident. Cost estimates for environmental and

disposal liabilities are not adjusted for inflation and are subject to revision as a result of changes in

technology and environmental laws and regulations.

The current law requires all non-retention ships to be disposed of by the end of FY 2006. If an extension of

this requirement is not granted and/or foreign scrapping is not available, then MARAD could realize a

substantial increase in this unfunded environmental liabilities.
212 FY 2005 Performance and Accountability Report

Note 15. Contingencies, Commitments, and Other Disclosures

Contingencies

Hurricane Katrina and Rita Disaster Relief. In September 2005, Hurricanes Katrina and Rita

significantly affected certain sections with the states of Louisiana, Florida, Mississippi, Texas and Alabama.

Currently DOT in conjunction with other Federal entities is assessing the estimated financial impact of the

affected areas. Congress may be providing supplemental appropriations to aid in the rebuilding efforts. As

of September 30, 2005 DOT obligated $290 million of which $161 million will reimbursed to the DOT

from FEMA. For FY 2006, DOT has obligated $233 million of which $.126 million will be reimbursed to

DOT from FEMA.

These funds cover certain transit and travel costs used in evacuating and relocating displaced persons; a

Ready Reserve Fleet of ships used for temporary housing, relief and recovery; airfield and terminal repairs;

restoration of FAA facilities; pipeline inspection; emergency work to restore essential traffic and minimize

damage, and protect remaining facilities and; repair and rebuild railroad infrastructure in a safe manner.

Legal Claims. As of September 30, 2005 and 2004, FAA's contingent liabilities for asserted and pending

legal claims reasonably possible of loss were estimated at $65.1 million and $76.7 million, respectively.

FAA does not have material amounts of known unasserted claims.

Grant Programs. FHWA pre-authorizes states to establish construction budgets without having received

appropriations from Congress for such projects. FHWA does not guarantee the ultimate funding to the

states for these “Advance Construction” projects and, accordingly, does not obligate any funds for these

projects. When funding becomes available to FHWA, the States can then apply for reimbursement of costs

that they have incurred on such project, at which time FHWA can accept or reject such request. For the

fiscal year ended September 30, 2005 and 2004, FHWA has pre-authorized $40 billion and $36 billion,

respectively, under these arrangements; however, no liability is reflected in the Highway Trust Fund

financial statements at September 30, 2005 and 2004, for these arrangements.

FTA executes Full Funding Grant Agreements (FFGAs) under its Capital Investment program (New

Starts) authorizing transit authorities to establish project budgets and incur costs with their own funds in

advance of annual appropriations by Congress. As of June 30, 2005, approximately $2.183 billion in

Section 5309 New Starts funds has been committed under FFGAs, but not yet appropriated by Congress.

However, no liability is reflected in the DOT financial statements at June 30, 2005, for these agreements.

Contract Options and Negotiations. As of September 30, 2005 and 2004, FAA had contract options of

$10 billion and $10.9 billion, respectively. These contract options give FAA the unilateral right to purchase

additional equipment or services or to extend the contract terms. Exercising this right would require the

obligation of funds in future years.

Aviation Insurance Program. FAA is authorized to issue hull and liability insurance under the Aviation

Insurance Program for air carrier operations for which commercial insurance is not available on

reasonable terms and when continuation of U.S. flag commercial air service is necessary in the interest of

air commerce, National security, and the U.S. foreign policy. FAA may issue (1) non-premium insurance,

and (2) premium insurance for which a risk-based premium is charged to the air carrier, to the extent

practical.
financial report 213

FAA maintains standby non-premium war-risk insurance policies for 37 air carriers having approximately

1,433 aircraft available for Defense or State Department charter operations.

On September 22, 2001, the Air Transportation Safety and System Stabilization Act (Public Law 107-42)

expanded premium insurance program authority to permit insurance of domestic operations. Under this

program, FAA initially provided third party liability war-risk insurance to U.S. carriers whose coverage

was cancelled following the terrorist attacks of September 11, 2001. Public Law 108-11 (and subsequent

amendments) required FAA to extend policies in effect on July 19, 2002, until August 31, 2005 and gave

the Secretary of Transportation discretion to further extend coverage through December 31, 2005. It also

mandated provision of hull loss and passenger and third party war risk liability insurance for those

policies. There are 77 FAA premium war-risk policies. Insured air carrier per occurrence limits for

combined hull and liability coverage range from $100 million to $4 billion.

Current war risk coverage is intended as a temporary measure to provide insurance to qualifying carriers

while allowing time for the commercial insurance market to stabilize. Premiums under this program are

established by FAA and are based on the value of policy coverage limits and aircraft activity. However,

airlines’ total charge for coverage is subject to a cap mandated by Congress. During FY 2005 and FY 2004,

FAA recognized insurance premium revenue of $157.5 million and $145.6 million, respectively. Premiums

are recognized as revenue on a straight-line basis over the period of coverage. Premium revenue is

reported on the FAA’s Consolidated Statement of Net Cost, under “Regional and Center Operations and

Other Programs.”

Typically, the maximum liability for both hull loss and liability, per aircraft, is $1.75 billion. No claims for

losses were pending as of September 30, 2005, or 2004. In the past, FAA has insured a small number of air

carrier operations and established a maximum liability for losing one aircraft. Since the inception of the

Aviation Insurance Program dating back to 1951, only four claims, all involving minor dollar amounts,

have been paid. Because of the unpredictable nature of war risk and the absence of historical claims

experience on which to base an estimate, no reserve for insurance losses has been funded.

Environmental. FAA is a party to two major environmental remediation projects in which the extent of

the liability is unknown. A study is in process to determine the magnitude and scope of the remediation

required at the two sites. Of the total environmental liability reported as of September 30, 2005, and 2004,

the amount related to these two sites is $50.3 million and $49.3 million, respectively. This liability includes

FAA's share of the known remediation cost and the cost to complete the study.

Commitments

Grant Programs. FAA’s Airport Improvement Program provides grants for the planning and development

of public-use airports that are included in the National Plan of Integrated Airport Systems. Eligible

projects generally include improvements related to enhancing airport safety, capacity, security and

environmental concerns. FAA's share of eligible costs for large and medium primary hub airports is 75%

with the exception of noise program implementation, which is 80%. For remaining airports (small

primary, relievers, and general aviation airports), FAA's share of eligible costs is 90%.

FAA has authority under 49 U.S.C. 47110(e) to issue letters of intent to enter into Airport Improvement

Program grant agreements. FAA records an obligation when a grant is awarded. Through September 30,

2005, FAA issued letters of intent covering FY 1988 through FY 2015 totaling $4.7 billion. As of September

30, 2005, FAA had obligated $3.6 billion of this total amount leaving $1.2 billion unobligated.
214 FY 2005 Performance and Accountability Report

Through September 30, 2004, FAA issued letters of intent covering FY 1988 through FY 2014 totaling

$4.7 billion. As of September 30, 2004, FAA had obligated $3.3 billion of this total amount, leaving $1.4

billion unobligated.

Other Disclosures

Overflight User Fees. FAA aviation overflight user fees were the subject of litigation for several years. As a

result, FAA suspended these billings in April 2003 and had no collections during fiscal year 2004. The

litigation ended in the latter part of FY 2004, and FAA resumed billing in FY 2005. Aviation overflight user

fee revenue was $109.7 million in FY 2005. Also, in FY 2005, the FAA Adminstrator appointed an Aviation

Rulemaking Committee. The Committee is studying FAA's fee-setting procedures with a view to making

recommendations in FY 2006 as to how procedures might be improved and the fees updated. Depending

on the outcome of the Committee's deliberations and the Administrator's assessment of its

recommendations, the fee structure may change accordingly.
financial report 215

Note 16. Net Cost By Program

Dollars in Thousands

FY 2005 FY 2004

PROGRAM COSTS

SURFACE

Highway Surface Transportation $ 7,496,099 $ 7,256,287

Mass Transit 8,007,313 8,195,431

National Highway System 7,149,319 7,116,070

Interstate Maintenance 4,109,000 3,933,214

Bridge Program 3,986,213 3,498,203

Highway Minimum Guarantee 2,302,346 2,516,100

Other Highway Trust Fund Programs 1,523,654 1,572,855

Other Highway Programs 399,239 217,537

High Priority Projects 1,102,491 1,183,664

Federal Railroad Administration Grants 1,267,104 1,187,760

Congestion Mitigation and Air Quality 810,589 937,166

Highway Safety Programs 463,792 780,926

Appalachian Development Highway 291,269 261,943

DOT Allocated Highway Programs 700,362 23,144

Department of Interior Allocated Highway Programs 98,252 401,112

Federal Lands Highways 314,338 221,599

Federal Motor Carrier Safety 381,217 396,829

Highway Reasearch and Development 566,411 816,813

Pipeline and Hazardous Materials Safety Administration 121,542 120,869

Research and Innovative Technology Administration 8,424 35,810

Rail Safety and Operations 139,509 117,490

Highway Planning 140,420 142,232

Highway Emergency Relief 800,782 177,015

Other Rail Programs 10,816 31,014

Rail Research and Development 46,112 24,978

Next Generation High Speed Rail 19,357 36,213

Alaska Railroad 31,831 22,599

Surface Transportation Board 21,609 20,478

Alameda Corridor — 41,728

Total Surface Program Costs $ 42,309,410 $ 41,287,079

AIR

Air Traffic Services $ 8,931,418 $ 8,079,011

Airports 3,711,927 2,977,068

Aviation Security 1,075,118 —

Regulation and Certification — 939,728

Other Federal Aviation Administration Programs 296,560 185,660

Commercial Space 14,073 12,527

Total Air Program Costs $ 14,029,096 $ 12,193,994
216 FY 2005 Performance and Accountability Report

FY 2005 FY 2004

MARITIME

Maritime Operations and Training $ 54,872 $ (7,845)

Maritime Guaranteed Loan (14,403) 10,793

Maritime Security Program 98,484 98,580

Maritime Ocean Freight Differential Program 105,503 147,558

Maritime Vessel Operations Revolving Fund 26,788 (18,066)

Maritime Operating Differential Subsidy 517 194

Maritime Operating Ship Disposal 14,332 —

Other Maritime Programs (7,179) 5,947

Total Maritime Program Costs $ 278,914 $ 237,161

CROSS-CUTTING

Office of the Secretary Working Capital Fund $ 3,999 $ (2,274)

Volpe National Transportation Systems Center 4,729 3,020

Total Cross-Cutting Program Costs $ 8,728 $ 746

In order to provide more accurate reporting, FHWA changed the manner in which it allocated costs to the

Highway Trust Fund programs in FY 2004. Such changes involved the method of categorizing projects

within programs and a revision to the allocation of the grant accrual to each program. The “Other

Highway Trust Fund Programs” category is comprised of small miscellaneous projects.

Note 16. net cost by program (cont.)

Dollars in Thousands
financial report 217

Note 17. Gross Costand Earned Revenue ByBudgetFunctionalClassification

Dollars in Thousands

FY 2005

Gross Cost Earned Revenue Net Cost

Gross Cost and Earned Revenue by Budget Functional Classification

054 Defense-Related Activities $ 99,048 $ — $ 99,048

401 Ground Transportation 42,345,414 165,970 42,179,444

402 Air Transportation 14,618,959 589,863 14,029,096

403 Water Transportation 636,167 456,301 179,866

407 Other Transportation 778,127 576,559 201,568

808 Other General Government 195,199 21,327 173,872

Total $ 58,672,914 $ 1,810,020 $ 56,862,894

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification

401 Ground Transportation $ 581,361 $ 10,041 $ 571,320

402 Air Transportation 1,999,237 133,073 1,866,164

403 Water Transportation 150,505 448,796 (298,291)

407 Other Transportation 102,500 587,398 (484,898)

Total $ 2,833,603 $ 1,179,308 $ 1,654,295

FY 2004

Gross Cost Earned Revenue Net Cost

Gross Cost and Earned Revenue by Budget Functional Classification

054 Defense-Related Activities $ 99,119 $ — $ 99,119

401 Ground Transportation 41,479,699 313,489 41,166,210

402 Air Transportation 12,506,942 312,948 12,193,994

403 Water Transportation 399,930 261,888 138,042

407 Other Transportation 857,669 677,027 180,642

808 Other General Government 283,540 7,334 276,206

Total $ 55,626,899 $ 1,572,686 $ 54,054,213

Intragovernmental Gross Cost and Earned Revenue by Budget Functional Classification

401 Ground Transportation $ 553,081 $ (1,075) $ 554,156

402 Air Transportation 2,380,081 84,246 2,295,835

403 Water Transportation 22,047 260,710 (238,663)

407 Other Transportation 99,526 670,378 (570,852)

808 Other General Government 110,076 7,334 102,742

Total $ 3,164,811 $ 1,021,593 $ 2,143,218
218 FY 2005 Performance and Accountability Report

Note 18. Statement of Changes in Net Position

Dollars in Thousands

prior period adjustments

Prior Period Adjustments for FY 2005 and FY 2004 are primarily due to MARAD for correction of an

error for the Ocean Freight Differential appropriation.

non-exchange revenue

FY 2005 FY 2004

Highway Trust Fund

Receipts

Excise Taxes and Other Non-Exchange Revenue (transferred from the general fund)

Gasoline $ 23,420,989 $ 18,244,158

Diesel and Special Motor Fuels 9,551,359 8,935,465

Trucks 4,549,657 3,237,017

Gasohol 1,797,493 5,716,127

Fines and Penalties 14,070 16,457

IMPT Revenue — 25

Total Taxes $ 39,333,568 $ 36,149,249

Less: Transfers to Land and Water Conservation Fund

Transfers to General Fund (1,000) (1,000)

Transfers to Aquatic Reserve (113,994) (111,350)

Gross Taxes (320,127) (311,639)

$ 38,898,447 $ 35,725,260

Less: Refunds of Taxes (reimbursed to general fund)

Gasoline (308,508) (305,286)

Gasohol (17,063) (27,751)

Diesel (639,083) (625,821)

Special Motor Fuel (4,454) (1,342)

Gas to make Gasohol (11,500) (22,865)

Diesel Fuel Bus Use (26,246) (31,423)

Total Refunds of Taxes $ (1,006,854) $ (1,014,488)

Total Excise Taxes $ 37,891,593 $ 34,710,772

Other Non-Exchange Revenue 10,035 13,556

Net Non-Exchange Revenue $ 37,901,628 $ 34,724,328
financial report 219

FY 2005 FY 2004

Federal Aviation Administration

Taxes and Other Non-Exchange Revenue

Passenger Ticket $ 7,007,134 $ 6,554,599

International Departure 1,922,368 1,455,529

Fuel (Air) 926,860 774,150

Waybill 460,563 498,871

Investment Income 439,793 446,956

Gasoline 43,934 —

Tax Refunds and Credits (100,628) (55,596)

Net Non-Exchange Revenue $ 10,700,024 $ 9,674,509

Other Miscellaneous Net Non-Exchange Revenue 1,179 (1,462)

Total Non-Exchange Revenue $ 48,602,831 $ 44,397,375

The financial statements of DOT for the Highway Trust Fund and the Airport and Airway Trust Fund

reflect actual tax collections for the six months ended March 31, 2005, plus an estimate of tax collections

expected for quarters ended June 30, 2005 and September 30, 2005. Actual tax collection data for the two

quarters ended June 30, 2005 and September 30, 2005 will not be available from the IRS until December

2005 and March 2006, respectively.

Motor vehicle tax evasion (MTFE) issues

Federal Highway Administration is addressing actions to be taken about the possible effects of anticipated

future demands, events and trends related to MFTE, generally accepted to cost the trust fund

approximately $1 billion or more annually. MFTE-related monies have been spent by the Internal Revenue

Service (IRS) to improve MFTE enforcement and determine the necessary program management changes

needed. Working with the IRS, FHWA will develop a written oversight plan to identify future actions to

oversee the development and implementation of highway use tax evasion activity. During fiscal year 2005,

expenditures for the Highway Trust Fund (HTF) exceeded revenues by approximately $6.4 billion. The

HTF equity (Corpus) available as of September 30, 2005 is $10.8 billion. However, Congress has

authorized appropriations in excess of curent available trust fund assets that amounts to $.9 billion after

considering amounts already transferred to the HTF agencies. FHWA is continuing to analyze the impact

that SAFETEA-LU will have on the trust fund.

Note 18. statementof changes in netposition (cont.)

Dollars in Thousands
220 FY 2005 Performance and Accountability Report

Note 19. Statement of Budgetary Resources

Dollars in Thousands

Significant adjustments were needed to the amounts previously reported on the Statement of Budgetary

Resources at September 30, 2004 for the Federal Highway Administration’s (FHWA) Highway Trust Fund

(HTF). The error was discovered by the management after the publication of its financial statements in

November, 2004. The adjustments principally related to a SF 132 Apportionment and Reapportionment

Schedule received in October 2004 relating to FY 2004 activity. Accordingly, adjustments have been made

to correct these errors resulting in a net increase in “Total Budgetary Resources” and “Total Status of

Budgetary Resources” of $2.97 billion. In addition an error was discovered in unobligated balances and

budget authority temporarily not available pursuant to public law which had been brought forward on

FHWA’s Apportionment and Reapportionment Schedule since at least FY 2002. This correction resulted in

a net decrease to “Total Budgetary Resources” and “Total Status of Budgetary Resources” of $2.54 billion at

September 30, 2004. A new SF 132 has been issued, including corrected balances to reflect the proper

amount of carried forward budget authority, and approved by OMB.

Significant adjustments were also needed to the amounts previously reported on the Statement of

Budgetary Resources at September 30, 2004 for the FHWA’s Non-Budgetary Financing Accounts for the

Transportation Infrastructure Finance and Innovation Act (TIFIA) Loan Program. The error was

discovered by management after the publication of its financial statements in November, 2004. The

adjustments principally related to a journal entry that obligated balances and reduced unapportioned

authority and borrowing authority as of September 30, 2004. This correction resulted in a net increase to

“Total Budgetary Resources” and “Total Status of Budgetary Resources” of $.2 billion

The next table on the following page details specific line items being restated on the Combined Statement

of Budgetary Resources.

FY 2005 FY 2004 (Restated)

The amount of direct and reimbursable obligations incurred against amounts apportioned

under Category A, B, and exempt from apportionment as of end of fiscal year: $ 69,765,896 $ 67,244,353

Available Contract Authority as of end of fiscal year $ 38,783,649 $ 31,532,182

Available Borrowing Authority as of end of fiscal year $ 20,607 $ —

Adjustments during fiscal year to Beginning Balance of Budgetary Resources

Rescissions $ (9,068) $ (496)

Prior Year Recoveries 519,964 92,160

Temporarily Not Available (60,947) (199)

Cancelled Authority (5,190) 1,965

Permanently Not Available (762,764) 276,691

Other Adjustments 43,401 (39,040)

Total Adjustments to Budgetary Resources $ (274,604) $ 331,081
financial report 221

2004

Originally Effect of 2004

Stated Restatement As Restated

Budgetary Resources (Selected Components)

Borrowing Authority $ 1,923,602 $ 172,661 $ 2,096,263

Contract Authority 43,489,033 2,742,508 46,231,541

Net Transfers (216,487) 241,722 25,235

Unobligated balance – beginning of period 38,336,603 (2,543,098) 35,793,505

Permanently Not Available (45,323,853) (15,028) (45,338,881)

Status of Budgetary Resources (Selected Components)

Obligations Incurred – Direct $ 64,756,645 $ (965,192) $ 63,791,453

Unobligaed balance available 14,840,959 241,722 15,082,681

Unobligated balance not available 23,391,134 1,322,235 24,713,369

existence, purpose, and availability of permanent indefinite appropriatons

FAA has permanent indefinite appropriations for the Facilities and Equipment, Grants-in-Aid, and

Research, Development and Engineering appropriations in order to fully fund special projects that were

on-going and spanned several years.

additional disclosures

Unobligated balances of budgetary resources for unexpired accounts are available in subsequent year until

expiration, upon receipt of an apportionment from OMB. Unobligated balances of expired accounts are

not available.

The Federal-Aid Highway Act of 1956, as amended by subsequent legislation, established the Highway

Trust Fund (HTF) as a mechanism for financing the accelerated highway program. It is a user-supported

fund, with the revenues of the HTF identified for financing highways, and the taxes dedicated to the HTF

paid by the users of highways. The HTF Corpus is a utility account that receives no budgetary resources.

Excise and user taxes are collected by the Treasury and deposited to the HTF Corpus. Deposits not needed

immediately for payments are invested by the Treasury's Bureau of Public Debt (BPD) in non-interest

bearing public debt securities. As funds are needed for payments, HTF Corpus investments are liquidated

and funds are transferred to FHWA for payment of obligations. Given the nature of the HTF Corpus

activity, the budgetary resources relating to "HTF Corpus" account is not reflected in the DOT Statement

of Budgetary Resources (SBR) at September 30, 2004; however, such budgetary resources are reflected in

the "Budget of the United States Government".

There are other differences between information required by SFFAS No. 7 and the amounts in the amounts

described as actual "actual" FY 2004 "Budget of the United States Government" aggregating approximately

$1 billion for which management is researching with Treasury. Adjustments were posted to the

unobligated balance carried forward at the beginning of FY 2004 as part of the restatement of the FY 2004

Budgetary SBR. This adjustment resulted in differences of $2.5 billion to the unobligated balance at the

beginning of period and $2.3 billion to the unobligated balances end of period that were less than what

was reported in the 2004 actual column of the FY 2006 Budget of the United States Government. In

addition, material differences exists between the fiscal year 2004 Statement of Budgetary Resources and

the fiscal year 2004 President's Budget "Actual" column for borrowing authority, unobligated balances not

available, obligated balances end of period and outlays of approximatley $1.2 billion, $1.3 billion and

$.2 billion, respectively.

Note 19. statementof budgetaryresources (cont.)

Dollars in Thousands
222 FY 2005 Performance and Accountability Report

Certain errors related to the preparation of FACTS II reporting for the period ending September 30, 2004

resulted in erroneous reporting of balances in the FY 2004 actual column of the President's Budget that

have resulted in material differences from the DOT consolidated financial statements. The reporting

errors were confined to the FACTS II reporting and did not result in any material adjustments to the

FY 2005 unobligated balance carried forward line on the FY 2005 SBR with the exception of amounts

related to the restatement of the 2004 SBR as described in the above table.

For FY 2006, the enacted budget of the United States has not been finalized. The President's Budget of the

United States for FY 2007 will not be published until February 2006, therefore DOT is unable to confirm if

differences exist between the information required by SFFAS No. 7 and the amounts described as "actual"

for FY 2005 in the FY 2007 Budget of the United States. The information will be published on OMB's

website located at www.whitehouse.gov/omb.

Note 19. Statement of Budgetary Resources (cont.)
financial report 223

Note 20. Incidental Custodial Collections

Dollars in Thousands

Dollars in Thousands FY 2005 FY 2004

Revenue Activity

Sources of Cash Collections

Miscellaneous Receipts $ 20,758 $ 19,157

Fines, Penalties, and Forfeitures — 11,022

Total Cash Collections $ 20,758 $ 30,179

Total Custodial Revenue $ 20,758 $ 30,179

Disposition of Collections

Transferred to Treasury (General Fund) $ 20,758 $ 30,179

Net Custodial Revenue Activity $ — $ —
224 FY 2005 Performance and Accountability Report

Note 21. Saint Lawrence Seaway Development Corporation

Dollars in Thousands

FY 2005 FY 2004

Condensed Information:

Cash and Short-Term Time Deposits $ 15,594 $ 14,084

Long-Term Time Deposits 882 1,210

Accounts Receivable 79 82

Inventories 249 246

Property, Plant and Equipment 76,835 78,329

Deferred Charges 2,716 2,234

Other Assets 602 538

TOTAL ASSETS $ 96,957 $ 96,723

Current Liabilities $ 2,820 $ 2,428

Actuarial Liabilities 2,716 2,234

TOTAL LIABILITIES $ 5,536 $ 4,662

Invested Capital $ 91,818 $ 93,313

Cumulative Results of Operations (397) (1,252)

TOTAL NET POSITION $ 91,421 $ 92,061

TOTAL LIABILITIES AND NET POSITION $ 96,957 $ 96,723

226 FY 2005 Performance and Accountability Report

Deferred Maintenance:

 DOT Asset Cost to Return to

Entity Major Class of Asset Method of Measurement Condition* Acceptable Condition**

FAA Buildings Condition Assessment 4 & 5 63,875 $ 

 Survey

Other Structures and Condition Assessment 4 & 5 19,984

 Facilities Survey

MARAD Vessels, Ready Reserve Condition Assessment 3 9,800

 Force (Various Locations) Survey

Real Property, Buildings Condition Assessment 3 32,502

 U.S. Merchant Marine Survey

 Academy, NY

Real Property, Structure Condition Assessment 3 1,420

 James River Reserve Fleet, VA Survey

Real Property, Structure Condition Assessment 3 4,075

 Beaumont Reserve Fleet Survey

Real Property, Structure Condition Assessment 3 2,985

Suisun Bay Reserve Fleet, CA Survey

Total 134,641 $ 

*Asset Condition Rating Scale:

 1 - Excellent

 2 - Good

 3 - Fair

 4 - Poor

 5 - Very Poor

**Acceptable Condition is:

 FAA Buildings 3 - Fair 

 FAA Other Structures and Facilities 3 - Fair 

 MARAD Vessels, Ready Reserve 1 - Excellent - Ships are seaworthy and ready for 

 Force mission assignments within prescribed time

 limits.

 MARAD Real Property, Buildings 3 - Fair - Buildings are safe and inhabitable.

 MARAD Real Property, Structures 3 - Fair - Adequate water depth, shore power, and

 mooring capabilities.

Deferred Maintenance is maintenance that was not performed when it should have been or was

scheduled to be performed and delayed until a future period. Maintenance is keeping fixed assets in 

acceptable condition, and includes preventative maintenance, normal repairs, replacement of parts and 

structural components, and other activities needed to preserve assets in a condition to provide 

acceptable service and to achieve expected useful lives.
Intragovernmental Balances by Trading Partner:

Intragovernmental Assets by Trading Partner: (Dollars in Thousands)

Fund Balance Accounts Other

Trading Partner with Treasury Investments Receivable Assets

Government Printing Office (04) - $ - $ - $ 147 $ 

U.S. Capital Police (09) - - 32 -

Executive Office of the President (11) - - 119 -

Department of Agriculture (12) - - 51 -

Department of Commerce (13) - - 534 -

Department of Interior (14) - - 996 -

Department of Justice (15) - - 453 -

U.S. Postal Service (18) - - 349 328

Department of State (19) - - 14 722

Department of Treasury (20) 29,140,842 19,000,999 212 18,850

Office of Personnel Management (24) - - 6 200

Social Security Administration (28) - - (57) -

Smithsonian Institution (33) - - 9 -

General Services Administration (47) - - 2,015 -

National Science Foundation (49) - - 14 -

Central Intelligence Agency (56) - - 1,459 100

National Labor Relations Board (63) - - 3 -

Tennessee Valley Authority (64) - - 5 -

Environmental Protection Agency (68) - - 129 13

Department of Homeland Security (70) - - 4,210 -

Agency for International Development (72) - - (906) -

Department of Health & Human Serv.(75) - - 3,935 -

Natl. Aero. and Space Admin. (80) - - 3,183 -

Department of Energy (89) - - 309 782

Department of Education (91) - - (296) -

Department of Defense (97) - - 77,331 7,858

Other Miscellaneous Agencies (95) - - 264,748 67,346

 Total 29,140,842 $ $ 19,000,999 $ 358,857 $ 96,346

 Total Intragovernmental Assets 48,597,044 $ 

financial report 227
228 FY 2005 Performance and Accountability Report

Intragovernmental Liabilities by Trading Partner: (Dollars in Thousands)

Accounts Other

Trading Partner Payable Debt Liabilities

Library of Congress (03) 20 $ - $ 30 $ 

Government Printing Office (04) (49) - 188

General Accounting Office (05) (3) - 32

U.S. Capital Police (09) - - 3,449

Department of Agriculture (12) 81 - 231,914

Department of Commerce (13) 6,126 - (7,794)

Department of Interior (14) 79,977 - 6,349

Department of Justice (15) 305 - 642

Department of Labor (16) 63 - 211,281

U.S. Postal Service (18) 691 - (31)

Department of State (19) - - (2,044)

Department of Treasury (20) 35,145 952,536 64,720

Office of Personnel Management (24) 777 - 68,329

Social Security Administration (28) - - (249)

Federal Trade Commission (29) - - (80)

U.S. Nuclear Regulatory Comm. (31) - - 86

Department of Veterans Affairs (36) 44 - -

General Services Administration (47) 12,326 - 8,716

Federal Deposit Insurance Corp (51) - - 208

Central Intelligence Agency (56) - - 282

National Foundation of Arts (59) - - 11

Consumer Product Safety Comm (61) - - 28

National Labor Relations Board (63) - - 3

Tennessee Valley Authority (64) (173) - 8,473

Environmental Protection Agency (68) (77) - 1,022

Department of Homeland Security (70) 76 - 2,638,767

Department of Health & Human Serv.(75) 162 - 8,995

Natl. Aero. and Space Admin. (80) 2,599 - 7,010

Department of Housing and Urban Dev. (86) - - 2,378

National Archives and Records Administ (88) 140 - -

Department of Energy (89) (261) - 9,443

Department of Education (91) - - (1,816)

Department of Defense (97) 34,918 - 114,733

Treasury General Fund (99) - - 15

Other Miscellaneous Agencies (95) 9,823 - 3,474

 Total 182,710 $ $ 952,536 $ 3,378,564

 Total Intragovernmental Liabilities 4,513,810 $ 
Intragovernmental Earned Revenues and Related Costs: (Dollars in Thousands)

Intragovernmental

Trading Partner Earned Revenue

Library of Congress (03) 3,180 $ 

Government Printing Office (04) 28

General Accounting Office (05) 92

U.S. Capital Police (09) 17,893

Department of Agriculture (12) 6,857

Department of Commerce (13) 6,812

Department of Interior (14) 8,577

Department of Justice (15) 17,890

Department of Labor (16) 3,450

U.S. Postal Service (18) 1,283

Department of State (19) 6,643

Department of Treasury (20) 58,794

Office of Personnel Management (24) 1,296

Federal Retirement Thrift Investment (26) 81

Social Security Administration (28) 6,213

Federal Trade Comm (29) 709

U.S. Nuclear Regulatory Comm. (31) 10

Smithsonian Institution (33) 574

Department of Veterans Affairs (36) 18,028

U.S. Equal Employment Comm (45) 566

General Services Administration (47) 11,619

National Science Foundation (49) 63

Securities and Exchange Comm. (50) 5,122

Federal Deposit Insurance Comm (51) 1,340

Federal Labor Relations Authority (54) 132

Central Intelligence Agency (56) 1,608

National Foundation of Arts (59) 237

Consumer Product Safety Comm (61) 88

National Labor Relations (63) 1,020

Federal Maritime Comm (65) 72

Environmental Protection Agency (68) 20,276

Department of Homeland Security (70) 293,552

Agency for International Development (72) 1,271

Small Business Administration (73) 880

Department of Health & Human Serv.(75) 939

Natl. Aero. and Space Admin. (80) 14,507

Department of Housing and Urban Dev. (86) 6,556

National Archives and Records (88) 606

Department of Energy (89) 2,745

Department of Education (91) 3,707

Department of Defense (97) 662,869

Other Miscellaneous Agencies (95) (8,877)

 Total $ 1,179,308

financial report 229
230 FY 2005 Performance and Accountability Report

Intragovernmental Earned Revenues and Related Costs: (Dollars in Thousands)

Intragovernmental

Trading Partner Earned Revenue

Gross Cost to Generate

Intragovernmental

Budget Functional Classification Earned Revenue

401 Ground Transportation 581,361 $ 

402 Air Transportation 1,999,237

403 Water Transportation 150,505

407 Other Transportation 94,116

808 Other General Government 8,384

 Total $ 2,833,603

Intragovernmental Non-Exchange Revenue:

 (Dollars in Thousands)

Trading Partner Transfers-In Transfers-Out

Department of Transportation (69) 69,534,141 $ $ 69,516,329

 Total 69,534,141 $ $ 69,516,329

 Total Intragovernmental Non-Exchange Revenue 17,812 $ 
Units as of Units as of 

Heritage Assets: 09/30/04 Additions Withdrawals 09/30/05 

Personal Property:

 Collections

 Artifacts 38 - - 38

 Museum 456 - - 456

 Other Collections 98 2 - 100

Total Collections 592 2 - 594

Total Personal Property

 Heritage Assets 592 2 - 594

Heritage Assets: Units as of Units as of 

09/30/04 Additions Withdrawals 09/30/05

Real Property:

 Buildings and Structures 1 - - 1

Total Real Property

 Heritage Assets 1 - - 1

Financial information for multi-use heritage assets is presented in the principal statements and notes.

