OIG: Feds' oversight of Seattle transportation funds 'insufficient'

The U.S. Department of Transportation's current oversight of Seattle’s federal transportation funds management is insufficient, according to a new report from the USDOT Office of General Inspector (OIG).

Over the past few years, the OIG has received complaints on its fraud and safety hotline about federally funded Seattle Department of Transportation (SDOT) projects that are subject to USDOT oversight, OIG officials said in a press release.

Between fiscal years 2014 and 2019, the SDOT received $259.8 million in grants and cooperative agreements from the Federal Highway Administration (FHWA), Federal Railroad Administration and Federal Transit Administration, OIG officials said.

The report found weaknesses in the USDOT operating administrations’ oversight regarding the execution of change orders that lacked required approval signatures; approval of a $140 million project estimate and contingency amounts with limited support; the inability to track where and how federal funds were spent; and procedures to ensure that federal funds transferred from FHWA to FTA are used in a timely manner or put to better use, OIG officials said.

The report also found weaknesses related to the U.S. Office of the Secretary of Transportation’s and FRA’s oversight of a project’s cost estimates and contingency rates, which resulted in $21 million in lapsed funds that could be put to better use, OIG officials added.

The OIG identified another $10.7 million in questioned costs due to a lack of adequate supporting documentation; $3.6 million in transferred FHWA funds that remain unobligated more than six years after being transferred, resulting in the funds lapsing; and $3.8 million in transferred funds the FTA has not de-obligated that have been inactive since 2017.

The OIG made 14 recommendations to improve USDOT funds management and oversight of federal funds provided for SDOT projects. USDOT agreed to all but one recommendation — that the FHWA remove $21 million in lapsed funding from its unobligated balances — and instead provided an alternative from FHWA.

Two recommendations include directives that the FRA:

• incorporate change orders as a focus area in its annual review process; and
• develop and implement policy to evaluate whether to deobligate funds when there is a significant reduction in project costs before the project is completed.
  

Six recommendations include directives that the FTA:

• include a sample of SDOT’s change orders as part of FTA’s triennial reviews;
• conduct a review of the city of Seattle’s internal controls for supporting documentation of expenditures billed to federal awards;
• recover the $9.9 million in costs the OIG identified;
• notify Washington State DOT that the $3.6 million in lapsed funds have been credited to the state and are available for other eligible transit projects;
• review $3.8 million in inactive funds and determine whether they will be used; and
• implement procedures and related mechanisms to show when unobligated transferred funds are obligated and to what projects.