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DEPARTMENT OF TRANSPORTATION CFDA 20.106 AIRPORT IMPROVEMENT PROGRAM I. PROGRAM OBJECTIVES The objective of the Airport Improvement Program is to assist sponsors, owners, or operators of public-use airports in the development of a nationwide system of airports adequate to meet the needs of civil aeronautics. II. PROGRAM PROCEDURES States, counties, municipalities, U.S. Territories and possessions, and other public agencies, including Indian tribes or Pueblos (sponsors) are eligible for airport development grants if the airport on which the development is required is listed in the National Plan of Integrated Airport Systems (NPIAS). Applications for grants must be submitted to the nearest Federal Aviation Administration (FAA) Airports Field Office. Primary airport sponsors must notify FAA by January 31 or another date specified in the Federal Register of their intent to apply for funds which they are entitled to under Public Law 97-248 (49 USC Chapter 31). A reminder is published annually in the Federal Register. Other sponsors are encouraged to submit early in the fiscal year and to contact the appropriate FAA Airports Field Officer for any local deadlines. Sponsors must formally accept grant offers no later than September 30 for grant funds appropriated for that fiscal year. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements. A. Activities Allowed or Unallowed Grants can be made for planning, constructing, improving, or repairing a public-use airport or portion thereof and for safety or security equipment. Eligible terminal building development is limited to nonrevenue-producing public-use areas that are directly related to the movement of passengers and baggage in air carrier and commuter service terminal facilities within the boundaries of the airport. Eligible construction is limited to items of work and for the quantities listed in the grant description and/or special conditions. In general, Federal funds cannot be expended for: - Passenger automobile parking facilities, buildings to be used as hangars, and portions of terminals that are revenue-producing or not directly related to the safe movement of passengers and baggage at the airports, and - Costs incurred before execution of the grant, unless such costs are for land, necessary costs in formulating a project, or costs covered by a letter of intent. The following are examples of items for which FAA funds cannot be expended: - Fuel farms. - Emergency planning. - Decorative landscaping, sculpture, or art works. - Communication systems, except those used for safety/security. - Training facilities, except those included in an otherwise eligible project as an integral part of that project and that are of a relatively minor or incidental cost, i.e., less than 10 percent of the project cost. An example of an exception would be a training room included as part of a new Aircraft Rescue and Firefighting (ARFF) facility. - Roads of whatever length, exclusively for the purpose of connecting public parking facilities to an access road. - Roads serving solely industrial or non-aviation-related areas or facilities. - General aviation terminals. - Airport surface detection systems (ASDE). - Maintenance/service facilities except for those allowed to service required ARFF equipment. - Office/administrative equipment, including data processing equipment, computers, recorders, etc. - Projects for the determination of latitude, longitude, and elevation except as an incidental part of master planning. Program guidance is provided in FAA Order 5100.38A, Airport Improvement Program Handbook, and FAA Advisory Circulars in the 150/5100 series. F. Equipment and Real Property Management Under this program, FAA is authorized by 49 USC 47107(c), as amended, to allow recipients to reinvest the proceeds from the sale of real property acquired with Federal awards for noise compatibility or airport development purposes. G. Matching, Level of Effort, Earmarking 1. Matching The share of allowable costs for a particular grant to be borne by FAA and other parties is established in the grant agreement. 2. Level of Effort - Not Applicable 3. Earmarking - Not Applicable L. Reporting 1. Financial Reporting a. SF-269, Financial Status Report - Applicable b. SF-270, Request for Advance or Reimbursement - Applicable c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Applicable d. SF-272, Federal Cash Transactions Report - Applicable e. FAA Form 5100-125, Operating and Financial Summary (OMB No. 2120-0557) Sponsors of commercial service airports are required to submit this report which reports revenues and expenditures at the airport, including revenue surplus. f. FAA Form 5100-126, Financial Government Payment Report (OMB No. 2120-0557) This reports amounts paid and services provided to other units of government. This reporting requirement technically applies to all sponsors of Federally assisted airports who accepted grants with assurance no. 26(d)(I)(ii), however, FAA is currently requiring submission only from commercial service airports. Commercial service airports are the airports most likely to generate excess revenue that could be diverted to non-airport uses. 2. Performance Reporting - Not Applicable 3. Special Reporting - Not Applicable N. Special Tests and Provisions 1. Revenue Diversion Compliance Requirement - The basic requirement for use of airport revenues is that all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities which are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. The limitation on the use of revenue generated by the airport shall not apply if the governing statutes controlling the owner's or operator's financing, that was in effect before September 3, 1982, provided for the use of any revenue from the airport to support not only the airport but also the airport owner's or operator's general debt obligations or other facilities (49 USC 47107(b)). Policies and Procedures Concerning the Generation and Use of Airport Revenue, issued February 16, 1999 (64 FR 7695), contains definitions of airport revenue and unlawful revenue diversion, provides examples of airport revenue and describes permitted and prohibited uses of airport revenue. The policy can be obtained from FAA's Airports Federal Register Notices Page on the Internet (http://www.faa.gov/arp/fedreg.htm). Penalties imposed for revenue diversion may be up to three times the amount of the revenues that are used in violation of the requirement (49 USC 4603(a)(5)). Audit Objective - Determine whether the airport revenues were used for required or permitted purposes. Suggested Audit Procedures a. Review the policy for using airport revenue. b. Perform tests of airport revenue generating activities (e.g., passenger facilities charges, leases, and telephone contracts) to ascertain that all airport generated revenue is accounted for. c. Test expenditures of airport revenue to verify that airport revenue is used for permitted purposes. d. Perform tests of transactions to ascertain that payments from airport revenues to the sponsors, related parties, or other governmental entities are airport-related, properly documented, and are commensurate to the services or products received by the airport. e. Perform tests to assure that indirect costs charged to the airport from the sponsor's cost allocation plan were allocated in accordance with the FAA policy on cost allocation. IV. OTHER INFORMATION The Federal Aviation Reauthorization Act of 1996, Section 805 (49 USC 47107(m)) requires public agencies that are subject to the Single Audit Act Amendments of 1996 (Act) that have received federal financial assistance for airports to include as part of their single audit a review and opinion of the public agency's funding activities with respect to their airport or local airport revenue system. In the February 16, 1999, Federal Register (64 FR 7675) the FAA issued a notice titled Policy and Procedures Concerning the Use of Airport Revenue. This notice provides that the opinion required by 49 USC 47107(m) is only required when the Airport Improvement Program (AIP) is audited as major program under Circular A-133 and that the auditor reporting requirements of Circular A-133 satisfy the opinion requirement. However, the notice provides that the AIP may be selected as a major program based upon either the risk-based approach prescribed in Circular A-133 '___ .520 or the FAA designating the AIP as a major program under '___ .215(c). DEPARTMENT OF TRANSPORTATION CFDA 20.205 HIGHWAY PLANNING AND CONSTRUCTION (Federal-Aid Highway Program) I. PROGRAM OBJECTIVES The objectives of the Highway Planning and Construction Program are to: (1) assist States in constructing and rehabilitating the National Highway System (NHS) including Interstate highways and building or improving other Federal-aid roads and streets; (2) provide aid for repairing the system, roads, and streets following disasters; (3) foster safe highway design; and, (4) replace or rehabilitate unsafe bridges. II. PROGRAM PROCEDURES Funds are provided to State Departments of Transportation (DOTs) to pay for a defined portion of the planning, research, and construction costs of approved projects. Funds can also be made available through State DOTs to Local Public Agencies (LPAs), such as cities, counties, tribal governments, Metropolitan Planning Organizations (MPOs), and other political subdivisions. Projects authorized under 23 USC 115, Advance Construction, must meet all Federal Highway Administration (FHWA) requirements in effect on the date of project authorization, even though no Federal funds may have been committed to the project. In some cases, projects may be administered by the State DOT under special rules procedures of 23 USC 106(c), under an agreement with the FHWA, which allows the State DOT to assume the responsibilities for design, plans, specifications, estimate, contract award, and inspections of projects. III. COMPLIANCE REQUIREMENTS In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements. A. Activities Allowed or Unallowed 1. Although State-owned lands may be used for highway purposes, Federal funds may not reimburse for more than the fair market value of the land required for highway purposes plus damages. This is computed as the lesser of either the sum of: the fair market value of the land required for highway purposes plus damages, or the sum of: (1) the fair market value of the State-owned land; (2) any additional cash payments made; and, (3) the cost of construction features to mitigate damages (23 CFR section 710.304). 