The Department of Transportation Should Improve Its Policies and Practices on Grant-Related Income

GGD-84-5: Published: Mar 30, 1984. Publicly Released: Mar 30, 1984.

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GAO completed a Government-wide review of Federal agency' and grantee' policies and practices for managing and reporting income generated under federally assisted programs.

GAO found that a number of Federal agencies, including the Department of Transportation (DOT), have not established regulations conforming to the Office of Management and Budget's (OMB) grant-related income standards and are not adequately implementing agency grant-related income regulations. As a result, the income generated was not used to increase the size of the federally assisted programs or to reduce the Federal Government's and grantees' shares of program costs. The Federal Highway Administration (FHwA) and the Urban Mass Transportation Administration (UMTA) have not adopted OMB standards or issued their own regulations on program income; therefore, they have lost some ability to direct the grantees' use of the income. In several cases, GAO found that DOT programs did not fully benefit from the income generated, and grantees are not always reporting income received. Because DOT regulations address only certain income, millions of dollars of grant-related income, such as interest and sales proceeds, are not being reported. In addition, some transportation grantees are earning and retaining interest on premature advances and withdrawals of Federal funds. Finally, GAO found that UMTA has not required grantees to return funds returned to it by a third party upon the settlement of a contract dispute. Federal cash management requirements state that these funds should be returned to the Federal Government if not authorized to meet immediate current expenses.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: FAA and UMTA plan to act on the recommendation. FHwA did not address this recommendation.

    Recommendation: The Secretary of Transportation should direct UMTA, FHwA, and FAA to require grantees to return interest earned on: (1) sales proceeds when the proceeds themselves are required to be returned; and (2) Federal funds advanced to nonstate agencies.

    Agency Affected: Department of Transportation

  2. Status: Closed - Not Implemented

    Comments: FAA and UMTA stated they already have regulations but said nothing about adhering to them. FHwA requires credits but not payments. GAO believes that credits are not the same as payments.

    Recommendation: The Secretary of Transportation should direct UMTA, FHwA, and FAA to require grantees to pay the Federal Government its share of property sales proceeds.

    Agency Affected: Department of Transportation

  3. Status: Closed - Not Implemented

    Comments: There will be no agency action until OMB concludes its study of A102.

    Recommendation: The Secretary of Transportation should direct UMTA, FHwA, and FAA to require grantees to report on the source, amount, and disposition of all types of grant-related income.

    Agency Affected: Department of Transportation

  4. Status: Closed - Not Implemented

    Comments: FHwA maintains that it always uses the deductive option; GAO disagrees. FAA and UMTA plan to review this issue.

    Recommendation: The Secretary of Transportation should direct UMTA, FHwA, and the Federal Aviation Administration (FAA) to specify in their grant agreements which program income option grantees should use and, when the deductive option is to apply, to specify that grant budgets should not be allowed to increase merely because unexpected program income was generated.

    Agency Affected: Department of Transportation

  5. Status: Closed - Not Implemented

    Comments: FHwA considers its requirements on income consistent with OMB standards; GAO disagrees.

    Recommendation: The Secretary of Transportation should direct the UMTA and the FHwA to establish regulations on program income that are consistent with the OMB standards.

    Agency Affected: Department of Transportation

  6. Status: Closed - Not Implemented

    Comments: UMTA believes that its position is legally supported; GAO disagrees.

    Recommendation: The Secretary of Transportation should direct UMTA to determine the Massachusetts Bay Transit Authority's current need for funds provided for light rail vehicles and seek the return of the Federal share of the excess funds being held and interest earned thereon.

    Agency Affected: Department of Transportation

 

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