USE OF INCOME DERIVED FROM THE 

COMMERCIAL DRIVER’S LICENSE 

INFORMATION SYSTEM FOR 

MODERNIZATION 

Federal Motor Carrier Safety Administration 

Report Number: MH-2008-059 

Date Issued: July 10, 2008 
 

U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General 

Subject: ACTION: Report on Use of Income Derived 

from the Commercial Driver’s License 

Information System for Modernization 

Federal Motor Carrier Safety Administration 

Report No. MH-2008-059 

Date: July 10, 2008 

From: Joseph W. Comé 

Assistant Inspector General 

 for Highway and Transit Audits 

Reply to 

Attn. of: JA-40 

To: Federal Motor Carrier Safety Administrator 

This report presents the results of the Office of Inspector General’s (OIG) audit of 

the amount and use of income derived from the Commercial Driver’s License 

Information System (CDLIS). The Federal Motor Carrier Safety Administration 

(FMCSA) is responsible for oversight of CDLIS, which is a nationwide 

clearinghouse of driving records for commercial drivers. 

The Commercial Motor Vehicle Safety Act of 19861

 limited commercial drivers to 

a single driver’s license and required states to exchange information on 

commercial drivers through a nationwide information system. States use CDLIS 

to check the driving history of a commercial driver’s license (CDL) applicant 

before issuing the license and to report traffic convictions of commercial drivers 

licensed in other states. CDLIS contains records for each registered commercial 

driver with identification data, such as name, social security number, and date of 

birth. The records are linked to the licensing states where detailed driver records 

are located. When a driver is convicted of a disqualifying violation while driving 

a commercial vehicle, the state that issued the CDL must disqualify the driver. 

Because of the information CDLIS provides on disqualifying violations, it plays a 

critical role in keeping unsafe commercial drivers off the road. 

CDLIS is operated by the American Association of Motor Vehicle Administrators 

(AAMVA),2

 under a 1988 operating agreement with the Department of 

 

1

 Pub. L. No. 99-570 (1986). 

2

 AAMVA is a non-profit organization of state motor vehicle officials who administer and enforce motor 

vehicle laws. 
2

Transportation (DOT). This agreement provides broad authority for AAMVA to 

operate CDLIS but makes no mention of funding for the operation, maintenance, 

or modernization of the system. Since becoming fully operational in 1992, CDLIS 

has been supported by fees paid to AAMVA by states and other users. As of 

February 2008, CDLIS had more than 13.4 million driver records. The states pay 

AAMVA an annual $1.00 user fee for each CDLIS record. This fee covers 

operating costs, such as leased line services, and allows users unlimited 

transactions, such as changes in driver identification information and interstate 

transfers of driver history records. 

In August 2005, the Safe, Accountable, Flexible, Efficient Transportation Equity 

Act: A Legacy for Users (SAFETEA-LU)3

 authorized $28 million in grants for 

fiscal years (FY) 2006 through 2009 to modernize CDLIS. Modernization is 

intended to improve the security and effectiveness of CDLIS and to prevent 

system degradation as usage and requirements grow. 

In August 2006 and July 2007, FMCSA and AAMVA entered into grant 

agreements to modernize CDLIS. FMCSA has awarded nearly $12 million to 

AAMVA and plans to award $8 million in FY 2008 to the states to assist in 

making their driver’s licensing information systems compatible with the 

modernized CDLIS. FMCSA also plans to award the remaining $8 million to 

AAMVA and the states in FY 2009. These grants will assist AAMVA and the 

states in implementing modernized software by December 2010, as required. 

Section 4123(f) of SAFETEA-LU requires that OIG conduct an audit to analyze 

the amount and use of revenue derived from CDLIS user fees. This audit responds 

to that requirement. The objectives of our audit were to: (1) determine how net 

income should be used under the CDLIS modernization grant, (2) identify total 

revenue derived from CDLIS user fees, the amount of related expenses AAMVA 

incurred, and net income, and (3) determine how the net income was used. 