2. Federal funds can be used only to reimburse costs that are: (1) incurred subsequent to the date of authorization to proceed; (2) in accordance with the conditions contained in the project agreement and the plans, specifications, and estimates (PS&E); (3) allocable to a specific project; and, (4) claimed for reimbursement subsequent to the date of the project agreement (23 CFR sections 1.9, 630.106, 630.205, and 630.303). 3. Federal funds can be used to reimburse for administrative settlement costs incurred in defending contract claim proceedings before arbitration boards or State courts only if approved by FHWA for Federal-aid projects. If special counsel is used, it must be recommended by the State Attorney or State DOT legal counsel and approved in advance by FHWA (23 CFR section 140.505). 4. Costs incurred by the State DOT or MPO for highway planning and research work are subject to a work program approved by FHWA (23 CFR section 420.111). 5. Payments for damages from right-of-way acquisitions for personal property, loss of business or goodwill, circuity of travel, diversion of traffic, and other items of damage not generally compensable in eminent domain are not eligible for Federal participation (23 CFR section 710.304(h)). 6. Federal funds may be used to reimburse for tuition and direct educational costs of continuing highway-related education of State DOT and LPA employees, but not for travel, subsistence, or salaries of students (23 CFR section 260.407). F. Equipment and Real Property Management The Federal share of proceeds from the sale of real property shall be used by the State for projects eligible under 23 USC. (23 USC 156). G. Matching, Level of Effort, Earmarking Requirements 1. Matching a. The State is generally required to pay a portion of the project costs. Portions vary according to the type of funds authorized and are stated in project agreements. b. A State's matching share for a project may be credited by the fair market value of donated private land incorporated in the project, and certain toll revenues used to build or improve highways, bridges and tunnels (23 USC 120 and 23 USC 323). c. Third party donations of funds, materials, and services may be used as a State's matching share on or after November 28, 1995. Donations must be made by the third party after the date the project is approved by FHWA and prior to approval of the final voucher (i.e., before the final request for payment). Donated materials and services must meet the eligibility requirements of the project. However, third party donations of services by units of local government cannot be credited against the non-Federal share of the project (23 USC 323). d. The fair value of land donated by State or local governments for highway purposes is eligible for matching share on a project. The fair market value shall not include any increase or decrease in value of donated land caused by the project. The fair market value of donated land shall be established as of the earlier of (1) the date on which the donation becomes effective or (2) the date on which equitable title to the land vests in the State (23 USC 323(b). e. For transportation enhancement projects, funds from Federal agencies (except U.S. DOT) may be used for the non-Federal share of the project. Funds appropriated to any Federal land management agency may be used to pay the non-Federal share of any Federal-aid highway project funded by section 104. Federal Lands Highway Program funds may be used to pay the non-Federal share of Federal-aid highway projects which provide access to or within Federal or Indian Lands (23 USC 120 (j) and 133(e)). 2. Level of Effort - Not Applicable 3. Earmarking - Not Applicable J. Program Income State and local governments may only use the Federal share of net income from the sale, use, or lease of property previously acquired with Federal funds if the income is used for projects eligible under 23 USC (23 USC 156). L. Reporting 1. Financial Reporting a. SF-269, Financial Status Report - Not Applicable b. SF-270, Request for Advance or Reimbursement - Not Applicable c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable d. SF-272, Federal Cash Transactions Report - Not Applicable e. PR-20, Voucher for Work Under Provisions of the Federal-Aid and Federal Highway Acts, as Amended (OMB No. 2125-0507) 2. Performance Reporting - Not Applicable 3. Special Reporting - Not Applicable N. Special Tests and Provisions 1. Use of Other State or Local Government Agencies Compliance Requirement - Other State or local government agencies may be used for acquiring rights-of-way and are reimbursed based on a written agreement (23 CFR section 710.203). Audit Objective - Determine whether other State or local government agencies acquire rights-of-way in accordance with their agreement with the State. Suggested Audit Procedures a. Examine records and ascertain if other agencies were used for acquiring rights-of-way on Federal-aid projects. b. Review a sample of right-of-way acquisition agreements with other agencies. c. Perform tests of selected payments to other agencies to verify that they comply with the written agreement. 