Buildings and Structuresinclude Union Station in Washington, D.C. Union Station is an elegant and unique turn-of-the-century rail station

in which one finds a wide variety of elaborate, artistic workmanship characteristic of the period. Union Station is listed on the National 

Register of Historic Places. The station consists of the renovated original building and a parking garage which was added by the U.S. Park 

Service. The Federal Railroad Administration received title to Union Station through appropriated funds and assumption of a mortgage. 

Mortgage payments are made by Union Station Venture Limited which manages the property. Union Station Redevelopment Corporation, a 

non profit group instrumental in the renovation of the station, sublets the operation of the station to Union Station Venture Limited.

Museum and Other Collections are owned by the Maritime Administration. They are merchant marine artifacts, composed of ships’ 

operating equipment, obtained from obsolete ships. They are inoperative and in need of preservation and restoration. Museum items are on 

loan to organizations whose purpose is historic preservation, education, and remembrance, open to the public during regularly scheduled 

hours. Other collections are on loan to public and private entities, the display of which is incidental to maritime affairs, such as county and 

state buildings, port authorities, pilots associations, public and college libraries, and other organizations.

Artifacts are those of the Maritime Administration. Maritime Administration artifacts are generally on loan to single purpose 

memorialization and remembrance groups, such as AMVets and preservation societies. 

HERITAGE ASSETS SUMMARY

ANNUAL STEWARDSHIP INFORMATION, SEPTEMBER 30, 2005

NUMBER OF PHYSICAL UNITS 

financial report 231
232 FY 2005 Performance and Accountability Report

Surface Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Highway Administration 

 Federal Aid Highways (HTF) 25,876,082 $ 29,377,231 $ 29,258,796 $ 29,207,012 $ 29,750,120 $ 

 Other Highway Trust Fund Programs 85,807 211,883 243,874 300,493 445,083

 General Fund Programs 144,159 31,616 73,046 962,370 330,790

 Appalachian Development System 23,801 146,306 128,480 263,430 425,810

 Federal Motor Carrier 125,261 149,091 159,628 299,450 195,740

Federal Transit Administration

Discretionary Grants 721,774 $ 495,322 $ 291,889 $ 160,655 $ 119,277 $ 

Formula Grants 3,978,247 4,283,634 4,390,965 4,723,674 4,521,288

Capital Investment Grants 1,902,425 2,371,521 2,632,841 1 2,788,920 3,375,206

Washington Metro 115,856 89,227 11,252 12,409 1,719

Interstate Transfer Grants 2,716 8,155 9,459 1,479 1,411

Surface Transportation Nonfederal

 Physical Property Investments $ 37,163,986 32,976,128 $ 37,200,230 $ 38,719,892 $ 39,166,444 $ 

(1) Outlays are not net of Federal Emergency Management Administration (FEMA) collection of $2.75 billion. 

Air Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Aviation Administration

Airport Improvement Program 2,178,576 $ 2,933,542 $ 2,786,717 $ 2,977,300 $ 3,712,423 $ 

Air Transportation Nonfederal 

 Physical Property Investments $ 2,933,542 2,178,576 $ 2,786,717 $ 2,977,300 $ 3,712,423 $ 

Total Nonfederal Physical Property

 Investments $ 40,097,528 35,154,704 $ 39,986,947 $ 41,697,192 $ 42,878,867 $ 

NON FEDERAL PHYSICAL PROPERTY

ANNUAL STEWARDSHIP INFORMATION, SEPTEMBER 30, 2005

TRANSPORTATION INVESTMENTS

(Dollars in thousands)

The Federal Highway Administration reimburses States for construction costs on projects related to the Federal Highway System of 

roads. The main programs in which the States participate are the National Highway System, Interstate Systems, Surface 

Transportation Program, and Congestion Mitigation/Air Quality Improvement. The States’ contribution is ten percent for the Interstate

System and twenty percent for most other programs.

The Federal Transit Administration provides grants to State and local transit authorities and agencies. 
The Federal Aviation Administration (FAA) makes project grants for airport planning and development under the Airport 

Improvement Program (AIP) to maintain a safe and efficient nationwide system of public-use airports that meet both present and 

future needs of civil aeronautics. FAA works to improve the infrastructure of the nation’s airports, in cooperation with airport 

authorities, local and State governments, and metropolitan planning authorities. 

Washington Metro provides funding to support the construction of the Washington Metrorail System.

Formula grants provide capital assistance to urban and nonurban areas and may be used for a wide variety of mass transit purposes, 

including planning, construction of facilities, and purchases of buses and railcars. Funding also includes providing transportation to 

meet the special needs of elderly individuals and individuals with disabilities.

Capital investment grants, which replaced discretionary grants in 1999, provide capital assistance to finance acquisition, construction, 

reconstruction, and improvement of facilities and equipment. Capital investment grants fund the categories of new starts, fixed 

guideway modernization, and bus and bus related facilities.

Interstate Transfer Grants provided Federal financing from FY 1976 through FY 1995 to allow States and localities to fund transit 

capital projects substituted for previously withdrawn segments of the Interstate Highway System.

financial report 233
234 FY 2005 Performance and Accountability Report

Surface Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Highway Administration 

 National Highway Institute Training 3,202 $ 9,146 $ 8,539 $ 4,069 $ 11,844 $ 

Federal Motor Carrier Safety Administration 

 California Highway Patrol 926 192 41

 Idaho Video 243 199 593 344 208

 Massachusetts Training Academy - 25 175 9 53

 Minnesota Crash Investigation - 18 57 21 -

Federal Transit Administration

 National Transit Institute Training 3,550 $ 2 $ 4,292 3,946 $ 4,667 $ 3,318 $ 

National Highway Safety Administration 

 Section 403 Highway Safety Programs 56,722 $ 83,389 $ 49,013 $ 53,964 $ 110,981 $ 

 Highway Traffic Safety Grants 207,255 229,145 210,469 205,509 216,702

Pipeline and Hazardous Materials Safety

 Administration

 Hazardous Materials (Hazmat) Training 7,771 $ 7,763 $ 7,782 $ 7,780 $ 8,065 $ 

Surface Transportation Human

 Capital Investments $ 278,743 333,631 $ 281,846 $ 276,555 $ 351,212 $ 

Maritime Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Maritime Administration

 State Maritime Academies Training(3) 8,257 $ 8,257 $ 8,363 $ 9,208 $ 9,215 $ 

 Additional Maritime Training 463 463 463 388 328

Maritime Transportation Human

 Capital Investments $ 8,720 8,720 $ 8,826 $ 9,596 $ 9,543 $ 

Total Human Capital Investments $ 287,463 342,351 $ 290,672 $ 286,151 $ 360,755 $ 

HUMAN CAPITAL INVESTMENT EXPENSES

ANNUAL STEWARDSHIP INFORMATION, SEPTEMBER 30, 2005

(Dollars in thousands)

The National Highway Institute develops and conducts various training courses for all aspects of Federal Highway Administration. 

Students are typically from the State and local police, State highway departments, public safety and motor vehicle employees, and U.S. 

citizens and foreign nationals engaged in highway work of interest to the U.S. Types of courses given and developed are modern

developments, technique, management, planning, environmental factors, engineering, safety, construction, and maintenance. 
(2) FY 2001 and FY 2002 outlay amounts are based on the enacted budget authority for FY 1999, FY 2000, and FY 2001 and on the approved 

outlay rates for the National Transit Institute (5%, 50%, 40%, and 5%).

(3) Does not include funding for the Student Incentive Payment (SIP) Program which produces graduates who are obligated to serve in a reserve

component of the United States armed forces.

The Pipeline and Hazardous Materials Safety Administration administers Hazardous Material Training (Hazmat). The purpose of 

Hazmat Training is to train State and local emergency personnel on the handling of hazardous materials in the event of a hazardous material 

spill or storage problem.

The California Highway Patrol educates the trucking industry for the Federal Motor Carrier Safety Administration about Federal an 

State commercial motor vehicle/carrier inspection procedures, and increase CMV driver awareness. The Idaho Video Program develops 

video training material utilized by FMCSA National Training Center for the purpose of training State and Local law enforcement personnel. 

The Massachusetts Training Academy provides training to State law enforcement personnel located in the northeast region of 

Massachusetts. The Minnesota Crash Investigation program provides training and develops processes and protocols for commercial motor 

vehicle crash investigations.

The National Transit Institute of the Federal Transit Administration develops and offers training courses to improve transit planning and 

operations. Technology courses cover such topics as alternative fuels, turnkey project delivery systems, communications-based train 

controls, and integration of advanced technologies.

The National Highway Safety Administration's programs authorized under the Highway Trust Fund provide resources to State and Local 

governments, private partners, and the public, to effect changes in driving behavior on the nation’s highways to increase safety belt usage 

and reduce impaired driving. NHTSA provides technical assistance to all states on the full range of components of the impaired driving 

system as well as conducting demonstrations, training and public information/education on safety belt usage. 

financial report 235
236 FY 2005 Performance and Accountability Report

Surface Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Highway Administration 

 Intelligent Transportation Systems 103,980 $ 124,950 $ 126,256 $ 146,852 $ 183,634 $ 

 Other Applied Research and Development 118,425 183,142 115,368 142,557 114,315

Federal Railroad Administration 

 Railroad Research and Development Program 6,717 $ 9,600 $ 2,402 $ 9,342 $ 6,032 $ 

Federal Transit Administration

Applied Research and Development

 Transit Planning and Research 1,931 1,931 4 3,895 3,483 2,546

 Transit University Transportation Centers 3,492 8,168 5 -- -

 Discretionary/Capital Investment Grants - - - - -

Office of the Secretary

Applied Research and Development

 Emergency Transportation 244 137 650 8 -

Pipeline and Hazardous Materials Safety Administration

Applied Research and Development

 Pipeline Safety 1,404 $ 4,000 $ 5,523 $ 6,375 $ 10,810 $ 

 Hazardous Materials 1,366 233 1,755 1,489 1,638

Research and Innovative Technology Administration

Applied Research and Development

 Research and Technology 3,318 $ 1,608 $ 1,454 $ 1,134 $ 1,564 $ 

Surface Transportation Research and 

 Development Investments $ 240,877 333,769 $ 257,303 $ 311,240 $ 320,539 $ 

(4) FY 2002 updated with Transit Cooperative Research Program estimate based on actual outlays. 

(5) Updated based on actual research and development related outlays. 

Air Transportation: FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Federal Aviation Administration

 Research and Development Plant 10,130 $ 3,020 $ 2,903 $ 4,230 $ 5,287 $ 

 Applied Research 120,395 59,150 29,406 91,743 103,659

 Development 3,419 603 251 478 547

 Administration 46,988 44,480 31,669 28,643 29,163

Air Transportation Research and

 Development Investments $ 180,932 107,253 $ 64,229 $ 125,094 $ 138,656 $ 

Total Research and Development 

 Investments $ 421,809 441,022 $ 321,532 $ 436,334 $ 459,195 $ 

RESEARCH AND DEVELOPMENT INVESTMENTS

 ANNUAL STEWARDSHIP INFORMATION, SEPTEMBER 30, 2005

(Dollars in thousands)
The Federal Transit Administration supports research and development in the following program areas: 

The Office of the Secretary's Office of Emergency Transportation is involved in research and development in mapping 

software for the Crisis Management Center, transportation policy, and outreach efforts. 

The Research and Innovative Technology Administration's Office of Research and Technology is involved in research and 

development for the University of Technology and Education.

The Federal Aviation Administration (FAA) conducts research and provides the essential air traffic control infrastructure to 

meet increasing demands for higher levels of system safety, security, capacity, and efficiency. Research priorities include 

aircraft structures and materials; fire and cabin safety; crash injury-protection; explosive detection systems; improved in-flight 

icing and ground de-icing operations; better tools to predict and warn of weather hazards, turbulence and wake vortices; aviation 

medicine, and human factors.

The Federal Highway Administration’s research and development programs are earmarks in the appropriations bills for the 

fiscal year. Typically these programs are related to safety, pavements, structures, and environment. Intelligent Transportation 

Systems were created to promote automated highways and vehicles to enhance the national highway system. The output is in 

accordance with the specifications within the appropriations act.

Research and development in Transit Planning and Research supports two major areas: the National Research Program and the 

Transit Cooperative Research Program. The National Research Program funds the research and development of innovative 

transit technologies such as safety-enhancing commuter rail control systems, hybrid electric buses, and fuel cell and batterypowered propulsion systems. The Transit Cooperative Research Program focuses on issues significant to the transit industry 

with emphasis on local problem-solving research. 

Transit University Transportation Centers, combined with funds from the Highway Trust Fund, provide continued support for 

research, education, and technology transfer.

Capital investment grants, which replaced discretionary grants in FY 1999, provide capital assistance to finance acquisition, 

construction, reconstruction, and improvement of facilities and equipment. Capital investment grants fund the categories of new 

starts, fixed guideway modernization, and bus and bus-related activities. 

The Pipeline and Hazardous Materials Safety Administration funds research and development activities for the following 

organizations and activities:

The Office of Pipeline Safety is involved in research and development in information systems, risk assessment, mapping, and 

non-destructive evaluation.

The Office of Hazardous Materials is involved in research, development, and analysis in regulation compliance, safety, and 

information systems.

financial report 237
238 FY 2005 Performance and Accountability Report

Performance Measure Completeness and Reliability Details

Each table includes a description of a performance measure and associated data provided by the 

agencies in charge of the measure. The Scope statement gives an overview of the data collection 

strategy for the underlying data behind the performance measure. The Source statement 

identifies the data system(s) from which the data for each measure was taken. The Statistical 

Issues statement has comments, provided by the Bureau of Transportation Statistics (BTS) and 

the agency in charge of the measure, which discuss variability of the measure and other points. 

The Completeness statement indicates limitations due to missing data or availability of current 

measures, methods used to develop projections are also provided, as appropriate. The Reliability 

statement gives the reader a feel for how the performance data are used in program management 

decision making inside DOT. 

For further information about the source and accuracy (S&A) of these data, and DOT’s data 

quality guidelines in accordance with Section 515 of the Treasury and General Government 

Appropriations Act for Fiscal Year 2001 (P.L. 106-554), please refer to the BTS S&A compendium 

available at 

http://www.bts.gov/programs/statistical_policy_and_research/source_and_accuracy_compen

dium/index.html. 

Details on DOT Safety Measures

Highway Fatality Rate 

(NHTSA—Fatality Analysis Reporting System (FARS), FHWA—Traffic Volume Trends (TVT)) 

Measure: Highway fatalities per 100 million vehicle-miles traveled (VMT) Calendar Year 

(CY) 

Scope: The number of fatalities is a count of occupant and non-motorist deaths which 

occur within 30 days of a crash involving motor vehicle traffic traveling on a 

trafficway customarily open to the public within the 50 States and Washington, 

D.C. 

VMT represent the total number of vehicle miles traveled by motor vehicles on 

public roadways within the 50 States and Washington, D.C. 

Sources: Motor vehicle traffic fatality data are obtained from the National Highway 

Traffic Safety Administration’s Fatality Analysis Reporting System (FARS). The 

FARS database is based on police crash reports and other State data. 

VMT data for 2005 are estimated based on preliminary 2004 VMT data from 

FHWA’s Traffic Volume Trends (TVT); a monthly report based on hourly traffic 

count data in the Highway Performance Monitoring System (HPMS). VMT data 

for 2004 and prior years are from the HPMS system based on State samples of 

road segments. 

Statistical 

Issues: 

The primary source of uncertainty in the fatality rate measure is the 

denominator, VMT. While the number of total fatalities used in the numerator is 

derived from census data and is relatively accurate, the VMT estimate in the 
other accompanying information 239

denominator has far more variability. 

The TVT data used for the 2005 VMT are an early estimate from the 2004 VMT. 

These data, collected at approximately 4,000 continuous traffic counting locations 

nationwide, are used to determine the percentage change in traffic for the current 

month from the same month of the previous year. The percentage change is 

applied to the nationwide travel for the same month of the previous year to 

obtain an estimate of nationwide travel for the current month. 

The 2004 and earlier VMT are compiled from data provided to FHWA from each 

State. They are estimates based on a sample of road segments, so the numbers 

have associated sampling errors. The methodology used by each of the States to 

estimate VMT varies and may introduce additional non-sampling errors. 

Although States provide VMT estimates on an annual basis, they are only 

required to update their traffic counts at all sampling sites once every 3 years. 

Thus, an annual VMT estimate from a particular State may be based, in part, on 

data collected during a previous year. 

Completeness: FARS has been in use for many years and is generally accepted as a complete 

measure for describing safety on the Nation’s highways. Total annual fatalities 

are available through CY 2004. The fatality estimates used to calculate the 2005 

rates shown in this report were forecasted using the most recent data from 1997 

to 2003. Inputs were monthly fatality counts from FARS from 1997 to 2003.

NHTSA’s first official estimates for 2005, the Early Projections, will be completed 

in spring 2006. Differences between the official Early Projection estimates and 

those in this report are to be expected. 

VMT data for 2004 are preliminary estimates provided by the Federal Highway 

Administration (FHWA). VMT data used to calculate the 2005 rates shown in 

this report are projected assuming an increase rate of 1.5 percent (based on 

previous increases in VMT) from the 2004 VMT estimate. The final measure of 

VMT for CY 2005 from the HPMS system will not be available until October 

2006. 

Reliability: The measure informs and guides NHTSA highway safety policy, safety program 

planning, regulatory development, resource allocation, and operational mission 

performance, and tracks progress toward the goal of saving lives by preventing 

highway crashes. 

Large Truck-Related Fatalities 

(FMCSA, NHTSA—Fatality Analysis Reporting System (FARS), FHWA—Traffic Volume Trends 

(TVT)) 

Measure: Fatalities involving large trucks per 100 million truck VMT. (CY) 

Scope: The measure includes all fatalities (e.g., drivers and occupants of passenger cars, 

motorcycles, large trucks, or pedestrians) associated with crashes involving 
240 FY 2005 Performance and Accountability Report

trucks with a gross vehicle weight rating of 10,000 pounds or more. 

Truck Vehicle Miles of Travel (TVMT) represents the total number of vehicle 

miles traveled by large trucks on public roadways within the 50 States and 

Washington, D.C. 

Sources: The number of fatalities comes from NHTSA’s Fatality Analysis Reporting 

System (FARS) data, a census of fatal traffic crashes within the 50 States and 

Washington, D.C. 

The TVMT data are derived from the FHWA’s Highway Performance 

Monitoring System (HPMS). 

Statistical 

Issues: 

The fatality counts in FARS are generally quite accurate. The major sources of 

error are underreporting by some precincts and inconsistent use of the definition 

of a truck. 

Because the TVMT data provided to FHWA from each State are estimates based 

on a sample of road segments, the numbers have associated sampling errors. 

The methodology used by each of the States to estimate TVMT varies and may 

introduce additional non-sampling error. Although States provide TVMT 

estimates on an annual basis, they are only required to update their traffic counts 

at all sampling sites once every three years. Thus, a portion of each States’ 

sample sites will report estimated traffic rather then actual traffic counts. 

Completeness: The FARS has been in use for many years and is generally accepted as a 

complete measure for describing safety on the Nation’s highways. Truck-related 

fatality data is complete through 2004. For 2005, the FARS data for crashes 

involving large trucks are not available. The value used for the 2004 rate is 

projected from 1997–2004 trend data. The actual fatality count for 2005 will be 

available in October 2006. 

The TVMT is complete through 2003. For 2004 and 2005, it is projected using the 

historical trend with adjustments for observed change in the total VMT in 2003. 

The final TVMT estimate for 2004 will be available in December 2005, and the 

final TVMT estimate for 2005 will be available in December 2006. 

Reliability: The measure informs and guides FMCSA highway safety policy, safety program 

planning, regulatory development, resource allocation, and operational mission 

performance, and tracks progress toward the goal of saving lives by preventing 

truck and bus crashes. 

Air Carrier Fatal Accident Rate 

Measure: U.S. commercial fatal aviation accidents per 100,000 (Last 3 years’ average) (FY) 

Scope: This measure includes both scheduled and nonscheduled flights of large U.S. air 

carriers (14 CFR Part 121) and scheduled flights of regional operators (14 CFR 
other accompanying information 241

Part 135). It excludes on-demand (i.e., air taxi) service and general aviation. 

Sources: Fatal aviation accidents: The data on commercial and general aviation fatalities 

come from the National Transportation Safety Board's Aviation Accident 

Database. Aviation accident investigators under the auspices of the National 

Transportation Safety Board develop the data. 

Departures Performed: The Office of Airline Information (OAI) within the 

Bureau of Transportation Statistics (BTS) collects the data on Form 41, Schedule 

T-100—U.S. Air Carrier Traffic and Capacity Data By Nonstop Segment and Onflight Market and Form 41, Schedule T-100 (f)—Foreign Air Carrier Traffic and 

Capacity Data by Nonstop Segment and On-flight Market. 

Statistical 

Issues: 

The joint government/industry group working on improving the level of safety 

for U.S. commercial aviation has determined that the number of departures is a 

better denominator measure to use for determining accident rates and the 

Government Accountability Office recommended that FAA use departures. 

Both accidents and departures are censuses, having no sampling error. 

However, missing data, particularly in the departure counts, will result in bias to 

some degree. 

Completeness: The FAA does comparison checking of the departure data collected by BTS. 

However, FAA has no independent data sources against which to validate the 

numbers submitted to BTS. FAA compares its list of carriers to the DOT list to 

validate completeness and places the carriers in the appropriate category (i.e., 

Part 121 or Part 135). NTSB and FAA's Office of Accident Investigation meet 

regularly to validate the accident count. 

To overcome reporting delays of 60 to 90 days, FAA must rely on historical data, 

partial internal data sources, and Official Airline Guide (OAG) scheduling 

information to project at least part of the fiscal year activity data. Due to 

reporting procedures in place, it is unlikely that calculation of future fiscal year 

departure data will be markedly improved. Lacking complete historical data on 

a monthly basis and independent sources of verification increases the risk of 

error in the activity data. 

Reliability: Results are considered preliminary based on projected activity data. FAA uses 

performance data extensively for program management, personnel evaluation, 

and accountability. Most accident investigations are a joint undertaking. 

National Transportation Safety Board (NTSB) has the statutory responsibility, 

but, in fact, most of the accident investigations related to general aviation are 

conducted by FAA Aviation Safety Inspectors without NTSB direct involvement. 

FAA’s own accident investigators and other FAA employees participate in all 

accident investigations led by NTSB investigators. 
242 FY 2005 Performance and Accountability Report

General Aviation Fatal Accidents

Measure: Number of fatal general aviation accidents. (FY) 

Scope: The measure includes on-demand (non-scheduled FAR Part 135) and general 

aviation. General aviation includes a diverse range of aviation activities. The 

range of general aviation aircraft includes single-seat homebuilt aircraft, 

helicopters, balloons, single and multiple engine land and seaplanes including 

highly sophisticated extended range turbojets. 

Sources: The data on commercial and general aviation fatalities come from the National 

Transportation Safety Board's Aviation Accident Database. Aviation accident 

investigators under the auspices of the National Transportation Safety Board 

develop the data. 

Statistical 

Issues: 

There is no major error in the accident counts. Random variation in air crashes 

results in a significant variation in the number of fatal accidents over time. 

Completeness: NTSB and FAA’s Office of Accident Investigation meet regularly to validate 

information on the number of accidents. It would be preferable to use fatal 

accident rates rather than fatal accidents as the performance measure. However, 

general aviation flight hours are based on an annual survey conducted by the 

FAA. Response to the survey is voluntary. The accuracy of the flight hours 

collected is suspect and there is no readily available way to verify or validate the 

data. For this reason, the General Aviation community is unwilling to use a rate 

measure until the validity and reliability of the survey data can be assured. 

Results are considered preliminary. NTSB continues to review accident results 

from FY 2004. 

Reliability: FAA uses performance data extensively for program management and personnel 

evaluation and accountability. Most accident investigations are a joint 

undertaking. NTSB has the statutory responsibility, but, in fact, most of the 

accident investigations related to general aviation are conducted by FAA 

Aviation Safety Inspectors without NTSB direct involvement. FAA’s own 

accident investigators and other FAA employees participate in all accident 

investigations led by NTSB investigators. 

Train Accidents Rate

Measure: Rail-related accidents and incidents per million train-miles. (FY) 

Scope: The RSIS is the principal monitoring strategy used by the FRA for the 

management, processing and reporting on railroad reported accidents/incidents; 

railroad inspections; highway-rail grade crossing data; and related railroad 

safety activities. The Railroad Accident/Incident Reporting Subsystem (RAIRS) 

is the repository of all FRA-mandated reports of railroad accidents, incidents, 

casualties, highway-rail grade crossing collisions and operating information. 
A train accident is any collision, derailment, fire, explosion, act of God, or other 

event involving the operation of railroad on-track equipment (standing and 

moving), which results in damages greater than the current reporting threshold 

to railroad on-track equipment, signals, track, track structures, and roadbed. 

Train accidents are reported on form FRA F6180.54, Rail Equipment 

Accident/Incident Report. The reporting threshold for 2005 is $6,700.

A train incident is any event involving the movement of on-track equipment that 

results in a reportable casualty but does not cause reportable damage above the 

current threshold established for train accidents. 

Operational data, including Train Miles, is reported on the form FRA F6180.55, 

Railroad Injury Illness Summary. 

Sources: FRA’s Railroad Accident/Incident Reporting Subsystem. 

Statistical 

Issues: 

None. 

Completeness: Railroads are required by regulation (49 CFR 225) to file monthly reports to the 

FRA of all train accidents that meet a dollar threshold (currently $6,700). They 

are also required to file monthly operations reports of train-miles, employee 

hours, and passenger train-miles. 

Reports must be filed within 30 days after the close of the month. Data must be 

updated when the costs associated with an accident vary by more than 10% 

(higher or lower) from that initially reported. 

Railroad systems that do not connect with the general rail system are excluded 

from reporting to FRA. Examples include subway systems (e.g., Washington, 

D.C. Metro, New York City subway, San Francisco Bay Area Rapid Transit 

District), track existing inside an industrial compound, and insular rail (e.g., rail 

that is not connected to the general system and does not have a public highway 

rail crossing or go over a navigable waterway). 

Reliability: FRA uses the data in prioritizing its inspections and safety reviews, and for more 

long-term strategic management of its rail safety program. FRA has inspectors 

who review the railroads’ reporting records, and who have the authority to write 

violations if railroads are not reporting accurately. Violations may result in 

monetary fines. 

Transit Fatality Rate 

Measure: Transit fatalities per 100 million passenger-miles traveled. (CY) 

Scope: Transit fatality data includes passengers, revenue facility occupants, trespassers, 

employees, other transit workers (contractors), and others. A transit fatality is a 

death within 30 days after the incident, which occurs under the collision, 

other accompanying information 243
244 FY 2005 Performance and Accountability Report

derailment, personal casualty (not otherwise classified), fire, or bus going off the 

road categories of National Transit Database (NTD) reporting. Previous to 2002,

transit involved parties were defined as patrons, employees, and others (the 

safety data was collected on a fiscal as opposed calendar year basis). Fatalities 

for the performance measurement use only transit agency Directly Operated 

(DO) mode data. Purchased Transportation (PT) data is not part of this measure. 

Certain fatalities are excluded as they are not considered to be directly related to 

the operation of transit vehicles. Those include suicides and fatalities occurring 

in parking facilities and stations, as well as fires in right-of-ways and stations. 

Also, the measure includes only the major transit modes (motor/trolleybus, light 

rail, heavy rail, commuter rail with vanpool, automated guideway, and demand 

response) and excludes ferryboat, monorail, inclined plane, cable car, and jitney. 

The passenger-miles traveled on public transit vehicles (buses, heavy and light 

railcars, commuter railcars, ferries, paratransit vans, vanpools, etc.) only refer to 

miles while in actual revenue service to the general public. 

These data are reported annually by operators to the FTA National Transit 

Database (NTD) and to the Federal Railroad Administration’s (FRA) Rail 

Accident and Incident Reporting System (RAIRS). FRA RAIRS data is used 

exclusively for commuter rail (CR) safety data. NTD and RAIRS data are an 

input to FTA’s Transit Safety & Security Statistics & Analysis program (formerly 

known as Safety Management Information Statistics [SAMIS]). 

Sources: The Transit Safety & Security Statistics & Analysis Annual Report, formerly 

SAMIS, is a compilation and analysis of transit accident, casualty, and crime 

statistics reported under the Federal Transit Administration’s (FTA’s) NTD 

Reporting System by transit systems that are beneficiaries of FTA Urbanized 

Area Formula funds. Starting in 2002, Commuter Rail safety data are being 

collected from the FRA Rail Accident Reporting System (RAIRS) in order to 

avoid redundant reporting to NTD. 

Transit fatalities: Transit Safety & Security Statistics & Analysis Annual Report 

Transit passenger miles: Transit Safety & Security Statistics & Analysis Annual 

Report 

Statistical 

Issues: 

The fatality counts in FTA’s Transit Safety & Security Statistics & Analysis are a 

census. The major source of uncertainty in the measure relates to passengermiles traveled. 

Passenger-miles are an estimate derived from reported passenger trips and 

average trip length. Passenger-miles are the cumulative sum of the distances 

ridden on passenger trips. Transit authorities have accurate counts of unlinked 

passenger trips and fares. An unlinked trip is recorded each time a passenger 

boards a transit vehicle, even though the rider may be on the same journey. 

Transit authorities do not routinely record trip length. To calculate passengermiles, total unlinked trips are multiplied by average trip length. To obtain an 

average trip length for their bus routes and rail routes, transit authorities use a 

FTA-approved sampling technique. Passenger-miles are the only data element 

that is sampled in the NTD. 
Validation based on annual trend analysis is performed on the passenger mile 

inputs from the transit industry. The validation is performed by statistical 

analysts at the NTD contractor (Veridian/General Dynamics Corp.). 

Completeness: The information for this measure comes from the FTA’s Transit Safety & Security 

Statistics & Analysis program, formerly FTA’s Safety Management Information 

System (SAMIS), which uses data reported by transit operators to the NTD. 

Many categories and definitions were added or changed in the new NTD in 2002, 

and have allowed for improvements and more timely analysis of trends and 

contributing factors. 

The 2005 measure is an extrapolation of partial-year data, particularly of 

passenger-miles traveled. 