To address our objectives, we compared AAMVA’s financial statements and 

independent audit reports on the financial statements for FYs 2003 through 2005, 

the period under audit. We examined, on a test basis, records supporting 

AAMVA’s statements of CDLIS revenue and operating costs for the 3-year 

period. We also examined legal issues governing the use of revenue CDLIS 

generated during the SAFETEA-LU modernization grant period.4

 

3

 Pub. L. No. 109-59 (2005). 

4

 SAFETEA-LU also requires that OIG (1) validate state-by-state CDLIS data, (2) determine the extent to 

which convictions are posted on commercial driver records, (3) make recommendations and develop a 

methodology for annually updating the baseline audit to ensure shortcomings in CDLIS are addressed, 

and (4) identify state-by-state actions necessary to improve the integrity of CDLIS data and to ensure the 

proper posting of convictions. We will address these remaining SAFETEA-LU requirements in a 

separate audit report. 
3

We conducted this performance audit in accordance with Generally Accepted 

Government Auditing Standards prescribed by the Comptroller General of the 

United States and we performed such tests as we considered necessary to detect 

fraud, waste, and abuse. Exhibit A describes the scope of our audit and the 

methodology we used to achieve our objectives. 

RESULTS IN BRIEF 

Our audit found that under the regulation governing Federal grants for 

modernizing CDLIS, program income derived from CDLIS revenue and fees 

during the grant project period must be used for operating and modernizing the 

system. We calculated that AAMVA accrued net income derived from CDLIS 

revenue and fees of $22.02 million for the 3 years ending on September 30, 2005.5

 

As of May 20, 2008, the date of our draft report, FMCSA and AAMVA had not 

changed the treatment of CDLIS program income by completing a revision of their 

1988 operating agreement to identify the modernization project period and to 

identify the specific duties and responsibilities for each party. 

However, in its June 20, 2008, written response to our draft report, FMCSA stated 

that it had entered into a new Cooperative Agreement with AAMVA, on 

June 9, 2008, to reflect the current programs, systems, and organizational changes 

that occurred since the 1988 operating agreement was ratified. The new 

Cooperative Agreement appears to address our finding that the treatment of 

CDLIS program income must be changed to ensure that income derived from 

CDLIS revenue and fees during the grant project period is used for operating and 

modernizing the system, that provisions are made for states to pay for future 

CDLIS enhancements, and that AAMVA accounts for and reports to FMCSA the 

amount and use of program income from CDLIS. We commend FMCSA for 

taking this needed action and going forward we will verify the provisions of the 

agreement and its implementation. 

AAMVA Must Change Treatment of CDLIS Program Income Under the 

Modernization Grant. Since the inception of the 1988 operating agreement with 

DOT, AAMVA has used CDLIS revenue to fund both CDLIS and non-CDLIS 

programs and services. The operating agreement did not restrict AAMVA’s use of 

CDLIS revenue. However, upon the August 2006 award of the grant to modernize 

CDLIS, CDLIS became a grant-supported activity subject to the Federal 

regulation known as the common rule.6

The common rule governs the use of program income, which is income earned 

from grant-supported activities. The rule prescribes three options for using 

 

5

 Our audit covered FYs 2003 through 2005, the three financial statement periods preceding our review. 

6 49 C.F.R. Part 19, “Uniform Administrative Requirements for Grants and Agreements with Institutions of 

Higher Education, Hospitals, and Other Non-Profit Organizations.” 
4

program income: (1) add the income to project-committed funds and use it to 

further project objectives, (2) use the income to finance the non-Federal share of 

the grant, and (3) deduct the income from total project allowable costs in 

determining the net allowable costs on which the Federal share is based. The 

common rule further requires that program income be deducted from the Federal 

share, unless otherwise stated in the grant agreement. 

