U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590

Skip to content
Facebook iconYouTube iconTwitter iconFlickr iconLinkedInInstagram

Home / Resources / Legislation, Regulations and Guidance / Directives and Memorandum / Orders

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

Best for printing: 50202.pdf (3.67 MB)

To view PDF files, you can use the Acrobat® Reader®.

Order 5020.2 - Attachment A | B | C

Background Guidance on State Transportation Agency (STA) Oversight Roles and Responsibilities Relating to Local Public Agency (LPA) Administered Federal-Aid Projects


As the recipient (grantee) of Federal-aid funds for the State, the STA is responsible for ensuring that Federal-aid funds are expended in accordance with applicable laws and regulations. The STA is not relieved of this responsibility when the project development and implementation authority are passed to another State agency, LPA, metropolitan planning organization (MPO), university, or non-profit entity (where such entity is an eligible subrecipient under State law). The following information provides guidance in defining the roles and responsibilities of the STA in its stewardship and oversight of the LPA in administering Federal-aid projects consistent with current statutory and regulatory authority.

Statutory and Regulatory Authority*

As specified in 23 CFR 630.112(a), when an STA signs a project agreement, the STA "agrees to comply with the applicable terms and conditions set forth in Title 23, U.S.C., the regulations issued pursuant thereto, the policies and procedures promulgated by the FHWA relative to the designated project covered by the agreement, and all other applicable Federal laws and regulations." These laws and regulations affirm that the STAs are responsible for ensuring that LPAs are aware of all the applicable Federal-aid program requirements. These requirements are generally the same as those imposed on the STAs for their STA-administered Federal-aid projects. Further, STAs are responsible for monitoring and oversight to ensure LPA compliance with Federal requirements.

The FHWA is responsible for ensuring that the STAs meet their responsibilities by making certain that:

The laws and regulations related to oversight of LPA-administered projects include but are not limited to:

Stewardship and Oversight (S&O) Agreement

Federal law requires that the STA be responsible for the oversight of LPA-administered Federal-aid projects. Further, STA's are required to provide adequate oversight of subrecipients, including oversight of any STA responsibilities the STA permits to be carried out by an LPA. See the March 28, 2014 FHWA Stewardship and Oversight Agreement Implementation Guidance, particularly item IV. Program Oversight (23 U.S.C. 106(g)): Section 3. Projects for Which Responsibilities Are Assumed by the State DOT for Projects Locally Administered (State Assumed/Locally Administered. This portion of the S&O guidance addresses the role of the STA in communicating, educating, and validating the Federal requirements with LPAs in terms of various programmatic level requirements.

* The cost principles and requirements in 49 CFR Part 18 will be superseded by the implementation of 2 CFR 200 Subpart E by USDOT on or before December 26, 2014. The regulation 2 CFR 200–Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards took effect for all Federal agencies in December 2013. These new regulations have not significantly changed the regulations cited above, but note should be taken of any applicable revisions.

Specifically, 2 CFR 200.331–Requirements for pass-through entities, aims to create more transparency by requiring the direct recipient of the Federal funds (in FHWA's case, the STA) to identify elements in order to properly award a project and analyze the inherent risks in letting the LPA carry out Federal requirements. Essentially, agreements between the State and subrecipient need the same detail as agreements between FHWA and the State.

** Being superseded by 2 CFR 200.331, 2 CFR Subpart F – especially 2 CFR 503(b) and 521(c) (OMB Circular A-133 has been incorporated into 2 CFR 200 Subpart F, Audit requirements (referred to as the "Supercircular"), which will apply to audits of fiscal years beginning after December 26, 2014 (see 2 CFR 200.110(b)).

*** Being superseded by 2 CFR 200.501. (In 2 CFR 200, "auditee" is defined as any non-Federal entity that expends Federal awards that must be audited under Subpart F. 2 CFR 200 supersedes, consolidates and streamlines OMB Circular A-110 (see 78 FR 78590 (December 26, 2013)).

**** Being superseded by 2 CFR 200.86, 200.93 and 200.330 (Grantee and Sub grantee removed as definitions and replaced with recipient and subrecipient:

***** Being superseded by 2 CFR 200.331 and 200.92 (Term subgrant has been replaced with subaward.)

****** Being superseded by 2 CFR 200.331(d) (Parallel responsibility language for recipient in 23 U.S.C. 106(g).)

Page last modified on July 24, 2017
Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000