Highway Emergency Relief:

Strengthened Oversight of Project Eligibility Decisions Needed

GAO-12-45: Published: Nov 8, 2011. Publicly Released: Dec 8, 2011.

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The Federal Highway Administration (FHWA), within the U.S. Department of Transportation (DOT), administers the Emergency Relief Program to provide funds to states to repair roads damaged by natural disasters and catastrophic failures. In 2007, GAO reported that in recent years states' annual demand for emergency relief funds often exceeded the program's $100 million annual authorization from the Highway Trust Fund and required supplemental appropriations from general revenues to address a backlog of funding requests from states. GAO recommended that FHWA tighten eligibility standards and coordinate with states to withdraw unneeded emergency relief funds, among other actions. For this report, GAO reviewed (1) Emergency Relief Program funding trends since 2007, (2) key program changes made in response to GAO's 2007 report, and (3) the extent to which selected emergency relief projects were approved in compliance with program eligibility requirements. GAO reviewed projects in New York, Texas, and Washington state, states selected based on the amount and frequency of funding allocations since 2007, among other factors.

From fiscal years 2007 through 2010, the Emergency Relief Program received about $2.3 billion, of which $1.9 billion came from three supplemental appropriations compared with about $400 million authorized from the Highway Trust Fund. FHWA allocated this funding to 42 states and 3 territories to reduce the backlog of funding requests, with $485 million in unfunded requests remaining as of June 2011. This backlog list did not include funding requests for August 2011 damages from Hurricane Irene. Because the program lacks time frames to limit states from requesting funds years after events occur, the June 2011 backlog list includes about $90 million for events that occurred prior to fiscal year 1994. Without time limits for emergency relief funding requests, FHWA's ability to anticipate and manage future program costs is hindered. In response to GAO's 2007 report, FHWA withdrew about $367 million of unobligated emergency relief funds from states and redistributed most of this funding for other emergency relief needs. However, additional funding remains unused, including (1) at least $63 million allocated to states before fiscal year 2007 that has yet to be obligated to projects and (2) $341 million obligated between fiscal years 2001 and 2006 that remains unexpended. Due to a lack of time frames for states to close-out completed projects, FHWA lacks project status information to determine whether unexpended funding is no longer needed and could be deobligated. FHWA has not addressed GAO's 2007 recommendation to revise its regulations to limit the use of emergency relief to fully fund projects that have grown in scope and cost as a result of environmental or community concerns. The Emergency Relief Program faces the continued risk of escalating costs due to projects that have grown in scope beyond the program's goal of restoring damaged facilities to predisaster conditions. GAO's review of 83 emergency relief project files in three FHWA state offices found many instances of missing or incomplete documentation--as such, GAO was unable to determine the basis by which FHWA made many eligibility determinations. For example, about half of the project files did not include required repair cost estimates, and 39 of 58 (67 percent) emergency repair projects approved for 100 percent federal funding did not contain documentation of completion within 180 days--a requirement for states to receive 100 percent federal funding. FHWA lacks clear requirements for how states submit and FHWA approves key project documentation, which has resulted in FHWA state offices applying eligibility guidelines differently. Establishing standardized procedures for reviewing emergency relief documentation and making eligibility decisions would provide greater assurance that projects are in fact eligible and that FHWA makes eligibility determinations consistently and transparently. GAO makes several recommendations including that FHWA establish (1) time frames to limit states' requests for emergency relief funds and to close completed projects and (2) standardized procedures for reviewing emergency relief documentation and making eligibility decisions. DOT provided technical comments on project time frames and costs which GAO incorporated as appropriate.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Federal Highway Administration (FHWA), within the U.S. Department of Transportation (DOT), administers the Emergency Relief Program to provide funds to states to repair roads damaged by natural disasters and catastrophic failures. Previously, we reported that states' annual demand for emergency relief funds often exceeded the program's $100 million annual authorization from the Highway Trust Fund and required supplemental appropriations from general revenues to address a backlog of funding requests from states. In November 2011, we reported that FHWA had a $485 million backlog of funding requests from states. Because the program lacks time frames to limit states from requesting funds years after events occur, this backlog contained almost $90 million in formal funding requests for several events that occurred between 1983 and 1993 that were previously determined to be eligible by FHWA. Without time limits for emergency relief funding requests, FHWA (1) faces the risk of states filing claims for additional funding years after an event's occurrence, particularly for projects that grow significantly in cost or scope over time; and (2) is hindered in its ability to manage future claims to the program and creates a situation where Congress may be asked to provide additional supplemental appropriations for emergency relief years after an event occurs. Therefore, we recommended FHWA establish specific time frames to limit states' ability to request emergency relief funds years after an event's occurrence, so that FHWA can better manage the financial risk of reimbursing states for projects that have grown in scope and cost. In response to our recommendation, Congress and FHWA took several actions. First, in July 2012, Congress passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), which amended eligibility requirements for the emergency relief program by requiring states to submit to DOT a comprehensive list of all eligible project sites and repair costs by not later than 2 years after the natural disaster or catastrophic failure. Second, in May 2013, FHWA revised its Emergency Relief Manual to incorporate this and other program changes required by MAP-21. Third, in February 2016, FHWA issued an Order intended to strengthen the administration and oversight of the Emergency Relief Program, which further clarified the program's rules for states submitting funding requests. This Order directed FHWA division officials to ensure that a state's detailed damage inspection reports--which document the damage, scope, and estimated cost of the repair work, and the eligibility of repairs--are completed within 3 months of the event. Further, the Order directed FHWA division officials to ensure that states understand that no new sites may be added to the comprehensive list of eligible project sites and costs later than 2 years after the disaster start date. The Order also directs FHWA officials to monitor states' project costs to ensure that any cost increases are not the result of unjustified or ineligible scope changes. These actions will provide FHWA with an important tool to control its exposure to the costs of older events. These actions also will help ensure that if emergency relief projects grow in scope and cost, these projects will not expand beyond the original intent of the program, which is to assist states to restore damaged highway facilities to their predisaster conditions.