At the time of our audit, FMCSA and AAMVA were negotiating a revised 

operating agreement to identify the specific duties and responsibilities for each 

party for the modernization project. Under the common rule, the project period 

started upon award of the first modernization grant in August 2006. However, 

FMCSA had not implemented the common rule pending completion of the revised 

operating agreement. In addition, the project was 1 year behind schedule, due to 

uncertainties regarding the use of CDLIS for complying with the Real ID Act of 

20057

 and coordination with the Department of Homeland Security (DHS). The 

Real ID Act set minimum standards for state-issued driver’s licenses and requires 

states to check documents presented to other states prior to issuing a driver’s 

license. DHS and FMCSA are considering CDLIS as a potential platform for 

verifying that a person does not hold more than one valid driver’s license. 

According to FMCSA, making modernization changes without considering the 

requirements of the Real ID Act would not be prudent. As a result, AAMVA has 

drawn only $2 million in modernization grant funds to date. We realize the 

importance of considering the impact of the Real ID Act on modernization, but to 

comply with the provisions of the common rule, FMCSA and AAMVA must 

finalize the operating agreement. 

With the June 9, 2008, signing of a Cooperative Agreement, FMCSA must now 

verify that AAMVA uses the funds to pay for CDLIS-related expenses only, 

including modernization costs. This verification is important because CDLIS 

must be self-sustaining. SAFETEA-LU requires that states pay for modernizing 

CDLIS in the future.8

 Therefore, the states must ensure that money is available 

after the project period to pay for the costs of modernization. AAMVA has 

realized net income from CDLIS operations in prior years, and future net income 

could be retained in a reserve fund as a set-aside for CDLIS operations and 

modernization. 

For the 3 years ending on September 30, 2005, AAMVA calculated gross earnings 

of $41.91 million, expenses of $24.23 million, and net income of $17.68 million 

from CDLIS operations. However, based on our statistical and non-statistical 

sample tests of AAMVA’s revenue and expenses, and supporting financial 

records, we calculated net income of $22.02 million. Our net income calculation 

 

7

 Pub. L. No. 109-13 (2005). 

8

 49 U.S.C. § 31309(e)(3), amended by Pub. L. No. 109-59 § 4123 (2005). 
5

was $4.34 million more than AAMVA’s calculation because AAMVA could not 

support $1.55 million for salary and overhead adjustments and did not include a 

pro-rata share of its investment income calculated at $2.79 million. For example, 

in its statement of CDLIS expenses, AAMVA included salaries and expenses that 

had already been charged to CDLIS in overhead pools. 

We found that AAMVA used $22 million in net income for the 3 fiscal years to 

fund both CDLIS and non-CDLIS programs and services. For example, AAMVA 

funded approximately $6 million for the National Motor Vehicle Title Information 

System, which allows motor vehicle agencies to verify the validity of vehicle 

ownership before issuing new titles and $5.4 million for various technology 

applications and networking services to facilitate the electronic exchange of 

information between jurisdictions. 

We made two recommendations that focused on actions FMCSA needs to take to 

ensure income earned from the operation of CDLIS is used to pay for CDLISrelated costs only. Our full recommendations are listed on page 9. 

In its June 20, 2008, comments to our May 20, 2008, draft report, FMCSA 

concurred with our recommendations. FMCSA stated that it had taken steps to 

implement both recommendations and provided specific details of the actions it 

plans to take to address the recommendations. FMCSA’s comments and our 

response are fully discussed on pages 9 and 10. FMCSA’s complete comments 

are included in the Appendix to this report. 

FINDING 

AAMVA Must Change Treatment of CDLIS Program Income Under the 

Modernization Grant 

Under the regulation governing Federal grants for modernizing CDLIS, income 

derived from CDLIS revenue and fees during the grant project period must be 

used for operating and modernizing the system. As of May 20, 2008, FMCSA and 

AAMVA had not completed revision of their 1988 operating agreement to identify 

the modernization project period and to identify the specific duties and 

responsibilities for each party. We calculated that AAMVA accrued net income 

derived from CDLIS revenue and fees of $22.02 million for the 3 years ending on 

September 30, 2005. 