Reliability: An independent auditor and the transit agency’s CEO certify that data reported 

to the NTD are accurate. Using data from the NTD to compile the Transit Safety 

& Security Statistics & Analysis program (formerly SAMIS) data, the USDOT 

Volpe National Transportation Systems Center compares current safety statistics 

with previous years, identifies questionable trends, and seeks explanation from 

operators. 

Natural Gas and Hazardous Liquid Pipeline Incidents 

Measure: Number of incidents for natural gas and hazardous liquid pipelines. (CY) 

Scope: This measure is based on reported hazardous liquid and natural gas accidents 

that meet Federal reporting criteria as defined in 49 CFR 191.1 and 191.15 for 

natural gas pipeline incidents and in 49 CFR 195.50 for hazardous liquid 

pipelines. 

Source: Office of Pipeline Safety (OPS) Incident and Accident Reports 

Statistical 

Issues: 

Reports are required to be submitted by the responsible operators within 30 days 

of an incident or face penalties for non-compliance. OPS routinely cross-checks 

incident/accident reports against other sources of data, such as the telephonic 

reporting system for incidents requiring immediate notification provided to the 

National Response Center (NRC). Compliance is very high and most incidents 

that meet reporting requirements are submitted. OPS is developing a Best 

Management Practice to ensure quality of the incident data. A response 

percentage cannot be calculated as the actual population of reportable incidents 

cannot be precisely determined. 

Completeness: The reported estimates are based upon incident data reported in January 

through June 2005. In reporting pipeline safety, there is both a safety and 

environmental measure. There may be a 60-day lag in reporting and compiling 

information in the database for analysis. Operators have 30 days to report 

other accompanying information 245
246 FY 2005 Performance and Accountability Report

incidents. Traditionally, there are more incidents in the summer than the winter. 

Preliminary estimates are based on data available as of middle of August, with 6 

months of data through the end of June. The CY 2005 estimate is based on a 

straight line extrapolation of that data (i.e., multiplying the cumulative incidents 

reported through June by 12/6 or doubling the number available from January 

through June). 

Projection of the environmental measure is less precise due to the nature of 

pipeline spills. A single large spill (10,000 barrels or more) can easily dwarf the 

total for all other CY spills combined. These large spills cannot be factored into a 

projection model due to their magnitude and infrequent and unpredictable 

occurrences. Thus, projections for the remaining six months of this CY assume 

that the average spill volume in the past six months will remain the same in the 

next six months. However, any large spill of non-highly volatile hazardous 

liquid in the next six months can move the projection upwards. 

Reliability: PHMSA uses these data in prioritizing its inspections and safety reviews, and for 

more long-term strategic management of its pipeline safety program. 

Serious Hazardous Materials Incidents

Measure: Number of serious hazardous materials transportation incidents. (CY) 

Scope: Serious reported hazardous materials incidents were initially defined by PHMSA 

to be those that result in a fatality or major injury (for most purposes, an injury 

resulting in hospitalization) due to a hazardous material, closure of a major 

transportation artery or facility, or evacuation of six or more persons due to the 

presence of a hazardous material, or a vehicle accident or derailment resulting in 

the release of a hazardous material. The definition includes those incidents 

resulting in a fatality or major injury, the evacuation of 25 or more employees or 

responders or any number of the general public, the closure of a major 

transportation artery, the alteration of an aircraft flight plan or operation caused 

by the release of a hazardous material, or the exposure of hazardous material to 

fire; plus any release of radioactive materials from Type B packaging, Risk 

Group 3 or 4 infectious substance, over 11.9 gallons or 88.2 pounds of a severe 

marine pollutant, or a bulk quantity (over 119 gallons or 882 pounds) of a 

hazardous material. This measure tracks only transportation-related releases of 

hazardous materials that are in commerce. Volume of spills is not tracked, as 

this does not necessarily indicate risk. 

Sources: Hazardous Material Information System (HMIS)—Office of Hazardous Materials 

Safety (OHM) on Form DOT F 5800.1.

Statistical 

Issues: 

Data are collected by the carrier involved in each reportable incident and 

submitted to PHMSA’s Office of Hazardous Materials Safety (OHM) on Form 

DOT F 5800.1. Carriers are required by regulation to report incidents and face 

significant penalties for failing to do so. Incident reports are received 

continuously by OHM. Carriers are required to submit incident reports to 
PHMSA within 30 days of an incident. Once received by OHM, it takes 

approximately one month for incident reports to be processed and verified. The 

data are then made available in the HMIS database during the next monthly 

update. 

Although the number of incidents may be underreported, such recording error is 

probably small in comparison to the annual variation due to chance. 

Completeness: PHMSA continues to receive reports from calendar year 2005. By the end of 

September 2005 actual incident data was received through August 31, 2005. 

PHMSA is projecting the remainder of the calendar year using the actual number 

of incidents that occurred during September, October, November, and December 

of 2004—the previous calendar year. This methodology for projecting the CY 

2005 estimate is expected to be within 2-4% of the final estimate which becomes 

available during the second quarter of CY 2006. 

Reliability: Annual hazmat incident data are used to track program performance, plan 

regulatory and outreach initiatives, and provide a statistical basis for research 

and analysis. The data is also used on a daily basis to target entities for 

enforcement efforts, and review of applications for exemption renewals. 

Details on DOT Mobility Measures

Highway Infrastructure Condition

Measure: Percentage of travel on the National Highway System (NHS) meeting pavement 

performance standards for “good” rated ride. (CY) 

Scope: Data include vehicle-miles traveled on the Highway Performance Monitoring 

System (HPMS) reported NHS sections and pavement ride quality data reported 

using the International Roughness Index (IRI). IRI is a quantitative measure of 

the accumulated response of a quarter-car vehicle suspension experienced while 

traveling over a pavement. Vehicle-Miles of Travel (VMT) represents the total 

number of vehicle-miles traveled by motor vehicles on public roadways within 

the 50 States, Washington, D.C., and Puerto Rico. 

Source: Data for this measure are collected by the State Highway Agencies using 

calibrated measurement devices that meet industry set standards and reported to 

FHWA. Measurement procedures are included in the FHWA HPMS Field 

Manual. The VMT data are derived from the HPMS. 

Statistical 

Issues: 

The major source of error in the percentages is the differences in data collection 

methodologies between the States and the differences in data collection intervals. 

FHWA is working on revisions to the HPMS data collection guidelines to 

minimize these potential errors. VMT data are also subject to sampling errors. 

The magnitude of error depends on how well the sites of the continuous 

counting stations represent nationwide traffic rates. HPMS is also subject to 

estimation differences between the States, even though FHWA works to 

other accompanying information 247
248 FY 2005 Performance and Accountability Report

minimize such differences and differing projections on growth, population, and 

economic conditions that impact driving behavior. 

Completeness: Data up to 2003 are final estimates. The 2004 measure is not available, as States 

report highway performance data to FHWA as late as October in the following 

calendar year. FY 2004 data are not complete. Even with complete FY 2004 data, 

projections must be made for FY 2005. 

Reliability: The HPMS data are collected by the 50 States, the District of Columbia, and 

Puerto Rico in cooperation with local governments. While many of the 

geometric data items, such as type of median, rarely change; other items, such as 

traffic volume, change yearly. Typically, the States maintain data inventories 

that are the repositories of a wide variety of data. The HPMS data items are 

simply extracted from these inventories, although some data are collected just to 

meet Agency requirements. The FHWA provides guidelines for data collection 

in the HPMS Field Manual. Adherence to these guidelines varies by State, 

depending on issues such as staff, resources, internal policies, and uses of the 

data at the data provider level. An annual review of reported data is conducted 

by the FHWA, both at the headquarters level and in the Division Offices in each 

State. The reported data are subjected to intense editing and comparison with 

previously reported data and reasonability checks. A written annual evaluation 

is provided to each State to document potential problems and to encourage 

corrective actions. Data re-submittal is requested in cases where major problems 

are identified. 

Highway Congestion

Measure: Percent of total annual urban-area travel occurring in congested conditions. (CY)

Scope: Data are derived from approximately 400 urban areas. The data reflects travel 

conditions on freeway and principal arterial street networks. Definitions: 

1. Urban area: Developed area with a density of greater than 1000 persons per 

square mile. 

2. Congested travel: Traveling below the posted speed limit(s). 

Source: Data collected and provided by the State Departments of Transportation from 

existing State or local government databases, including those of Metropolitan 

Planning Organizations. FHWA’s Highway Performance Monitoring System 

(HPMS) serves as the repository of the data. The Texas Transportation Institute 

utilizes HPMS data to derive the above measures. 

Statistical 

Issues: 

The methodology used to calculate performance measures has been developed 

by the Texas Transportation Institute (TTI) and reported in their annual Mobility 

Study. A detailed description the of TTI’s methodology is available at 

http://mobility.tamu.edu/ums/report/methodology_appB.pdf. 
Completeness: The 2003 and prior measures are final. The 2004 measure is preliminary, as 

partial 2004 HPMS data were used to construct the estimates. HPMS data is 

compiled from the States and verified approximately 10 months from the base 

year, e.g., 2005 actual numbers will not be available from HPMS until October 

2006. The 2005 measure is a projection based on recent year trends. 

Reliability: The HPMS data are collected by the 50 States, the District of Columbia, and 

Puerto Rico in cooperation with local governments. While many of the geometric 

data items, such as type of median, rarely change; other items, such as traffic 

volume, change yearly. Typically, the States maintain data inventories that are 

the repositories of a wide variety of data. The HPMS data items are simply 

extracted from these inventories, although some data are collected just to meet 

Agency requirements. The FHWA provides guidelines for data collection in the 

HPMS Field Manual. Adherence to these guidelines varies by State, depending on 

issues such as staff, resources, internal policies, and uses of the data at the data 

provider level. 

An annual review of reported data is conducted by the FHWA, both at the 

headquarters level and in the Division Offices in each State. The reported data 

are subjected to intense editing and comparison with previously-reported data 

and reasonability checks. A written annual evaluation is provided to each State 

to document potential problems and to encourage corrective actions. Data resubmittal is requested in cases where major problems are identified. 

Transit Ridership 

Measure: Average percent change in transit boardings per transit market (150 largest 

transit agencies), adjusted for changes in employment levels. (CY) 

Scope: The metric is average percent change in transit boardings adjusted for 

employment levels. The components are transit passenger boardings and 

employment levels within a transit market. 

The modes covered are: Motor Bus (MB), Heavy Rail (HR), Light Rail (LR), 

Commuter Rail (CR), Demand Response (DR), Vanpool (VP), and Automated 

Guideway (AG). 

Employment data are collected and reported by the Bureau of Labor Statistics. 

Sources: Transit Passengers: Data derived from counts made on bus and rail routes by 

transit agencies that are beneficiaries of FTA Urbanized Area Formula funds as 

part of their monthly National Transit Database (NTD) Reporting System 

submissions. Data is collected from the 150 largest transit systems. 

Employment: Bureau of Labor Statistics Current Employment Statistics (CES) 

Survey. 

Statistical The sources of uncertainty include coverage errors and auditing issues. These 

other accompanying information 249
250 FY 2005 Performance and Accountability Report

Issues: data are validated by the FTA Office of Oversight’s NTD contractor staff. 

By statute, every FTA formula grant recipient in an urbanized area (defined by 

the Census as having a population of 50,000 or more) must report to the National 

Transit Database (NTD). In cities of this size, virtually every transit authority 

receives FTA funding, and there are only a few cities with over 50,000 persons 

that do not provide public transit service. Publicly-funded transit service can be 

directly-operated or purchased transportation. 

Transit authorities have accurate counts of unlinked passenger trips and fares. 

An unlinked trip is recorded each time a passenger boards a transit vehicle, even 

though the rider may be on the same journey. The sources of uncertainty include 

coverage errors and auditing issues. Until 2002, reports were required only on 

an annual basis. 

Beginning in 2002, monthly NTD reports were required of the largest 150 transit 

operators on certain safety, service level, and service utilization statistics. In 2003 

and part of 2004, due to lack of NTD funding, there were many months without 

contract support to perform monthly data collection. With contract support, by 

the end of 2005, almost all transit agencies are reporting on a monthly basis. 

However, the 150 is dynamic, not static. Because much of transit is contracted 

out, or purchased transportation, there are often reporting gaps in the top 150 

when contracts are lost or contractors go out of business. For example, in New 

York City, the top six private bus contractors went out of business in 2005. 

Another common example is Dallas Area Rapid Transit (DART). DART 

dropped their large bus contract and provided the service in-house. The 

monthly data is being reported, but it looks like one reporter didn’t report. 

Further, in the past, for the sake of an accurate comparison between years, the 

FTA procedure has been to eliminate the entire agency when only one mode has 

a reporting gap for a single month. That means, if one of Boston’s vanpool 

contractors did not report one month, FTA would eliminate all of Boston’s data 

entirely. Boston has heavy rail, light rail, bus, ferry, demand response, etc. In 

2006, we will only drop the mode not reported. All these factors overstated the 

number of agencies that did not report. Through June 2005 data had been 

reported on a monthly basis for all modes for the full year of 2004 and 2005 by

123 of the largest 150 transit operators. Operators reporting data represent 88 % 

of nationwide transit utilization; all 150 operators represent 94 % of nationwide 

transit utilization. 

Employment data are reported by Bureau of Labor Statistics. The Current 

Employment Statistics (CES) Survey is a monthly survey of business 

establishments that provides estimates of employment, hours, and earnings data 

by industry for the Nation as a whole, all States, and most major metropolitan 

areas. The CES survey is a Federal-State cooperative endeavor in which State 

employment security agencies prepare the data using concepts, definitions, and 

technical procedures prescribed by the Bureau of Labor Statistics. All estimates 

from a sample survey are subject to sampling and other types of errors. Survey 

data are also subject to nonsampling errors, such as those that can be introduced 

into the data collection and processing operations. Estimates not directly 

derived from sample surveys are subject to additional errors resulting from the 

special estimation processes used. 
Completeness: DOT has revised this measure to better account for the impact of economic 

conditions on transit use by adjusting for changes in the level of employment in 

each urbanized area and to improve timeliness. An increase in average transit 

ridership per market, adjusted for changes in employment, represents an 

increase in transit’s share of the personal travel market. 

In order to improve the timeliness of the data reported, and to make the period 

being reported more comparable across areas, in the future, the measure will 

utilize data on transit unlinked passenger trips (used as a surrogate for 

passenger-miles) from the new monthly National Transit Database that was 

initiated in 2002. This data is to be available for the largest 150 transit operators, 

which account for about 94 % of all transit ridership. Thus, for 2005, the 

indicator will compare transit ridership for the urbanized areas containing the 

150 largest transit agencies (normalized for employment levels) for the year 

ending in September 2005 with the year ending in September 2004. Data on 

employment is based on monthly employment levels for metropolitan statistical 

areas reported by the Bureau of Labor Statistics. 

Reliability: An independent auditor and the transit agency’s CEO certify that data reported 

to the NTD are accurate. FTA also compares data to key indicators such as 

vehicle revenue-miles, number of buses in service during peak periods, etc. 

FTA has undertaken a major initiative to increase ridership nationwide. This 

measure has been built into all FTA senior executive performance 

accountabilities. 

Transportation Accessibility 

Measure: 1. Percentage of bus fleets that are compliant with the Americans with 

Disabilities Act (ADA). (CY) 

2. Percent of key rail stations that are compliant with the Americans with 

Disabilities Act (ADA). (CY) 

Scope: Accessibility for bus fleet means that vehicles are equipped with wheelchair lifts 

or ramps. 

Transit buses are buses used in urbanized areas to provide public transit service 

to the general public. Transit buses do not include private intercity buses (e.g., 

Greyhound), private shuttle buses, charter buses, or school buses. 

The percentage of bus fleets that are equipped with lifts or ramps is only a partial 

measure of overall accessibility under the ADA as it measures only the 

availability of transit buses in our National fleet that can accommodate 

wheelchairs through the use of mechanical lifts or ramps. Accessibility for 

transit vehicles under the ADA includes other equipment and operational 

practices that are not reflected in this indicator. 

Accessibility for key rail facilities is determined by standards for ADA 

other accompanying information 251
252 FY 2005 Performance and Accountability Report

compliance. Transit systems were required to identify key stations. A key 

station is one designated as such by public entities that operate existing 

commuter, light, or rapid rail systems. Each public entity has determined which 

stations on its system have been designated as key stations through its planning 

and public participation process using criteria established by DOT regulations. 

All new rail stations are required to be ADA compliant upon completion and 

must meet standards for new rail stations, not key stations. 

All altered stations are required to be ADA compliant upon completion and 

must meet standards for alterations of transportation facilities by public entities. 

Sources: Compliant bus fleets: National Transportation Database (NTD). 

Compliant rail stations: Rail Station status reports to the FTA. 

Statistical 

Issues: 

Data is obtained from a census of publicly-funded transit buses in urbanized 

areas. Information on the ADA key rail stations is reported to FTA by transit 

authorities. These data are not based on a sample. 

Completeness: At a transit authority, vehicle purchases are significant capital expenditures. 

Vehicles purchased with FTA funds must have a useful life of 12 years. Whether 

a bus is purchased or leased, the equipment on the bus is recorded, including 

lifts and ramps. For the last 20 years, transit agencies have reported on the 

equipment in their bus fleets to the FTA in their annual NTD submissions. There 

is a census of publicly-funded transit buses in urbanized areas. It is not a 

sample. Urbanized areas have more than 50,000 persons, and are defined by the 

Census Department. By statute, every FTA formula grant recipient in an 

urbanized area must report to the NTD. In cities of this size, virtually every 

transit authority receives FTA funding. There are only a few cities of over 50,000 

persons that do not provide public transit service. Publicly funded transit 

service can be directly operated or purchased transportation. 

Reliability: All data in the NTD is self-reported by the transit industry. The transit agency’s 

Chief Executive Officer and an independent auditor for the transit agency certify 

the accuracy of this self-reported data. The data is also compared with fleet data 

reported in previous years and cross-checked with other related operating and 

financial data in the report. Fleet inventory is also reviewed as part of FTA’s 

Triennial Review, and a visual inspection is made at that time. 

Information on ADA key rail stations is reported to FTA by transit authorities. 

The FTA’s Office of Civil Rights conducts oversight assessments to verify the 

information on key rail station accessibility. Quarterly rail station status reports, 

and key rail station assessments have significantly increased the number of key 

rail stations that have come into compliance over the last several years. 

FTA will primarily influence the goal through Federal transit infrastructure 

investment, which speeds the rate at which transit operators can transition to 

ADA-compliant facilities and equipment, oversight, and technical assistance. 
Access to Jobs 

Measure: Number of employment sites (in thousands) that are made accessible by Job 

Access and Reverse Commute (JARC) transportation services. (FY) 

Scope: This measure assesses one part of the JARC program—the numbers of 

employment sites made accessible that were not previously accessible. The new 

employment sites represented new sites connected geographically by the new 

service or new employment sites reached during time periods not previously 

covered (late night and weekend service). An employment site is a new stop 

reaching employers not previously reached either directly by demandresponsive services or that are within 1⁄4 mile of the new service stop for fixedroute service. Services that make an employment site accessible may include, 

but are not limited to, carpools, vanpools, and other demand-responsive services 

as well as traditional bus and rail public transit. This measure does not account 

for those JA RC activities that encourage riders to use already existing sources of 

public transit. 

Source: FTA Grantees 

Statistical 

Issues: 

In previous years, FTA has had difficulty in getting complete information from 

its grantees. Changes resulting from a FTA analysis of this issue have improved 

grantee reporting compliance to 80 % of those JARC grantees expected to report. 

Completeness: JARC grantees are requested to report the new employment sites reached by the 

transportation services initiated under their grant. Approximately 80 % of the 

JARC grantees have reported this data for FY 2004 and similar or better results 

are expected for FY 2005. FTA projects these results to estimate the total new 

employment sites reached by all grantees. 

The calculation methodology is based on the expenditures of selected grantees 

when compared to the total expenditures of all grantees during the same twofiscal-year period. In subsequent years, FTA further proposes to supplement this 

approach by simplifying the data-reporting process, developing profiles of all 

grantees, and conducting on-site surveys to collect qualitative information about 

program performance from selected grantees. 

The preliminary methodology for projecting the number of employment sites 

reached in FY 2005 has two elements. Phase I will use existing data collected for 

FY 2004 to project employment sites reached, based on expenditure level for FY 

2005. Phase 2 will involve projections based on actual FY 2004 and FY 2005 

cumulative data that will be available in early 2006. Phase 2 involves the 

collection of 2005 data collected from grantees. If data collected is incomplete, 

then projections will be made for grantees not reporting, based on data collected 

in FY 2004 / FY 2005. 

Reliability: Oversight contractors review the data and contact grantees to ascertain 

methodologies on a sample basis, or when the information warrants review. 

other accompanying information 253
254 FY 2005 Performance and Accountability Report

Aviation Delay 

Measure: Percent of all flights arriving within 15 minutes of schedule at the 35 Operational 

Evolution Plan airports due to NAS-related delays (FY) 

Scope: NAS On-Time Arrival is the percentage of all flights arriving at the 35 OEP 

(Operational Evolution Plan) airports equal to or less than 15 minutes late, based 

on the carrier flight plan filed with the FAA, and excluding minutes of delay 

attributed by air carriers to weather, carrier action, security delay, and prorated 

minutes for late arriving flights at the departure airport. 

The adjusted sum of flights arriving on or before 15 minutes of flight plan arrival 

time is divided by the total number of completed flights. 

A flight is considered on-time if it arrives no later than 15 minutes after it’s 

published, scheduled arrival time. This definition is used in both the DOT 

Airline Service Quality Performance (ASQP), and Aviation System Performance 

Metrics (ASPM) reporting systems. Air carriers, however, also file up-to-date 

flight plans for their services with the FAA that may differ from their published 

flight schedules. This metric measures on-time performance against the carriers 

filed flight plan, rather than what may be a dated published schedule. 

The time of arrival of completed passenger flights to and from the OEP 35 

airports is compared to their flight plan scheduled time of arrival. For delayed 

flights, delay minutes attributable to extreme weather, carrier caused delay, 

security delay, and a prorated share of delay minutes due to a late arriving flight 

at the departure airport are subtracted from the total minutes of delay. If the 

flight is still delayed, that delay is attributed to the National Aviation System 

(NAS) and the FAA, and counted as a delayed flight. 

Sources: The ASPM database, maintained by the FAA’s Office of Aviation Policy and 

Plans, and supplemented by DOT’s ASQP causation data, contains the data for 

on-time arrivals. By agreement with the FAA, ASPM flight data is filed by 

certain major air carriers for all flights to and from most large and medium hubs, 

and is supplemented by flight records contained in the Enhanced Traffic 

Management System (ETMS) and flight movement times provided by 

Aeronautical Radio, Inc. (AIRINC). Data are sufficient to complete ASPM data 

files for 55 airports. The 35 OEP airports are a sub-set of these 55 airports. 

Statistical 

Issues: 

None, all flight data to/from the 35 OEP airports are reported. 

Completeness: The FY 2005 data will not be finalized until about 90 days after the close of the 

fiscal year; essentially the start of the next calendar year. 

Reliability: Flight plan data is extracted from carrier records supplied under ASPM, which 

contains flight data. Summary data are compared and supplemented with data 

filed monthly with DOT under 14 CFR Part 234, Airline Service Quality 

Performance Reports, which separately requires reporting by major air carriers 

on flights to and from all large hubs. 
Details on DOT Global Connectivity Measures

Disadvantaged and Women-Owned Small Businesses

Measure: 1. Percent share of the total dollar value of DOT direct contracts that are awarded 

to women-owned businesses. (FY) 

2. Percent share of the total dollar value of DOT direct contracts that are awarded 

to small disadvantaged businesses. (FY) 

Scope: Includes contracts awarded by DOT Operating Administrations through direct 

procurement. It does not include FAA contracts exempt from the Small Business 

Act. 

Sources: Prior to October 1, 2003, these data are derived from the USDOT Contract 

Information System (CIS, which fed the old Federal Procurement Data System 

(FPDS). The CIS included all USDOT contracting activities that reported to the 

Federal Procurement Data Center (FPDC). Migration to the new Federal 

Procurement Data System on October 1, 2003 enabled the removal of agency 

FPDS feeder systems government-wide (including CIS). New data reports will 

come directly from FPDS. 

Data are compiled by USDOT Contracting staff from Department contract 

documents. Selected information is either transmitted from the operating 

administration contract writing systems, or manually data-keyed via the FPDS 

web site, into the FPDS database, which can be queried to compute needed 

statistics. All USDOT contracts are enumerated. 

Statistical 

Issues: 

Until recently the reliability of the Federal Procurement Data System/Next 

Generation (FPDS/NG) was an issue with DOT and other federal agencies 

including the General Accountability Office (GAO). The FPDS is designed to be 

an accurate and reliable system, as required by the Small Business Act, 

Section 644(g). However, it is recognized that at least through the transitional 

periods of FY 2003 through FY 2006, there may be issues of synchronization and 

data reliability between federal agencies and the FPDS/NG. DOT currently is 

required to scrub FPDS/NG data and resubmit it for validation. 

After reverifying these data against internal sources, there are no known major 

errors present in the data. Business types are as identified in the Central 

Contractor Registration (CCR) database. However, random variation in the 

number of DOT contracts as well as the number of women-owned and smalldisadvantaged businesses each year results in some random variation in these 

measures from year to year. 

Completeness: The Federal Procurement Data System (FPDS) is prescribed by regulations as the 

official data collection mechanism for DOT acquisitions. 

Reliability: There is extensive regulatory coverage to ensure data reliability. The system is 

other accompanying information 255
256 FY 2005 Performance and Accountability Report

used to prepare many reports to Congress, the Small Business Administration 

and others. Performance goals actual data, as finalized by the Small Business 

Administration is the only reliable basis for program evaluations as mandated by 

the Small Business Act, Section 644(g). 

St. Lawrence Seaway System Availability

Measure: Percent of days in the shipping season that the U.S. portion of the St. Lawrence 

Seaway is available. (FY) 

Scope: The availability and reliability of the U.S. sectors of the St. Lawrence Seaway, 

including the two U.S. Seaway locks in Massena, N.Y., are critical to continuous 

commercial shipping during the navigation season (late March to late 

December). System downtime due to any condition (weather, vessel incidents, 

malfunctioning equipment) causes delays to shipping, affecting international 

trade to and from the Great Lakes region of North America. Downtime is 

measured in hours/minutes of delay for weather (visibility, fog, snow, ice); 

vessel incidents (human error, electrical and/or mechanical failure); water level 

and rate of flow regulation; and lock equipment malfunction. 

Sources: Saint Lawrence Seaway Development Corporation (SLSDC) Office of Lock 

Operations and Marine Services 

Statistical 

Issues: 

None. 

Completeness: As the agency responsible for the operation and maintenance of the U.S. portion 

of the St. Lawrence Seaway, SLSDC’s lock operations unit gathers primary data 

for all vessel transits through the U.S. Seaway sectors and locks, including any 

downtime in operations. Data is collected on site, at the U.S. locks, as vessels are 

transiting or as operations are suspended. This information measuring the 

System’s reliability is compiled and delivered to SLSDC senior staff and 

stakeholders each month. In addition, SLSDC compiles annual System 

availability data for comparison purposes. Since SLSDC gathers data directly 

from observation, there are no limitations. 

Historically, the SLSDC has reported this performance metric for its entire 

navigation season (late March to late December). Unfortunately due to reporting 

timelines, system availability data is only reported through September in this 

report.

Reliability: SLSDC verifies and validates the accuracy of the data through review of 24-hour 

vessel traffic control computer records, radio communication between the two 

Seaway entities and vessel operators, and video and audiotapes of vessel 

incidents. 
Bilateral Agreements 

Measure: Number of Bilateral and Multilateral agreements completed. 

The Bilateral Aviation Safety Agreement (BASA) is made up of two parts: (1) an 

executive agreement signed by the Department of State and Ministry of Foreign 

Affairs, and (2) one or more implementation procedures signed by the FAA and 

the other civil aviation authority. The measure is the number of agreements 

signed with foreign governments. 

Scope: Global. The purpose of a BASA is to promote aviation safety and environmental 

quality; and to enhance cooperation and increase efficiency in matters related to 

civil aviation. By building a network of competent civil aviation authorities and 

concluding agreements with additional countries and/or regional authorities, 

the FAA can increase safety globally. Improved global understanding of U.S. 

safety regulations, processes, and procedures leads to better international 

regulatory oversight. Since the BASA is based on recognition of comparability of 

the U.S. and foreign systems for approval and surveillance of aviation industry, 

the BASA allows the FAA to rely upon capabilities and technical expertise of 

other civil aviation authorities in particular areas of aviation safety. This 

minimizes duplication of efforts and opens new lines of communication between 

authorities. FAA can then better focus on U.S. safety priorities and rely on 

competent civil aviation authorities for those activities taking place overseas. 

Sources: FAA. 

Statistical 

Issues: 

None. 

Completeness: Signed BASA. This is achieved when an executive agreement and at least one 

implementation procedures is concluded with a given country or regional 

authority. 

Reliability: None. 

Reduced Barriers to Trade in Transportation 

Measure: The number of potential air transportation consumers (in billions) in 

international markets traveling between the U.S. and countries with open skies 

and open transborder aviation agreements. 

Scope: The number of potential air transportation consumers is the total population of 

the U.S. and countries with open skies aviation agreements with the U.S. By the 

end of FY 2005, there were 69 open skies agreements. This measurement 

includes the annual increase in population for the countries where open skies 

other accompanying information 257
258 FY 2005 Performance and Accountability Report

have been achieved, as well as the additional populations for newly negotiated 

open skies agreements. The estimate for the additional population is based on 

the median population size of the countries without open skies agreements. The 

measurement thus reflects the extent to which the liberalization resulting from 

open skies agreements, negotiated by DOT, increases travel opportunities 

between the U.S. and countries with previously restricted aviation agreements. 

Source: Estimate of the population of the U.S. and countries with open skies agreements 

with the U.S., Midyear Population, international Data Base, U.S. Bureau of the 

Census (per website). 

Statistical 

Issues: 

The International Data Base of the U.S. Bureau of the Census is a reliable source 

of population estimates. The Bureau’s website and publications provide 

qualifying data notes that more fully describe technical and other issues. These 

qualifying notes do not significantly affect our analyses. 

Completeness: The International Data Base of the U.S. Bureau of the Census is a reliable source 

of population estimates. The Bureau’s website and publications provide 

qualifying data notes that more fully describe technical and other issues. These 

qualifying notes do not significantly affect our analyses. 

Reliability: The International Data Base of the U.S. Bureau of the Census is a reliable source 

of population estimates. The Bureau’s website and publications provide 

qualifying data notes that more fully describe technical and other issues. These 

qualifying notes do not significantly affect our analyses. 

Enhanced International Competitiveness of U.S. Transport Providers 

Measure: The number of international negotiations conducted annually to remove marketdistorting barriers to trade in transportation.

Scope: The number of international negotiations conducted annually to remove marketdistorting barriers to trade in transportation is the number (or rounds) of 

meetings and negotiations that are conducted in an effort to reach open skies 

agreements, other liberalized aviation agreements, or to resolve problems. By 

the end of FY 2005, there were 69 open skies agreements, an open transborder 

agreement with Canada and 19 liberalized (but not open skies) agreements. 

These numbers, however, do not represent, but understate, the number of 

negotiating sessions that have historically been held to complete these 

agreements. The measurement thus reflects an estimate of the extent of and 

manner by which the DOT might best apply the necessary resources to open the 

competitive environment and provide increased travel opportunities and 

economic benefits. 

