Need for Controls by the Urban Mass Transportation Administration Over No-Prejudice Authorizations

PSAD-80-36: Published: Mar 14, 1980. Publicly Released: Mar 14, 1980.

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The Urban Mass Transportation Administration (UMTA) is authorizing local transit authorities to incur cost on a "no-prejudice" basis. These authorizations permit local authorities to use local funds for a variety of purposes, such as project development and the purchase of buses, with the understanding that such costs may be reimbursed if future grants are approved. However, UMTA does not guarantee that future grants will be made or that any of the incurred costs will be eligible for reimbursement if a grant is approved.

According to UMTA, as of January 31, 1980, outstanding no-prejudice authorizations totaled about $265 million. A review of UMTA records showed that the amounts for some authorizations had not been recorded, some amounts represented only the potential Federal share, and some other amounts represented the total project cost. The first concern is that controls and incentives such as those embodied in the full-funding contracts executed with transit authorities for developing project segments, are not part of the no-prejudice authorizations. Under no-prejudice authorizations, cost increases due to poor management or other inefficiencies could qualify as reimbursable. No-prejudice authorizations also lack incentive for achieving project objectives within a fixed budget. The second concern is that no-prejudice authorizations, in effect, commit funds before the Congress has had an opportunity to determine future appropriations or to approve or disapprove further development of a particular project. Any authorizations for project development assistance should deal only with specific identifiable and usable project segments and should include limitations on the period of development and amount of Federal participation.

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