Sneak Preview: FHWA Policy Aims To Enhance State Review Program

November 20, 2015 | By Jerry Ashworth | Post a Comment

xsass_bookshot(The following was excerpted from a recent article in the Single Audit Information Service). Officials with the Department of Transportation (DOT), Federal Highway Administration (FHWA) anticipate that internal policy updated in 2014 related to its Financial Integrity Review and Evaluation (FIRE) program will enable its division offices to more accurately monitor state use of FHWA funds and ensure the validity of reviews conducted by FHWA’s division offices.

Under the FIRE program, which FHWA launched in 2005, FHWA’s division offices assess states’ management of FHWA funds to determine if states have financial oversight deficiencies that would make them vulnerable to inactive obligations (i.e., funded projects that are stalled) or improper payments, and make recommendations for corrective actions. Division administrators certify the results of the reviews (called “financial management reviews”). The DOT Office of Inspector General (OIG) recently audited FIRE program reviews conducted by five FHWA division offices from October 2010 through September 2013 to determine if these reviews were effective and if division offices followed agency policy. The OIG concluded that certain program areas lacked adequate oversight and documentation.

In general, the OIG determined that the division offices it reviewed had complied with FIRE program policies and procedures. It even noted that the division offices exceeded the FIRE program requirements for evaluating improper payments by proactively conducting quarterly or even monthly reviews of billings submitted to FHWA for payment.

The OIG found that four of the five division offices did not apply updated criteria for defining materiality when conducting FIRE reviews, yet the division administrator still certified the reviews. These offices used FHWA’s 2007 policy on materiality for their reviews, which described a dollar threshold for materiality, rather than using FHWA’s 2008 policy (FHWA Order 4560.1B), which was in effect during the audit period.

Rather than using a materiality threshold, the 2008 policy defined an “instance of material nonconformance or materiality” as “a significant internal control system weakness producing such quantitative or qualitative impacts that an FHWA official is precluded from providing the needed reasonable assurance that the objective of Office of Management and Budget (OMB) Circular A-123 has been met.” In other words, an instance of material nonconformance was now viewed as a systemic deficiency in the design or operation of a program or a significant internal control weakness. Circular A-123 defines management’s responsibility for internal control in federal agencies, and provides guidance to improve the accountability and effectiveness of federal programs and operations by establishing, assessing, correcting and reporting on internal control.

(The full version of this story has now been made available to all for a limited time on Thompson’s Grants Compliance Expert site).


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