Source: Estimate of the number of annual negotiating sessions that are required to 

achieve further international aviation liberalization. It is an internal estimate 

generated by the Office of the Assistant Secretary for Aviation and international 

Affairs based on a number of analytical, economic and geopolitical factors. 
Statistical 

Issues: 

Due to geopolitical factors, the nature of international aviation negotiations can 

follow an unpredictable course. It is impossible to gauge or comment upon the 

data limitations, statistical issues, data completeness and data reliability. 

Completeness: Due to geopolitical factors, the nature of international aviation negotiations can 

follow an unpredictable course. It is impossible to gauge or comment upon the 

data limitations, statistical issues, data completeness and data reliability. 

Reliability: Due to geopolitical factors, the nature of international aviation negotiations can 

follow an unpredictable course. It is impossible to gauge or comment upon the 

data limitations, statistical issues, data completeness and data reliability. 

Details on DOT Security Measures

Strategic Mobility

Measure: Percentage of DOD-required shipping capacity complete with crews available 

within mobilization timelines. (FY) 

Scope: This measure is based on the material availability of over 50 ships in the 

Maritime Administration’s Ready Reserve Force (RRF) and over 120 ships 

enrolled in the Voluntary Intermodal Sealift Agreement (VISA) program, which 

includes 47 ships enrolled in the Maritime Security Program (MSP). A second 

factor pertinent to this measure is the availability of sufficient licensed and 

unlicensed mariners to operate the available ships. The performance measure 

represents the number of available ships (compared to the total number of ships 

in the RRF and VISA) that can be fully crewed within the established readiness 

timelines. While other Government (primarily Military Sealift Command) 

owned or controlled sealift type vessels are not included in this measure, they 

draw their crews from the same pool of mariners. Accordingly, the availability 

measure is adjusted to reflect expected requirements during the early stages of a 

military crisis. 

Sources: Ship availability data is from MARAD’s Office of Sealift Support (MSP/VISA 

ships) and the Office of Ship Operations (RRF ships). Mariner availability data is 

compiled and measured based on data obtained from the U.S. Coast Guard 

Mariner Licensing and Documentation data, MARAD's Office of Sealift Support 

estimates of the size of the sailing workforce and their availability for duty 

during a mobilization, and Department of Defense requirements. 

Statistical 

Issues: 

None. 

Completeness: Data are complete. 

Reliability: MARAD’s data is reasonably reliable and useful in managing its reserve fleet 

readiness program. 

other accompanying information 259
260 FY 2005 Performance and Accountability Report

DOD-Designated Port Facilities

Measure: Percentage of DOD-designated commercial strategic ports for military use that 

are available for military use within DOD established readiness timelines. 

Scope: The measure consists of the total number of DOD-designated commercial 

strategic ports for military use that are forecast as able to meet DOD-readiness 

requirements on 48-hour notice, expressed as a percentage of the total number of 

DOD-designated commercial strategic ports. Presently there are 15 DODdesignated commercial strategic ports. Port readiness is based on monthly 

forecasts submitted by the ports and semi-annual port readiness assessments by 

MARAD in cooperation with other NPRN partners. The MARAD/DOD semiannual port assessments provide data or other information on a variety of 

factors, including the following: the capabilities of channels, anchorages, berths, 

and pilots/tugboats to handle larger ships; rail access, rail restrictions, rail ramp 

offloading areas, and rail storage capacities; the availability of trained labor 

gangs and bosses; number and capabilities of available cranes; long-term leases 

and contracts for the port facility; distances from ports to key military 

installations; intermodal capabilities for handling containers; highway and rail 

access; number of port entry gates; available lighting for night operations; and 

number and capacity of covered storage areas and marshalling areas off the port.

Sources: Data consists of the responses received from representatives of the port 

authorities for those commercial ports designated by the Department of Defense 

as strategic ports. Forecasts are requested on a monthly basis. One hundred 

percent of the strategic ports provide availability forecasts. The MARAD Office 

of National Security Plans maintains continuing dialog with respondents. 

Statistical 

Issues: 

None. 

Completeness: Data are complete. 

Reliability: MARAD’s data is reasonably reliable according to the Bureau of Transportation 

Statistics and useful in managing its port readiness program. 

Transportation Capability Assessment for Readiness 

Measure: Transportation Capability Assessment for Readiness Index Score 

Scope: The Office of Intelligence, Security, and Emergency Response (OET) measures its 

performance in meeting the Homeland and National Security Performance goal 

to “prepare the nation’s transportation system for a rapid recovery from 

intentional harm and natural disasters” by assessing progress in six functional 

areas: (1) Crisis Management Center, (2) U. S. Disaster Response, (3) Training 
and Exercises, (4) Continuity of Operations (COOP), (5) Continuity of 

Government (COG), and (6) International Response. 

Sources: This measure is based on a self-assessment score determined by OET. Each 

functional area is rated based on between 1 and 5 specific criteria. 

The criteria are: 

Function 1—Crisis Management Center (20 points) 

1. Does the Secretary’s Crisis Management Center (CMC) have adequate 

resources, such as communications, technology, and fully ready 

technical staff? (10 points) 

2. Have the CMC workers been trained and participated in at least two 

exercises per year? (10 points) 

Function 2—U. S. Disaster Response (20 points) 

1. Do the Regional Emergency Transportation Coordinators (RETCO) and 

Regional Emergency Response Teams have the necessary time, skills and 

equipment to successfully carry out their natural disaster and WMD 

functions? (6 points) 

2. Is there adequate secure communications with state and local 

government and the transportation community when dealing with 

WMD or national security crises? (5 points) 

3. Has the National Response Plan (NRP) Transportation Annex been 

updated in the past 2 years? (3 points) 

4. Within the past 2 years, have all ten regions updated their NRP 

Transportation Annexes? (3 points) 

5. Have DOT and DOD sufficiently coordinated their transportation 

functions? (3 points) 

Function 3—Training and Exercises (20 points) 

1. Have Regional Response Teams and key personnel from state and local 

government and industry participated in DOT sponsored training and 

exercises, and did the training and exercises include both natural 

disasters and national security crises? (20 points) 

Function 4—Continuity of Operations (COOP) (20 points) 

1. Is DOT’s primary COOP site fully functional? (10 points)

2. Is the OST COOP plan updated at least once every two years? (3 points) 

3. Have the Operating Administrations COOP Plans been updated in the 

last 2 years? (4 points) 

4. Has there been at least one COOP exercise or activation for both OST as 

well as all DOT modes in the last 12 months? (3 points) 

Function 5—Continuity of Government (COG) (10 points) 

1. Does DOT have a complete National Emergency Management Team 

(NEMT)? (5 points) 

2. Have the NEMT team members received at least 1 training/exercise 

session during the year? (5 points) 

Function 6—International Response (10 points) 

1. Has DOT, as a U.S. representative to NATO, participated in at least 4 key 

NATO meetings and 2 exercises annually? (8 points) 

2. Has DOT sufficiently coordinated its international disaster role with the 

U.S. State Department and its Civil Reserve Air Fleet activities with the 

DOD? (2 points) 

other accompanying information 261
262 FY 2005 Performance and Accountability Report

Statistical 

Issues: 

None. 

Completeness: The measure is complete and reflects the combined score of all evaluation 

criteria. 

Reliability: Scores are reliable to the extent that specific quantitative evaluation criteria are 

available for each of the questions used to rate the functions. 

Details on DOT Environmental Stewardship Measures

Wetland Protection and Recovery

Measure: Ratio of wetlands replaced for every acre affected by Federal-aid Highway 

projects. (FY)

Scope: Measure includes acreage of wetlands associated with all Federal-aid highway 

projects funded during the fiscal year. To be included, wetland replacement (or 

investment in a wetland bank) must have begun. 

Source: State DOTs input Federal-aid related wetland degradation and replacement data 

into either locally-developed wetland mitigation databases or the FHWA 

Wetlands Management Database. FHWA compiles and reports the final data. 

Statistical 

Issues: 

The uniformity of the data is not guaranteed, since it is subject to interpretation 

by the State DOT. In particular, there is no uniform definition of what should be 

reported as acres mitigated. The FHWA has provided guidance to the States as 

to which mitigation activities are to be reported. 

Completeness: Data are compiled by State DOTs using local sources. 

Reliability: All Federal agencies including FHWA and other DOT modes must comply with 

National Environmental Policy Act (NEPA) and the Clean Water Act 

(specifically section 404(b)(1) of the CWA) regarding disruption of wetlands. 

These laws require agencies to identify project alternatives that would avoid or 

minimize impacts to wetlands as a first consideration. These alternatives are 

subjected to analysis under both NEPA and the Clean Water Act. Under the law, 

these alternatives must be chosen unless the project sponsors clearly 

demonstrate that they are not viable because they do not meet the project 

purpose and need, or will lead to other more significant environmental impacts. 

If, in compliance with the law, wetland disruption is unavoidable, FHWA then 

works to achieve this goal of wetland replacement. 
DOT Facility Cleanup

Measure: Percentage of DOT facilities categorized as No Further Remedial Action under 

the Superfund Amendments and Reauthorization Act (SARA). (FY) 

Scope: EPA maintains a Federal Facility Hazardous Waste docket which contains 

information regarding Federal facilities that manage hazardous wastes or from 

which hazardous substances have been or may be released. DOT facilities listed 

on the docket are discussed in the Annual SARA report sent to Congress each 

year. EPA regional offices make the determination to change facility status to 

NFRAPs on the docket. 

Sources: EPA Federal Facility Hazardous Waste docket which is issued twice a year. 

Statistical 

Issues: 

None. 

Completeness: The primary criterion for NFRAP is a determination that the facility does not 

pose a significant threat to the public health or environment. Responsibility for 

these facilities may be with FAA, FHWA, or FRA. NFRAP decisions may be 

reversed if future information reveals that additional remedial actions are 

warranted. The OAs’ activities are controlled, to a degree, by interaction and 

decisions made by EPA Regional personnel. This measure is current and has no 

missing data. 

Reliability: DOT uses this data to prioritize cleanup activities and attendant resource levels. 

However, there is insufficient time to complete remediation prior to the close of 

the FY for any sites added in the July report. 

Mobile Source Emissions

Measure: 12-month moving average number of area transportation emissions conformity 

lapses. (FY) 

Scope: The transportation conformity process is intended to ensure that transportation 

plans, programs, and projects will not create new violations of the National 

Ambient Air Quality Standards (NAAQS), increase the frequency or severity of 

existing NAAQS violations, or delay the attainment of the NAAQS in designated 

non-attainment (or maintenance) areas. 

Sources: The FHWA and FTA jointly make conformity determinations within air quality 

non-attainment and maintenance areas to ensure that Federal actions conform to 

the purpose of State Implementation Plans (SIP). With DOT concurrence, the 

EPA has issued regulations pertaining to the criteria and procedures for 

transportation conformity, which were revised based on stakeholder comment. 

other accompanying information 263
264 FY 2005 Performance and Accountability Report

Statistical 

Issues: 

None. 

Completeness: If conformity cannot be determined within certain time frames after amending 

the SIP, or if three years have passed since the last conformity determination, a 

conformity lapse is deemed to exist and no new non-exempt projects may 

advance until a new determination for the plan and Transportation 

Improvement Program (TIP) can be made. This affects transit as well as 

highway projects. During a conformity lapse, FHWA and FTA can only make 

approvals or grants for projects that are exempt from the conformity process 

(pursuant to Sections 93.126 and 93.127 of the conformity rule) such as a safety 

project, and transportation control measures (TCM) that are included in an 

approved SIP. Only those project phases that have received approval of the 

project agreement, and transit projects that have received a full funding grant 

agreement, or equivalent approvals, prior to the conformity lapse may proceed. 

This measure is current and has no missing data. 

Reliability: There are no reliability issues. FHWA and FTA jointly make conformity 

determinations within air quality non-attainment and maintenance areas to 

ensure that Federal actions conform to the purpose of State Implementation 

Plans (SIPs). 

Hazardous Liquid Materials Spilled

Measure: Tons of hazardous liquid materials spilled per million ton-miles shipped by 

pipelines. (CY) 

Scope: This measure is based on reports each operator files using PHMSA F 7000-1 for 

an accident that meets the criteria in 49 CFR §195.50. An accident report is 

required for each failure in a pipeline system subject to this part in which there is 

a release of the hazardous liquid or carbon dioxide transported resulting in any 

of the following: (a) Explosion or fire not intentionally set by the operator. (b) 

Release of 5 gallons (19 liters) or more of hazardous liquid or carbon dioxide, 

except that no report is required for a release of less than 5 barrels (0.8 cubic 

meters) resulting from a pipeline maintenance activity if the release is: (1) Not 

otherwise reportable under this section; (2) Not one described in Sec. 

195.52(a)(4); (3) Confined to company property or pipeline right-of-way; and (4) 

Cleaned up promptly; (c) Death of any person; (d) Personal injury necessitating 

hospitalization; (e) Estimated property damage, including cost of clean-up and 

recovery, value of lost product, and damage to the property of the operator or 

others, or both, exceeding $50,000. 

Sources: Office of Pipeline Safety (OPS) Accident Report for Hazardous Liquid Pipeline 

Systems F 7000-1 

Statistical 

Issues: 

Spill data are collected by the pipeline operator involved in each reportable 

incident and submitted to PHMSA's Office of Pipeline Safety (OPS) on Form 
PHMSA F 7000-1. Pipeline operators are required by regulation to report 

incidents and face significant penalties for failing to do so. Pipeline operators are 

required to submit incident reports to DOT within 30 days of the incident. Any 

accident discovered by OPS to be reportable and for which an accident report 

was not submitted is referred to the Office of Pipeline Safety’s Enforcement, 

which ensures compliance with the reporting requirement. 

Post-1985 ton-mile data are calculated using a base figure reported in a 1982 

USDOT study entitled Liquid Pipeline Director and then combined with data from 

the Association of Oil Pipe Lines and the Oil Pipeline Research Institute. Lack of 

additional information raises definitional and methodological uncertainties 

about the data’s reliability. Moreover, the three different information sources 

introduce data discontinuities, making time comparisons unreliable. (National 

Transportation System (NTS) 2002). 

The performance measure is a ratio of “Tons Net Loss” and “Ton-Miles 

Shipped.” Uncertainty in either the numerator or the denominator can have a 

large effect on the overall uncertainty. Some factors of possible variance in the 

numerator include: 1) a few large spills can make OPS miss this goal and 2) even 

when the total number of spills fluctuates, the net volume lost may increase. The 

denominator may fluctuate with the overall economy, i.e., the volume shipped 

increases with economic boom and decreases when the economy slows down. 

The environmental metric tracks a highly variable trend and OPS has noted in 

the past that the variability of this metric warrants close study. OPS has moved 

this year to "non-HVL (highly volatile liquids)" only for the environmental 

metric as HVLs evaporate on release and don't impact the environment in the 

usual way that other liquid petroleum products do. In previous years OPS had 

included HVLs in the metric and the variability was even more pronounced. 

The past long term pattern for the trend was to generally meet or miss the goal 

every other year as the actual performance bounced above and below the trend 

line regularly. OPS continues to lessen the overall standard deviation of the 

metric over time (the performance of the trend is getting statistically more sound 

over time). This measure also has continued a general downward trend even 

though it bounces above and below the trend line over time. 

Completeness: The data for this measure fluctuate year to year. PHMSA is studying the spill 

data to determine the nature of this fluctuation and improve this measure. The 

2005 measure is projected by extrapolating partial year (January-June) reported 

data. 

Reliability: PHMSA uses this data in conjunction with pipeline safety data in prioritizing 

compliance and enforcement plans and in strategic management of the pipeline 

safety program. 

Aircraft Noise Exposure 

Measure: Percent reduction in number of people within the U.S. who are exposed to 

other accompanying information 265
266 FY 2005 Performance and Accountability Report

significant aircraft noise levels (Day/Night Average Sound Level (DNL) 65 

decibels or more) from the three-year average for 2000 to 2002. 

Scope: Residential population exposed to aircraft noise above Day-Night Sound Level of 

65 decibels around U.S. airports. 

Sources: A statistical modeling technique (Model for Assessing the Global Exposure of 

Noise because of Transport Airplanes (the MAGENTA model)) is applied using 

U.S. population data from the Department of Commerce, locally-developed 

traffic distribution (route and runway utilization), and aircraft distributions 

developed using the Enhanced Traffic Management System (ETMS) and current 

aircraft registration databases. The local traffic utilization data is available for 

the busiest U.S. airports in the form of studies developed for the FAA’s 

Integrated Noise Model (INM). For smaller airports, a generic statistical 

procedure was employed. 

Statistical 

Issues: 

This measure is derived from model estimates that are subject to errors in model 

specification. 

Completeness: No actual count is made of the number of people exposed to aircraft noise. 

Aircraft type and event level are current. However, some of the databases used 

to establish route and runway utilization were developed from 1990 to 1997, 

with many of them now over seven years old. Changes in airport layout 

including expansions may not be reflected. The benefits of Federally-funded 

mitigation, such as buyout, are accounted. 

FAA has replaced the actual number of people exposed to significant noise with 

the percent decrease in the number of people exposed, measured from the threeyear average for calendar year 2000-2002. Moving to the 3-year average 

stabilizes noise trends, which can fluctuate from year to year and are affected by 

unusual events such as the 9/11 attacks and the subsequent economic downturn. 

The FY 2000– FY 2002 base time periods includes these events and is the same 3-

year period used for the emissions goal. 

The move from actual numbers to percent helps avoid confusion over U.S. noise 

exposure trends caused by annual improvements to the noise exposure model. 

A major change to MAGENTA resulted in a significant improvement in the 

estimate of the number of people exposed to significant noise levels around US 

airports. Until now, the scope of the measure included scheduled commercial jet 

transport airplane traffic at major U.S. airports. With access to better operational 

data sources, the scope of the MAGENTA calculation has expanded to include 

unscheduled freight, general aviation, and military traffic. The expanded scope 

of operations results in an increase in the estimate of the number of people 

exposed to significant noise. 

The growth in the number of people exposed results from improvements in 

measurement, not a worsening in aviation noise trends. Planned improvements 

to MAGENTA will continue to increase the estimate of the number of people 

exposed to aircraft noise, giving the false impression that aircraft noise exposure 

is increasing. Changing the noise performance goal to an annual percent change 

in aircraft noise exposure will better show the trend in aircraft noise exposure. 
The change will also make the Government Performance Review Act (GPRA) 

goal consistent with the FAA Flight Plan goal. 

Reliability: The Integrated Noise Model (the core of the MAGENTA model) has been 

validated with actual acoustic measurements at both airports and other 

environments such as areas under aircraft at altitude. External forecast data are 

from primary sources. The MAGENTA population exposure methodology has 

been thoroughly reviewed by an ICAO task group and was most recently 

validated for a sample of airport-specific cases. 

Details on DOT Organizational Excellence Measures

DOT Major System Acquisition Performance 

Measure: For major DOT systems, the percentage of cost, schedule, and performance goals 

established in acquisition project baselines that are met. (FY) 

Scope: This performance measure encompasses acquisition management data for all of 

DOT’s major systems acquisition contracts, primarily in the FAA, but also from 

any office procuring a major system as defined in OMB Circular A-11, and 

DOT’s Capital Programming and Investment Control order. 

Source: The data for acquisition programs comes from each DOT organization procuring 

major systems. 

Statistical 

Issues: 

FAA: Performance is measured separately for schedule and cost goals. Schedule 

performance is measured by calculating the number of schedule milestones met 

divided by the total schedule milestones planned. Cost performance is 

measured by comparing the total F&E budget-at-completion amount established 

in the January FAA Capital Investment Plan (CIP) against the projected budgetat-completion amount published in the August CIP. Any program with a total 

variance of more than a 10% threshold would be considered not meeting the 

established fiscal year performance goal. 

Completeness: This measure is current with no missing data. Each DOT organization maintains 

its own quality control checks for cost, schedule, and technical performance data 

of each major systems acquisition in accordance with OMB Circulars A-11, A109, and A-130, Federal Acquisition Regulations, and Departmental orders 

implementing those directives and regulations. 

Reliability: Each DOT organization having major system acquisitions uses the data during 

periodic acquisition program reviews, for determining resource requests. It is 

also used during the annual budget preparation process, for reporting progress 

made in the President’s budget and for making key program management 

decisions. 

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268 FY 2005 Performance and Accountability Report

Major DOT Infrastructure Project Cost and Schedule Performance

Measure: 1. Achieve 95% of schedule milestones for major Federally-funded 

transportation infrastructure projects, or miss those milestones by less than 10%. 

(FY) 

2. Achieve 95% of cost estimates for major Federally-funded infrastructure 

projects, or miss them by less than 10%. (FY) 

Scope: Active FTA New Starts projects with Full Funding Grant Agreements larger than 

$1 billion; FHWA projects with a total cost of $1 billion or more, or projects 

approaching $1 billion with a high level of interest by the public, Congress, or 

the Administration; and FAA runway projects with a total cost of $1 billion or 

more. 

Sources: FTA: FTA uses independent reviews and third-party assessments such as the 

Corps of Engineers and other oversight contractors to validate the accuracy of 

project budgets and schedules before grantees are awarded Full Funding Grant 

Agreements. Project/Financial Management Oversight contractors review 

project budgets on a monthly basis and FTA assesses projected total project costs 

against baseline cost estimates and schedules. 

FHWA: The percent cost estimates and scheduled milestones for a FHWA Major 

Project are measured from when the Initial Financial Plan (IFP) is prepared and 

approved to the required Annual Project Update. The update contains the latest 

information about the cost and schedule for each of the Major Projects. Division 

Office Project Oversight Managers provide monthly status reports as a 

supplement to the Annual Update. 

FAA: Project cost performance for each major project is measured from cost 

estimates submitted by the airport sponsor to support its letter of intent (LOI) 

and actual expenditure data from FAA data sources (for grants) and airport 

sponsor submissions (for overall project cost). Project schedule performance is 

measured from the Runway Template Action Plan (RTAP), as specified in the 

National Airspace System Operational Evolution Plan. 

Statistical 

Issues: 

FTA: Scheduled milestone achievement is measured by the difference between 

the actual Revenue Operations Date and the date of the execution of the Full 

Funding Grant Agreement divided by the difference between the Revenue 

Operations Date in the Full Funding Grant Agreement and the date of execution 

of the Full Funding Grant Agreement. Cost estimate achievement is measured 

by the actual Total Project Cost divided by the Total Project Cost in the Full 

Funding Grant Agreement. 

FHWA: A scheduled milestone is defined as being achieved upon completion of 

the project. Major Projects generally require 6-10 years from an IFP to 

completion. Cost estimates are prepared by comparing the costs in the most 

recent Annual Update to the IFP estimate. Because of the small number of Major 

Projects, FHWA may not meet its target if only a few projects show cost 
increases. 

FAA: Schedule completion performance is measured for two milestones—the 

project design and the project construction. A project milestone is considered to 

meet the performance target if actual cumulative rate of completion is not more 

than 10 % behind scheduled cumulative rate of completion, using the RTAP 

schedule as a base. For example, a 36-month schedule would allow a 3.6 month 

delay at any point in the schedule. In FY 2005, all of the three major runway 

projects met the performance target for completion. 

Cost performance now will be measured by comparing cumulative actual costs 

incurred at the end of each fiscal year with cumulative costs shown in the 

scheduled of costs submitted with the LOI application. A project will be 

considered to meet the cost performance target if cumulative costs are no more 

than 10 % higher than projected costs in the cost schedule. For the three current 

major projects, the baseline of scheduled costs is $3.4 billion. The source of this 

baseline cost is the most recent LOI amendment for each project, which reflects 

unanticipated cost overruns and project scope changes that are beyond the 

control of the airport sponsor. This includes costs directly or indirectly related to 

litigation, additional mitigation costs and material and supply cost increases due 

to contracting delays. Based on this measure, two of three major runway projects 

met the cost performance target in FY 2005. 

Completeness: FTA: This measure is current with no missing data. The information is currently 

tracked with an in-house MS Excel database. A Web-based database, FASTTrak, 

is being developed to track this type of project information in the future. The 

measures are calculated monthly by an FTA Headquarters Engineer, checked by 

the Team Leader and reviewed by the Office Director. 

FHWA: The FHWA Major Projects Team maintains the project schedules and 

cost estimate information in a spreadsheet, which is updated when a Project IFP 

is approved and/or the Annual Update is received and accepted. The data is 

available and reported on a semi-annual basis. 

FAA: Federal financial commitments to airport sponsors are tracked by two 

automated systems, the System of Airports Reporting (SOAR) and the Delphi 

financial system. These systems are updated immediately when a grant 

payment is made or a grant is amended or closed-out. The FAA relies on the 

airport sponsor to report actual project costs on a quarterly basis. Project design 

and construction milestones (scheduled and actual) are contained in the RTAP 

and developed by all involved FAA lines of business, the airport sponsor and 

airlines. The RTAP is comprised of tasks that must be considered when 

commissioning the runway and assigns accountability to the airport, airline, and 

FAA allowing early identification and resolution of issues that might impact the 

runway schedule. 

Reliability: FTA: Calculations of schedule achievement are based on month of this report, 

and not on projected Revenue Operations Date. Re-calculations of schedule and 

cost baselines are made to reflect amendments to the Full Funding Grant 

Agreements. FTA uses independent reviews and third-party assessments such 

as the Corps of Engineers and other oversight contractors to validate the 

other accompanying information 269
270 FY 2005 Performance and Accountability Report

accuracy of project budgets and schedules before grantees’ are awarded Full 

Funding Grant Agreements. FTA continues to work to improve its rigorous 

oversight program and has made project cost and budget performance a core 

accountability of every senior manager in the agency. 

FHWA: Both the IFP and the Annual Update undergo a rigorous review by the 

Division Office and the Major Projects Team prior to approval and acceptance. 

FAA: Reporting of Federal financial commitments to airport sponsors is done in 

accordance with FAA policy and guidance related to administering the Airport 

Improvement Program (AIP) and the authorizing statue. The FAA’s AIP Branch 

monitors FAA regional offices for compliance with policy and guidance, 

including input into SOAR and Delphi, and conducts periodic regional 

evaluations. Actual project costs reported by the airport sponsor are verified by 

an annual single audit required by OMB. Such audits cover the entire financial 

and compliance operation of the airport sponsor’s governing body. Status of the 

project design and construction schedule contained in the RTAP is updated 

quarterly, based on meetings held with the airport sponsor and airlines. 

Transit Grant Process Efficiency 

Measure: Percentage of transit grants obligated within 60 days after submission of a 

completed application. (FY) 

Scope: FTA grants obligated during a fiscal year period for major programs: Urbanized 

area, non-Urbanized area, and Elderly and Persons with Disabilities formula 

grants; Capital grants; Job Access and Reverse Commute grants; Over-The-Road 

Bus grants; and Planning grants. 

Sources: FTA internal databases including the Transportation Electronic Award 

Management (TEAM) system. 

Statistical 

Issues: 

Processing time is calculated from submission date to obligation date. $0 dollar, 

non-funding grant amendments are excluded from analysis. 

Completeness: Data are current with no missing data, since FTA uses internal databases, 

including the Transportation Electronic Award Management (TEAM) system. 

All grants obligated during the fiscal year for the selected programs (see scope) 

are included in the original data set. In rare cases where the submission date is 

omitted (which prevents processing time calculation), missing dates are 

researched and added to the database prior to reporting. The “$0” amendments 

are excluded because they are not representative of the grant processing action 

being tested. 

Reliability: The files that contain raw data from TEAM have been tested to ensure that all 

fiscal-year-to-date obligated grants are included and that data is current. Report 

programs screen various date fields to identify any missing or out-of-sequence 

dates that would skew averages; dates are corrected prior to reporting. 
Reconciliation reports of TEAM data are produced monthly and anomalies are 

explored and resolved. Detailed monthly grant processing progress reports 

provide management tools to the Regional Administrators, who continue to 

make this goal a top priority. 

Environmental Justice

Measure: Number of environmental justice (EJ) cases that remain unresolved after one 

year. (FY) 

Scope: Data will cover complaints filed with DOT under Title VI of the Civil Rights Act 

of 1964 and that have had environmental justice elements, such as allegations of 

substantially adverse environmental or health impact on a minority or lowincome community by a transportation project. Case resolutions are actions that 

end or administratively close out complaints. These include such actions as 

determinations of no jurisdiction, withdrawals by complainants, resolutions 

achieved through alternative dispute resolution, findings of no violation, and 

negotiated settlements after discrimination findings under Title VI. 

Sources: Data are collected from the entire population of interest. Data for External 

Complaint Tracking System (XTRAK) will cover all complaints filed with DOT 

that involve allegations of discrimination by an entity that received DOT 

funding, or in situations where DOT has statutory enforcement authority. Valid 

bases for allegations of discrimination include: age, color, disability, ethnicity, 

National origin, race, religion, and sex. 

Upon receipt of information alleging discrimination, data will be entered by the 

Departmental Office of Civil Rights (DOCR) staff and DOT Civil Rights office 

personnel. Data will be entered continuously by DOCR as cases are filed and as 

the responsible DOT Civil Rights office processes the case. XTRAK includes 

information on all external administrative civil rights complaints filed with DOT.

Statistical 

Issues: 

None. 

Completeness: This indicator does not measure the impact of DOT’s efforts to prevent the 

conditions that give rise to complaints. It does provide an initial measure of 

response timeliness, which is important to the public. The measure was 

expanded in 2000 to include the percentage of cases that remain unresolved after 

one year as a further indicator of the timeliness of resolution. All environmental 

justice cases by definition relate to the concerns of a community of low-income 

and/or minority people. In addition, the number of cases indicates the 

pervasiveness of community perception of significantly adverse environmental 

and health concerns. 

It should be noted that environmental justice complaints can include allegations 

of discrimination on the basis of low income, which is not covered by Federal 

civil rights statutes. Thus, although most EJ complaints are also under Title VI of 

other accompanying information 271
272 FY 2005 Performance and Accountability Report

the Civil Rights Act of 1964, not all are. Finally, there is no firm definition of 

what constitutes an EJ complaint, and thus, views can differ on what should be 

entered into XTRAK as an EJ complaint. 

The measure is current with no missing data. 

Reliability: Performance data are used by the DOCR and other DOT OAs in strategic 

management of this program. 
IPIA Reporting Details

I. Describe your agency’s risk assessment(s), performed subsequent to compiling your full 

program inventory. List the risk-susceptible programs (i.e., programs that have a

significant risk of improper payments based on OMB guidance thresholds) identified 

through your risk assessments. Be sure to include the programs previously identified in 

the former Section 57 of OMB Circular A-11. 

The Department of Transportation (DOT) engaged AOC Solutions, Inc to review its programs 

and activities and identify those that may be susceptible to significant improper payments. DOT 

identified ten programs with the highest potential for improper payments based on the highest 

2004 fiscal year expenditures, which comprised the majority of FY 2004 DOT expenditures. 

The following programs were identified as most susceptible to improper payments based on DOT’s 

assessment of their full program inventory. These programs have the greatest potential risk for 

significant improper payments. 

The ten identified programs were subject to a risk assessment, based on the following criteria: Gross 

Expended Amount, Complexity of Payments, Established Internal Controls and Oversight, Type of 

Program Recipient, Number of Program Recipients, Volume of Payments, Probability of Growth, and 

Changes in the Program from the previous year. The risk criterion was used to determine the 

sampling size for each program. From that, each program underwent an in depth statistical improper 

payment review based on the OMB guidelines. 

II. Describe the statistical sampling process conducted to estimate the improper payment rate 

for each program identified. 

AOC Solutions performed a risk analysis of each of the ten programs in order to determine the 

appropriate sample size of payments to review based on the program’s relative risk rating. Each 

criteria factor was scaled from high to low and had a numerical score assigned to each level. 