2. Cooperative acquisition of rights-of-way Compliance Requirement - When funds are reimbursed for the acquisition of rights-of-way in coordination or cooperation with other Federal programs, the acquisition and cost-sharing responsibilities of State DOTs and the other agencies shall be set forth in an agreement (23 CFR section 710.304). Audit Objective - Determine whether rights-of-way acquired in coordination or cooperation with other Federal programs are accomplished in accordance with an agreement. Suggested Audit Procedures a. Ascertain through a review of the agreement if rights-of-way were acquired in coordination or cooperation with other Federal programs. b. Test the transaction records and verify that they comply with the agreement. 3. Replacement of publicly owned real property Compliance Requirement - Federal funds may be used to reimburse the reasonable costs for the functional replacement of publicly-owned real property, provided that FHWA concurs that it is in the public interest. The cost of increases in capacity and other betterments are not eligible except if: (1) necessary to replace a utility; (2) required by existing codes, laws, and zoning regulations; or (3) related to reasonable prevailing standards for the type of facility being replaced (23 CFR sections 712.604 and 712.605). Audit Objective - Determine whether the functional replacement of real property was accomplished within FHWA requirements. Suggested Audit Procedures a. Ascertain if there were any functional replacements of publicly-owned real property. b. Verify that FHWA concurred in paying the reasonable costs of the functional replacements. c. Review a sample of transactions involving replacement costs and verify that the costs charged to the Federal-aid project were consistent with the FHWA-approved agreement between all parties which sets forth how the costs of the facility are to be shared. 4. Project extensions Compliance Requirement - FHWA must approve extensions affecting project costs or the amount of liquidated damages, except those for projects administered by the State DOT under 23 USC 106(c) which allow the State DOT to assume the responsibilities for design, plans, specifications, estimates, contract awards and inspection of progress (23 USC 106(c); 23 CFR section 635.121). Audit Objective - Determine whether proper FHWA approvals were obtained for contract extensions affecting project costs and the amount of liquidated damages assessed. Suggested Audit Procedures a. Review the systems for monitoring and controlling contract time and review project files to determine if there were project extensions. b. Verify that FHWA approval was obtained for time extensions affecting project cost and, where applicable, the amount of liquidated damages assessed. 5. Sampling program Compliance Requirement - A State DOT or LPA must have a sampling and testing program for projects to ensure that materials and workmanship generally conform to approved plans and specifications (23 CFR section 637.205). Audit Objective - Determine whether the State is following a quality assurance program that meets FHWA's requirements. Suggested Audit Procedures a. Obtain an understanding of the recipient's sampling and testing program. b. Review documentation of test results on a sample basis to verify that the proper number of tests are being taken in accordance with the program. 6. Contractor recoveries Compliance Requirement - When a State recovers funds from highway contractors for project overcharges due to bid-rigging, fraud, or anti-trust violations or otherwise recovers compensatory damages, the Federal-aid project involved shall be credited with the Federal share of such recoveries (Tennessee v. Dole 749 F.2d 331 (6th Cir. 1984); 57 Comp. Gen. 577 (1978); 47 Comp. Gen. 309 (1967)). Audit Objective - Determine whether the proper credit was made to the Federal share of a project when recoveries of funds are made. Suggested Audit Procedures a. Determine the extent to which the State has recovered overcharges and other compensatory damages on Federal-aid projects through appropriate interviews and a review of legal, claim, and cash receipt records. b. Review a sample of cash receipts and verify that appropriate credit is reflected in billings to the Federal Government. 7. Project Approvals Compliance Requirement - Construction projects administered under standard procedures cannot be advertised nor force account work commenced until FHWA: (1) approves the plans, specifications, and estimates; and, (2) authorizes the State DOT to advertise for bids or approves the force account work. Construction cannot begin until after FHWA concurs in the contract award (23 CFR sections 630.205, 635.112, 635.204, and 635.309). This requirement does not apply to construction projects administered by the State DOT under 23 USC 106(c) which allow the State DOT to assume the responsibilities for design, plans, specifications, estimates, contract awards and inspection of progress (23 USC 106(c); 23 CFR section 640.113). Audit Objective - Determine whether project activities are started with required Federal approvals. Suggested Audit Procedures a. Review a sample of projects and identify dates of the necessary approvals, authorizations, and concurrences. b. Identify dates that projects were advertised and contract or force account work was initiated and compare to FHWA's approval dates. DEPARTMENT OF TRANSPORTATION CFDA 20.500 FEDERAL TRANSIT CAPITAL IMPROVEMENT GRANTS CFDA 20.507 FEDERAL TRANSIT CAPITAL AND OPERATING ASSISTANCE FORMULA GRANTS I. PROGRAM OBJECTIVES The objective of the Capital Improvements Grants Program (49 USC 5307) and the Capital and Operating Assistance Formula Grants Program (49 USC 5309) is to assist in financing the planning, acquisition, construction, preventative maintenance and improvement of facilities and equipment in mass transportation services. Operating expenses are also eligible in urbanized areas with populations of less than 200,000. II. PROGRAM PROCEDURES Grants are awarded to public agencies on approval of applications for specific programs or projects submitted to the Federal Transit Administration (FTA). Progress is monitored by FTA through on-site inspections, telephone contacts, correspondence, and quarterly progress and financial status reports. FTA provides funds based on a project's progress. FTA is required to perform reviews and evaluations of 49 USC 5307 grant activities at least every 3 years. FTA Order 9010.1B, "Triennial Reviews," dated April 5, 1993, provides guidance to FTA staff and recipients on the conduct of triennial reviews. These reviews are conducted with specific reference to compliance with statutory and administrative requirements and consistency of actual program activities with (1) the approved program of projects, and (2) the planning process required under 49 USC 5303. III. COMPLIANCE REQUIREMENTS A. Activities Allowed or Unallowed The activities allowed are specified in the grant agreement. F. Equipment and Real Property Management Any disposition of equipment before the end of its useful life is subject to prior FTA concurrence in the method of disposition. Unless otherwise determined in writing by FTA, the fair market value for rolling stock removed from service before the end of its useful life is the FTA share of the unamortized value of the remaining service life, based on straight line depreciation of the original purchase price, based upon the date the equipment was removed from revenue service rather than the date of disposal. FTA standards for the useful life of vehicles are contained in FTA Circular 9030.1C, Urbanized Area Formula Program: Grant Application Instructions, Chapter V, Paragraph 9, Buses; and FTA Circular 9300.1A, Capital Program: Grant Application Instructions, Chapter III, Paragraph 8, Requirements Related to Bus Purchases. These circulars are available on the FTA National Transit Library page on the Internet (http://www.fta.dot.gov/ntl/index.html). Recipients, with FTA approval, are allowed to sell, transfer or lease property, equipment, or supplies acquired with federal transit funds that is no longer needed for transit purposes. The proceeds must be used to reduce the gross project costs of another federally funded capital transit project (49 USC 5334(g)(4) and 49 CFR section 18.32). I. Procurement and Suspension and Debarment 1. Buy America All procurements for all steel, iron, and manufactured products in excess of $100,000 require, as a condition of responsiveness, a Buy America certificate, documentation of general waiver, per Appendix A to 49 CFR section 661.7, or documentation of specific waiver. A manufactured product is domestic if all of the manufacturing processes for the product took place in the United States and if all items or material used in the product are of United States origin. Four types of waivers that must be obtained through a request to the FTA are if: (a) the materials and products are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; (b) inclusion of domestic material will increase the overall project contract by more than 25 percent; (c) FTA finds that the application of the Buy America requirements is not in the public interest (except for those items already listed in 49 CFR section 661.7, Appendix A) (Buses and other rolling stock (including train control, communication, and traction power equipment) are exempted from the Buy America requirements if the cost of their components produced in the United States is more than 60 percent of all their components and final assembly takes place in the United States); or (d) the procurement of buses or other rolling stock fails to meet the component and final assembly test as required in 49 CFR section 661.11 (49 CFR part 661). A recipient which makes purchases of rolling stock for transportation of fare-paying passengers, must conduct or will cause to be conducted a pre-award audit before entering a formal contract for the purchase of rolling stock, and that a post-delivery audit is complete before title to the rolling stock is transferred. Pre-award and post-delivery audits verify the accuracy of the Buy America certification, purchaser's requirements certification, and certification of compliance with or inapplicability of Federal motor vehicles safety standards (49 CFR part 663). 2. Disadvantaged Business Enterprises (DBE) Recipients shall require that each transit vehicle manufacturer, as a condition to bid on transit vehicle procurement in which FTA funds are involved, certify that it has an overall DBE goal approved by the FTA Administrator or that it has submitted an overall DBE goal and it has not been disapproved by the FTA Administrator (49 CFR section 23.67). 