CDLIS Program Income Must Fund Only CDLIS-Related Expenses. Since 

the inception of the 1988 operating agreement with DOT, AAMVA has used 

CDLIS revenue to fund both CDLIS and non-CDLIS programs and services. The 

operating agreement did not restrict AAMVA’s use of the CDLIS revenue. 

However, upon award of the grant to modernize CDLIS in August 2006, CDLIS 
6

became a grant-supported activity subject to the Federal regulation known as the 

common rule. This rule governs the use of program income, which is income 

earned from grant-supported activities. The common rule prescribes three options 

for using program income: (1) add the income to project-committed funds and use 

it to further project objectives, (2) use the income to finance the non-Federal share 

of the grant, and (3) deduct the income from total project allowable costs in 

determining the net allowable costs on which the Federal share is based. The 

common rule further requires that program income be deducted from the Federal 

share, unless otherwise stated in the grant agreement. 

At the time of our audit, FMCSA and AAMVA were negotiating a revised 

operating agreement to identify the specific duties and responsibilities for each 

party for the modernization project. Under the common rule, the project period 

started upon award of the first modernization grant in August 2006. However, 

FMCSA had not implemented the common rule pending completion of the revised 

operating agreement. In addition, the project was 1 year behind schedule, due to 

uncertainties regarding the use of CDLIS for complying with the Real ID Act of 

2005 and coordination with the Department of Homeland Security (DHS). The 

Real ID Act set minimum standards for state-issued driver’s licenses and requires 

states to check documents presented to other states prior to issuing a driver’s 

license. DHS and FMCSA are considering CDLIS as a potential platform for 

verifying that a person does not hold more than one valid driver’s license. 

According to FMCSA, making modernization changes without considering the 

requirements of the Real ID Act would not be prudent. As a result, AAMVA has 

drawn only $2 million in modernization grant funds to date. We realize the 

importance of considering the impact of the Real ID Act on modernization, but 

compliance with the provisions of the common rule is imperative. 

With the June 9, 2008, signing of a Cooperative Agreement, FMCSA must now 

monitor AAMVA’s expenditures to verify that AAMVA uses grant funds and 

program income to pay for CDLIS-related costs only, including current and future 

modernization and system enhancements designed to reduce fraud. This 

verification is important because CDLIS must be self-sustaining. SAFETEA-LU 

requires that states pay for modernizing CDLIS in the future; therefore, states must 

have funds available to pay for additional costs of modernization after the Federal 

grant funds are spent. AAMVA has realized net income from CDLIS operations 

in prior years, and future net income could be set aside in a reserve fund for 

CDLIS operations and modernization. 

AAMVA Generated Net Income From CDLIS. At the time of our review, 

AAMVA’s consolidated financial statements for FYs 2003 through 2005 did not 

segregate CDLIS operations from its overall operations. At our request, AAMVA 

prepared a report of CDLIS revenue and expenses, using data from its accounting 
7

records. AAMVA’s calculation of CDLIS net income included adjustments for 

salaries and overhead costs for some of its employees. According to its 

calculations for the 3 years ending on September 30, 2005, AAMVA’s gross 

income from operating CDLIS was $41.91 million, expenses were $24.23 million, 

and net income was $17.68 million. However, we calculated net income from 

CDLIS of $22.02 million, based on the results of our statistical and non-statistical 

sample tests of AAMVA’s revenue and expenses and our review of supporting 

financial records. 

Our calculation of $22.02 million in net income was $4.34 million more than 

AAMVA’s calculation of $17.68 million because AAMVA (1) could not support 

$1.55 million for salary and overhead adjustments and (2) did not include a prorata share of its investment income calculated at $2.79 million. 

AAMVA Overstated Labor, Fringe Benefits and Overhead Costs. AAMVA 

deducted indirect salaries, fringe benefits, and overhead expenses for 

29 employees and members of the AAMVA Board of Directors who worked on 

CDLIS programs. AAMVA claimed the 29 employees worked on CDLIS or 

CDLIS-related programs, but did not charge time directly to those programs. 