Programs were assessed on each criteria factor and scores were summed to achieve a total risk 

Operating Administration Program

Federal Highway Administration Federal Aid Highway Program - State Project *

Federal Lands Highway Program - Contracts

Federal Aviation Administration Operations

Facilities and Equipment

Airport Improvement Program *

Federal Transit Administration Capital Investment Grants *

Formula Grants *

Office of the Secretary of Transportation Working Capital Fund

DOT Payroll**

Federal Railraoad Administration Grants

* Identified in the former Section 57 of OMB Circular A-11

**For administrative purposes, payroll was reviewed as a single program for all of DOT

other accompanying information 273
274 FY 2005 Performance and Accountability Report

score. The table below shows the final risk ratings of each of the ten programs reviewed, along 

with the risk rating of each program from the FY 2003 review for comparison. 

OA Program FY 2003 

Risk Rating 

FY 2004 

Risk Rating 

DOT Payroll Moderate Moderate 

OST Working Capital Fund Moderate Low 

FRA Grants Low Low 

FHWA Federal Aid Grants Moderate Moderate 

FHWA Federal Lands Moderate Moderate 

FTA Formula Grants Moderate Low 

FTA Capital Investment Grants Moderate Low 

FAA Airport Improvement Program (Grants) Moderate Moderate 

FAA Operations (excluding Payroll) High Moderate 

FAA Facilities and Equipment High Moderate 

Program risk ratings for FY 2004 either improved or remained the same as FY 2003 ratings. 

Improvements were noted in Working Capital Fund, FTA Formula Grants and Capital 

Investment Grants, and FAA Operations and Facilities and Equipment programs due to 

improvements in established controls and program oversight. 

Most notably, FAA converted from DAFIS to the Delphi financial system, which provides 

increased system controls over payments. In addition, FAA initialized the formation of an 

internal control division to direct the activities related to internal controls and compliance with 

OMB Circular A-123, Management’s Responsibility for Internal Control. This division provides 

oversight and leads development, implementation and operation of internal control activities. 

A stratified sampling design which took into account payment amounts as well as the assessed 

risk of each program was used in the review. The sampling plan was designed with a 90% 

confidence level, which indicates a 90% likelihood that the true population value is within the 

results of the sample value. 

Once the system extracts were received, payments per program were rank ordered and placed 

into bounded strata from lowest to highest dollar value. Once the program’s population of 

payments was stratified, the number of samples to be selected were distributed among the strata, 

with proportionally more samples assigned to higher dollar value strata, following the Probability 

Proportional to Size (PPS) selection technique. 

III. Describe the Corrective Action Plans for: 

A. Reducing the estimated rate of improper payments. Include in this discussion what is 

seen as the cause(s) of errors and the corresponding steps necessary to prevent future 

occurrences. If efforts are already underway, and/or have been ongoing for some 

length of time, it is appropriate to include that information in this section. 

AOC Solutions did not identify any improper payments exceeding both 2.5% of program payments 

and $10 million during the FY 2005 review. The results of this study match those of the review done 

in FY 2004 by KPMG. Concurrently, our recovery audit work has shown there to be no chronic

areas of weakness. With these results to date, no corrective actions have been necessary. 

If a significant or chronic improper payment problems is discovered the Department will develop 

a corrective action plan and reduction targets. 
 B. Grant-making agencies with risk susceptible grant programs, discuss what your agency 

has accomplished in the area of funds stewardship past the primary recipient. Include

the status on projects and results of any reviews.

The test procedures applied during the reviews covered payments made by DOT to grantee 

entities under the Federal Highway Administration Federal Aid Program; the Federal Aviation 

Administration Airport Improvement Program; the Federal Railroad Administration Grant 

Program; and the Federal Transit Administration Formula Grant and Capital Investment Grant 

Programs. However, test procedures did not address subsequent flow down payments made by 

grantees to vendors. States and other non-Federal entities administer these grant programs and, 

accordingly, much of the activity subject to testing for improper payments is accounted for at 

these entities. DOT does not have records of grantee-level payment activities available for 

testing. Therefore, test procedures used for this review did not cover these activities. 

To address the foregoing limitation, DOT devised an innovative research and development 

(R&D) strategy that was implemented at the Federal Highway Administration’s Highway and 

Construction (Federal Aid) grant program. This strategy involved using a proof of concept 

research project to develop and test a methodology to satisfy the testing, estimation, and 

remediation requirements of IPIA for grant programs, particularly those involving construction 

projects. 

DOT completed the project successfully in the summer of 2005. The result of this study as noted 

above is a methodology and testing procedures that will be used at the grantee level. The 

Department is now in the process of extending the methodology nationwide. 

IV. The table below is required for each reporting agency. Please note the following changes 

from prior year reporting: (1) all risk susceptible programs must be listed in this chart 

whether or not an error measurement is being reported; (2) where no measurement is 

provided, agency should indicate the date by which a measurement is expected; (3) if the 

Current Year (CY) is the baseline measurement year, indicate by either footnote or by “n/a” 

in the Prior Year (PY) column; (4) if any of the dollar amount(s) included in the estimate 

correspond to newly established measurement components in addition to previously 

established measurement components, separate the two amounts to the extent possible; (5) 

include outlay estimates for CY +1, +2, and +3; and (5) agencies are expected to report on CY 

activity, and if not feasible, then PY activity is acceptable. 

* Future year outlay estimates (CY+1, +2 and +3) should match the outlay estimates for those years as 

reported in the most recent President’s Budget. 

other accompanying information 275
276 FY 2005 Performance and Accountability Report OA Program 2003 Outlays(2) 2003 Percentage 2003 Dollar Amount(3) 2004 Outlays(2) 2004 Percentage 2004 Dollar Amount(3) 2005 Outlays(2) 2005 Percentage 2005 Dollar Amount(3) 2006 Outlays(2) 2006 Percentage 2006 Dollar Amount(3) 2007 Outlays(2) 2007 Percentage 2007 Dollar Amount(3) Airport Improvement Program(1) $2,641 0.00% (903) $2,917 0.00% $0 $2,996 0.00% $0 $3,215 0.00% $0 $3,215 0.00% $0 Facilities & Equipment $2,520 Not Reported $2 ($2,491) $2,481 0.00% $0 $2,701 0.00% $0 $2,376 0.00% $0 $2,376 0.00% $0 Operations $3,270 Not Reported $22,000 ($5,831) $2,805 1.60% 0.00% $7,309 0 $3,278 0.00% $0 $3,539 0.00% $0 $3,539 0.00% $0 Formula Grants(1) $4,394 0.00% $0 $4,724 0.00% $0 $4,521 0.00% $0 $2,328 0.00% $0 $2,328 0.00% $0 Capital Investment Grants(1) $2,635 0.00% $0 $2,788 0.00% $0 $3,375 0.00% $0 $2,512 0.00% $0 $2,512 0.00% $0 Federal Aid(1) $29,585 0.00% $0 $29,514 0.00% $0 $31,217 0.00% $0 $33,922 0.00% $0 $33,922 0.00% $0 Federal Lands $631 Not Reported $150 ($12) $653 0.00% $0 $750 0.00% $0 $959 0.00% $0 $959 0.00% $0 Federal Railroad Administration Grants $1,021 Not Reported $556 $1,302 0.00% $0 $1,296 0.00% $0 $375 0.00% $0 $375 0.00% $0 Office of the Secretary Working Capital Fund $439 Not Reported $751 ($20,290) $365 0.00% .04% $0 ($210) $332 0.00% $0 $392 0.00% $0 $392 0.00% $0 DOT Payroll $5,380(4) Not Reported $0 $6,903 0.00% $0 $6,641 0.00% $0 $6,376 0.00% $0 $6,376 0.00% $0 Federal Transit (1) Identified as a Section 57 Program (2) Outlays are in Millions (3) Improper Payment Dollar amount is Actual (4) FAA Payroll only Administration Federal Highway Administration Federal Aviation Administration Improper Payment Reduction Outlook
V. Discuss your agency’s recovery auditing effort, if applicable, including any contract 

types excluded from review and the justification for doing so; actions taken to 

recoup improper payments, and the business process changes and internal controls 

instituted and/or strengthened to prevent further occurrences. In addition, 

complete the table below. 

In 2002, the Department of Transportation engaged PRG-Schultz to provide Recovery Audit 

services. Since that time, PRG has been working with the Department to identify 

overpayments and areas of weakness. The recovery auditor has access to our financial system 

to review payment records and has seamlessly been integrated into our business process with 

minimal cost to the government. 

To date, the recovery audit has found no chronic problems within DOT’s processes and 

procedures. The chart below describes the findings for DOT’s recovery audit. 

Department of Transportation 

Recovery Audit Program 

Summary Results 2000 - 2004 

Agency Estimated Amount to Audit Amount Reviewed 

Amount Identified and 

Recovered 

Error 

Rate 

FHWA $ 693,000,000.00 $ 561,330,000.00 $ 55,952.40 0.010% 

FAA $ 1,925,000,000.00 $ 1,655,500,000.00 $ 2,424,616.23 0.146% 

FTA $ 171,875,000.00 $ 154,000,000.00 $ 68,155.00 0.044% 

NHTSA $ 71,500,000.00 $ 54,340,000.00 $ 0 0.000% 

OIG $ 6,875,000.00 $ 5,500,000.00 $ 0 0.000% 

FMCSA $ 6,187,500.00 $ 4,752,000.00 $ 0 0.000% 

VOLPE $ 5,500,000.00 $ 4,400,000.00 $ 0 0.000% 

OST-WCF $ 103,125,000.00 $ 82,500,000.00 $ 14,224.00 0.017% 

FRA $ 71,500,000.00 $ 57,200,000.00 $ 8,341.36 0.015% 

RSPA $ 4,812,500.00 $ 3,850,000.00 $ 0 0.000% 

MARAD $ 3,437,500.00 $ 2,750,000.00 $ 0 0.000% 

OST $ 1,375,000.00 $ 1,100,000.00 $ 0 0.000% 

BTS $ 687,500.00 $ 550,000.00 $ 92,695.21 16.854% 

Totals $ 3,064,875,000.00 $ 2,587,772,000.00 $ 2,663,984.20 0.10%

other accompanying information 277
278 FY 2005 Performance and Accountability Report

VI. Describe the steps the agency has taken and plans to take to ensure that agency 

managers are held accountable for reducing and recovering improper payments. 

DOT management has taken a strong role in ensuring that agency managers are held accountable 

for reducing and recovery improper payments. The Deputy CFO has taken the lead in initiative 

and is heavily involved in the daily decisions of the program. Additionally, the Department’s 

CFO has taken a role in advocating the program. During the year our CFO spoke at an American 

Association of State Highway Transportation Officials meeting on the initiative. 

Monthly, the department’s chief financial officers and agency financial managers are briefed at 

the CFO Council and Financial Management Committee meetings on the status of Improper 

Payment initiatives. Additionally, monthly reports are distributed to all levels of Department 

outlining the work of the recovery audits. 

To date there have been no significant amount of improper payments identified that are 

necessary to reduce and recover. If improper payments are found, the Office of the 

Secretary/Office of Financial management, will work with the organization to ensure that 

reduction targets and recovery rates are established. 

VII. 

A. Describe whether the agency has the information systems and other 

infrastructure it needs to reduce improper payments to the levels the agency has 

targeted. 

The Department of Transportation currently has all of the information systems and infrastructure 

needed to ensure the propriety of payments at the Federal level. This is shown through the 

results of our improper payment review of our top ten programs as well as our recovery audit 

work that has been completed. 

B. If the agency does not have such systems and infrastructure, describe the 

resources the agency requested in its FY 2006 budget submission to Congress to 

obtain the necessary information systems and infrastructure. 

As noted earlier, the Department devised and executed a research and development strategy for

effectively addressing the grants program review limitations. While the research project is 

complete, the Department is now trying to determine the infrastructure needed to take this 

strategy nationwide. As the plan nationwide plan is devised the project may require additional 

infrastructures. 

VIII. Describe any statutory or regulatory barriers which may limit the agencies’ corrective 

actions in reducing improper payments and actions taken by the agency to mitigate the 

barriers’ effects. 

Test procedures applied during the review covered payments made by DOT to grantee entities 

under the Federal Highway Administration Federal Aid Program; the Federal Aviation 

Administration Airport Improvement Program; the Federal Railroad Administration Grant 

Program; and the Federal Transit Administration Formula Grant and Capital Investment Grant 

Programs. However, test procedures did not address subsequent flow down payments made by 

grantees to vendors. States and other non-Federal entities administer these grant programs and, 

accordingly, much of the activity subject to testing for improper payments is accounted for at 
these entities. DOT does not have records of grantee-level payment activities available for 

testing. Therefore, test procedures used for this review did not cover these activities. 

To address the foregoing limitation, DOT devised an innovative research and development 

(R&D) strategy that was implemented at the Federal Highway Administration’s Highway and 

Construction (Federal Aid) grant program. This strategy involved using a proof of concept 

research project to develop and test a methodology to satisfy the testing, estimation, and 

remediation requirements of IPIA for grant programs, particularly those involving construction 

projects. DOT completed the project successfully in the summer of 2005 and is in the process of 

extending the methodology nationwide. The results of this project are provided in a separate 

report.

To address the limitations in non-construction programs, DOT is currently working with the 

Federal Transit Administration and the Federal Aviation Administration to expand existing 

oversight programs to meet IPIA requirements. DOT anticipates completing this process in FY 

2006 for full implementation in FY 2007. 

IX. Additional comments, if any, on overall agency efforts, specific programs, best 

practices, or common challenges identified, as a result of IPIA implementation. 

In the aftermath of Hurricanes Katrina and Rita, the Department of Transportation (DOT) has 

been spending millions of dollars on relief efforts. Depending on supplemental appropriations, 

DOT expects to spend billions of dollars to rebuild the transportation infrastructure in Alabama, 

Louisiana, Texas and Mississippi. With this concentrated and accelerated spending, there is an 

inherently higher risk of erroneous payments. To help eliminate or reduce the level of erroneous 

payments and to enhance internal controls for future relief efforts, DOT has decided to 

concentrate FY 2006 testing in the hurricane regions. The Department’s four largest grant 

programs; Federal Highways – Highway Planning and Construction Program; Federal Transit 

Administration – Capital Grants and Investment Grants; and Federal Aviation Administration – 

Airport Improvement Program. 

Testing will take place on a partially “real-time” basis. As funds are expended, we 

will ensure that projects are meeting their contractual obligations. This will aid the Department 

in preventing improper payments funded with the hurricane relief money. 

It would also allow the Department to test established controls and would assist us in enhancing 

or developing additional controls to prevent or detect identified problems. 

As an outcome of this testing, DOT will issue an interim report for our FY 2006 Performance and 

Accountability Report (PAR) which will include (1) the amounts and causes of improper 

payments for each grant program, and (2) control procedures that can be used to prevent or 

detect improper payments in National emergency situations such as hurricanes, terrorist attacks, 

etc. 

In addition to improper payment testing in the hurricane affected regions, DOT will also take the 

following actions to expand our overall Improper Payments Information Act (IPIA) program in 

FY 2006: 

1. Actively seek participants to implement our IPIA research project in FHWA’s 

Highway Planning and Construction Program. We hope to get a significant number 

of State DOTs to volunteer to implement our IPIA methodology. 

other accompanying information 279
280 FY 2005 Performance and Accountability Report

2. Develop long term plans for incorporating IPIA testing into FHWA, FTA and FAA 

grants management programs. To save time and money, it will be most beneficial to 

all parties involved if the IPIA program is incorporated into existing programs. Our 

goal is that beginning in FY 2007 we will have 

IPIA requirements integrated with other grants management and oversight 

programs. 
FY 2005 OMB "PART" (Program Assessment Rating Tool) 

PROGRAM FOR DOT 

Summaries from the FY 2005 PART evaluation cycle are shown below: 

Program Name FAA Operations (Air Traffic Services) 

Strategic Goal(s) Effected Safety 

Score 65% Adequate 

Major Findings/ 

Recommendations 

OMB downgraded the program in the areas of strategic and 

performance planning (lack of quantified long term goals and 

efficiency measures). Although FAA has been meeting its overall 

aviation fatal accident goal, it has not been as effective in meeting 

program performance measures such as preventing runway 

incursions or controller operational errors. 

Actions Planned/Taken Cost efficiency measures have been developed as well as targets 

established for the 2006 President's Budget. Measures have been 

briefed to the GAO and DOT IG as well as reported publicly in the 

2004 ATO Annual Performance Report. Targets are being 

formulated and will be set by the end of September 2005. 

Program Name FAA Research, Engineering & Development (RD&E) 

Strategic Goal(s) Effected Safety, Mobility 

Score 93% Effective 

Major Findings/ 

Recommendations 

The program received high marks in all evaluation areas. This 

program received the highest scores ever achieved by a DOT 

program. 

Actions Planned/Taken Delphi financial reports are used in conjunction with CAS reports 

within ATO Planning and ATO Finance as part of the RE&D funds 

management and tracking. 

Program Name FHWA Highway Infrastructure Investments 

Strategic Goal(s) Effected Organizational Excellence 

Score FY 2004 Score was 82%; FY 2005 Score = 70% Moderately Effective 

Major Findings/ 

Recommendations 

The OMB review emphasized stewardship and oversight, bringing 

FHWA administrative funds into this review which resulted in a 

score reduction of 12 points. 

Actions Planned/Taken FHWA has prepared a plan for improving program and project 

oversight of States. Directed more resources to comprehensive 

evaluation activities, particularly at the State project level. Devise 

efficiency measures to show that program delivery is costeffective. With the passage of the Safe, Accountable, Flexible, and 

Efficient Transportation Equity Act, A Legacy for Users 

(SAFETEA-LU), proposed budget and legislative changes will 

allow FHWA to more effectively and efficiently meet its 

performance goals. 

Program Name FHWA – Federal Lands Highways Program 

Strategic Goal(s) Effected Environmental Stewardship 

Score 82% Moderately Effective 

other accompanying information 281
282 FY 2005 Performance and Accountability Report

Major Findings/ 

Recommendations 

OMB noted that the evaluation score reflected good business 

planning and an internal efficiency measures. 

Actions Planned/Taken A team with FHWA and National Park Service employees was 

established to develop guidance to facilitate the implementation of 

the Memorandum of Agreement (MOA) concerning the delivery of 

a larger Park Roads and Parkway Program. The Team identified 

eleven issues that are critical to the delivery of the program. 

Several groups are currently working on many of these issues and 

it has been proposed that additional teams be established to 

address the remaining issues. The ultimate goal is to develop a 

comprehensive delivery plan and performance measures. 

Program Name FRA – Railroad Safety Program 

Strategic Goal(s) Effected Safety 

Score 80% Moderately Effective 

Major Findings/ 

Recommendations 

The program received relatively good scores across the board with 

no major deficiencies noted. 

Actions Planned/Taken FRA has developed a schedule for hiring independent reviewers to 

evaluate elements of the safety program on a five-year rolling 

basis. FRA plans to request funding from OMB for independent 

evaluation in FY 2007 budget. 

Program Name FTA – New Starts 

Strategic Goal(s) Effected Organization Excellence 

Score 83% Moderately Effective 

Major Findings/ 

Recommendations 

The program received relatively good scores across the board with 

no major deficiencies noted. 

Actions Planned/Taken 1. Provide a performance-based budget justification for the New 

Starts program. 

2. As FTA uses new performance targets to measure performance, 

the 2006 budget will better reflect how funding impacts 

performance. 

Program Name Research and Special Programs Administration (now PHMSA) – 

HAZMAT Emergency Preparedness Grants 

Strategic Goal(s) Effected Safety 

Score 83% Moderately Effective 

Major Findings/ 

Recommendations 

OMB noted that the Hazmat Emergency Preparedness grant 

program was effective and efficiently run. However, OMB 

downgraded the program for not having long term performance 

goals specific to the grant program. 

Actions Planned/Taken PHMSA has completed the preliminary work to begin assessing 

the alignment between activities and DOT goals. A 

comprehensive program evaluation is schedule to be conducted in 

FY 2007. 

Program Name FMCSA Safety Grants 

Strategic Goal(s) Effected Safety, Security 

Score FY 2004 score 61%; FY 2005 score 72% 

Major Findings/ 

Recommendations 

Improved score was a result of a positive performance trend 

toward meeting the long term performance targets. 
Actions Planned/Taken FMCSA Division Administrators have completed and are now 

implementing their first annual Division Safety Plans. Division 

Safety Plans identify state-specific priority safety initiatives 

addressing Division safety goals that derive from agency goals. 

The Division Safety Plans, in consonance with MCSAP grants, 

strengthen the link between state Commercial Vehicle Safety Plans 

(CVSP) and National highway safety objectives. 

Accountability for agency operational targets in the performance 

budget is cascaded from headquarters Program Managers to Field 

Administrators and Division Administrators, and results are 

reported in the DOT PAR. Division Administrators also track and 

report quarterly on progress toward Division Safety Plan 

initiatives and milestones. 

FMCSA has aligned the agency performance budget request and 

program priorities 

consistent with the Safe, Accountable, Flexible, Efficient 

Transportation Equity Act: A Legacy for Users (SAFETEA-LU). 

other accompanying information 283
284 FY 2005 Performance and Accountability Report

Department of Transportation Direct Obligations 

Period ended Sept 30, 2005

Federal Aviation Administration

Operations 12,653,317,588

Facilities & Equipment 2,640,788,510

Research Engineering and Development 128,828,452

Airport Improvement Program 3,672,787,428

FAA Total 19,095,721,978

Federal Highway Administration

Federal Aid Highways 33,185,209,833

Miscellaneous Highway Trust Funds 82,012,431

Appalachian Development Highway System, General Fund 77,856,035

Appalachian Development Highway System, Highway Trust Fund 492,777

Miscellaneous Appropriations 27,442,077

FHWA Total 33,373,013,153

Federal Motor Carrier Safety Administration

Motor Carrier Safety Administrative Expenses 252,924,625

National Motor Carrier Safety Program 188,132,670

FMCSA Total 441,057,295

National Highway Traffic Safety Administration

Operations and Research (General) 3,763,857

Operation and Research Trust Fund 210,975,855

Highway Safety Grants 22,320,000

National Driver Register 3,646,503

NHTSA Total 240,706,215

Federal Transit Administration

Administrative Expenses 75,759,652

Formula Grants 4,436,489,389

Capital Investment Grants 3,263,375,812

Job Access & Reverse Commute 126,501,641

University Transportation Research 13,741,718

Transit Planning and Research 194,090,223

Washington Metropolitan Area Transit Authority 646,579

Discretionary Grants 31,045,274

FTA Total 8,141,650,288
Department of Transportation Direct Obligations 

Period ended Sept 30, 2005

Federal Railroad Administration 

Safety and Operations 133,999,726

Research and Development 30,698,015

National Passenger Railroad Corporation (Amtrak) 1,227,092,187

Alaska Railroad Rehabilitation 24,800,000

Next Generation High Speed Rail 14,559,478

FRA Total 1,431,149,406

Research & Innovative Technology Administration

Research and Development 3,687,863

Bureau of Transportation Statistics Allocation 26,778,144

RITA Total 30,466,007

Pipeline & Hazardous Materials Safety Administration

Administrative Expenses 0

Hazardous Materials Safety 0

Research and Special Projects 42,638,336

Pipeline Safety 71,887,106

Emergency Preparedness Grants 14,188,561

PHMSA Total 128,714,003

Maritime Administration

Ship Disposal 17,251,057

Operations and Training 115,289,878

Title XI Administration 4,725,888

Maritime Guaranteed Loan Program 40,481,917

War Risk Insurance 50,000

Vessel Operations Revolving Fund 603,496

Ready Reserve Force 1,513,652

Maritime Security Program 100,451,595

MARAD Total 280,367,483

St. Lawrence Seaway Development Corporation

Operations and Maintenance 17,341,844

SLSDC Total 17,341,844

other accompanying information 285
286 FY 2005 Performance and Accountability Report

Department of Transportation Direct Obligations 

Period ended Sept 30, 2005

Office of the Secretary 

Salaries & Expenses 82,087,179

Office of Civil Rights 8,408,243

Transportation Planning, Research & Development 20,996,869

Minority Business Outreach 2,640,725

Minority Business Resource Center 521,864

Essential Air Service 102,841,987

Compensation for Air Carriers 15,330

New Headquarters Building 43,355,413

OST Total 260,867,610

Office of the Inspector General

Salaries and Expenses 57,558,375

OIG Total 57,558,375

Surface Transportation Board

Salaries and Expenses 20,012,955

STB Total 20,012,955

DOT Total 63,518,626,612
TOP MANAGEMENT CHALLENGES 

Department of Transportation 

Report Number: PT-2006-007 

Date Issued: November 15, 2005 

other accompanying information 287
288 FY 2005 Performance and Accountability Report

U.S. Department of 

Memorandum

Transportation

Office of the Secretary 

of Transportation

Office of Inspector General 

Subject: INFORMATION: DOT’s FY 2006 Top 

Management Challenges 

Report Number PT-2006-007 

Date: November 15, 2005 

From: Kenneth M. Mead 

Inspector General 

Reply to 

Attn. of: J-1 

To: The Secretary 

Deputy Secretary 

The Office of Inspector General (OIG) has identified nine top management challenges

for the Department of Transportation (DOT) for fiscal year (FY) 2006. In considering 

the items for this year’s list, we continue to focus on the Department’s key strategic 

goals to improve transportation safety, capacity, and efficiency. 

The OIG’s list for FY 2006 is summarized below. This report and the Department’s 

response (see Appendix) will be incorporated into the DOT Performance and 

Accountability Report, as required by law. The exhibit to this report compares this 

year’s list of management challenges with the list published in FY 2005. 

 Working With Other Agencies To Respond to Disasters and Address 

Transportation Security 

- Responding to Hurricane Katrina and Other National Disasters

- Addressing Transportation Security

 Getting the Most for Every Taxpayer Dollar Invested in Highway and

Transit Projects 

- Actions by FHWA and the States Are Needed To Provide Oversight of 

Highway Funds To Ensure Projects Are Delivered on Time, Within Budget, 

and Free From Fraud

- Enhancing Fraud Prevention Capabilities and Taking Aggressive Action 

Against Those Who Perpetrate Fraud, Including Motor Fuel Tax Evasion 

- Tough Decisions Ahead in Choosing Between Competing Transit Needs 
2

 Building on Recent Initiatives To Further Strengthen Surface Safety 

Programs 

- Addressing Highway Safety Problems Where Serious Injuries and Fatalities 

Persist 

- Preventing Fraud in the Commercial Driver’s License Program 

- Strengthening Rail Safety Program Oversight and Enforcement 

 Reforming Intercity Passenger Rail To Improve Performance 

- Amtrak Has Little Incentive To Improve Cost-Effectiveness but Must Do

More To Operate Efficiently and Improve Performance 

- States Need a Larger Voice in Determining Service Requirements 

- Adequate and Stable Federal Funding Is Essential 

 Mitigating Flight Delays and Relieving Congestion—Actions Needed To 

Meet Demand 

- Taking Appropriate Action Against Growing Aviation Delays 

- Keeping Planned Infrastructure and Airspace Projects on Schedule To 

Relieve Congestion and Delays 

- Exploring Alternatives for Managing Capacity Where Infrastructure and 

Airspace Redesign Initiatives Are Not Feasible 

 Reauthorizing Aviation Programs—Establishing Requirements and

Controlling Costs Are Prerequisites for Examining FAA Financing Options 

- Controlling Major Acquisitions Costs—Delivering New Systems That Work 

on Time and Within Budget and Making Decisions About the Scope of 

Billion-Dollar Projects That Have Been Delayed 

- Getting Control of Support Services Contracts 

- Establishing Requirements for the Next Generation Air Traffic 

Management System 

- Addressing the Expected Surge in Air Traffic Controller Attrition and 

Negotiating an Affordable and Equitable Bargaining Agreement 

- Completing the Cost Accounting System To Control Costs and Improve 

Operations

 Aviation Safety—Developing Effective Oversight Programs for Air Carrier 

Operations, Repair Station Maintenance, and Operational Errors 

- Implementing a Risk-Based Approach to Air Carrier and Repair Station 

Oversight 

- Ensuring Reporting of Operational Errors 

 Improving Information Technology Investment and Computer Security 

- Clarifying the Departmental Investment Review Board’s Role in Assisting 

the Secretary To Maximize the Value and Manage the Risk of Major

Information Technology Investments 

- Eliminating Redundant IT Infrastructure Outside of DOT Headquarters To 

Reduce Operating Costs 

other accompanying information 289
290 FY 2005 Performance and Accountability Report

3

- Better Securing Air Traffic Control Systems 

- Correcting Weaknesses in the Federal Railroad Administration Network

and Enhancing Business Contingency Plans for Critical DOT Systems 

 Ensuring That Reforms Are Implemented in the Maritime Administration’s

Title XI Loan Guarantee Program 

- Completing the Development of the Title XI Loan Guarantee Tracking 

System 

- Enforcing the Requirements Established To Mitigate Risks of Noncompliant

Loans and Pursuing Remedies To Cure Defaults 

If you have any questions concerning this report, please call me at (202) 366-1959 or 

Todd J. Zinser, Deputy Inspector General, at (202) 366-6767. You may also contact 

Theodore P. Alves, Principal Assistant Inspector General for Auditing and 

Evaluation, at (202) 366-1992. 

# 
4

1. Working With Other Agencies To Respond to Disasters 

and Address Transportation Security 

The Department of Transportation (DOT) has always played a significant role in 

helping states to rebuild infrastructure damaged or destroyed by natural disasters by 

providing technical assistance and funds through emergency relief programs. The

attacks of September 11, 2001, along with the recent destruction in the Gulf Coast 

region caused by Hurricanes Katrina and Rita, exposed the vulnerabilities of our 

Nation’s citizens and critical transportation and energy infrastructure to catastrophic 

events. What has become clear as a result of these events is the continuing need for a 

well-defined, well-coordinated, interagency approach to preparing for, responding to, 

and recovering from such devastating events. As DOT addresses the daunting 

rebuilding tasks, it will need to work closely with other agencies, such as the 

Departments of Homeland Security (DHS) and Defense to: 

 Ensure that missions are performed in a well-coordinated and cost-effective

manner to protect reconstruction funding from fraud, waste, and abuse. History 

has shown that in the aftermath of crises, substantial infusions of funding for 

recovery efforts are often accompanied by fraud perpetrated by parasitic elements

who exploit weaknesses in Government oversight. 

 Address security issues within the U.S. transportation system and protect users 

from criminal and terrorist acts. 

Responding to Hurricane Katrina and Other National Disasters 

While the Federal Emergency Management Agency (FEMA) within DHS has been 

assigned the primary responsibility for responding to Hurricane Katrina and other

national disasters, coordinating Federal operations is a shared responsibility. Under 

the National Response Plan adopted in December 2004, some 32 Federal agencies and

non-profit groups agreed to participate in concerted response efforts to aid areas

affected by terrorist attacks, major disasters, and other emergencies of national 

significance. 

Under the National Response Plan, DOT is the lead agency for transportation 

(Emergency Support Function-1) and a support agency for 11 other critical NRP 

functions. In the aftermath of Hurricane Katrina, DOT deployed personnel and 

support to the affected region as part of the national response. This included moving 

over 14,000 truckloads of goods, such as disaster meals, water, ice, and generators 

and transporting people via air and bus to safe locations across the country. DHS 

Secretary Chertoff characterized the airlift organized by the Department between 

September 3rd and 11th as the largest domestic civilian airlift in U.S. history. 

