Report of Independent Auditor

INDEPENDENT AUDITOR'S REPORT

To the Inspector General of the Department of Transportation,
     Federal Highway Administrator,
     National Highway Traffic Safety Administrator,
     Federal Transit Administrator,
     Federal Railroad Administrator,
     Federal Motor Carrier Safety Administrator, and
     Director, Bureau of Transportation Statistics

In our audit of the financial statements of the Department of Transportation (DOT) Highway Trust Fund (HTF) for fiscal year (FY) 2004 we found:

• The HTF financial statements as of and for the year ended September 30, 2004 are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America;
  
• Four material weaknesses in internal control and one additional reportable condition;
  
• Four instances of noncompliance with laws and regulations;
  
• HTF Agencies did not substantially comply with the Federal Financial Management Improvement Act of 1996 (FFMIA);
  
• HTF Agencies made some progress on certain internal control and laws and regulations findings identified in the FY 2003 audit reports; however, several conditions continue to exist and, accordingly, continued improvement is needed; and
  
• Based on limited procedures performed on the required supplementary information (including Management's Discussion and Analysis) and other accompanying information, we found no material inconsistencies with the financial statements or nonconformance with Office of Management and Budget (OMB) guidance.

The following sections discuss in more detail these conclusions and the scope of our audit.

Opinion on Financial Statements (Reissued June 30, 2005)

Consideration of Internal Control

Compliance with Laws and Regulations

Systems Compliance with FFMIA Requirements

Status of Prior Year's Reportable Conditions

Consistency of Other Information

Objectives, Scope and Methodology