- Briefing Room
U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
FHWA Order 5020.2
|Stewardship and Oversight of Federal-Aid Projects Administered by Local Public Agencies (LPA)|
|Classification Code||Date||Office of Primary Interest|
|5020.2||August 14, 2014||HIPA-40|
What is the purpose of this FHWA Order?
The purpose of this Order is to:
Define the STAs’ roles and responsibilities for stewardship and oversight of LPA-administered Federal-aid projects (see paragraph 6. Definitions).
Establish a uniform methodology for assessing risk in the STAs’ stewardship and oversight of LPA-administered Federal-aid projects.
Establish a uniform methodology for ensuring compliance with Federal requirements of LPA-administered Federal-aid projects.
What is the scope of this Order?
This Order applies to FHWA’s stewardship and oversight of the STAs’ LPA stewardship and oversight program (see paragraph 6. Definitions).
What is the intended outcome of this Order?
The intended outcome of this Order is improved program integrity and compliance, and effective oversight by the STAs of LPA-administered Federal-aid projects. The FHWA can accomplish this outcome by implementing consistent procedures and criteria to help identify and mitigate risks (e.g., financial integrity and project delivery) associated with these projects.
What is the background of this Order?
Section 106(g) of Title 23, United States Code (U.S.C.), makes STAs responsible for determining that subrecipients of Federal-aid highway funds have adequate project delivery systems for Federal-aid projects and have sufficient accounting controls for proper management of such Federal funds. It also requires FHWA to periodically review STA monitoring of subrecipients (see paragraph 6. Definitions)
As the recipient of Federal-aid funds for the State, the STA is responsible for ensuring that Federal-aid funds are expended in accordance with applicable Federal laws and regulations. The STA is not relieved of this responsibility when it designates a city, county, township, municipality, or other political subdivision (e.g., State agency, LPA, metropolitan planning organization, university, or eligible non-profit entity) to administer Federal-aid funds for projects or a phase of a project.
What is the relationship between this Order and the Risk-Based Stewardship and Oversight (RBSO) and the Stewardship and Oversight (S&O) Agreement Implementation Guidance?
Stewardship and oversight of LPA-administered projects are part of FHWA’s RBSO approach. An LPA-administered project is simply an alternate means of project delivery when the State makes a subaward to the LPA. This Order is compatible with and builds on the guidance and direction provided in the "Risk Based Stewardship and Oversight Guidance" issued March 28, 2014. The RBSO guidance identifies the role of the STA in communicating, educating, and validating Federal requirements to LPAs in terms of programmatic requirements of the STAs’ stewardship and oversight of LPA-administered Federal-aid projects.
What is an LPA?
Local public agency means any city, county, township, municipality, or other political subdivision that may be empowered to cooperate with the STA in highway matters. [23 CFR 635.102]
What is a subrecipient?
Subrecipient means a non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency. [2 CFR 200.93]
What is an LPA-administered project?
An LPA-administered project is a Federal-aid project that the STA has formally agreed to allow an LPA to administer in whole or part, including but not limited to project phases such as design, right-of-way, and construction.
What is the LPA S&O program?
The LPA S&O program is the collective stewardship and oversight efforts of the FHWA, the STAs, and LPAs to ensure that LPA-administered projects comply with all applicable Federal-aid program requirements. These S&O efforts are described in S&O agreements between the FHWA division offices and the STAs.
What authorities govern this Order?
Authority: 23 U.S.C. 106(g) – Oversight Program. Section 106(g) provides that the Secretary shall establish an oversight program to monitor the effective and efficient use of funds authorized under Title 23, U.S.C., which shall be responsive to all areas relating to financial integrity and project delivery. The oversight program includes annual reviews that address elements of each STA’s project delivery system and periodic reviews of how the STA is monitoring subrecipients [23 U.S.C. 106(g)(3) and (4)(B)]. Section 106(g)(4) provides that States are responsible for determining that subrecipients of funds made available under Title 23, U.S.C., have adequate project delivery systems for projects approved under 23 U.S.C. 106 and have sufficient accounting controls to manage such Federal funds properly.