3. Procurement of Vehicles and Facilities In prohibiting discrimination in the provision of transportation services against persons with disabilities, the Americans with Disabilities Act of 1990 (ADA) requires that vehicles purchased or leased after August 25, 1990, and new and altered facilities designed and constructed (as marked by the notice to proceed) after January 25, 1992, must comply with the appropriate standards in 49 CFR parts 37 and 38 (42 USC 12101-12213). L. Reporting 1. Financial Reporting a. SF-269, Financial Status Report - Applicable b. SF-270, Request for Advance or Reimbursement - Applicable c. SF-271, Outlay Report and Request for Reimbursement for Construction d. SF-272, Federal Cash Transactions Report - Not Applicable 2. Performance Reporting - Not Applicable 3. Special Reporting Report of DBE Awards and Commitments (OMB No. 2105-0510) - Based on the level of FTA funding, exclusive of transit vehicle purchases, recipients are required to implement a DBE program. To monitor the progress of the DBE program, the recipient is required to submit quarterly reports based on a recordkeeping system (49 CFR section 23.49). N. Special Tests and Provisions 1. Environmental Review Compliance Requirement - The National Environmental Policy Act (NEPA) (42 USC 4321 et seq.) and the FTA implementing rule (23 CFR part 771) require that the environmental effects of proposed mass transportation projects be documented and that environmental protection be considered before a decision is made to proceed with a project. Additionally, if there is no feasible or prudent alternative to avoid the effects, all reasonable steps must be taken to minimize adverse environmental effects, in accordance with Section 4(f) of the Department of Transportation Act of 1966, as amended. It is the policy of FTA that, among other matters, measures necessary to mitigate adverse impacts be incorporated into any proposed transportation improvement (49 USC 303). Environmental mitigation measures are described in NEPA environmental documents, when required. For projects requiring an Environmental Impact Statement (EIS), mitigation measures are summarized in a Record of Decision. For projects requiring an Environmental Assessment, mitigation measures are summarized in a Finding of No Significant Impact (FONSI). For categorically excluded projects, any mitigation measures will be documented in the FTA approval memorandum for the project. In all cases, environmental mitigation measures should be referenced in the construction grant agreement with the recipient (23 CFR part 771). Audit Objective - Determine whether environmental mitigation measures associated with FTA assisted construction were implemented as referenced in the construction grant agreement. Suggested Audit Procedures a. Identify any FTA assistance provided for construction and review copies of the grant agreement and EIS or FONSI to identify mitigation measures specified. b. For sample of mitigation measures, compare the status of implementation with the commitments made in the environmental documents or grant agreement. 2. Charter Service Compliance Requirement - Recipients must execute a one-time agreement with FTA which provides that neither the recipient nor any of its subrecipients will provide charter service that uses equipment or facilities acquired with FTA funds, unless there are no willing and able private charter service operators or one or more of the exceptions listed in 49 CFR part 604 are met and the charter service is incidental to the provision of mass transportation. Charter service is defined as transportation, using buses or vans (funded in whole or in part by FTA), of a group of persons pursuant to a common purpose, under a single contract at a fixed charge for the vehicle or service, which has acquired the exclusive use of the vehicle or service to travel together under an itinerary either specified in advance or modified after leaving the place of origin. This definition includes the incidental use of FTA-funded equipment for the exclusive transportation of school students, personnel and equipment, and the housing of charter vehicles in FTA-funded facilities. Incidental charter service is defined as service which does not: (a) interfere with or detract from the provision of the mass transportation service for which the facilities or equipment were funded under the Act; or (b) does not shorten the mass transportation life of the equipment or facilities (49 CFR part 604). Audit Objective - Determine whether the use in charter service of equipment and facilities acquired with FTA funds conformed to 49 CFR part 604. Suggested Audit Procedures a. Ascertain if the recipient provides charter service with FTA-funded equipment by obtaining written representation from recipient, and reviewing revenue accounts for indications of charter bus revenue statements. b. Review the recipient's policies and procedures for charter, rental, or lease of its transit equipment. c. Test transactions which meet the definition of charter service and ascertain if: (1) FTA-assisted equipment or facilities (e.g., parking lots and maintenance garages) were used; (2) Documentation was available evidencing the absence of a willing and able private operator or an exception provided in 49 CFR part 604; (3) Documentation was available evidencing a charter fee that recovers the entire operating and capital costs of equipment used; and (4) Inventory records were adjusted to extend the useful life of the FTA subsidized transit equipment by the amount of charter service. 