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Tools & Programs:
TE045 Improving Federal-aid Financial Management

In the mid-1990s, FHWA implemented a broad-based effort to test and evaluate innovative strategies for state DOTs to get the most from Federal highway grants. Designated officially as the "Test and Evaluation Project TE-045," this effort advanced many financial management tools that are now standard, such as advance construction, flexible matching, and toll credits.

With the current strain on highway funding, FHWA seeking ideas for improving grant assistance through a renewed test and evaluation of innovative financial management practices. FHWA has recently approved alternative cost recovery approaches that will allow California to hire nine additional oversight engineers for local public agency projects. It has also allowed Vermont to recover the costs of administering Emergency Relief funds that are being used to rebuild roads destroyed by Tropical Storm Irene. In both cases, the test program allowed state DOTs to use federal funds for overhead costs without developing a complex "indirect cost allocation plan" (ICAP). With this expedited approval, Vermont and California were able to begin billing FHWA for these additional administrative costs sooner.

By testing methods that are more flexible yet fully consistent with Federal Cost principals, FHWA has allowed these states to use scarce funds more effectively. The Office of Innovative Program Delivery in partnership with the office of the Chief Financial Officer is encouraging state DOTs and Division offices to review current financial management practices and identify opportunity to test innovation in financial management. These tests must focus on policy, guidance and regulation within the Federal-aid program. Through sharing successful approaches taken by some states, the program will help all state DOTs pursue new financial flexibilities.

May 23, 2012 Webinar

Improving Financial Management Presentation: web | Download PDF [243 kb]

Transcript: web | Download PDF [745 kb]

Audio: https://connectdot.connectsolutions.com/p1cll13ab4x/.

Submission Form

Submission Form: Download Word [121 kb] | Download PDF [224 kb]

Other materials

Action Memorandum from the Administrator: web | Download PDF [125 kb]

DOT Press Release on CA and VT Innovation: web | Download PDF [43 kb]

Update January 2013

The Administrator recently presented the Missouri Division and DOT with the first ever Innovation in Project Finance and Financial Management Award for its proposal to allow the Missouri Transportation Finance Corporation to sell existing loans on its books in order to raise new capital for additional loans. This approach - an opportunity available to all Federally-authorized State Infrastructure Banks - promises to attract new investment in highway infrastructure.

While the Missouri proposal received special attention, it is just one of many innovative proposals submitted by the Divisions and their State DOT partners in response to our recent solicitation for ideas to improve financial management of the Federal-aid program. The Office of Innovative Program Delivery (OIPD) is pleased to announce the other concepts accepted for testing and evaluation. They are:

  • Arizona's application to use a narrative cost allocation methodology to streamline the reimbursement of Federal-aid funds to improve the stewardship of Local Public Agency (LPA) programs.
  • Arizona's plan to use State Planning and Research funds to redesign the process by which LPAs select and deliver local projects funded with Federal dollars.
  • California's application to use a narrative cost allocation methodology to streamline the reimbursement of Federal-aid funds spent to improve the stewardship of LPA programs.
  • California's plan to use Federal-aid funds to upgrade and consolidate the Caltrans project and financial management systems.
  • Michigan's application to apply a tapered match to the entire Surface Transportation Program to take full advantage of Canada's $550 million for access connections to the New International Trade Crossing.
  • New Jersey's two proposals to use a narrative cost allocation methodology to streamline the reimbursement of Federal-aid funds spend to improve the stewardship of LPA programs.
  • New Mexico's application to use a narrative cost allocation methodology to streamline the reimbursement of Federal-aid funds spent to improve the stewardship of LPA programs.
  • New York's proposal to use a narrative cost allocation methodology to recover administrative costs quickly for Emergency Relief (ER) Projects, including those in the wake of Superstorm Sandy.
  • Ohio's plan to offer an optional "safe harbor" indirect cost rate to LPAs, allowing these agencies the option of streamlined reimbursement for administrative and overhead costs.
  • Texas' application, on behalf of additional States, to offer an optional "safe harbor" indirect cost rate to new or small architecture/engineering firms for their administrative and overhead costs.
  • Washington's proposal to use a narrative cost allocation methodology to streamline the reimbursement of Federal-aid funds spent to improve the stewardship of LPA programs.

Several concepts above are achievable under existing authorities, and others will require a tool (Test and Evaluation Program TE-045) employed in the mid-1990s to waive existing policy or regulation in order to test promising new approaches. OIPD will be contacting each Division Office directly to discuss the design and schedule of the initiative, the details of which may differ from those in the original submission. In addition, we will be contacting all the Divisions that submitted proposals to explore alternate approaches to achieve their objectives.

OIPD would like to thank all the Divisions and State DOTs for their participation in this solicitation. We look forward to collaborating further and showcasing innovations that promise to improve our financial management of the Federal-aid Highway Program.

For more information contact:

Mark Sullivan
202.366.5785
mark.sullivan@dot.gov

Projects

California Department of Transportation

Application: Download PDF [1.73 MB]

Approval Memo: web | Download PDF [200 kb]

Vermont Agency of Transportation

Application: Download PDF [651 mb]

Approval Memo: web | Download PDF [252 kb]

Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000
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