Who is responsible for assuring that Federal-aid projects administered by LPAs comply with applicable Federal requirements?
Under 23 U.S.C. 106(g), STAs are responsible for the delivery of Federal-aid projects for which they are the direct recipients, including any project for which the STA has made an agreement for an LPA-administered project. The STA is responsible for assuring that such projects receive adequate supervision and inspection to certify that the projects are completed in conformance with approved plans and specifications. [23 CFR 635.105(a)]
The STAs have broad flexibility in the kinds of stewardship and oversight strategies they select to ensure that LPAs comply with all applicable Federal statutory and regulatory requirements. The FHWA will encourage the use of practices that have proven to produce successful results.
The FHWA is responsible for stewardship and oversight of the Federal-aid highway program. The FHWA division offices ensure the STA is adequately monitoring LPA project administration activities, and that LPA-administered projects are in compliance with applicable Federal statutory and regulatory requirements.
What will be the approach to conducting the LPA S&O program assessments and how often will they be conducted?
This Order implements a two-phased approach to assessing an STA’s stewardship and oversight of LPA-administered Federal-aid projects. Phase 1 (Program Assessment) is to be conducted in Performance Year (PY) 2015, and Phase 2 (Project Compliance Determination) in PY 2016. (A PY is June 1 to May 31.) Thereafter, Program Assessment and Compliance Determination will be on a 3-year cycle. The third year will give division offices with Plans of Corrective Action (PCAs) additional time to address identified compliance concerns from Phase 1 and/or Phase 2 before the next round of the assessment cycle. The Phases are defined as follows:
Phase 1 – In this phase, FHWA will assess programs by using Attachment B, Parts 1, 2, and 3 to establish what project aspects LPAs are managing, the overall size of the STA’s LPA program, the S&O process in the STA, the "state-of-the-practice" in terms of context and attributes of the STA’s S&O effort, a compliance determination at the program level, and a collective assessment of overall potential risk in the STA’s S&O process.
Phase 2 – Once the program assessment phase is complete, the next effort will be to determine the overall level of compliance at the project level. This phase will include completing Compliance Assessment Program (CAP) reviews based on a corporate review guide for LPA-administered Federal-aid projects. The corporate review guide will be available at the beginning of PY 2016.
Development and implementation of PCAs and/or mitigation efforts resulting from compliance determinations at the program and/or project level will follow division office oversight procedures.
How will FHWA establish a consistent framework of procedures and criteria to assess the effectiveness of STAs in overseeing LPAs and ensuring they comply with applicable Federal requirements?
As noted in the prior paragraph (see paragraph 9),this Order implements a two-phased approach to assessing an STA’s stewardship and oversight of LPA-administered Federal-aid projects. To make this happen:
Each division office will conduct a program assessment in PY 2015 using the process outlined in Attachment A, "Overview of Toolkit for Conducting a Program Assessment on the Oversight of Local Public Agency (LPA) Administered Federal-Aid Projects." Division offices will assess the effectiveness of the STAs’ stewardship and oversight of LPA-administered projects and document their state-of-the-practice and degree of compliance at the program level.
In conducting these program assessments, the division offices are to use Attachment B, Part 1: "Overview Assessment of STA Oversight Framework for LPA-Administered Federal-Aid Projects (Context and Attributes);" Part 2: "Oversight Assessment of LPA-Administered Federal-Aid Projects – Program Compliance Overview;" and Part 3: "Division’s Conclusions." Each division office will determine if the STA’s established LPA policy and procedural guidance are adequate and are being followed, as well as the overall risk of the STA’s S&O LPA program.
The program assessment of STA organizational structure, processes, and procedures (Attachment B, Part 1) will enable the division office to:
1) Determine if the STA has an acceptable review and oversight plan that details required STA oversight activities that will be performed on LPA-administered projects;
2) Determine if the STA has suitable written agreements with LPAs, regarding roles and responsibilities;
3) Confirm that the STA has established an overall stewardship and oversight framework capable of fulfilling its responsibility to ensure LPAs have adequate project delivery systems and accounting controls.