3. School Bus Operation Compliance Requirement - The recipient, as a condition of eligibility, must enter into an agreement with the FTA Administrator stating that the recipient will not engage in school bus operations exclusively for the transportation of students and school personnel in competition with private school bus operators unless it demonstrates to the FTA Administrator any one of the exceptions listed in 49 CFR section 605.11 and the Administrator concurs. However, all recipients can operate "Tripper Service" defined as mass transportation service, open to the public, and designed or modified to accommodate the needs of school students and personnel, using various fare collections or subsidy systems. Buses used in "Tripper Service" are required to be clearly marked as open to the public and should not carry designations such as "school bus" or "school special" (49 CFR part 605). Audit Objective - Determine whether school bus service provided with FTA funded equipment was approved by FTA or that FTA-assisted equipment and facilities used to accommodate students conformed to the definition of "Tripper Service." DEPARTMENT OF TRANSPORTATION 20.600 STATE AND COMMUNITY HIGHWAY SAFETY 20.601 ALCOHOL TRAFFIC SAFETY AND DRUNK DRIVING PREVENTION INCENTIVE GRANTS I. PROGRAM OBJECTIVES The objective of the State and Community Highway Safety Program is to provide a coordinated national highway safety program to reduce traffic accidents, deaths, injuries, and property damage. II. PROGRAM PROCEDURES Funds are provided to the States, following submission of their highway safety plans, in accordance with a predefined formula. Each State distributes at least 40 percent of the funds to political subdivisions of the State, to be expended on local projects. III. COMPLIANCE REQUIREMENTS A. Activities Allowed or Unallowed Funds must be expended as specified in the grantee's highway safety plan. Certain specific costs which will not be approved or that require prior approval have been identified in Highway Safety Grant Funding Policy for NHTSA/FHWA Field-Administered Grants and are listed below (23 CFR section 1200.20). 1. The following costs are allowable or allowable with specific conditions: a. Equipment - Major equipment (tangible, nonexpendable, personal property having a useful life of more than one year and an acquisition cost of $5000 or more per unit) purchases for new and replacement equipment must be pre-approved. b. Installation - The purchase and installation of regulatory and warning signs and supports and field reference markers are allowable for roads off the Federal aid system. c. Travel - Travel for out-of-state individuals benefiting the host State's highway safety program is allowable. d. Training - The cost of training personnel and the development of new training curricula and materials is allowable. However, training costs for Federal employees, with the exception of Department of the Interior personnel assigned Section 402 responsibility, are unallowable. e. Program Administration - The costs for consultant services, promotional activities, alcoholic beverages to support police "sting" operations, and meetings and conferences are allowable. 2. The following costs are unallowable: a. Facilities and Construction: highway construction, maintenance or design, construction or reconstruction of permanent facilities, highway safety appurtenances, office furnishings and fixtures, and land. b. Equipment: truck scales, traffic signal preemption systems. c. Training: individual's salary, and training employees of Federal agencies, excepted as noted above. d. Public Communications: advertising space. e. Program Administration: research costs, expenses to defray activities of Federal agencies, and commercial drivers' compliance requirements. G. Matching, Level of Effort, Earmarking 1. Matching a. The State shall pay at least 20 percent, or the applicable sliding scale rate, as stated in the grant award, of the total cost of the program. The State shall pay at least 50 percent of the costs for planning and administration (23 CFR section 1252.4; 23 USC 120(b), 402(d), and 406(c)). b. The Highway Safety Act requires that those States that qualify for special incentive programs under Section 410 (CFDA 20.601) must match Federal funds at 25 percent the first year, 50 percent the second year, and 75 percent the third year (23 USC 408 and 410). c. Additional matching requirements may be specified in the grantee's highway safety plan to limit the maximum Federal share of an ambulance, helicopter, or aircraft to 25 percent. 2. Level of Effort - Not Applicable 3. Earmarking a. At least 40 percent of Federal funds apportioned to a State for any fiscal year shall be expended by or for the political subdivisions of the State in carrying out local highway safety programs (23 CFR section 1250, 23 USC 402(b)(1)(C)). b. The costs for planning and administration shall not exceed 10 percent of the funds received by the State (23 CFR section 1252.4). L. Reporting 1. Financial Reporting a. SF-269, Financial Status Report - Not Applicable b. SF-270, Request for Advance or Reimbursement - Not Applicable c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable d. SF-272, Federal Cash Transactions Report - Not Applicable e. HS-217, Highway Safety Plan Cost Summary (OMB No. 2127-0003) f. Federal-Aid Reimbursement Voucher (OMB No. 2127-0003) 2. Performance Reporting - Not Applicable 3. Special Reporting - Not Applicable
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