To verify this adjustment, we judgmentally selected and reviewed a sample of the 

29 employees’ payroll records for 8 of the 78 pay periods in the 3-year period. 

AAMVA’s adjustment included (1) the salary and fringe benefits in 2003 for one 

employee who was not employed in 2003, (2) salaries for five employees that had 

already charged time directly to CDLIS, and (3) salaries for six employees and 

expenses for the Board of Directors that had already been charged to CDLIS in 

overhead pools. Based on the results of our review of AAMVA’s payroll records, 

we concluded that AAMVA overstated the salaries, fringe benefits, and overhead 

costs by $1.55 million. 

AAMVA’s calculation of net income for the 3-year period did not include a 

$2.79 million pro-rata share of AAMVA’s investment income of $5.74 million. 

AAMVA earned investment income on assets purchased with revenue generated, 

in part, by CDLIS. We calculated the CDLIS investment income using the ratio of 

CDLIS total gross income of $41.91 million to AAMVA’s total gross income of 

$86.24 million from all sources, or 49 percent of the $5.74 million in investment 

income that AAMVA reported. According to the Government Accountability 

Office,9

 grant-generated income includes investment income. 

As shown in table 1, CDLIS revenue significantly exceeded CDLIS expenses for 

the 3-year period, according to both OIG and AAMVA calculations. 

 

9

 Government Accountability Office, Principles of Federal Appropriations Law, Vol. II, Chapter 10, 

10-89, GAO-06-382SP, (3rd ed., February 2006). 
8

Table 1. CDLIS Net Income for 3-Year Period 

Ending September 30, 2005 ($ in millions) 

OIG’s Calculation* 

CDLIS Revenue and 

Expenses 

FY 

2003 

FY 

2004 

FY 

2005 

3-Year 

Total 

AAMVA’s 

Calculation 

(3 Years) 

Difference in 

OIG and 

AAMVA 

Calculations 

CDLIS Revenue $13.29 $14.10 $14.52 $41.91 $41.91 $0.00 

CDLIS Expenses (7.91) (7.02) (7.75) (22.68) (24.23) 1.55 

Prorated share of 

Investment Income 1.12 0.71 0.96 2.79 

No 

calculation 2.79 

Total Net Income $6.50 $7.79 $7.73 $22.02 $17.68 $4.34 

*

 OIG calculation based on analysis of AAMVA’s records. 

AAMVA’s Use of CDLIS Net Income. Our audit found that AAMVA used 

approximately $22 million in net income for the three fiscal years to fund both 

CDLIS and non-CDLIS programs and services. Under its 1988 operating 

agreement with DOT, AAMVA used CDLIS income to purchase investments, set 

up reserve funds, and fund both CDLIS and non-CDLIS programs and services. 

AAMVA’s expenditures for non-CDLIS programs and services, for the 3 years 

ending September 30, 2005, provided benefits to state safety programs. In 

addition to operating CDLIS, AAMVA serves as an information clearinghouse for 

motor vehicle administration, law enforcement, and highway safety issues. 

AAMVA’s programs encourage uniformity and reciprocity among the states, 

Canadian provinces, and liaisons with other levels of government and the private 

sector. Specifically, AAMVA funded approximately: 

• $6.0 million for the National Motor Vehicle Title Information System, 

which inhibits title fraud and automobile theft by allowing motor vehicle 

agencies to verify the validity of ownership before issuing new titles. 

• $5.4 million for various technology applications and networking services to 

facilitate the electronic exchange of information between jurisdictions. 

• $3.8 million for government and public affairs, such as monitoring Federal 

and state legislative initiatives affecting the motor vehicle and law 

enforcement communities. 

• $3.8 million for programs to promote uniformity in issuing commercial and 

non-commercial driver’s licenses, testing and vehicle registration, and 

driver fitness. 

• $1.2 million for conference expenses and training for AAMVA members 

related to motor vehicle safety issues. 
9

• $1.7 million for other programs, such as ID Security and AAMVA’s 

strategic planning process. 

