USDOT Federal Highway Administration USDOT Home | FHWA Home | Feedback
Skip to main content

Tools & Programs:
Federal-aid Fund Management Tools

Federal-aid Matching Strategies

Flexible Match

Flexible match allows a wide variety of public and private contributions to be counted toward the non-Federal match for Federal-aid projects. Flexibility in matching Federal-aid highway funding with the typical 20 percent local share exists primarily through two means:

  1. Using Federal funds as a match
  2. Third party donations

Federal Funds as a Match

Although moneys from other federal agencies generally cannot be used to pay for the local portion of a Federal-aid project, some flexibility exists in several instances.

  1. Transportation Enhancement Projects - Funds from other Federal agencies may count toward the non-federal share of transportation enhancement projects. See 23 U.S.C. 133(e)(5)(C)(ii) on the innovative financing of transportation enhancement activities.

  2. Federal Land Management Agency Funds for Scenic Byways - 23 U.S.C. 162(f) allows a Federal land management agency to use funds authorized for use by the agency as the non-Federal share in the case of any scenic byway project along a public road that provides access to or within Federal or Indian land.

  3. Funds from Federal Land Management Agencies in General - These funds may be used as a nonfederal match on all Title 23 projects, as well as public transportation projects under Chapter 53 of Title 49. Federal land management agencies manage federally owned land, which comprises nearly 30 percent of all U.S. land. Almost all of this land is managed by three departments: 1) the Department of Agriculture through the Forest Service; 2) the Department of Interior through the Bureau of Land Management, Fish and Wildlife Service, and National Park Service; and 3) the Department of Defense primarily through the Army Corps of Engineers. See 23 U.S.C. 120(k) on the use of Federal Land Management Agency funds.

  4. Funds from the Federal Lands Highway Program - These funds may be used as a nonfederal match on all Title 23 projects, as well as public transportation projects under Chapter 53 of Title 49 that provide such access. See 23 U.S.C. 120(l) on the use of Federal Lands Highways Program funds.

  5. Recreational Trails Program (RTP) - 23 U.S.C. 206 on the Recreational Trails Program offers other opportunities to use Federal funds as a match. Further detail is available in RTP Program guidance.

  6. TIFIA - The proceeds of a secured TIFIA loan may be used for any non-Federal share of project costs required under Title 23 or Chapter 53 of Title 49, if the loan is repayable from non-Federal funds. See 23 U.S.C. 603(b)(8) on the terms and limitations of a TIFIA loan.

Third Party Donations

Third party donations allow states to apply the value of third party-donated funds, land, material, or services toward their nonfederal share of project costs.

This flexible match provision increases a state's ability to fund its transportation programs by:

  1. Accelerating certain projects that receive donated resources.
  2. Allowing states to reallocate funds that otherwise would have been used to meet Federal-aid matching requirements.
  3. Promoting public-private partnerships by providing incentives to seek private donations.

Third parties include private companies, organizations, individuals, and since SAFETEA-LU, local governments. Federal and state government agencies are excluded by this definition. The flexibility to apply the value of third party donations to nonfederal highway project shares has existed since the 1995 NHS Act, which amended 23 U.S.C. 323 Donations and Credits.

Further opportunities for state and local governments to leverage transportation investment exist through prudent and timely acquisition and management of real property. 23 U.S.C. 108 Advance Acquisition of Real Property permits states to receive credit toward a non-Federal match when State or locally owned lands are incorporated into a Federal project. This provision substantially expands the prior law enacted by the NHS Act already permitting matching credit for private property donations, and it provides more flexible ways for state and local governments to preserve corridors. 23 U.S.C. 156 Proceeds from the Sale or Lease of Real Property allows State and local governments to retain income from the sale, use, or lease of property previously acquired with Federal funds, if the income is used for Title 23 eligible projects. These provisions introduced by TEA-21 give state and local governments more flexibility in acquiring and managing real property in support of transportation systems.

Process

The process for third party donations includes the following steps:

  1. State identifies candidate project for match.
  2. State identifies non-Federal funds or materials for match.
  3. FHWA reviews proposed match and valuation and approves match.
  4. Non-Federal funds or materials are used on project, documented, and then applied as match when state submits billings for progress payments.
  5. FHWA reimburses Federal share of costs.

The following examples illustrate how third party donations are considered when calculating Federal and state shares of total project costs. The donated item must qualify as a participating cost meeting eligibility standards and within the scope of the project. The common rule (49 CFR 18) requires a donation to be made during the period of the grant (between authorization and final voucher). Donations made prior to authorization should be treated as a cost incurred prior to authorization under 23 CFR 1.9(b).

When calculating the pro rata share of projects costs, the donation should be treated the same as a costs incurred. The value of the donation is added to the total project costs and the appropriate pro rata calculation made. However, in the case of a large donation, the amount of Federal funds obligated cannot exceed actual project costs.

Example 1:

Actual cash outlay for project costs incurred: $2,000,000

Value of donations; include real property, funds, materials, services, buildings/equipment

$300,000
Total project value $2,300,000
   
Federal pro rata share of total project value = 80% (80% of $2,300,000) $1,840,000
State share of total project value = 20% (20% of $2,300,000) $460,000
Total project value $2,300,000
   
State share of total project value $460,000
Value of donations ($300,000)
Actual cash outlay by State for project $160,000

 

Example 2: If the value of the donation is $650,000, then the Federal share is limited to the amount of actual cash outlay for the project calculated as follows:

Actual cash outlay for project cost incurred $2,000,000
Value of donations (includes real property, funds, materials, and services) $650,000
Total value of project $2,650,000
   
Federal pro rata share of total value of project = 80% (80% of $2,650,000) $2,120,000
The Federal obligation amount is limited to the actual cash outlay $2,000,000

 

Example 3: Cash Donation

Total project costs $5,000,000
Cash donation $1,000,000
Cash donation $4,000,000
   
Federal pro rata share of revised total project costs = 80% (80% of $4,000,000) $3,200,000
State share of revised total project costs = 20% (20% of $4,000,000) $800,000

 

It should be noted (as shown in Example 1 above) that the value of the donations must be added to the total project value when computing the Federal and state shares. In Example 1, the Federal and state shares were computed from the total project value of $2,300,000, which included $300,000 in donations. The shares were not computed solely on the basis on the project's cash outlay of $2,000,000.