State Infrastructure Banks (SIBs)

Project Eligibility and Compliance with Relevant Requirements

The Division Office in each State with a SIB pilot program carries out certain stewardship and oversight functions related to the SIB pilot programs to ensure the State is complying with the statutorily required cooperative agreement and the policies and procedures relating to the SIB pilot program. It is considered a best practice to address any material changes to a SIB pilot program via an addendum to the cooperative agreement jointly approved by the FHWA Division Office and the State. Provided below is a summary of stewardship and oversight practices for NHS Act SIB pilot programs and TEA-21 SIB pilot programs.

Compliance Requirement

Section 350 of the NHS Act requires all projects receiving assistance from an NHS Act SIB pilot program to comply with the Federal requirements that apply to projects under title 23 or title 49 (as appropriate) when the assistance is derived from: (1) the Federal funds deposited into the SIB; (2) the non-Federal matching funds; (3) all repayment amounts from Federal sources; and (4) any investment income generated from these funds. Under Section 350, repayments to an NHS Act SIB pilot program not derived from Federal funds may be treated as State funds. Projects receiving assistance from non-Federal repayments must be eligible for assistance under title 23 or title 49 but may be administered as State or local funded projects. Such projects are not subject to Federal requirements.

Section 1511 of TEA-21 requires all projects receiving assistance from a TEA-21 SIB pilot program Federal account to comply with the Federal requirements that apply to projects under title 23 or title 49 as appropriate. Therefore, Federal requirements apply to all rounds of lending by a TEA-21 SIB. States will sometimes create separate SIB accounts wholly funded with State monies. These accounts are not subject to Federal requirements.

Receipt and Review of Annual Report

In accordance with the SIB Guidance, each SIB pilot program submits an Annual Report to the FHWA Division Office no later than 90 days after the end of each Federal fiscal year. This report provides a history of the SIB activity as well as a more detailed update regarding the activity of the immediately preceding year. To aid in the conformity of these annual reports, the Center for Innovative Finance Support has prepared an electronic spreadsheet that States may use as an alternative and streamlined means of satisfying the annual reporting requirement. The Annual Report should be reviewed by the Division Office before being submitted to the Center for Innovative Finance Support.

Review of SIB Pilot Program Compliance with Federal Requirements

The FHWA Division Office oversight of a SIB pilot program includes a variety of items related to Federal regulations and requirements. Additional detail on the SIB pilot program requirements can be found in the SIB Guidance, Section 350 of the NHS Act, and Section 1511 of TEA-21. The FHWA Division Office should monitor compliance with the following requirements of Section 350 of the NHS Act and Section 1511 of TEA-21 as a best practice:

• Use of appropriate fiscal controls and accounting procedures. Each SIB pilot program is required to establish fiscal controls and accounting procedures sufficient to ensure proper accounting for payments received and disbursements made through the SIB, and to provide SIB fund balances at the beginning and end of the accounting period. The SIB is subject to the single audit requirements established by the Office of Management and Budget Circular A-133.
• Proper investment of SIB fund balances and reinvestment of interest on SIB fund balances to the account in which it was earned. Funds held in SIB accounts are invested in U.S. Treasury securities or other financing instruments that the State currently uses for its own funds to earn interest. If a State chooses to use an investment instrument that it does not currently use for its own State funds, the State seeks approval from FHWA. The interest earned on funds deposited into the SIB is credited to the account in which it was earned.
• Proper records retention. The State retains project files relating to the SIB pilot program until all financial assistance has been repaid and necessary audits have been performed. Retention and disposition of SIB files is in accordance with State laws unless such period for retention conflicts with the requirement above or the three-year minimum requirement of 49 CFR 18.42 (Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments), in which event the longer period of retention will apply.
• Allowable levels of administrative cost expenditure. A State may expend no more than 2 percent of the Federal funds contributed to capitalize the SIB to pay the reasonable costs of administering the bank. This limitation does not apply to non-Federal funds in the SIB.
• Maintenance of an investment grade rating for SIBs that issue debt to increase the pool of lendable funds (a "leveraged" SIB). A SIB that issues debt to increase its pool of lendable funds (a "leveraged" SIB) must maintain on a continuing basis an investment grade rating on its debt issuances and its ability to pay claims under credit enhancement programs of the bank. (see section 350(e) of the NHS Act; section 1511(f) of TEA-21)

If, at any time, FHWA or FTA, as applicable, determines that the State has not complied with the terms of its cooperative agreement, the requirements of the NHS Act or TEA-21, as applicable, or other Federal requirements, in accordance with existing guidance, the appropriate agency will notify the State of the non-compliance and request the State to take appropriate corrective action or submit a compliance plan to FHWA and FTA, as applicable, within 60 days.