    Recommendation: To improve the accountability of federal funds, ensure that FHWA's eligibility decisions are applied consistently, and enhance oversight of the Emergency Relief Program, the Secretary of Transportation should direct the FHWA Administrator to establish specific time frames to limit states' ability to request emergency relief funds years after an event's occurrence, so that FHWA can better manage the financial risk of reimbursing states for projects that have grown in scope and cost.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: In January 2012, FHWA issued written guidance to its staff directing them to no longer permit this practice. FHWA also instituted an internal control to track each states' balance of unused funds on a monthly basis so that unused funding can be more easily identified and withdrawn. Using this new practice, FHWA identified and withdrew a net present value of $231,217,468.80 in unused allocations in fiscal year 2012. According to FHWA officials, this savings was directly attributable to the directive prohibiting states from transferring unused allocations to new events and to the recommendation in GAO's November 2011 report and has led to improved FHWA financial oversight of Emergency Relief funds.

    Recommendation: To improve the accountability of federal funds, ensure that FHWA's eligibility decisions are applied consistently, and enhance oversight of the Emergency Relief Program, the Secretary of Transportation should direct the FHWA Administrator to instruct FHWA division offices to no longer permit states to transfer unobligated allocations from a prior emergency relief event to a new event so that allocations that are no longer needed may be identified and withdrawn by FHWA.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: The Federal Highway Administration (FHWA), within the U.S. Department of Transportation (DOT), administers the Emergency Relief Program to provide funds to states to repair roads damaged by natural disasters and catastrophic failures. Previously, we reported that states' annual demand for emergency relief funds often exceeded the program's $100 million annual authorization from the Highway Trust Fund and required supplemental appropriations from general revenues to address a backlog of funding requests from states. In November 2011, we reported that FHWA had a $485 million backlog of funding requests from states. Because the program lacks time frames to limit states from requesting funds years after events occur, this backlog contained almost $90 million in formal funding requests for several events that occurred between 1983 and 1993 that were previously determined to be eligible by FHWA. Without time limits for emergency relief funding requests, FHWA (1) faces the risk of states filing claims for additional funding years after an event's occurrence, particularly for projects that grow significantly in cost or scope over time; and (2) is hindered in its ability to manage future claims to the program and creates a situation where Congress may be asked to provide additional supplemental appropriations for emergency relief years after an event occurs. Therefore, we recommended FHWA establish specific time frames to limit states' ability to request emergency relief funds years after an event's occurrence, so that FHWA can better manage the financial risk of reimbursing states for projects that have grown in scope and cost. In response to our recommendation, Congress and FHWA took several actions. First, in July 2012, Congress passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), which amended eligibility requirements for the emergency relief program by requiring states to submit to DOT a comprehensive list of all eligible project sites and repair costs by not later than 2 years after the natural disaster or catastrophic failure. Second, in May 2013, FHWA revised its Emergency Relief Manual to incorporate this and other program changes required by MAP-21. Third, in February 2016, FHWA issued an Order intended to strengthen the administration and oversight of the Emergency Relief Program, which further clarified the program's rules for states submitting funding requests. This Order directed FHWA division officials to ensure that a state's detailed damage inspection reports--which document the damage, scope, and estimated cost of the repair work, and the eligibility of repairs--are completed within 3 months of the event. Further, the Order directed FHWA division officials to ensure that states understand that no new sites may be added to the comprehensive list of eligible project sites and costs later than 2 years after the disaster start date. The Order also directs FHWA officials to monitor states' project costs to ensure that any cost increases are not the result of unjustified or ineligible scope changes. These actions will provide FHWA with an important tool to control its exposure to the costs of older events. These actions also will help ensure that if emergency relief projects grow in scope and cost, these projects will not expand beyond the original intent of the program, which is to assist states to restore damaged highway facilities to their predisaster conditions.

