WASHINGTON — Between 3% and 8% of federal money earmarked for the highway system since 2010 has gone to waste on inactive projects, according to a new Government Accountability Office Report, which cites lax federal oversight and recommends a narrower role for the Federal Highway Administration.

The report is the result of a request by Rep. Peter DeFazio, D-Ore., a member of the House Transportation and Infrastructure Committee. He asked the GAO to examine how the FHWA’s partnership with state departments of transportation affects its oversight of the roughly $40 billion of federal funds sent to states to maintain and build roads and bridges. His request comes as the Senate transportation bill has proposed new standards that states would have to meet to receive federal funding.

The GAO report concludes that the relationship between the FHWA and the states is mostly beneficial. But it notes that the 52 nationwide FHWA division offices have often been hesitant to utilize their most powerful oversight techniques, such as withholding federal funding.

The report also shows that millions of dollars from the financially imperiled Highway Trust Fund continue to be sent to inactive projects despite an effort by the U.S. Department of Transportation over the past few years to curtail that problem.

“FHWA benefits from using recognized partnership practices to advance the federal-aid highway program and conduct program oversight — such as clear delineation of roles and responsibilities between FHWA and its state partners and formal and informal conflict resolution — that are recognized as leading practices,” the report says.

“FHWA’s partnership approach allows it to proactively identify issues before they become problems, achieve cost savings and gain states’ commitment to improve their processes.”

The report details how state DOTs have sometimes managed to work with the FHWA to slash project costs to a fraction of an original estimate, or to make a program eligible for federal funding after originally failing to meet U.S. standards.

Though the FHWA division offices have been required to conduct quarterly reviews of inactive road projects since 2008, about 3.4% of federal highway money was being funneled to such projects as of March. As recently as September 2008, that percentage was 8%, the report says.

Though FHWA division offices can de-obligate funds for such projects, the GAO reports that officials in three offices visited said they were hesitant to do so because it might damage their working relationships with state officials.

One office described the choice to de-obligate funds as “walking the tight rope,” according to the report.

“That’s been a perennial problem for over 20 years,” said Jack Basso, director of program finance and management at the American Association of State Highway and Transportation Officials, and a former chief financial officer at the FHWA.

Basso said the report is primarily positive, and that a variety of factors, such as disputes with contractors, can contribute to inactive projects remaining on the books.

The GAO report concludes that states should take more responsibility away from the federal government.

“Based on this review, there may be areas where national interests are less evident and where Congress may wish to consider narrowing FHWA’s responsibilities,” it says. “In fiscal year 2011, about 48% of federal aid funds were obligated for projects for which oversight could be assumed by the states.”

Basso said there has long been a push for FHWA to do less micromanagement, and that the agency has already done so to some extent over the years.

Additionally, state DOTs would have no problem picking up extra responsibility, he said. The report said that states are less likely than FHWA officials to view the relationship between them as a true partnership.

“We’d actually welcome that,” Basso said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.