Although AAMVA had the flexibility to spend CDLIS program income on nonCDLIS expenses in the past, the common rule requires that program income 

derived from CDLIS revenue and fees during the modernization grant project 

period must be used for operating and modernizing the system. As such, it is 

imperative that the revised operating agreement identifies the specific duties and 

responsibilities for each party. Additionally, FMCSA must verify that AAMVA 

accounts for program income and uses the funds only to pay for the operation, 

maintenance, and modernization of CDLIS. 

RECOMMENDATIONS 

We recommend that the FMCSA Administrator: 

1. Amend the 1988 operating agreement to ensure that AAMVA: 

a. uses CDLIS program income in accordance with the common rule. 

b. makes provisions for a reserve fund or other funding vehicle for states to 

pay for future CDLIS enhancements. 

2. Ensure that AAMVA accounts for and periodically reports to FMCSA the 

amount and use of CDLIS program income during the modernization project 

period, retroactive to August 2006. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

In its June 20, 2008, written comments to our draft report, FMCSA concurred with 

our two recommendations and provided an action plan to address each of the 

recommendations, including actions it had already initiated. FMCSA’s complete 

comments to our recommendations are included as an Appendix to this report. 

FMCSA agreed to take the following actions. 

• Recommendation 1, FMCSA stated that it agreed to and signed a Cooperative 

Agreement with AAMVA on June 9, 2008. This agreement defined 

prescriptive requirements on AAMVA’s use of income derived from CDLIS. 

Consistent with the common rule, AAMVA will use program income to fund 

eligible CDLIS modernization project or program objectives and requirements 

described by the Cooperative Agreement, and will retain a portion of program 

income to fund future modernization efforts without funding from FMCSA. 
10

These provisions will remain in effect as long as AAMVA is the designated 

operator of CDLIS. 

• Recommendation 2, FMCSA stated that the Cooperative Agreement requires 

that AAMVA, by December 9, 2008, provide FMCSA a financial report on 

program income and expenditures from August 31, 2006, to June 30, 2008. 

Thereafter, AAMVA must provide FMCSA a quarterly financial report on 

program income and expenditures for eligible activities. Finally, AAMVA 

must provide FMCSA audited financial reports for each Federal fiscal year no 

later than January 31 of the following fiscal year. 

We consider FMCSA’s current and planned actions for our two recommendations 

to be responsive; and therefore, consider the recommendations resolved. We will, 

however, continue to monitor the status of FMCSA’s implementation of our 

recommendations, and the recommendations will remain open until FMCSA 

completes its proposed actions. 

We appreciate the courtesies and cooperation of FMCSA representatives during 

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

(202) 366-5630 or Kerry R. Barras, Program Director, at (817) 978-3318. 

# 
Exhibit A. Objectives, Scope, and Methodology 

11

EXHIBIT A. OBJECTIVES, SCOPE, AND METHODOLOGY 

Our objectives were to: (1) determine how net income should be used under the 

CDLIS modernization grant, (2) identify total revenue derived from CDLIS user 

fees, the amount of related expenses AAMVA incurred, and net income, and 

(3) determine how the net income was used. 

We conducted this performance audit from August 2006 through May 2008 in 

accordance with Generally Accepted Government Auditing Standards prescribed 

by the Comptroller General of the United States and performed such tests as we 

considered necessary to detect fraud, waste, and abuse. 

We reviewed AAMVA’s financial statements and independent audit reports on the 

financial statements for FYs 2003 through 2005. We analyzed AAMVA’s 

subsidiary records for CDLIS revenue and operating costs and revenue expended 

on non-CDLIS-related programs for this period. Further, we examined legal 

issues governing the use of income generated by CDLIS through review of 

pertinent public laws, the United States Code, and the Code of Federal Regulations 

and through discussions with OIG and FMCSA attorneys. 