The program assessment of the STA’s commitment to deliver a sufficient level of stewardship and oversight of LPA-administered Federal-aid highway projects (Attachment B, Part 2) will enable each division office to determine the adequacy of STA program operations in the context of project delivery and compliance with Federal requirements. Additionally, division offices will be able to:
1) Confirm that the STA has dedicated resources for appropriate oversight of LPA-administered projects;
2) Determine if the STA dedicates and maintains qualified staff, knowledgeable in Federal program requirements, to provide adequate oversight of LPA-administered projects;
3) Determine how the STA assesses the capability and knowledge of the LPA staff with regard to Federal program requirements and whether the STA provides training for LPA staff; and
4) Verify and document that the STA’s oversight efforts are providing the needed level of assurance that the LPA-administered projects are being implemented in compliance with all applicable Federal laws, regulations, and policies.
The conclusion to the program assessment (Attachment B, Part 3) will require division offices to determine the adequacy of project delivery and funds management along with the corresponding risk level of the STA’s LPA S&O Program.
Based on the program assessment results, division offices will work with STAs to develop and implement necessary PCAs.
The division offices will submit program assessment results to the Office of Program Administration’s Stewardship and Oversight Team (HIPA-40). The Stewardship and Oversight Team will assess the state-of-the-practice of the STAs’ stewardship and oversight of LPA-administered Federal-aid projects and the resulting potential risk at the corporate level based on the collective information provided in the division offices’ program assessments. Additional information to be submitted upon request includes:
To measure the effectiveness of STA stewardship and oversight activities for LPA-administered projects, division offices will conduct project-level compliance assessments beginning in PY 2016 through the use of a Corporate Review Guide for the LPA S&O Program under the CAP. This effort will supplement other division office LPA oversight activities that are conducted through CAP core and technical reviews, Projects of Division Interest (PoDI) reviews, and conventional program/process reviews. Collectively, these reviews will enable the division office to:
1) Provide reasonable, statistically based assurance that Federal-aid requirements are being met, and
2) Determine the strengths, weaknesses, opportunities, and threats in LPA program administration and oversight.
Division offices will require STAs to develop and complete PCAs to address any noncompliance issues at the program or collective project level (i.e., systemic project noncompliance issues). Divisions may develop additional action plans to address other issues identified during the program assessment, division risk assessment and/or corporate risk assessment. The PCAs activities are to be developed and tracked through each division’s unit performance planning process as established by the Integrated National Planning and Updating Tool (INPUT), including the use of the Review Response Tracker feature (see Attachment A).
What are the responsibilities of FHWA Headquarters?
Identify minimum expectations and requirements for STA oversight of LPA- administered Federal-aid projects;
Develop and maintain a program assessment tool that will identify the "state-of-the-practice" program level compliance at the national and State levels, as well as to serve as input to a consistently administered risk assessment process. It is noted that the parameters for conducting future assessments will be modified after the analysis of the baseline assessment results. The baseline data will identify areas of risk and their respective risk levels as well as potential for greater flexibility in conducting future assessments;
Provide guidance on division office reporting of LPA program assessment (i.e., timelines, reporting formats, etc.);
Compile, analyze, and provide nationwide assessment data to determine national trends and potential risks to the Federal-aid highway program;
Analyze the findings from the CAP-Corporate LPA program review to help determine if the STAs’ collective stewardship and oversight practices result in a nationally compliant program and use the information as input to the National Risk Assessment;
Develop and update LPA S&O program guidance as part of RBSO;
Promote improved and enhanced stewardship and oversight of the LPA program; and
Establish and maintain a Web site that will provide the most current information on the LPA program in each State.
Is other assistance and guidance available to carry out this Order?
Yes. The Order will be implemented within FHWA by using the additional guidance in the LPA Program Assessment Toolkit (or equivalent if superseded). The Toolkit (attached) clearly defines how FHWA division offices will complete the LPA S&O Program Assessment requirements in this Order. The Office of Program Administration is also available for assistance.
In addition, division offices will find guidance on the oversight of LPA-administered projects on the FHWA StaffNet at Infrastructure – Program Administration - Local Project Oversight.
Gregory G. Nadeau