    Recommendation: To improve the accountability of federal funds, ensure that FHWA's eligibility decisions are applied consistently, and enhance oversight of the Emergency Relief Program, the Secretary of Transportation should direct the FHWA Administrator to establish clear time frames for states to close out completed projects in order to improve FHWA's ability to assess whether unexpended program funds are no longer needed and could be deobligated.

    Agency Affected: Department of Transportation

  4. Status: Closed - Implemented

    Comments: The Federal Highway Administration (FHWA), within the U.S. Department of Transportation, administers the Emergency Relief Program to provide funds to states to repair roads damaged by natural disasters and catastrophic failures. In 2011, we reported that many of the 83 project files we reviewed in three states did not contain documentation sufficient to support FHWA's decision that these projects met the eligibility requirements of the Emergency Relief Program. As a result, we were unable to determine the basis of FHWA's eligibility decisions on projects costing more than $190 million, raising questions about whether Emergency Relief Program funds were being put to their intended use. Specifically, we found (a) missing or incomplete damage inspection reports and repair cost estimates, (b) a lack of documentation demonstrating that emergency repairs were completed within 180 days of the disaster--a requirement to receive 100 percent federal reimbursement, and (c) a lack of documentation supporting "betterments"-- improvements or added protective features that go beyond restoring highway facilities to pre-disaster conditions. We recommended FHWA establish standardized procedures for FHWA division offices to follow in making eligibility decisions including (a) clear requirements that FHWA approve and retain damage inspection reports and detailed repair cost estimates; (b) a requirement that division offices verify and document the completion of emergency repairs within 180 days of an event to ensure that only emergency work completed within that time frame receives 100 percent federal funding; and (c) consistent standards for approving betterments, including guidance on what information the required benefit-cost analyses should include. In response to our recommendations, FHWA issued an Order in February 2016 intended to strengthen the administration and oversight of the Emergency Relief Program and ensure the use of funding for eligible projects. The Order included procedures to ensure that FHWA division offices approve and retain damage inspection reports with detailed repair cost estimates, delineate and document activities to be classified as emergency repairs, and verify and document that the appropriate federal share is being adhered to (and that only emergency work completed within 180 days receives 100 percent federal funding) using a risk based approach. The Order also contained standards for approving betterments, including plans to develop guidance on what information the required benefit-cost analyses should include. Implementing our recommendations to establish standardized procedures for making eligibility decisions for the Emergency Relief Program will provide greater assurance that emergency projects are in fact eligible for funding, and that FHWA makes eligibility determinations consistently and transparently.

    Recommendation: To improve the accountability of federal funds, ensure that FHWA's eligibility decisions are applied consistently, and enhance oversight of the Emergency Relief Program, the Secretary of Transportation should direct the FHWA Administrator to establish standardized procedures for FHWA division offices to follow in reviewing emergency relief documentation and making eligibility decisions. Such standardized procedures should include: (1) clear requirements that FHWA approve and retain detailed damage inspection reports for each project and include detailed repair cost estimates; (2) a requirement that division offices verify and document the completion of emergency repairs within 180 days of an event to ensure that only emergency work completed within that time frame receives 100 percent federal funding; and (3) consistent standards for approving betterments, including guidance on what information the benefit-cost analyses should include to demonstrate that the proposed betterment will result in a savings to the Emergency Relief Program, and a requirement that FHWA approval of funding for betterments be clearly documented.

    Agency Affected: Department of Transportation

 

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