We tested certain data fields in AAMVA’s FYs 2003 through 2005 CDLIS income 

and expense transaction data base for data entry errors. To determine the accuracy 

of documentation supporting CDLIS revenue and expenses, we selected a simple 

statistical random sample of 70 AAMVA income and expense transactions for 

fiscal years 2003 through 2005. We reviewed the 70 sample records for 

(1) approval, (2) adequate support, (3) matching line items, (4) consistent account 

numbers between schedule and supporting documents, and (5) duplicate 

transactions. Based on the results of our tests for data entry errors and our 

statistical sample of CDLIS transactions, we concluded that the data were 

sufficiently reliable to meet our audit objectives. 

In assessing the validity of AAMVA’s assertion that 29 employees spent a portion 

of their time working on CDLIS or CDLIS-related programs but did not charge 

time to CDLIS cost centers, we analyzed a nonstatistical sample of the timecards 

for the 29 employees, covering 8 pay periods during the 3-year period under 

review. We reviewed the employees’ payroll records and found that time charged 

to CDLIS cost centers and overhead accounts had already been allocated to 

CDLIS. We computed AAMVA’s overstatement of the additional salaries and 

applied fringe benefits and overhead for the 3-year period. To calculate fringe 

benefits and overhead applied to the overstated salaries, we used the rates 

identified in AAMVA’s audited financial statements. 
Exhibit B. Objectives, Scope, and Methodology 

12

EXHIBIT B. MAJOR CONTRIBUTORS TO THIS REPORT 

THE FOLLOWING INDIVIDUALS CONTRIBUTED TO THIS REPORT.

Name Title 

Kerry R. Barras Program Director 

Linda G. Morgan Project Manager 

David W. Brown Senior Analyst 

Carlton H. Hamilton Auditor 

Seth Kaufman Associate Counsel 

Harriet E. Lambert Writer-Editor 

Thomas K. Lehrich Chief Counsel 

Petra Swartzlander Statistician 
APPENDIX. FMCSA COMMENTS 

13

APPENDIX. FMCSA COMMENTS 

Memorandum 

U.S . Department 

of Transportation 

Federal Motor Carrier 

Safety Administration 

INFORMATION: Response to Office of 

Inspector General's Report on Use of Income Date: JUN 20 2008 

from the CDLIS for modernization 

John H. Hill Reply to 

Administrator Attn. of: MC-ESL 

Joseph W. Come 

Assistant Inspector General for 

 Highway and Transit Audits 

Thank you for your memorandum of May 20 transmitting the Office of Inspector General's 

(OIG) report titled "Use of Income Derived from the Commercial Driver's License Information 

System for Modernization." We have reviewed the report and are pleased to advise that the 

Federal Motor Carrier Safety Administration (FMCSA) has initiated implementation of both 

recommendations included in the report. 

As referenced in the draft report, the FMCSA and the American Association of Motor Vehicle 

Administrators (AAMVA) are working cooperatively to modernize the Commercial Driver 's 

License Information System (CDLIS) to improve system effectiveness, address known 

limitations, and prepare the system to accommodate future growth and new requirements. 

Section 4123 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 

for Users (SAFETEA-LU) authorized the modernization of CDLIS, which includes adding 

additional security features, upgrading the communications network, integrating medical 

certificate information, improving self-auditing capabilities, and providing for the electronic 

exchange of expanded information needs. This law included an authorization of $28 million in 

grants for fiscal years (FY) 2006 through 2009 for this purpose. The FY 2006 and FY 2007 

funding of $5 million and $7 million was awarded to AAMVA for development costs. The FY 

2008 funding of $8 million will be awarded to the States. The States and AAMVA are expected 

to share the $8 million funding in FY 2009. 

Concurrently, FMCSA and AAMVA have developed and entered into a new CDLIS Operation, 

Management, Administration, and Modernization Cooperative Agreement to reflect current 

programs, systems, and organizational changes since the original agreement was ratified . The 

original agreement designating AAMVA as the operator of CDLIS was executed on December 

21, 1988, and signed by representatives from the Federal Highway Administration (FHWA), 

AAMVA, and AAMVAnet, Inc., a former affiliate of AAMVA. Since AAMVAnet, Inc. no 
APPENDIX. FMCSA COMMENTS 

14

longer exists and FHWA's CDLIS responsibilities have been transferred to FMCSA, a new 

agreement was needed. 