Additionally, the Department supported efforts to establish command and control 

other accompanying information 291
292 FY 2005 Performance and Accountability Report

5

facilities using its National Defense Reserve Fleet and worked to repair the 

infrastructure at airports, roadways, ports, and pipelines. The Office of Inspector 

General (OIG) provided a law enforcement presence in the affected region, protecting 

DOT personnel and assets at airports and aboard the Reserve Fleet vessels. 

DOT support will continue during the unprecedented recovery and rebuilding effort

that will be needed. Effective oversight of Hurricane Katrina response and recovery 

funds will be important to ensure that all elements of DOT, across all transportation 

modes, perform their disaster response and recovery missions in the most costeffective manner. To that end, the OIG will work to ensure that the Operating 

Administrations provide proper stewardship over the resources devoted to the 

recovery effort. Specifically, the OIG will: 

 Verify that expenditures of Federal funds on transportation services and programs

are being appropriately tracked by the Operating Administrations as required by 

the Assistant Secretary for Budget and Programs and Chief Financial Officer; 

 Proactively ensure that Operating Administrations and state transportation 

departments exercise adequate oversight of Department expenditures and put

systems in place to make certain that funds are appropriately spent; 

 Audit select projects, grants, and contracts; 

 Conduct fraud awareness and prevention activities to alert Federal, state, and local 

government agencies; and 

 Investigate allegations of fraud involving transportation-funded projects, to

include presenting cases to the Department of Justice for prosecution, participating 

in resulting prosecutions, and ensuring that the Operating Administrations and 

states take appropriate suspension and debarment actions. 

Our preliminary risk assessment to determine if the accounting, tracking, and 

financial reporting of the costs of Hurricanes Katrina, Ophelia, and Rita were 

consistent with specific guidance provided by the Department noted that the 

Operating Administrations were working to establish procedures and controls to 

implement this guidance. Also, good controls seemed to have been established to 

track the Mission Assignments assigned to the Department by FEMA. We expressed 

concern about the adequacy of controls over funds used to support transportationrelated emergency response activities provided by the Federal Aviation 

Administration (FAA) Southern Region. In addition, we observed that procedures

and controls to track all administrative costs, as well as costs incurred prior to 

receiving Department guidance, had not been fully developed. Department officials 

agreed to address our concerns promptly, even before we issued our preliminary

assessment, and stated that the Operating Administrations were working to determine 

all costs incurred and documenting these costs. We will verify the actions taken as
6

part of our ongoing oversight efforts of the Department’s response to Hurricanes 

Katrina and Rita as announced on October 6, 2005. 

Addressing Transportation Security

Aside from its disaster relief efforts, DOT also has the responsibility of working with 

other agencies to secure the U.S. transportation system and protect its users from 

criminal and terrorist acts. In our report of DOT’s Top Management Challenges for 

FY 2005, we discussed the growing interdependency among Federal agencies in this 

area. The imperative for DOT is to effectively integrate new security measures into 

its existing safety regimen and to do so in a way that promotes stronger security 

without degrading transportation safety and efficiency. 

DOT and DHS have signed a Memorandum of Understanding (MOU) to improve

their cooperation and coordination in promoting the safe, secure, and efficient 

movement of people and goods throughout the U.S. transportation system. Finalizing

the MOU was the first of many critical steps accomplished by DOT in what is a very

dynamic process, but much more remains to be sorted out between the two 

departments. 

There are MOU annexes and agreements covering various transportation modes, such 

as rail security, that have not been finalized but are necessary to clearly identify the 

roles and responsibilities of DHS and DOT for transportation security-related subjects 

such as research and development, emergency communication, and the oversight and 

enforcement jurisdiction of Transportation Security Administration (TSA) and 

Federal Railroad Administration inspectors. Further, when DOT and DHS finalize an 

annex or agreement clearly defining the roles and responsibilities of each agency, they 

must follow through and execute the terms of the annex or agreement. 

For example, the Public Transportation Security annex, signed on September 8, 2005, 

by the Federal Transit Administration, TSA, and the Office of State and Local 

Government Coordination and Preparedness, will require vigilance to ensure that all 

the provisions of the annex are carried out to their fullest extent. Vigilance is also

required to ensure the annex meets Congress’ directives under the Safe, Accountable, 

Flexible, and Efficient Transportation Equity Act: A Legacy for Users 

(SAFETEA-LU). The Act directs DOT and DHS to develop security standards 

applicable to public transportation and regulations for providing grants to assist transit

agencies in enhancing system security. 

For further information, the following report can be seen on the OIG web site at 

http://www.oig.dot.gov: 

 New Approaches Needed in Managing FAA’s Hazardous Materials Program 

other accompanying information 293
294 FY 2005 Performance and Accountability Report

7

2. Getting the Most for Every Taxpayer Dollar Invested in 

Highway and Transit Projects 

Stewardship of taxpayer dollars has been a constant hallmark and theme of Secretary 

Mineta, and year after year in our Management Challenge Reports we have pointed to 

the need to make improvements in this area. This year, we see positive signs from the 

Federal Highway Administration (FHWA) with its commitment to increase oversight 

of transportation dollars, and we urge that sustained attention be given to this area. 

We continue to see examples of ineffective management of highway funds, such as 

the identification of over $1.2 billion in Federal highway aid obligations sitting idle 

during the last 7 years and transportation program fraud that continues to deny states 

much-needed funds for infrastructure improvements. The Department of 

Transportation (DOT) also faces continuing challenges with the ever-increasing 

demand both for new transit systems and for repair and maintenance of older systems. 

Department leaders have sent a very clear message demanding effective oversight of

public funds entrusted to FHWA, and there have been signs of improvement in the

Department’s oversight capability and efficiency, but there is still significant progress 

that must be made. The Department should ensure that it sustains this improvement, 

and, where oversight has failed, both Department employees and grantees must face 

the consequences. State and local government agencies share responsibility for 

stewardship of infrastructure improvement projects, and this task is during a time 

when Highway Trust Fund (HTF) revenues are falling short of an overwhelming 

demand for infrastructure funding. It is imperative that FHWA, along with state and 

local government entities, have management control systems in place to reduce the 

incidences of waste, fraud, and abuse; to detect them; and to respond forcefully when 

they occur. A 1-percent improvement in the efficiency with which states managed the

$700 billion investment in highway projects over the last 6 years would have yielded 

an additional $7 billion for infrastructure improvements—enough to fund 8 of the 

23 active major projects. 

We see three key issues that need to be addressed: 

 Actions by FHWA and the states are needed to provide oversight of Highway 

Funds to ensure projects are delivered on time, within budget, and free from fraud. 

 Enhancing fraud prevention capabilities and taking aggressive action against those 

who perpetrate fraud, including the evasion of motor fuel taxes. 

 Tough decisions between competing transit needs. 
8

Actions by FHWA and the States Are Needed To Provide Oversight of 

Highway Funds To Ensure Projects Are Delivered on Time, Within Budget, 

and Free From Fraud 

Secretary Mineta stated in March 2005 that FHWA needs to make “revolutionary” 

changes in how it conducts stewardship and oversight of Federal-aid funds. We 

agree, and our past reviews have disclosed that stronger FHWA stewardship and 

oversight of how Federal funds are invested is essential. Prior to her departure, 

former Administrator Peters had begun developing several new policies, procedures, 

and practices to improve FHWA oversight. Successfully implementing these 

initiatives will require a fundamental change in the way FHWA conducts business—

FHWA needs to accelerate the shift of its role from being a supportive partner to the 

states to one of providing independent oversight of state activities. 

The cornerstone of FHWA’s plan to improve its oversight must be to aggressively 

implement its new Financial Integrity Review and Evaluation (FIRE) program. The 

FIRE oversight program, developed in response to a material weakness reported in the 

2004 Highway Trust Fund financial statements, is intended to improve controls and 

ensure that funds are safeguarded against fraud, waste, and abuse. FIRE is an 

important program that supports FHWA’s annual certification of internal and 

financial controls for these financial statements through reviews of financial processes 

and transactions. The program includes, in part, a risk assessment of the grant 

financial management process and reviews of Federal-aid billing transactions to

determine whether items billed to FHWA represent eligible costs, funds are properly 

obligated and effectively used, and findings reported by the Office of Inspector

General (OIG) and the Government Accountability Office are adequately resolved. 

FHWA should identify sufficient resources to aggressively implement the program 

and write its employees’ performance objectives to derive the greatest benefits 

possible from this program.

Specifically, FHWA needs to: 

 Ensure major project cost estimates and schedule milestones are credible.

Concerns over FHWA’s reviews of state-prepared project cost estimates and 

finance plans came to our attention in 1999 when we found that FHWA had failed 

to recognize that Boston’s Central Artery/Tunnel project managers and the 

Massachusetts Turnpike Authority had hidden about $1.4 billion in project cost 

increases. More recently, the California San Francisco-Oakland Bay Bridge East 

Span project experienced a near doubling in its cost estimate from $2.6 billion to 

$5.1 billion, and the Texas Katy Freeway Reconstruction project rose 56 percent 

from $1.7 billion to $2.7 billion. We found that FHWA Division personnel had 

not exercised the due diligence necessary to ensure that these project cost 

estimates were reasonable. Instead, Division personnel largely relied on the 

certification from those state departments of transportation that the cost numbers 

other accompanying information 295
296 FY 2005 Performance and Accountability Report

9

were valid, which they were not. FHWA needs to ensure that an independent and 

rigorous review of project finance plans is accomplished before approval, as 

opposed to relying on state representations. 

 Free up idle funds for other infrastructure expansion and preservation 

projects. During our fifth review in 8 years of inactive obligations in 14 states, 

we found $258 million of obligations that were no longer needed. We statistically 

projected that an additional $403 million of unneeded obligations continued to sit 

idle nationwide. FHWA needs to make a concerted effort to ensure the projected

$403 million of unneeded obligations is identified and de-obligated. FHWA is 

committed to strengthening its oversight of inactive obligations and is working to 

resolve this longstanding problem. Our ongoing work indicates some success in 

these efforts as we found that in 14 states FHWA had de-obligated $239 million.

FHWA also provided us with additional information showing that a total of 

$757 million will be de-obligated nationwide. 

 Develop a process to effectively detect improper payments and stop wasteful

spending by grantees. In FY 2004, the Department identified several grant 

programs as being susceptible to improper payments, including the Federal Aid 

Highway Program. The Department also initiated a pilot project to identify 

improper payments; however, the pilot project was too limited. Meanwhile, OIG 

investigators continue to identify instances of improper payments. For example,

in May 2005, as a result of an OIG investigation, a Connecticut concrete 

contractor agreed to pay $499,000 to the Department for supplying materials not 

meeting specifications. Grants awarded to the National Crash Analysis Center at 

George Washington University are another example of FHWA’s failure to detect 

improper payments. FHWA’s lack of oversight and the University’s lack of 

management controls contributed to the success of a fraud scheme at the Crash 

Analysis Center that cost the Department $900,000 over 

4 years. The fraudulent expenditures cited have since been returned to the

Agency. In response to this case, FHWA is reorganizing and redesigning its 

procedures to improve oversight of research agreements. This includes creating a 

new division within the Office of Acquisition Management devoted to the award 

and administration of cooperative agreements with all universities and other 

recipients. With the huge increases in DOT funding due to the passage of

legislation1

 in August 2005 reauthorizing the highway program, there is a 

compelling need for FHWA to provide better oversight and accountability of 

Federal payments to uphold the public trust. 

 Clean up bad data and generate reliable financial statements. In 2004, we

reported a material weakness in FHWA’s financial statement preparation and 

1 “Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users” (SAFETEA-LU), Public Law

109-59 (119 Stat. 1144). 
10

analysis. Although FHWA has made some progress correcting these deficiencies,

the consequences of these weaknesses became evident in December 2004 when

FHWA disclosed a material error that resulted in a $2.966 billion understatement 

of previously reported budgetary resources that required the financial statements to 

be restated. Substantial improvements still need to be made to avoid another

material weakness in this area. 

 Make certain Statewide Transportation Improvement Programs (STIPs) do 

not make misleading promises of what can realistically be accomplished. A

few states have significantly reduced or delayed planned highway projects because 

adequate funds were not available. For example, in response to OIG concerns, an 

FHWA Headquarters team reviewed Puerto Rico’s STIP process and found that

insufficient funds had been identified to accomplish programmed projects. The

review concluded that the STIP was not financially constrained and the process 

had been ineffective since 1993. These STIPs are required to be fiscally

constrained. Consequently, FHWA needs to ensure they present truthful and 

credible information. 

 Redouble efforts to develop a multi-disciplinary workforce. As of June 2005,

financial specialists occupied less than 4 percent of the permanent positions at 

FHWA Divisions and Headquarters, the same as 3 years ago. This year, the 

Government Accountability Office reported2

 that FHWA’s progress toward 

developing a more multi-disciplinary approach to oversight was limited by its 

failure to incorporate this approach into its human capital planning efforts. This 

was despite instructions from Congress in 2003 to develop a more multidisciplinary workforce to perform oversight activities. Improving FHWA’s 

financial analysis capability is critical because the failure to properly oversee 

states’ project management practices can lead to increased project costs. Today’s 

highway project oversight requires more employees with professional expertise in 

financing, cost-estimating, program analysis, and schedule management. Yet, our

reviews have shown weaknesses in how FHWA has implemented its oversight,

particularly in regards to financial management, indicating a need to improve

skills in this area. FHWA needs to aggressively identify the skill sets needed to 

meet its stewardship and oversight responsibilities and act to meet this need. 

Enhancing Fraud Prevention Capabilities and Taking Aggressive Action 

Against Those Who Perpetrate Fraud, Including Motor Fuel Tax Evasion 

Contract and grant fraud continues to be a priority for the OIG, making up 

approximately 40 percent of our active case load. These investigations often involve 

bribery and corruption, bid-rigging, false claims, labor and materials overbilling, 

disadvantaged business enterprise fraud, and product substitution. During FY 2005, 

2 GAO Report Number GAO-05-173, Federal-Aid Highways: FHWA Needs a Comprehensive Approach to Improving 

Project Oversight,” January 2005. 

other accompanying information 297
298 FY 2005 Performance and Accountability Report

11

our increased focus on contract and grant fraud investigations has yielded 

52 indictments, 42 convictions, and over $84 million in total monetary recoveries. 

For example, in 2005, two Wisconsin transportation contractors were sentenced for

their part in rigging bids on approximately $100 million in DOT-funded contracts. 

The OIG investigation determined the two companies received over $62 million in 

illegal Federal contract work. The defendants and their companies were ordered to

pay over $3 million in fines and restitution. The State of Wisconsin and FHWA 

debarred the companies and individuals involved. 

The previously mentioned embezzlement scheme at the George Washington 

University is an example of Federal grant fraud that went undetected for too long. In 

June 2005, a University engineering professor who was the principal investigator for 

the DOT-funded National Crash Analysis Center was sentenced to serving 38 months 

in jail and paying restitution for stealing over $900,000 in FHWA grants between 

2000 and 2004. The embezzlement was uncovered only after a University official 

identified a potential conflict of interest involving the professor’s plan to contract

under the FHWA grant agreement with a firm he controlled and partly owned. The 

success of this 4-year fraud scheme depended upon the University’s lack of adequate 

internal controls over its administration of the FHWA grant agreement, as well as 

inattention by FHWA. 

Our investigations have consistently demonstrated that many fraud schemes depend 

on (1) employees not performing basic oversight responsibilities, (2) lax internal 

controls, and (3) inadequate procedures to track costs and services rendered. But, to

its credit, the Department is taking seriously its responsibility to aggressively combat 

fraud. Specifically, over the past year the Department issued new, uniform guidance

for suspension and debarment of contractors who were either indicted or convicted of

fraud. The Department, however, must ensure the modal administrations follow the 

guidance and take aggressive action against those who perpetrate fraud. 

In addition to contract and grant fraud, which unnecessarily increases costs, fuel fraud 

represents a drain on the HTF’s main source of revenue. FHWA estimates that over

90 percent of HTF revenues will be derived from fuel taxes over the next 10 years.3

In FY 2004, motor fuel excise taxes totaled nearly $36 billion. The Internal Revenue 

Service estimates that $1 billion in HTF revenue is being lost each year due to the 

mixing of motor fuel with other products to increase the fuel volume and reduce the 

effective tax rate—this is just one of many fraud scams. Unless fuel fraud is

significantly curtailed, the real prospect exists that there will not be sufficient funds 

available to support the activities authorized in the Safe, Accountable, Flexible, and 

Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). 

3 Other HTF revenues are generated from truck-related taxes on tires, truck and trailer sales, and heavy vehicle use.
12

During FY 2005, we increased our collaboration with local, state, and Federal 

stakeholders responsible for state motor fuel excise tax enforcement. We are working 

closely with Washington State police officials in the investigation of two employees 

of a Washington State fuel delivery company who devised a scheme to steal pre-taxed 

motor fuel from a pipeline company’s terminal rack using a misappropriated 

maintenance code. A loss of at least $500,000 in Federal and state fuel taxes resulted 

from the theft of an estimated 1.2 million gallons of fuel, which was sold at market or 

below market prices at gas stations in Idaho, Washington, and Oregon. 

Any loss of Federal fuel taxes represents a commensurate loss of revenues to the

HTF. The overall impact of fuel tax evasion losses to the HTF is amplified because 

HTF revenues are not keeping up with funding requirements. Concurrently, demands 

on highway capacity have reached unprecedented levels, and replacement and 

rehabilitation costs for existing infrastructure have greatly increased. When fuel taxes 

are not paid, states fall short in needed dollars for the construction and upkeep of our 

Nation’s roads and bridges. To help address these issues, the Department should 

emphasize to the Internal Revenue Service that the motor fuel tax evasion compliance 

and enforcement strategy needs to be strengthened to help ensure all taxes are 

collected and remitted. Ultimately, the Internal Revenue Service is responsible for 

ensuring that an effective fuel tax evasion strategy is developed and implemented. 

Tough Decisions Ahead in Choosing Between Competing Transit Needs

The Federal Transit Administration’s (FTA) New Starts program relies on full

funding grant agreements, which are long-term funding commitments that help meet 

the financial requirements of large transit projects. Because FTA awards relatively 

few of these agreements each year and funding to support the pipeline of New Starts 

projects is limited, it is crucial that only the most promising projects be selected as 

candidates for funding. As of the most recent New Starts Annual Report, there were 

18 New Starts projects with full funding grant agreements and another 31 in the 

pipeline that were collectively seeking $14.6 billion in Federal funding. Funding 

available through SAFETEA-LU, along with available contingent commitment 

authority, will provide approximately $10.3 billion for these projects. In other words, 

fully one-third of the construction projects that have been requested through the New

Starts program may not receive Federal funding. 

Although not all projects in the pipeline will advance to full funding grant 

agreements, this gap between the funds being sought and the available commitment 

authority is likely to increase. For example, costs for the Charlotte South Corridor 

Light Rail Transit increased in 2004 from $385 million to $426 million primarily

because of increases in the cost of concrete and steel for the track bed and vehicle 

maintenance building. The estimated total cost for this project has increased almost 

29 percent over its 2001 cost of $331.1 million. 

other accompanying information 299
300 FY 2005 Performance and Accountability Report

13

While many are seeking funding of new transit systems, aging transit systems are

experiencing financial difficulties. Many transit systems neither generate enough 

revenue to operate their day-to-day service nor provide operators with enough capital 

to refurbish and maintain their infrastructure. Cities such as Chicago and 

Washington, DC, rely on subsidies from state and local jurisdictions to cover budget 

deficits from operations, leaving these systems without enough revenue for capital 

maintenance and refurbishment. As more new systems are built, the competition for 

rail modernization funding and operating assistance will become more intense. The 

Department will need to focus on the problems of these aging systems in large cities

to prevent the loss of vital transportation services. Otherwise, transit system 

shutdowns—like those threatened in Philadelphia and Pittsburgh in 2004—could 

occur. Action will be needed to ensure that these transit agencies do not face many of 

the problems that Amtrak faces, such as the ever-increasing and unfulfilled need for 

huge capital investments to improve its infrastructure to a state of good repair. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov:

 Impact of Water Leaks on the Central Artery/Tunnel Project and Remaining 

Risks 

 FHWA’s Need To Capture Aggregate Cost and Schedule Data To Improve Its 

Oversight of Federal-Aid Funds 

 Water Leaks Within the I-93 Tunnels of the Central Artery Project 

 Managing Risk in the Federal-Aid Highway Program 

 Highway Trust Fund FY 2004 Financial Statements 

 DOT Consolidated Financial Statements for Fiscal Years 2004 and 2003 

 Audit of the Tren Urbano Rail Transit Project 

 Finance Plan for the Central Artery/Tunnel Project 

 The Rating and Evaluation of New Starts Transit Systems 

 DOT FY 2005 Budget and Management Challenges 

 Opportunities To Control Costs and Improve the Effectiveness of Department of 

Transportation Programs 

 Controlling Costs and Improving the Effectiveness of Federal Highway 

Administration and Federal Transit Administration Programs 

 Audit of Actions To Prevent Fraud on Cooperative Agreements With Universities 
other accompanying information 301

14

3. Building on Recent Initiatives To Further Strengthen 

Surface Safety Programs 

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

for Users (SAFETEA-LU), enacted August 10, 2005, includes significant funding 

increases and initiatives in highway, commercial vehicle, and rail safety programs. It

includes a highway safety improvement program that provides funding for 

infrastructure improvements for highway safety and at highway-rail grade crossings.

DOT has set an ambitious goal of reducing the rate of highway fatalities from

1.46 fatalities per 100 million vehicle miles traveled to 1.0 fatalities by 2008. 

Meeting this goal appears unrealistic at this time as it would require significant 

acceleration in past improvements to meet the precipitous drop targeted after year 

2007 (see Figure 3-1). The Department should explain how it will meet the targeted 

decline in annual fatality rate from 2007 to 2008 (nearly 28 percent), which, if met, 

would more than double the largest year-to-year rate decline going back 30 years. 

Figure 3-1. Actual Fatality Rates When Projected to 2008 Lag Targeted Rates* 

1.51 1.51 1.48

1.00

1.38 1.38 1.38 1.38 1.40 1.40 1.50

1.46 1.44 1.43 1.41 1.40

0.00

0.50

1.00

1.50

2.00

2001 2002 2003 2004 2005 2006 2007 2008

Year

Actual Fatality Rate Target Rate Projected Rate

Fatality Rate

Source: OIG Analysis of NHTSA Data

* Fatality rates are shown as the number of fatalities per 100 million vehicle miles traveled.

DOT must use the tools provided in SAFETEA-LU to build on past initiatives. Key

steps are to: 

 Address highway safety problems where serious injuries and fatalities persist, 

 Prevent fraud in the Commercial Driver’s License (CDL) program, and 

 Strengthen Rail Safety Program oversight and enforcement. 
302 FY 2005 Performance and Accountability Report

15

Addressing Highway Safety Problems Where Serious Injuries and Fatalities 

Persist 

SAFETEA-LU provides state incentives, managed by the National Highway Traffic 

Safety Administration (NHTSA), addressing three persistent challenges—reducing 

alcohol-impaired driving fatalities, promoting greater seat belt use, and abating the

increase in motorcycle fatalities. 

 More Focus on States With the Greatest Number of Alcohol-Impaired

Driving Fatalities. SAFETEA-LU will now allow NHTSA to direct grant 

funding to 10 states with the most fatalities related to impaired drivers, an action 

we previously supported in congressional testimony. 

 Use of SAFETEA-LU Authority To Aggressively Promote Greater Seat Belt

Use in States. NHTSA has been effective in promoting seat belt use—steadily 

increasing the usage rate to a high of 82 percent in 2004. However, only 21 states 

and the District of Columbia have a primary seat belt law. SAFETEA-LU 

provides incentives to states to pass either a primary seat belt law or maintain or 

increase seat belt use. These incentives provide a potent force for the new 

NHTSA Administrator to use in aggressively promoting changes in seat-belt use. 

 Help States Address the Steady Increase in Motorcycle Fatalities. Motorcycle

fatalities have increased for the last 7 years. Research shows that increased use of 

motorcycle helmets could save lives, but the helmet usage rate for motorcyclists in 

the United States dropped to 48 percent in 2005, after remaining unchanged at 

58 percent for the 3 previous years. Only 20 states and the District of Columbia 

require helmets for all motorcycle riders. Making use of the SAFETEA-LU safety 

incentive grants, NHTSA could promote a reduction in the number of motorcycle 

deaths. 

Preventing Fraud in the Commercial Driver’s License Program 

Curbing CDL fraud is important to highway safety as it helps ensure that only drivers 

with the requisite skills drive large trucks and other commercial vehicles. Over the 

last 5 years, we have investigated and prosecuted CDL fraud schemes in 23 states and 

found over 8,000 CDLs that were issued to drivers through corrupt examiners, mostly

third-party examiners working on behalf of the state to test CDL applicants. Our 

work has paired us with the Department of Justice and other Federal and state law

enforcement agencies to root out CDL fraud schemes and has been supported by the

Federal Motor Carrier Safety Administration (FMCSA). Yet, problems persist. For 

example: 

 In July and August 2005, two former employees of the Colorado Department of 

Motor Vehicles, working with a “middleman,” pled guilty to fraud for facilitating 

the unlawful sale of CDLs and Colorado State driver’s licenses to undocumented 
other accompanying information 303

16

aliens. The investigation disclosed that these individuals were involved in a 

scheme to sell at least 100 Colorado State driver’s licenses and 20 CDLs. 

 In June 2005, three employees of a firm providing legal documents preparation 

and language translation services entered guilty pleas for assisting Illinois 

residents in obtaining false proof of residency and providing the answers to the 

CDL written test through a corrupt language translator at the test site. It is 

estimated that more than 600 fraudulent licenses were issued in this scheme. 

Tragically, a defendant in a related case who possessed a fraudulent Wisconsin

CDL caused a fatal truck crash, killing a family of four. 

 In April 2005, a third party tester for the Louisiana Department of Public Safety 

pled guilty to making false statements fraudulently certifying the test scores

required to obtain CDLs. The investigation disclosed that the defendant accepted 

bribes in exchange for falsely certifying passing test scores for 12 applicants. The

Louisiana Department of Commercial Motor Vehicles subsequently identified and 

retested 60 CDL holders tested by the defendant. All of the drivers failed the 

retest and their CDLs were revoked. 

FMCSA has initiated improvements to the CDL program, but it will need to 

implement SAFETEA-LU provisions on learner’s permits, background checks, and 

information systems modernization to further strengthen the program. Improvement

should include ensuring that states track the status and disposition of suspect CDL 

holders, and require the retesting of drivers when appropriate. Based on information 

we obtained from the states on 15,032 suspect CDL holders, from 1998 to 2003, we 

were not able to determine whether actions, such as retesting or removal of CDL 

privileges, had been taken against 6,739 (45 percent) of these individuals. 

Strengthening Rail Safety Program Oversight and Enforcement 

Over the last 10 years, the Federal Railroad Administration (FRA) has made 

significant strides in reducing collisions and fatalities at highway-rail grade crossings

(grade crossings). Nevertheless, grade crossing collisions increased from 2,976 in 

2003 to 3,059 in 2004 (3 percent) and fatalities increased from 333 in 2003 to 368 in 

2004 (11 percent). Furthermore, train accidents increased from 2,994 in 2003 to 

3,292 in 2004 (10 percent) and fatalities jumped from 4 in 2003 to 13 in 2004, a 

225 percent increase. Our February 2005 review of safety and enforcement data 

showed that safety problems have long persisted for four of the nation’s largest 

railroads, despite the increase in civil penalties FRA has assessed against them. In 

total, FRA’s civil penalty settlement amounts for all railroads increased by 

180 percent, from $3.8 million in 2000 to $10.6 million in 2004. 

To its credit, FRA implemented a reconciliation process in July 2004 to enforce 

reporting of fatal grade crossing collisions to the National Response Center, began 

implementation of a National Inspection Plan in April 2005 to strengthen its 

compliance program, and issued a safety advisory in May 2005 promoting grade 
304 FY 2005 Performance and Accountability Report

17

crossing safety. However, given the rise in the types of accidents and fatalities 

discussed above, coupled with the upward trend in train and highway traffic, it is

critical that FRA’s program oversight and enforcement efforts are carefully targeted 

to address those rail safety problems that are most likely to result in accidents and 

fatalities. 

FRA should: 

 Improve its oversight of grade crossing accident reporting, accident investigations, 

and enforcement of safety regulations. Improved oversight is needed because the 

Federal Government investigated very few crossing collisions from 2000 to 2004,

and FRA recommended only a few crossing warning signal violations for

enforcement actions, despite the many critical safety defects it identified. 

 Use its newly issued rail safety action plan as the linchpin for further reducing railrelated accidents and fatalities by increasing enforcement, focusing inspection 

resources on areas of greatest safety concerns such as the most frequent and 

highest risk causes of accidents, and using accident and inspection data to target 

compliance problems. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Reauthorization of TEA-21 Safety Programs

 Processing Petitions To Import Non-Canadian Gray Market Vehicles 

 Follow-Up Audit on NHTSA’s Office of Defects Investigation 

 Review of NHTSA’s Progress in Implementing Strategies To Increase the Use of 

Seat Belts 

 Progress and Challenges in Implementing the TREAD Act 

 NHTSA Office of Defects Investigation 

 Background Checks for Holders of Commercial Drivers Licenses With 

Hazardous Materials Endorsements 

 Follow-up Audit of the Implementation of the North American Free Trade 

Agreement’s Cross-Border Trucking Provisions 

 Investment Review Board Deliberations on the Motor Carrier Management 

Information System 

 Improvements Needed in the Motor Carrier Safety Status Measurement System

 Improving the Testing and Licensing of Commercial Drivers 

 Highway-Railroad Grade Crossing Safety Issues 

 FRA Safety-Related Findings and Recommendations 

 Report on the Audit of the Highway-Rail Grade Crossing Safety Program 

 FRA Oversight of Use of Slow Orders and Track Reclassification 
18

4. Reforming Intercity Passenger Rail To Improve 

 Performance 

Intercity passenger rail service is an important component of a balanced transportation 

system, but Amtrak’s current model is broken. Amtrak continues to incur

unsustainably large operating losses, provide poor on-time performance, and bear 

increasing levels of deferred infrastructure and fleet investment on its system. From

fiscal year (FY) 1997 to FY 2004, annual operating losses rose from $797 million to 

$1.3 billion, and Amtrak’s debt grew from $1.7 billion to $4.6 billion. Although 

ridership increased to 25.1 million in FY 2004, passenger revenues were 2.8 percent 

below the level achieved in 2002. Amtrak has an estimated $5 billion backlog of 

infrastructure repairs, and on-time performance continues to fall—from 77 percent in 

FY 2002 to 71 percent in FY 2004. 

Reauthorization is an opportunity for true reform to reduce costs, repair neglected 

infrastructure, improve service, and redesign routes to better serve the public. 

Reauthorization should focus on improving mobility in corridors (routes of less than 

500 miles) around the country—not just in the Northeast Corridor—and in 

restructuring long-distance services (routes of greater than 500 miles) to complement 

corridor services. 

This will require new relationships and new partnerships among the Federal 

Government, the states, Amtrak, and the freight railroads. It will involve giving states 

much greater authority and control over intercity passenger rail decisions, along with 

a responsibility to provide state funds. It is imperative that the Department of 

Transportation work with Congress to create a new model for passenger rail 

transportation that provides essential mobility with greater efficiency, reliability, and 

cost-effectiveness. 

Three key steps in providing this new direction are to: 

 Require Amtrak to do more to reduce cost, although it has little incentive to 

improve cost-effectiveness; 

 Give states a larger voice in determining service requirements; and 

 Establish adequate and stable Federal funding. 