The recommendations offered by the GIG have enabled us to build upon our accomplishments 

and forge new working relationships and a new operating agreement that is consistent with 

FMCSA's and AAMVA's stewardship and oversight responsibilities of CDLIS. 

Responses to Specific Recommendations Recommendation 1. Amend the 1988 operating 

agreement to ensure that AAMVA: 

a. Uses CDLIS program income in accordance with the common rule. 

b. Makes provisions for a reserve fund or other funding vehicle for States to pay for 

future CDLIS enhancements. 

Response: The new CDLIS Operation, Management, Administration, and Modernization 

Cooperative Agreement agreed to, and signed on June 9,2008, by both parties provides very 

prescriptive requirements on AAMVA's use of revenue derived from the operation of CDLIS. 

The agreement defines CDLIS modernization program income as income earned by the AAMVA 

beginning on the first day of the first month during which the new modernized CDLIS central site 

is operational and continuing thereafter, as long as AAMVA is the FMCSA's designated operator 

of CDLIS. Consistent with the common provisions, AAMVA will retain program income to 

further fund eligible project or program objectives and requirements. The agreement also 

provides that AAMVA retain a portion of program income to fund future modernization efforts 

without funding from the FMCSA, to include all eligible activities associated with the following 

functions: 

a. Maintaining the network, hardware, and software needed for the sending and receiving 

of messages including the additional information required by SAFETEALU, between the 

CDLIS Central Site and all of the jurisdictions; 

b. Providing assistance to States when problems occur with messages between States; 

c. Maintaining a problem reporting system to track known problems and the resolution of 

the problem; 

d. Providing updated information on problems to the FMCSA quarterly; 

e. Creating Structured Tests (A basic test, and specific tests as may be required by 

program and system changes); 

f. Performing Structured Testing with States (The basic test is to be performed at least 

once every 3 years. The basic test will be included with the specific tests, if it has been 

over 2 years since a State completed the basic testing); 

g. Maintaining documentation: State Procedures Manual, AAMVA Code Dictionary 

(ACD) Manual (uniform conviction and withdrawal codes), CDLIS System 

Specifications (or other documents that are created to support CDLIS), and Unified 

Network Interface (UNI) documentation as it applies to CDLIS; 

h. Providing training on CDLIS Documentation: State Procedures Manual, ACD Manual, 

CDLIS System Specifications and implementation documents; 
APPENDIX. FMCSA COMMENTS 

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i. Providing training on UNI documentation as it applies to CDLIS; 

J. Maintain the CDLIS Central Site in accordance with Federal Security Standards; and 

k. Retaining a portion of program income to establish a fund designated for future 

modernization efforts. 

In advance of the development and implementation of the modernized CDLIS, the agreement also 

requires AAMVA to use any program income from CDLIS to fund eligible activities associated 

with the operation and maintenance of existing CDLIS. 

Recommendation 2. Ensure that AAMVA accounts for and periodically reports to FMCSA on 

the amount and use of CDLIS program income during the modernization projects period 

retroactive to August 2006. 

Response: The new agreement requires that AAMVA provide a financial report within 6 months 

of the execution of the agreement regarding the total revenues and expenditures of program 

income by AAMVA since August 31,2006 to June 30, 2008. Thereafter, AAMVA will provide a 

quarterly financial report to FMCSA regarding the total revenues and expenditures of the 

program income by AAMVA on eligible activities as described in the agreement. Each report 

shall be due no later than sixty calendar days of the last day of the quarter. In addition, AAMVA 

will provide audited financial report for each Federal fiscal year no later than January 31st of the 

following fiscal year. 

We appreciate the work done by the OIG and the professionalism demonstrated by the audit team. 

Please contact Mr. William A. Quade, Associate Administrator, Office of Enforcement and 

Program Delivery, if you have any questions about the CDLIS modernization effort or the 

agreement.