Amtrak Has Little Incentive To Improve Cost-Effectiveness but Must Do 

More To Operate Efficiently and Improve Performance 

Amtrak, as the sole provider of intercity passenger rail service, has few incentives, 

other than the threat of budget cuts or elimination, for cost control or delivery of 

services in a cost-effective way. Amtrak has not achieved significant cost savings 

since its last reauthorization. Cash losses have merely kept pace with inflation, rising 

other accompanying information 305
306 FY 2005 Performance and Accountability Report

19

an average 2.1 percent per year. In short, there has been little or no efficiency gain. 

Funding these losses leads to the bigger question of whether or not Federal dollars for 

intercity passenger rail are being used as efficiently and wisely as possible. 

In our recent analysis of Amtrak’s long-distance services, our goal was to determine 

whether cost savings could be achieved without eliminating any routes, station stops, 

or frequencies. We estimated that changes in services on those routes could save 

between $375 million and $790 million (depending upon the variability of 

maintenance labor costs) in net operating costs and $395 million in avoidable planned 

capital expenditures from FY 2005 to FY 2009. Our report identified labor, 

maintenance, and equipment costs that could be reduced. 

We are awaiting Amtrak’s implementation of pilot programs related to our 

recommendations, as promised in the Amtrak Board of Directors’ response to the 

report. The Government Accountability Office and the Amtrak Inspector General 

also have issued reports and testimony that highlighted wasteful practices in Amtrak’s

food and beverage services. Recently, in response to a request from a congressional 

committee, our office initiated an audit to review the costs and expenditures

associated with legal services performed for Amtrak. 

States Need a Larger Voice in Determining Service Requirements 

The current model for providing intercity passenger service does not give states 

enough say in selecting the best mix of service for their needs—what cities are served, 

schedules, frequency of service, and what amenities should be provided. Those 

decisions are made by Amtrak, and they are not always in the best interests of the 

states. 

Intercity passenger rail would be better served with state-led initiatives as to where 

and how intercity passenger rail service is developed. State sponsorship will become 

increasingly important under our proposal, as the states should also be asked to

provide increased operating and investment support. Capital funding decisions, as 

with mass transit, should ultimately reside with the Department of Transportation, 

based on congressional direction and in partnership with the states. 

Adequate and Stable Federal Funding Is Essential 

None of the corridors around the country, including the Northeast Corridor (NEC),

can provide the type of mobility needed without significant up-front investment. In 

the NEC this means bringing the existing facilities to a state of good repair. In other

corridors around the country, it means creating the infrastructure for high-frequency 

services in partnership with freight railroads and commuter authorities. 

A robust Federal program of capital matching grants will be essential if these 

corridors are to be developed. In addition, long-distance services that provide

connections between corridors require recapitalization if they are to be run efficiently 
20

and are to provide the high quality services their passengers deserve. None of this, 

however, implies giving more money directly to Amtrak, especially under the current 

model. A number of other issues that have proven contentious in the past must also 

be addressed. These include what to do about Amtrak’s legacy debt, its governance, 

and its assets, including management and ownership of the NEC. 

Some proposals for reforming intercity passenger rail service advocate eliminating the 

monopoly Amtrak now holds. Introducing competition into the intercity passenger 

rail system by authorizing multiple passenger rail service providers is one way to 

encourage efficiency and innovation. But competition is not likely to occur unless 

and until the rail system is restored to a state of good repair. The first steps that must 

be achieved are to ensure adequate Federal and state funds are available for operations 

and for infrastructure repair; make significant cuts to net operating costs; and give 

states more power to select routes, schedules, frequencies, and amenities. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Reauthorization of Intercity Passenger Rail and Amtrak (September 21, 2005)

 Analysis of Cost Savings on Amtrak’s Long-Distance Services 

 Intercity Passenger Rail and Amtrak 

 Reauthorization of Intercity Passenger Rail and Amtrak (April 21, 2005)

 Assessment of Amtrak’s 2003 and 2004 Financial Performance and 

Requirements 

other accompanying information 307
308 FY 2005 Performance and Accountability Report

21

5. Mitigating Flight Delays and Relieving Congestion— 

Actions Needed To Meet Demand 

After a few years of relative reprieve from aviation congestion, traffic and delays are 

once again returning, with the Federal Aviation Administration’s (FAA) Air Route 

Traffic Control Centers reporting 2005 year-to-date operations that exceed 

2000 levels by more than 3 percent. This growth in operations has brought an

increase in the number of aviation delays, with the incidence, rate, and length of

delays this past summer approaching 2000 levels, which was generally regarded as 

the worst summer of aviation delays. 

The Department of Transportation’s challenge in addressing delay growth is threefold: 

 Taking appropriate action against growing aviation delays, 

 Keeping planned infrastructure and airspace redesign projects on schedule while 

effectively implementing short-term initiatives to relieve congestion and delays, 

and 

 Exploring alternatives for managing capacity where new initiatives are not 

feasible. 

Taking Appropriate Action Against Growing Aviation Delays 

As the following figures illustrate, the number of arrival delays in the summer months

of 2005 (June, July, and August) was within 5 percent of the number of arrival delays

in the same period in 2000 and represented an 8 percent increase over the number of 

delays in 2004. The rate of delay in 2005 (25.3 percent) is also gaining on the 

summer of 2000, when 28.2 percent of arrivals were delayed. The average length of 

delays during the summer of 2005 (56.4 minutes) was actually 5 percent greater than 

the average delay length in 2000 (53.9 minutes) (see Figure 5-3). 

575,696

451,600

359,382 373,702

503,589

545,517

2000 2001 2002 2003 2004 2005

Figure 5-1. Number of Delayed Arrivals,

Summer 2000 vs. Summer 2005

Source: FAA Data

Number of Delayed Arrivals

28.2%

22.3%

18.4% 19.2%

23.8%

25.3%

0%

5%

10%

15%

20%

25%

30%

2000 2001 2002 2003 2004 2005

Figure 5-2. Percent of Delayed Arrivals, 

Summer 2000 vs. Summer 2005

Source: FAA Data
fother accompanying information 309

22

Delays were particularly 

disruptive this summer 

at several key airports. 

Of the top 15 delayed 

airports during the

summer of 2005, 

11 were also among the 

top 15 airports during 

the summer of 2000. 

Italicized entries in 

Table 5-1 identify the 

new airports in the 

ranking in 2005. At the

four most delayed 

airports, more than one 

of every three flights arrived late. The average delays at these 15 airports exceeded 

48 minutes, with 5 airports exceeding an hour. LaGuardia had the longest average 

delays of just over 70 minutes. 

Table 5-1. Top Fifteen Delayed Airports: Summer2005 

Rank Airport Percent

Delayed

Average

Minutes

1 Newark(EWR) 37.02 68.81

2 Atlanta(ATL) 35.41 62.98

3 NY-Kennedy(JFK) 35.28 58.01

4 WestPalmBeach (PBI) 33.39 53.88

5 LaGuardia (LGA) 31.58 70.03

6 Philadelphia(PHL) 31.43 66.26

7 Miami (MIA) 30.79 58.16

8 Louisville(SDF) 30.41 47.59

9 Boston(BOS) 29.97 59.59

10 Bradley(BDL) 28.58 55.83

11 Washington-Dulles(IAD) 28.40 60.11

12 Indianapolis(IND) 28.18 55.45

13 Fort Lauderdale (FLL) 27.59 54.43

14 Dallas-LoveField (DAL) 27.49 48.93

15 Baltimore (BWI) 27.46 56.21

As we learned during the painful delay-ridden years in 1999 and 2000, congestion and 

delays are strong drivers of customer service issues. As delays are again returning, 

we have initiated work at the request of Representative John Mica, Chairman of the 

House Committee on Transportation and Infrastructure, to review airline customer 

service commitments and, in particular, the Department’s role in ensuring that airlines 

are treating their customers consistently within existing laws and regulations. 

53.9 52.8

49.0

50.7

54.2

56.4

2000 2001 2002 2003 2004 2005

Figure 5-3. Average Delay Length, 

Summer 2000 vs. Summer 2005

Source: FAA Data

Minutes
310 FY 2005 Performance and Accountability Report

23

The Department has had some success in intervening to mitigate delays before they 

reach a crisis situation. Most notably, delays appear to be improving at ChicagoO’Hare, an airport that has been plagued by congestion for more than 30 years. In the 

summer of 2000, O’Hare ranked first in the list of most delayed airports, with more 

than 40 percent of flights arriving late. This past summer, O’Hare ranked 30th out of 

53 airports, with a delay rate of 24.3 percent. 

The improvement appears to be, at least in part, a result of the Department’s

administrative actions in 2004 to cap hourly operations at O’Hare at a level consistent 

with available capacity. The controls on landing slots and schedules have brought 

some short-term relief, but, in the long run, controls do not accommodate demand and 

can stifle competition. 

The Department’s challenge will be to develop a toolbox of relief measures, including

construction, technological improvements, procedural changes, administrative 

controls, and market-based solutions, that can be used as appropriate given the

severity of conditions and the physical and practical constraints of the affected 

airports. The importance of FAA’s efforts to develop and define the next generation 

air traffic management system and corresponding funding requirements are included 

in our views on the challenges facing FAA with respect to the upcoming 

reauthorization process. 

Keeping Planned Infrastructure and Airspace Projects on Schedule To 

Relieve Congestion and Delays 

While new technologies can help enhance airport arrival rates, new runways provide 

the most increases in capacity. New runways have been built at the Phoenix, Detroit, 

Miami, Denver, Houston, Orlando, and Cleveland Airports. Without a doubt, 

congestion would be much worse without the new capacity in the system. 

Between now and 2008, eight additional runway projects (six new runways, a major 

extension of an existing one, and a significant reconfiguration of another) are

expected to come on-line. These include projects at the Atlanta, Boston, and 

Philadelphia Airports. There are over 10 other new runway projects in various

planning stages, including major efforts at Chicago O’Hare, but completion dates are 

not yet firm. The Department and FAA will need to make sure that, among other 

issues, navigation equipment and airspace modifications are in place when these 

projects are commissioned. 

Airspace redesign efforts are also critical to enhance the flow of air travel in both the 

short- and long-term. In May 2005, we reported that FAA’s management of redesign 

efforts was fragmented and diffused—projects had been delayed 3 years or more, 

thereby postponing capacity improvements. We recommended that FAA prioritize 

efforts, establish criteria for assessing a project’s system-wide impacts, and revamp
other accompanying information 311

24

how resources are used. FAA is taking steps to address these concerns—the key will 

be sustained management attention and follow-through. 

Exploring Alternatives for Managing Capacity Where Infrastructure and 

Airspace Redesign Initiatives Are Not Feasible 

As delays return, FAA and some airports are considering a variety of administrative 

and market-based solutions (e.g., slot auctions, schedule caps, congestion pricing) that

allow some variable pricing of access to control congestion and delays. FAA has 

used administrative actions twice to reduce delays at O’Hare and is considering 

continuing with this approach until the O’Hare Modernization effort is complete. At

LaGuardia, where slot controls expire in 2007, new runway construction is not an 

option; tools to manage demand will likely be needed to prevent what could be 

crippling delays. Market-based solutions have merit but entail difficult policy 

questions (i.e., who sets the rates and who collects the funds). 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Aviation Industry Performance: Trends in Demand and Capacity, Aviation 

System Performance, Airline Finances, and Service to Small Airports 

 Chicago’s O’Hare Modernization Program 

 Outlook for Aviation Delays in the Summer of 2005 and Actions Needed To

Mitigate Congestion in the Short- and Long-Term 

 Airspace Redesign Efforts Are Critical To Enhance Capacity but Need Major 

Improvements 

 Review of December 2004 Holiday Air Travel Disruptions 
312 FY 2005 Performance and Accountability Report

25

6. Reauthorizing Aviation Programs—Establishing 

 Requirements and Controlling Costs Are Prerequisites for 

Examining FAA Financing Options 

A major focus of the Federal Aviation Administration (FAA) over the next year will 

be preparing to reauthorize a wide range of aviation programs and exploring 

alternative financing mechanisms. The current authorization and various taxes expire

in 2007, and FAA has begun seeking views on alternative financing options. 

However, before decisions about various financing mechanisms—such as adjustments 

to existing taxes, user fees, or borrowing authority—can be made, a clear 

understanding of the financial requirements (for new and existing efforts) and of ways

to control costs is needed. 

For decades, the Aviation Trust Fund has provided FAA with a dedicated stream of 

revenue for airport improvements, capital projects, and operations. However, there 

has been a decline in expected revenues coming into the Trust Fund. In 2001, FAA

estimated that Trust Fund revenues in 2005 would be about $14.5 billion. That 

estimate has now been reduced to $10.9 billion, a reduction of $3.6 billion (nearly 

25 percent) from the 2001 estimate. 

FAA’s budget has remained essentially flat at just under $14 billion since fiscal year 

(FY) 2004. The Agency is in the situation where increasing operating costs are 

crowding out its capital and airport accounts. Also, there are increasing demands on 

the Trust Fund and other revenue sources, including the General Fund. In FY 2006, 

FAA’s budget is expected to exceed estimated Trust Fund revenues by $2.0 billion, as

shown in Figure 6-1. 

$10.9

$10.5

$12.1

$10.1

$13.5

$9.9

$13.5

$9.3

$13.9

$9.7

$13.9

$10.9

$13.8

$11.8

$0

$2

$4

$6

$8

$10

$12

$14

$16

$ in Billions

FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 est. FY 2006 est.

Figure 6-1. FAA's Budget vs. Trust Fund Revenues

FAA's Budget Trust Fund Revenues
26

Historically, the General Fund has made up the difference between the Trust Fund 

contribution and FAA’s budget. There are some exceptions, including FY 2000,

when the Trust Fund paid for FAA’s entire budget. For the last 10 years, (FY 1996 to 

FY 2005), the General Fund contributed on average about 21 percent of FAA’s 

budget. Over the past 3 years (FY 2003 to FY 2005), the General Fund has 

contributed about $3 billion annually to FAA’s budget. However, FAA’s FY 2006 

budget request estimated the General Fund contribution to be $1.6 billion, or 

11 percent of the Agency’s budget request. The size of the General Fund contribution 

will be a central issue in the upcoming debate about how to finance FAA. 

The challenges facing FAA include: 

 Controlling costs with major acquisitions by delivering new systems that work, are 

on time, and are within budget and making decisions on the scope of billion-dollar 

projects that have been delayed for years; 

 Getting control of support service contracts, reducing associated costs, and

following through on the implementation of new procedures; 

 Establishing requirements for the next generation air traffic management system; 

 Addressing the expected surge in controller attrition and negotiating an affordable 

and equitable bargaining agreement; and 

 Completing a cost-accounting system to reduce costs and improve operations. 

Controlling Major Acquisition Costs—Delivering New Systems That Work on 

Time and Within Budget and Making Decisions About the Scope of BillionDollar Projects That Have Been Delayed 

FAA needs reliable cost and schedule estimates for its major acquisitions. It will be 

important for FAA to deliver new systems without incurring additional cost growth or 

schedule delays. FAA needs to make decisions whether to continue, modify, or

discontinue multi-billion programs like the Standard Terminal Automation 

Replacement System (STARS) and FAA’s Telecommunications Infrastructure (FTI) 

projects. 

 STARS was expected to replace computers and controller workstations at FAA’s 

terminal facilities. In 1996, FAA estimated that STARS would be completed in 

FY 2005 at a cost of $940 million for 172 systems, but it is no longer the same 

program. Facing costs of over $2 billion, FAA limited STARS deployments in 

2004 to just 50 sites at a cost $1.46 billion. FAA subsequently reduced the 

number of sites to 47. In June 2005, FAA approved acquiring new equipment for 

nine more terminal facilities—five small sites and four large sites with aging 

displays. FAA intends to deploy STARS at the five small sites but pursue a 

competitive procurement for the four sites with aging displays. Final decisions 

about over 100 sites have not been made, efforts to replace aging and failing 

other accompanying information 313
314 FY 2005 Performance and Accountability Report

27

displays at large sites have not been accelerated, and the cost and timeframes to 

complete terminal modernization remain unknown. 

 FTI is expected to replace most of FAA’s existing telecommunications services

and was expected to save the Agency millions annually beginning in FY 2005. 

However, FTI capital costs have grown from $205 million to $310 million, or 

51 percent, and operating costs (i.e., telecommunications services) are now 

estimated to be more than $2.1 billion. According to FAA officials, cost growth is

attributable to, among other things, expanded FTI requirements, improved 

security, and a more comprehensive estimate of transition efforts. FTI equipment 

has been installed at fewer than 700 of 4,500 sites, and only about 6 percent of the

25,000 existing services and circuits to be replaced are now operating with new 

equipment. Overall, the vast majority of the new equipment is not yet operational.

Moreover, the underlying assumptions about program costs and expected savings 

that drove the investment in FTI are no longer valid because of delays in installing 

new equipment. FTI is a high-risk effort, and FAA needs to develop an executable 

plan to complete the effort without further cost increases or schedule delays. 

Getting Control of Support Services Contracts 

Every year, FAA uses contractors to provide more than $1.3 billion of support 

services. Of particular and urgent concern is FAA’s use of three large multiple-award 

contracts for support services that use pre-qualified vendors and, in some instances, 

pre-negotiated labor rates. 

Our audit of one multiple-award program administered by the Aeronautical Center in 

Oklahoma City identified vulnerabilities for these contracts, including inadequate 

scope management, revolving employment where FAA employees have recently left 

FAA for employment with the contractors, lack of competition awarding the 

contracts, contract performance issues, and failing to use cost estimates as well as 

audits. 

We provided FAA with specific steps it needed to implement to strengthen controls 

over support service contracts. FAA agreed that action needed to be taken quickly.

FAA issued guidance indicating that the Chief Financial Officer would exercise 

greater oversight over support services contracts. This included establishing an

independent cadre of personnel with significant acquisition and financial controls

experience to advise the Chief Financial Officer in reviews of acquisitions of support 

services. We will be following up to ensure that all planned actions to improve 

controls over support service contracts have been implemented. Until FAA 

establishes necessary procedures to implement its planned corrective actions, the 

potential for cost overruns and improper payments on these contracts will still exist. 
28

Establishing Requirements for the Next Generation Air Traffic Management 

System 

Because much of FAA’s current capital budget focuses on keeping things running

(i.e., sustainment), attention has focused on FAA’s new Joint Program and 

Development Office and what it can deliver. The office is mandated to coordinate

research among Federal agencies and develop a vision for the next generation air 

traffic management system in the 2025 time frame. FAA is in the process of 

determining what “interim capabilities” it will pursue, as well as funding the 

requirements. It will be important for FAA to give Congress an understanding of how 

much money will be needed (in both the short- and long-term) and for what purposes, 

as was promised by DOT officials earlier this year. 

Addressing the Expected Surge in Air Traffic Controller Attrition and 

Negotiating an Affordable and Equitable Bargaining Agreement 

Over the next 10 years, FAA estimates that approximately 73 percent of the 

organization’s nearly 15,000 controllers will become eligible to retire. FAA 

anticipates a need to train and hire 12,500 new controllers over the same period to

meet anticipated needs. This must be done within a tightly constrained budget. 

At the direction of Congress, FAA issued the first in a series of annual reports in 

December 2004 that addresses the expected surge in controller attrition. In our 

opinion, the report is a good first step in that it lays out the magnitude of the issues 

and establishes broad measures for meeting the challenge. However, there are several 

issues that need to be specifically addressed in the next report to Congress. 

FAA has not identified the annual and total costs for hiring and training the number of

controllers it says it needs over the next 10 years. Although FAA has submitted some 

of the cost details of its staffing plan in its FY 2006 Budget Submission, the Agency

provided no details for FY 2007 and beyond, when the costs of the staffing plan may 

increase significantly. In addition, FAA’s plan does not address staffing needs by 

location. Without accurate facility-level planning, FAA runs the risk of placing too 

many or too few controllers at key locations. FAA has committed to evaluate its

facility staffing standards and provide details by the end of this calendar year. 

Another cost-driver for FAA will be negotiating a new collective bargaining 

agreement with the National Air Traffic Controllers Association, the union 

representing FAA’s largest workforce. The current contract, which has been extended 

for 2 years, expired in September 2005. Unlike the previous agreement, which

required an estimated $1 billion in additional funding over its original 5-year term, 

FAA needs to ensure that the new agreement is cost effective and does not crowd out

other programs, such as its safety inspector workforce. In addition, FAA needs to

ensure that productivity initiatives are in place and measurable. It is unlikely that 

other accompanying information 315
316 FY 2005 Performance and Accountability Report

29

FAA can achieve significant reductions in its operating costs without substantial 

improvements to controller workforce productivity. 

Completing the Cost Accounting System To Control Costs and Improve 

Operations 

FAA has made significant advances by substantially completing the portion of its 

cost-accounting system for the Air Traffic Organization in FY 2004. Also, FAA 

completed labor-distribution systems for all personnel in August 2005 and plans to 

have a fully operational system in place by September 30, 2006. 

With a number of further refinements we have recommended, FAA should have

sufficiently accurate data for establishing alternative financing mechanisms, including

user fees. Additional refinements include finding an acceptable method of assigning 

about $800 million in miscellaneous service-level costs (including depreciation) to

facilities and strengthening controls over its labor-distribution system. FAA faces 

challenges in completing its cost-accounting system: (1) deploying the system to its 

Safety and Airports line of business (which represents about one-third of its 

operational costs), (2) integrating the system with its labor-distribution system for 

controllers, and (3) linking the system with performance measures. 

Another critical issue for FAA in exploring financing options is allocating its costs to 

airspace users. While a cost-accounting system will provide decision makers with 

information on FAA’s costs at the national and facility level, it will not allocate these 

costs to diverse airspace users (i.e., passenger airlines, cargo airlines, or general 

aviation). FAA has an ongoing study using cost accounting and activity data to 

allocate costs for providing air traffic services and has sought industry comment on 

methods for doing so. Allocating FAA costs involves difficult policy decisions 

regarding, among other things, use of congested airspace, marginal use of the system,

and aircraft size. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Key Issues for the Federal Aviation Administration’s FY 2005 Budget 

 Observations on Bringing More Fiscal Discipline and Accountability to FAA’s 

Air Traffic Control Modernization Program 

 FAA Needs To Reevaluate STARS Costs and Consider Other Alternatives 

 Terminal Modernization: FAA Needs To Address Its Small, Medium, and Large 

Sites Based on Cost, Time, and Capability 

 Next Steps for the Air Traffic Organization 

 Perspectives on the Aviation Trust Fund and Financing the Federal Aviation 

Administration 
30

 Status of FAA’s Major Acquisitions: Cost Growth and Schedule Delays Continue 

To Stall Air Traffic Modernization 

 Report on Controller Staffing: Observations on FAA’s 10-Year Strategy for the 

Air Traffic Controller Workforce 

 Addressing Controller Attrition: Opportunities and Challenges Facing the 

Federal Aviation Administration 

 Opportunities To Improve FAA’s Process for Placing and Training Air Traffic 

Controllers in Light of Pending Retirements 

other accompanying information 317
318 FY 2005 Performance and Accountability Report

31

7. Aviation Safety—Developing Effective Oversight Programs 

for Air Carrier Operations, Repair Station Maintenance, 

and Operational Errors

The Federal Aviation Administration’s (FAA) primary mission is safety, and, to its 

credit, the Agency is making progress toward a risk-based safety oversight system to 

focus limited inspection resources. The U.S. aviation industry has maintained an 

impressive safety record. However, financial uncertainty, competition from low-cost 

carriers, and rebounding air traffic all contribute to a very different and still evolving 

aviation environment. Large U.S. air carriers are working aggressively to move away 

from high cost structures by reducing in-house staff and increasing the use of outside 

repair facilities. The transition to increased use of outside repair facilities is not the 

issue—it is that maintenance, wherever it is done, requires oversight. FAA must 

ensure it is channeling its oversight toward the organizations actually performing the

maintenance. At the same time, FAA needs to work more aggressively to reduce

instances where aircraft fly too close together in what are called operational errors. 

Key challenges for FAA are: 

 Following through on its commitments to advance risk-based systems for air 

carrier operations and work performed by external repair facilities, and 

 Continuing its efforts to identify and reduce operational errors. 

Implementing a Risk-Based Approach to Air Carrier and Repair Station 

Oversight 

FAA continues to face challenges in advancing its efforts to implement risk-based 

oversight systems. Facing a rapidly changing aviation industry and its own 

challenging budget, FAA needs effective systems that will enable it to target its 

inspection resources to areas of higher risk. To its credit, FAA has implemented riskbased, data-driven approaches for oversight of air carriers: the Air Transportation 

Oversight System (ATOS), used for oversight of 17 air carriers, and the Surveillance 

and Evaluation Program, used for oversight of the remaining 110 commercial air 

carriers. FAA is also working to implement a similar risk-based system for oversight 

of repair stations. However, our reviews have shown that FAA still has a substantial 

amount of work ahead to refine and effectively implement these oversight systems. 

Air Carrier Oversight. FAA inspectors were not able to use its risk-based oversight 

systems to respond effectively to the changes network carriers were making to reduce

costs and compete with low-cost carriers. For example, FAA inspectors did not 

complete 26 percent of their planned inspections when air carriers were at the height 

of streamlining operations and reducing costs. This is neither an adequate response to 
32

these changes nor reflective of a more agile approach, given that more than half of the 

inspections that were not completed were in areas where inspectors had identified 

risks. Improvements are still needed in the processes FAA inspectors use to identify 

risks in air carriers’ systems, prioritize inspections, and shift inspections to areas of 

greater risks. 

To improve its oversight of air carriers, FAA has committed to: 

 Strengthen national assistance to field offices and improve field office managers’ 

oversight of risk assessment and inspection planning processes; 

 Develop procedures to ensure inspectors are continually monitoring the effects of 

industry changes, such as financial distress; 

 Ensure that inspections are prioritized so high-risk areas are inspected before 

lower-risk areas and that inspectors are able to effectively change inspection plans 

when new risks are identified. 

We realize that FAA is facing budgetary challenges, so our work also highlighted the

need for FAA to make enough efficiency gains to ensure it can commit adequate 

resources to air carrier oversight. This will remain important as the airline industry 

continues to make significant changes in operations, to work to resolve financial 

challenges, and to navigate through bankruptcy. FAA’s practice of shifting resources 

for increased surveillance at bankrupt carriers may not be a viable option, given that 

three of the major air carriers are now in bankruptcy. The current state of the industry 

makes it imperative that FAA improve its risk-based oversight system so inspectors 

focus their efforts on areas of greatest risk. 

Repair Station Oversight. Outsourcing aircraft maintenance has been a prominent

aspect of air carrier efforts to restructure their operations and reduce costs. Providing 

oversight of air carrier outsourcing, or use of external repair facilities, has been 

particularly challenging for FAA. We reported in July 2003 that FAA needed to

improve the processes it used to monitor domestic and foreign repair station 

operations. FAA initially planned to implement all of the recommendations we made 

for improving this program by August 2005, but it has completed only one of nine 

promised actions. FAA now indicates all recommended actions will not be fully

implemented until the beginning of fiscal year (FY) 2007. 

A key part of the work that remains is completion of FAA’s plan to implement a new

risk-based system for oversight of domestic repair stations. FAA has developed the 

framework for the system but still needs to train the inspectors and develop new 

computer software that will provide inspectors with data analysis capabilities. FAA 

needs to expedite improvements to its process for oversight of repair stations, 

especially given the continued trend of air carriers shifting maintenance to outside

repair facilities. Air carriers now outsource 53 percent of their maintenance expense, 

compared to just 37 percent in 1996. 

other accompanying information 319
320 FY 2005 Performance and Accountability Report

33

A portion of this maintenance outsourcing consists of maintenance work performed 

by repair facilities that have not been certificated by FAA, meaning FAA has not 

verified that they have the staff, facilities, or equipment to perform the work. At the 

request of Representative James Oberstar, we conducted a review of air carriers’ use 

of non-certificated repair facilities. We found that non-certificated repair facilities 

perform some of the same maintenance functions that certificated facilities perform, 

such as flight control repairs and scheduled maintenance tasks. However, these 

facilities are not included in FAA’s risk-based oversight system for air carriers or its 

planned oversight system for repair stations. Ultimately, FAA is responsible for

oversight of air carrier maintenance, regardless of who performs it. Therefore, FAA 

may need to place emphasis in this area to better assess air carriers use of noncertificated repair facilities. We recently issued a draft report to FAA on this matter. 

FAA must follow through on its commitments to advance its risk-based systems for 

oversight of air carriers and repair stations, particularly in light of the magnitude of

changes in the aviation industry and the pace at which they are occurring. Aircraft 

maintenance, no matter where it is performed, requires oversight. FAA must ensure it 

is shifting its resources toward the organizations actually performing the maintenance. 

Ensuring Reporting of Operational Errors 

A primary indicator of system safety is the number of operational errors (when air 

traffic controllers allow planes to come too 

close together in the air). Reducing these 

incidents is a key performance goal for FAA

and one that continues to require heightened

attention at all levels of the Agency. 

This past year, there was an increase in the 

number of operational errors reported—

1,4894

 (up from 1,150 in FY 2004), which is

the highest number of errors reported in the 

past 6 years (see Figure 7-1). In addition, of 

the 1,489 errors reported, 73 were classified 

as serious incidents (those rated as “high” severity), compared to 40 serious incidents

reported in FY 2004. While that increase is significant, it is important to recognize 

that the number of errors reported in prior years may not be an accurate benchmark. 

This is because at the majority of FAA facilities, FAA relies on an inaccurate system 

of self-reporting operational errors. 

In September 2004, we determined that only 20 of FAA’s 524 air traffic control 

facilities (both FAA- and contractor-operated) have an automated system that 

identifies when operational errors occur. At its towers and terminal radar approach 

4 Based on preliminary data. 

Figure 7-1. Operational Errors

FY 1999 to FY 2005

1,145

941

1,489

1,185

1,061

1,150

1,194

0 300 600 900 1,200 1,500

FY 2005

FY 2004

FY 2003

FY 2002

FY 2001

FY 2000

FY 1999

Source: FAA
34

control (TRACON) facilities, FAA depends on a system of self-reporting operational 

errors. 

Recent investigations by our office and FAA at two locations found multiple instances 

of unreported operational errors. For example, in response to a hotline allegation at 

the Dallas/Fort Worth TRACON, we identified multiple operational errors that had 

not been reported. Prior to our investigation, the facility reported just two operational 

errors during the 6-month period from January 1 to June 24, 2004. During our

investigation, we identified five unreported operational errors that occurred during 

May and June alone. After instituting appropriate use of playback tools5

 in June 

2004, the facility reported 36 operational errors during the next 6 months. 

At the New York TRACON, FAA initiated an internal investigation in response to a 

rash of allegations that operational errors were increasing. That review identified 

147 unreported operational errors during a 2-month period. A number of these errors 

were serious and indicated the need for immediate corrective action. Managers at the 

facility took immediate actions to improve operations, including re-training all 

personnel and redesigning certain facility-specific air traffic procedures. 

This past year, FAA has taken actions to improve the reporting of operational errors. 

In response to our September 2004 report, FAA recently implemented procedures that 

require towers and TRACONs to conduct random audits of radar data to identify 

potential unreported operational errors. FAA Headquarters is also conducting random

audits at selected facilities and is evaluating its severity rating system in an effort to 

more accurately capture the collision risk that operational errors pose. Clearly, these 

actions are steps in the right direction, but FAA will need to remain committed to 

following through on those efforts—the number of unreported errors identified just at 

New York TRACON underscores the need for top management attention to this issue. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Safety Oversight of an Air Carrier Industry in Transition 

 Letter to Representative Oberstar Regarding FAA Actions on Air Carriers’ Use 

of Aircraft Repair Stations 

 Controls Over the Reporting of Operational Errors 

 Alleged Cover-Up of Operational Errors at DFW TRACON 

5 Playback tools are software programs and other electronic instruments for recreating air traffic incidents by replaying 

recorded radar and voice data. 

other accompanying information 321
322 FY 2005 Performance and Accountability Report

35

8. Improving Information Technology Investment and 

 Computer Security

The Department of Transportation (DOT) is responsible for one of the largest 

information technology (IT) investment portfolios among civilian agencies, with 

almost 500 computer systems supporting key mission areas at a cost of about 

$2.7 billion annually. Over 80 percent of the investments are in air traffic control 

modernization. During fiscal year (FY) 2005, the Department enhanced the quality of 

systems security reviews to better ensure the integrity, confidentiality, and availability 

of system-dependent operations. The departmental Investment Review Board (IRB)

also continued its oversight of major IT investments but with mixed results. Last 

year, we reported that corrective actions were needed to enhance air traffic control 

systems security protection and correct known problems in the Operating 

Administrations’ business contingency plans. The Department has yet to complete 

these corrective actions. We also found security weaknesses in a DOT network that 

made the Department vulnerable to attacks from the Internet. The major challenges 

facing DOT in the IT investment and computer security areas include: 

 Clarifying the departmental Board’s role in assisting the Secretary to maximize the 

value and manage the risk of major IT investments, 

 Eliminating redundant IT infrastructures outside of DOT Headquarters to reduce 

operating costs, 

 Better securing operational air traffic control systems, and 

 Correcting weaknesses in the Federal Railroad Administration network and 

enhancing business contingency plans for critical DOT systems. 

Clarifying the Departmental Investment Review Board’s Role in Assisting the 

Secretary To Maximize the Value and Manage the Risk of Major Information 

Technology Investments 

This year, the IRB reviewed investment projects managed by various Operating 

Administrations, including the Federal Aviation Administration (FAA). While 

projects managed by most Operating Administrations have benefited from the Board’s 

oversight, the Board has had little positive impact on complicated air traffic control 

projects, which are still experiencing significant cost increases and schedule delays. 

We reviewed 16 FAA major acquisitions and found that 9 projects had experienced 

schedule delays of 2 to 12 years, and 11 projects had experienced cost growth of 

about $5.6 billion. The bulk of the cost growth occurred before the establishment of 

the new Air Traffic Organization and had been building for some time without being 

recognized. Some major investment projects have experienced persistent cost and 
36

schedule problems, such as the Wide Area Augmentation System and the Standard

Terminal Automation Replacement System. 

Nine years after Congress passed acquisition reform for FAA, exempting it from 

compliance with Federal acquisition regulations, air traffic control modernization 

projects are still experiencing performance problems, along with the cost increases 

and schedule delays. Further, FAA’s acquisition process has stayed on the 

Government Accountability Office’s high-risk list since 1995. Meanwhile, FAA 

continues to initiate new, costly, and complex IT modernization projects. This year, 

two new multibillion-dollar FAA investment projects—FAA Telecommunication

Infrastructure (FTI) and En Route Automation Modernization (ERAM)—went 

forward to the Office of Management and Budget (OMB) without reliable cost and 

schedule data and other project information. OMB rejected the budget submissions

and asked the Board to reexamine business cases for these investment projects. 

We are concerned that the Board’s review of FAA’s major IT investment projects is 

not providing value-added services as intended and is facing the risk of becoming a

paperwork exercise that provides little substantive value to the Secretary. There are 

two basic reasons for this: 

 First, there is a lack of clarity about the Board’s role in reviewing major FAA 

investment projects. The Clinger-Cohen Act of 1996 requires the Secretary to 

implement a process for “maximizing the value and assessing and managing the

risks of the information technology acquisitions of the executive agency.” The 

Board was created as part of this process and is tasked with advising the Secretary 

regarding whether to continue, modify, or terminate major IT investments within

the Department. However, FAA has frequently cited its independent acquisition 

authority, based on provisions in the Department’s Appropriations Act for Fiscal 

Year 1996, to argue that the Board should play only a limited role in overseeing 

FAA investments. The provision in the Appropriations Act exempted FAA from 

compliance with the Federal acquisition regulations and key Federal procurement 

laws to help facilitate implementation of a timelier and more cost-effective 

acquisition process. 

The issue that needs to be resolved is whether FAA’s exemption from compliance 

with the Federal procurement regulations also applies to management oversight

required by the Clinger-Cohen Act. Until this issue is resolved, it is our opinion 

that the Board’s continued “review” of FAA’s multibillion-dollar investment 

projects will not result in “maximizing the value and assessing and managing the 

risks of the information technology acquisitions,” and will impede the Secretary’s 

ability to fulfill his Clinger-Cohen Act requirements. 

 Second, to be effective, the Board needs to perform more substantive, in-depth, 

and analytical reviews of progress, problems, and risks associated with these 

other accompanying information 323
324 FY 2005 Performance and Accountability Report

37

complicated investments. The current level of support available to the Board is 

not sufficient to allow the members to make responsible decisions about these 

investments. The Board relies on the pre-IRB “prep group” process, which is 

composed of Operating Administration representatives who perform a cursory 

review of each others’ investment projects. This prep group is led by an Associate 

Chief Information Officer with the support of one mid-level staff person, who

came on board only 4 months ago. Obtaining adequate support to research 

potential project cost, schedule, and performance shortfalls is essential if the 

Board is to perform oversight to maximize the value and manage the risks of 

major IT investments in the Department. 

Eliminating Redundant IT Infrastructures Outside of DOT Headquarters To 

Reduce Operating Costs 

Last year, DOT identified opportunities for cost savings by consolidating systems 

used to support common business operations across the Operating Administrations, 

such as office IT infrastructure (e.g., desktop computers, local area networks, e-mail), 

financial management, and grants management. While most initiatives are still under 

evaluation, the Department has made progress in consolidating the 10 separate IT 

operating environments at Headquarters into a single, common operating 

environment. Initially, the Department estimated an 18- to 26-percent reduction in 

costs from the consolidation, based on industry averages. This would translate into 

multimillion-dollar annual savings for the Headquarters consolidation effort. 

However, based on a recent study, the Department lowered the estimated cost savings 

to about $2 million over a period of several years. To achieve worthwhile savings, 

DOT needs to consolidate the fragmented IT infrastructures outside of Headquarters. 

For example, four Operating Administrations with field offices co-located in San

Francisco use separate networks to connect to Headquarters. Integrating these 

fragmented networks could result in immediate and substantial cost savings to the 

Department. 

Better Securing Operational Air Traffic Control Systems 

Last year, FAA committed to taking aggressive corrective actions to better protect air 

traffic control systems but did not start to initiate these corrective actions in earnest 

until this April. As a result, FAA’s overall progress in this area was insufficient. In

FY 2005, the Government Accountability Office also identified the need to enhance 

both computer security protection in air traffic control systems and physical security 

protection at air traffic control facilities. 

FAA had committed to completing security reviews of all operational air traffic 

control systems—at en route, approach control, and airport terminal facilities—

between FY 2005 and FY 2007. During FY 2005, according to FAA, it conducted

security reviews at all en route centers. However, these reviews were incomplete for 

the following reasons: 
38

 More than 30 computer systems are used to support en route (high-altitude) air 

traffic services. However, FAA officials collected systems security information 

on only about half of these systems. 

 FAA is still in the process of analyzing the information collected; it has not yet 

determined what remediation work is needed to secure the systems reviewed. 

 FAA officials did not perform any independent testing at en route centers. Testing 

is key to identifying potential security breaches and is required for reviewing highrisk systems, according to minimum Government security standards. 

This year, FAA conducted a tabletop exercise and identified a cost-effective strategy 

to restore essential en route air service in case of prolonged service disruptions. 

However, FAA is years away from completing the planned actions necessary to 

implement the strategy. We recognize that FAA faces critical decisions in balancing 

its priorities in today’s tight budget environment, yet it needs to assign a priority to 

implementing the selected contingency plan during FY 2006 to meet the President’s 

requirements for protecting the Nation’s critical infrastructure. 

The President designated the air traffic control system as part of the critical national 

infrastructure due to the important role of commercial aviation in fostering and 

sustaining the national economy and ensuring the safety and mobility of citizens. 

FAA’s current business continuity plan has worked well in the past in dealing with 

temporary, less severe service disruptions. However, it is not adequate to deal with 

prolonged service disruptions at a major facility such as an en route center, which 

would severely disrupt air traffic, causing significant economic losses and subjecting 

travelers to delays and inconvenience. 

It is also important that FAA coordinate the implementation of the selected

contingency plan with other modernization projects—ERAM and FTI—at en route 

facilities. These modernization projects have been under development for several 

years, and one is scheduled for completion in 2007. To be cost effective, FAA needs 

to assign a priority to identifying continuity plan requirements that need to be 

included in ERAM or FTI implementation. As Government experts have pointed out,

retrofitting requirements into a completed project costs significantly more than 

accommodating them when the project is under development. 

Correcting Weaknesses in the Federal Railroad Administration Network and 

Enhancing Business Contingency Plans for Critical DOT Information 

Systems 

This year, we reviewed security over the Federal Railroad Administration’s network,

which has a direct connection to the Internet. We found this network vulnerable to 

unauthorized access and attack from both outside and inside the Department. We 

were able to gain unauthorized access to individual computers on the network from 

the Internet and obtained sensitive information, such as draft safety inspection reports, 

other accompanying information 325
326 FY 2005 Performance and Accountability Report

39

proposed penalties for safety violations, and travel vouchers containing employee 

Social Security Numbers and credit card numbers. These individual computers, 

however, do not host FRA financial and human resources systems. Given the

interconnectivity of Department networks, vulnerabilities in one network can put 

other DOT systems at risk. DOT management is taking actions to remediate the 

security weaknesses identified. 

In FY 2003, we reported cases in which the recovery processing sites for critical

information systems were within 10, 15, or 25 miles of the primary sites. Such 

proximity made DOT vulnerable to losing both sites to the same disaster. We 

recommended, and the Department agreed, to develop guidance on the minimum

geographic distance between primary and backup sites, but it has yet to be developed.

Further, none of the several Operating Administrations that we identified as having 

this problem have moved their backup sites to a more remote location to reduce the 

risk of losing all processing capabilities to a single disaster. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 DOT Information Security Program (October 7, 2005)

 DOT Information Security Program (October 1, 2004)

 DOT Information Security Program (September 25, 2003)

 DOT Information Security Program (September 27, 2002)

 DOT Information Security Program (September 7, 2001)

 Security and Controls Over the Federal Railroad Systems Network 

 Security and Controls Over the Remote Maintenance and Management System, 

FAA 

 Security and Controls Over Technical Center Computer Systems, FAA 

 Security and Controls Over En Route Center Computer Systems, FAA 

 DOT’s Implementation of the Federal Implementation of the Federal 

Information Security Management Act 

 Quality Control Review of the Report on Controls Over the Delphi Financial 

Management System, DOT 

 Office of the Chief Information Officer’s Budget, DOT 

 Consolidated DOT Financial Statements for Fiscal Years 2004 and 2003 
40

9. Ensuring That Reforms Are Implemented in the Maritime 

Administration’s Title XI Loan Guarantee Program

As of June 30, 2005, the Maritime Administration’s (MARAD) consolidated Title XI 

loan guarantee program portfolio was valued at $3.2 billion, with another 

$618 million in pending loan guarantee applications. The loan guarantees are 

designed to assist private companies in obtaining financing for the construction of 

ships or the modernization of U.S. shipyards—with the Government holding a

mortgage on the equipment or facilities financed. 

Over 25 percent ($800 million) of the portfolio remains on “Credit Watch,” which

means it is at an elevated risk of default and is being monitored more extensively by 

MARAD. However, the number of companies considered at the greatest risk has 

been reduced and reductions have also been experienced in the total exposure and 

number of companies on the Credit Watch list since the issuance of our last audit 

report on September 28, 2004 (see Figure 9-1). 

Figure 9-1. Title XI “Credit Watch” Portfolio Breakdown

September 30, 2004 

$3.5 Billion Total Portfolio

June 30, 2005 

$3.2 Billion Total Portfolio

Non-Credit Watch

74%

High Risk

15%

Medium Risk

7%

Low Risk

4%

Non-Credit Watch

75%

High Risk

4%

Medium Risk

18%

Low Risk

3%

21 Credit Watch Companies 20 Credit Watch Companies 

There is a natural tension that exists between the dual missions of the Title XI 

program. On the one hand, MARAD is charged with supporting the domestic 

shipbuilding industry. On the other hand, MARAD is responsible for protecting the 

taxpayers’ dollars. However, the reforms that we have recommended, such as timely 

financial monitoring and tracking of the portfolio and seeking compensating measures 

to address the increased risk associated with any waivers or modifications, are not 

inconsistent with the dual missions of the Agency but are fundamental to proper 

management and oversight of any credit program. Nonetheless, MARAD has made 

progress in implementing the new policies and procedures that we have recommended 

to provide better oversight of the program.

other accompanying information 327
328 FY 2005 Performance and Accountability Report

41

Given the amount of funds at risk, however, it is essential that MARAD continue to

be vigilant and closely manage and monitor the loan guarantee portfolio by: 

 Completing the development of its computerized Title XI loan guarantee tracking 

system and 

 Fully enforcing the reserve requirements established to mitigate the risks of 

noncompliant loans and pursuing remedies to cure any outstanding defaults. 

Over the past 21⁄2 years, we have issued two audit reports on the Title XI Loan 

Guarantee Program. Our March 2003 report responded to a request from Congress 

following several large loan defaults that had occurred in the previous 5 years. Those 

loan defaults resulted in payouts of approximately $490 million. One company alone, 

American Classic Voyages Co., accounted for $330 million of that amount. Our audit

identified a number of areas where MARAD could improve its Title XI program 

practices, limit the risk of default, and prevent future losses to the Federal 

Government. 

Our September 2004 report was a follow-up to the 2003 audit and was initiated as a 

result of the Emergency Wartime Supplemental Appropriation bill that Congress 

passed on April 16, 2003.6

 The bill provided $25 million for the costs of new Title XI 

loan guarantees that were to remain available until September 30, 2005. However, 

Congress prohibited MARAD from obligating or expending those funds “...until the 

Department of Transportation Inspector General certifies to the House and Senate 

Committees on Appropriations that the recommendations of report CR-2003-0317

have been implemented to his satisfaction.” 

During our follow-up audit, we found that MARAD had developed policies and 

procedures that addressed each of the recommendations from our March 2003 audit 

report. However, in verifying the development of these policies and procedures, we 

found additional issues that needed to be addressed to limit the risk of default and 

reduce future losses of Government funds. 

Our certification of the program in the follow-up audit report was contingent upon an

action plan created by MARAD with steps and milestones to address the additional 

recommendations. In accordance with its action plan, MARAD must complete the 

following tasks to be better positioned to protect Federal Funds. 

Completing the Development of the Title XI Loan Guarantee Tracking 

System 

Until MARAD is able to fully implement a computerized tracking system for its 

portfolio, it will be unable to efficiently realize its goal. MARAD’s rudimentary 

6 “Making Emergency Wartime Supplemental Appropriations for the Fiscal Year 2003,” Public Law 108-11. 7 OIG Report Number CR-2003-031, “Title XI Loan Guarantee Program,” March 27, 2003. 
42

financial monitoring system is inadequate to effectively manage its $3.2 billion 

portfolio. Therefore, developing a computerized database system is essential for 

MARAD to efficiently and promptly assess the financial condition of the companies 

in its portfolio and to track trends in these companies’ finances and operations.

Pursuant to our recommendation, MARAD obtained congressional approval to use up 

to $2 million of the $25 million appropriated in the April 2003 Emergency Wartime 

Supplemental Appropriation to develop a comprehensive computer-based financial 

monitoring system. The plan to develop, acquire, and implement a new monitoring 

system is on track, and the “alternative analysis” phase is nearing completion. This

involves an investigation into whether any pre-existing tools can be “piggybacked” to 

reduce the ultimate cost of the system. MARAD expects to complete this phase of the 

process by the end of calendar year 2005. MARAD will be implementing the system 

during calendar year 2006 with full implementation anticipated by the end of 2006. 

Enforcing the Requirements Established To Mitigate Risks of Noncompliant 

Loans and Pursuing Remedies To Cure Defaults 

MARAD was not sufficiently enforcing the reserve requirements established to 

mitigate the risks of noncompliant loans. The Title XI Reserve Fund and Financial 

Agreement, a key instrument in the Title XI closing documentation, establishes 

financial tests and covenants that the borrowers are required to meet. The Reserve 

Fund established in this agreement is a type of escrow account that borrowers pay into

each year they do not meet certain financial tests. Paying into the Fund provides 

borrowers additional security over the life of the loan guarantee in case they run into 

financial difficulty. 

In response to our recommendation, MARAD performed an accounting of each 

company’s Reserve Fund requirements and continues to negotiate with those 

companies that remain in default. While this effort has been somewhat successful, 

several outstanding defaults remain, requiring MARAD’s continued enforcement. 

We continue to closely monitor the steps MARAD is taking in response to our 

recommendations. MARAD has worked to get satisfactory procedures in place, but

the proof of its efforts will be in the follow through and implementation regarding 

specific loan guarantee applications. 

For further information, the following reports and testimonies can be seen on the 

OIG web site at http://www.oig.dot.gov: 

 Title XI Loan Guarantee Program (March 27, 2003)

 Title XI Loan Guarantee Program (June 5, 2003)

 Title XI Loan Guarantee Program (September 28, 2004)

other accompanying information 329
330 FY 2005 Performance and Accountability Report

Exhibit. Comparison of FY 2006 and FY 2005 Top Management Challenges

43

EXHIBIT. COMPARISON OF FY 2006 AND FY 2005 TOP

MANAGEMENT CHALLENGES 

Items in FY 2006 Report Items in FY 2005 Report 

 Working With Other Agencies To Respond 

to Disasters and Address Transportation 

Security

None 

 Getting the Most for Every Taxpayer Dollar 

Invested in Highway and Transit Projects 

 Getting the Most Value From Investments in 

Highway and Transit Infrastructure Projects 

 Strengthening Financial Management To 

Protect Federal Funds 

 Holding the Line on Programs Conducive to 

Fraud 

 Building on Recent Initiatives To Further 

Strengthen Surface Safety Programs 

 Ensuring That Surface Safety Programs 

Lead to More Lives Saved 

 Holding the Line on Programs Conducive to 

Fraud 

 Reforming Intercity Passenger Rail Service 

To Improve Performance 

 Restructuring the Intercity Passenger Rail 

System To Match Fiscal Capacity

 Mitigating Flight Delays and Relieving 

Congestion—Actions Needed To Meet 

Demand

 Increasing Aviation Capacity and Mitigating 

Delays

 Reauthorizing Aviation Programs—

Establishing Requirements and Controlling 

Costs Are Prerequisites for Examining FAA 

Financing Options 

 Delivering Air Traffic Control Services and 

Fielding New Air Traffic Control 

Equipment While Controlling Costs in a 

Fixed Budget Environment 

 Strengthening Financial Management to 

Protect Federal Funds 

 Aviation Safety—Developing Effective 

Oversight Programs for Air Carrier 

Operations, Repair Station Maintenance, and 

Operational Errors 

 Ensuring Safety in a Changing Aviation

Environment 

 Improving Information Technology 

Investment and Computer Security

 Improving Cost Effectiveness of 

$2.7 Billion in Information Technology 

Investments and Continuing To Enhance 

Computer Security

 Ensuring That Reforms Are Implemented in 

the Maritime Administration’s Title XI Loan 

Guarantee Program

 Management Attention Needed To 

Strengthen Oversight of Title XI Loan 

Guarantees
APPENDIX. OST COMMENTS 

Appendix. OST Comments

44

Memorandum

U.S.Department of 

Transportation 

Office of the Secretary 

of Transportation 

Subject: 

ACTION: Departmental Comments on the OIG Draft 

Report – Top Management Challenges, Department of 

Transportation Date: November 1, 2005 

Reply to 

Attn. of:

To: Kenneth Mead 

Inspector General 

We appreciate the opportunity to review and comment on the Office of Inspector General’s 

(OIG) Management Challenges Report for the Department of Transportation (DOT). We 

value the perspective offered by the OIG and your efforts to help management ensure DOT’s 

programs are on track and our operations are effective, efficient and financially sound. We

are gratified to note that DOT is taking meaningful action in response to each of the 

management challenges recognized in the draft report. We provide the following discussion, 

which offers some highlights of those actions, to be included in the final OIG Management 

Challenges report. Separately we have offered detailed comments related to specific and 

technical issues in the draft report. 

DOT Provided Expeditious, Effective Relief to Hurricane Victims 

DOT quickly and effectively marshaled resources to aid the victims of the Hurricanes 

affecting our Nation’s Gulf Coast this year. Fulfilling the Department’s role to help move 

people and goods in emergency situations, DOT moved record numbers of individuals in the 

Nation’s largest domestic airlift. On land, DOT oversaw the formation of an emergency bus 

fleet rivaling the size of the Greyhound fleet, in a matter of days. The Department continues 

its efforts to assist by helping arrange transportation services needed to move vital food, 

water and supplies necessary for relief and recovery efforts. All these actions were 

performed using existing, competitively bid, proven contracting mechanisms that were put in 

place in preparation for such a need. Recognizing the potential for abuse, DOT moved 

quickly to implement special enhanced oversight mechanisms, in line with Office of 

Management and Budget (OMB) directives, to further ensure that our critical emergency 

response activities were not targets for abuse. 

Security and Continuity of Operations Are a Key Focus 

DOT continues to build an unprecedented level of cooperation with the Department of 

Homeland Security (DHS). With the primary framework established by a Memorandum of 

other accompanying information 331
332 FY 2005 Performance and Accountability Report

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2 

Understanding (MOU) between DOT and the DHS, each of our operating administrations, as 

appropriate, are working to implement more specific, function-based agreements, or annexes 

to the MOU. The annexes will ensure each organization explicitly understands its security 

related responsibilities and how they will be fulfilled in coordination with the Transportation 

Security Administration and other DHS organizations. These specific annexes have been 

implemented in key areas, including aviation security, transit security, and hazardous 

materials and we continue to aggressively pursue final agreement on a few remaining 

matters. Once the agreements are implemented, we work closely with DHS to keep them up 

to date and effective. For example, when FAA identified an opportunity to enhance 

communications with TSA regarding hazardous materials left at airport gates, the annex was 

revised to incorporate more effective electronic information exchange mechanisms which are 

now being implemented. 

Another key aspect of security for the Department is ensuring its continuity of operations 

(COOP) and its ability to support interagency disaster and security efforts. DOT’s COOP 

planning has received extensive, detailed review by the Government Accountability Office 

(GAO), which enabled us to continue efforts to refine and improve the Department’s 

capabilities. The recent Gulf Coast hurricanes reinforced DOT’s understanding of the need 

for focusing not only Federal, but also regional, state, and field office continuity of 

operations so that regardless of the nature of the emergency, vital transportation services can 

continue. 

Efforts in Place to Maintain and Enhance Federal Funds Stewardship 

The Department expects and demands nothing less than full accountability over the use of 

precious taxpayer funds, and works hard to ensure that its programs overseeing expenditures 

are effective and efficient. For example, the Federal Transit Administration’s New Starts 

program has been recognized by the GAO as “a model the Federal government could use for 

approving other transportation projects.” Efforts are in progress to further enhance the 

Federal Highway Administration’s capabilities for ensuring that funds are similarly well 

spent, consistent with the overall statutory framework for the Federal-aid highway program,

which leaves considerable decision-making authority in the hands of the states. FHWA is 

more fully incorporating financial stewardship initiatives into its traditional focus on sound 

engineering and project management. 

Continued Progress Improving Surface Transportation Safety 

Over the last year, DOT saw continued progress in meeting and exceeding its surface 

transportation safety goals. The highway fatality rate dropped to the lowest level since 

record keeping began 30 years ago. Similarly, total rail-related accidents and fatalities also 

declined. Nonetheless, we recognize much work remains to continue progress and to bring 

accident and fatality rates even lower. For example, to reduce the number of highway-rail 

grade crossing accidents, FRA has developed measures to detect failures by railroads to 

provide immediate notification of certain serious incidents and has embarked on a strict 

enforcement policy for failure to report crossing accidents. The Federal Motor Carrier Safety 
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3 

Administration has also stepped up activity to improve motor carrier safety through 

education, inspection and enforcement. Further, the National Highway Traffic Safety 

Administration is using all means available by statute, to further increase highway safety by 

encouraging manufacturers to produce safer vehicles, reducing alcohol related crashes, and 

increasing safety belt use. 

DOT is a Proponent of Amtrak Reform 

DOT, by working with the Congress and through its membership on the Amtrak Board of 

Directors, has been a vocal proponent of effective Amtrak reform to increase management 

accountability and encourage response to market forces. Working with the Congress, the 

President submitted legislative proposals that would significantly change Amtrak’s 

operational structure, create a system driven by sound economics, introduce carefully 

managed competition to provide higher quality rail services at reasonable prices, and 

establish a long-term partnership between the states and the Federal Government to support 

intercity passenger rail service. We continue our efforts with the Congress to bring about 

real and effective Amtrak reform. At another level, DOT, through its membership on the 

Amtrak Board of Directors serves as a proponent of strong and effective management

oversight and works to reinvigorate the role of the Board in ensuring that Amtrak functions 

as effectively and efficiently as possible. 

DOT Initiatives Address Flight Delays 

DOT has worked aggressively to reduce flight delays by expanding infrastructure where 

possible and also implementing strong measures to better allocate existing capacity where 

expansion is not an option. In pursuing these initiatives, we seek to ensure efficient 

utilization of increasingly scarce aviation resources, provide for airline competition, and 

maximize passenger movement through the system in a safe and customer-oriented manner. 

Throughout DOT’s efforts we have been careful to seek and accommodate the perspectives 

of system users. We continue to work with key stakeholders to explore new and innovative 

solutions, evaluate the impact of alternative actions, and identify the most practical and 

effective means available to ensure that our airspace is managed in a way that makes it as 

productive as possible, while maintaining the highest levels of aviation safety. 

Aviation Reauthorization Offers an Opportunity for New Thinking in Aviation 

Funding 

We agree with the OIG that aviation trust fund revenues are shrinking while the demands and 

costs to the system continue to increase. New approaches are needed to fund the aviation 

system. The Department is working aggressively with stakeholders to explore options, 

understand the implications of alternative solutions, and seek to identify a path that will keep 

this Nation’s aviation system second to none. We also agree that the FAA must closely 

examine its own cost structure with the intention of identifying and implementing actions to 

reduce costs. Air Traffic Control Systems must be developed on time, within budget and 

other accompanying information 333
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4 

meet or exceed performance expectations. FAA has been strengthening its capabilities to 

manage to these results, and progress is being achieved. 

Aviation Safety Continues at Exceptionally Strong Levels 

DOT, FAA, and the airline industry last year achieved the lowest airline fatal accident rate in 

the history of aviation. Further, for the third consecutive year, runway incursions are down. 

FAA’s aviation safety inspectors are using risk-based systems to guide their activities. Risk 

management techniques are also being extended to aviation repair station oversight, which 

will be using revised inspector guidance, new training, and improved data for an enhanced 

comprehensive repair station surveillance program.

Actions Continue to Address IT Security, Investment and Enterprise Architecture 

DOT continues to strengthen its IT infrastructure by addressing computer security issues, 

improving computer acquisition oversight, and updating its enterprise architecture. DOT has 

certified and accredited 96 percent of its information technology (IT) systems. This provides 

management with an acceptable level of assurance that all systems either meet a minimum

level of baseline requirements or have plans of action and milestones to mitigate any

remaining risks. The Department implemented a continuous vulnerability scanning program

as part of its compliance review process. DOT has also improved its oversight of IT 

investment with participation in the capital planning process expanded across all OAs. 

During the year, DOT released an updated iteration of our modernization blueprint including 

as-is and to-be enterprise architecture for the DOT common IT infrastructure in a framework 

aligned with OMB guidance. Finally, the Department continues working with OMB on a 

number of governmentwide endeavors, significantly improving its exhibit 300s and recently 

completing a plan that will reduce the risk associated with FAA Air Traffic Control 

Modernization, with the ultimate intention of gaining agreement to have GAO remove it 

from its high risk list. 

Title XI Loan Guarantee Program is Functioning Effectively 

With oversight from OIG and DOT’s Credit Council, MARAD has worked to refine the 

Title XI loan guarantee program. MARAD now systematically monitors its loan portfolio 

and the creditworthiness of the companies making use of program funding. The number of 

companies now considered at the greatest risk have been reduced and creditworthiness

overall has improved. MARAD has achieved progress implementing new policies and 

procedures to provide better oversight of the program and has not experienced any defaults 

during the last three fiscal years. This year, MARAD will implement a computer based 

system that will further facilitate its monitoring efforts. 

In conclusion, many of these categories, such as aviation and surface transportation safety 

will likely remain management challenges for DOT in future years as demands on the 

transportation system and traffic continue to increase; there will always be a need for 
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5 

vigilance in regard to transportation safety. Similarly, there will always been a need for 

careful oversight in the stewardship of funds and transportation security activities and 

programs. In other, more specific challenges, such as the MARAD’s Title XI program, we 

believe considerable progress has been achieved and will continue to be made with the 

expectation that these issues will not appear in future OIG reports on DOT’s management 

challenges. 

other accompanying information 335
336 FY 2005 Performance and Accountability Report

ACKNOWLEDGMENTS

We would like to recognize the following people among many, for their contribution to the 

FY 2005 Performance and Accountability Report. In particular, we acknowledge the efforts of 

Sarah Hosemann, Gretchen DePasquale, Kristine Leiphart, and Michael Soto, as principal 

writers, and Teresa Lampkin as the principal analyst for the financial statements. 

Ted Alves 

Joe Austin 

Thomas Bruneel 

Wendy Calvin 

Jim Chen 

Jim Citro 

Gwen Daniel 

Gretchen DePasquale 

Jane Dion 

Sheldon Edner 

Kellie Feeney 

Ron Filbert 

Conswella Hackney 

Benita Harris 

Earl Hedges 

Ellen Heup 

Chuck Hiep 

Sarah Hosemann 

Laurie Howard 

Lana Hurdle 

Tony Jacobik 

Alan Jeeves 

Catherine 

Johnson 

Matthew Johnson 

Andrew Julian 

Shane Karr 

James Lampert 

Teresa Lampkin 

Tim Lawler 

Terrence Letko 

Thuy Lynch 

Kristine Leiphart 

Michelle Hill 

David Litman 

Tyrone Lumpkins 

Rosalie Manley 

Linda Mann 

Rita Mantero 

Rick Mayronne 

Carla Mazyck 

Kenneth Mead 

Willie Miller 

Ray Morris 

Larry Neff 

Jeffery Newsome 

Yvonne Griffin 

Kevin O'Malley 

Warren Owens 

Jerry Schoenauer 

Phyllis Scheinberg 

DJ Stadtler 

David Tochen 

Scott Poyer 

Tom Sachs 

Jack Schmidt 

Steve W. Smith 

Woody Stanley 

Michael Soto 

Michael Tyler 

Robert Tuccillo 

Dee Williams 

This report could not have been produced without the participation of the DOT 

Operating Administrations, General Counsel, Office of the Inspector General, Office of 

Governmental Affairs, and the organizations that helped in the preparation and 

editing of this Performance and Accountability Report.