AASHTO Journal - FHWA Identifies $3.5B Highway Funding Discrepancy

A $3.5 billion discrepancy that dates back at least 18 years between the accounting systems used by the Federal Highway Administration and the U.S. Department of Transportation could negatively affect federal highway contract authority provided by formula to the states.

[Above image by Jericho via Wikimedia Commons]

At issue is that FHWA tracks more comprehensive and detailed data including program and project level data used for paying invoices and reimbursements via an accounting system called the Financial Management Information System or FMIS, which shows an estimated $4.7 billion balance in contract authority authorized prior to the Infrastructure Investment and Jobs Act or IIJA, enacted in November 2021.

However, USDOT uses a different system called Delphi – which shows a $1.2 billion balance – to manage financial data at a higher aggregated level for all of its modal agencies, which include FHWA but also the Federal Aviation Administration, Federal Transit Administration, and Federal Railroad Administration, among others, and considers Delphi as its accounting “system-of-record.”

According to the FHWA, the discrepancy occurred during the changeover by USDOT to Delphi, sometime between fiscal years 2003 and 2005. FHWA and USDOT have been unable to find the root cause of the discrepancy, though they are reexamining FY 2004 through 2005 transactions over the next several months to reconfirm that finding. Their analysis will indicate what remedial actions are required.

As a temporary measure, FHWA informed state departments of transportation that it is rationing access to pre-IIJA contract authority to ensure they use no more than the $1.2 billion recorded in Delphi for project funding as the agency looks for ways to fully reconcile the two different balances in the coming months.

FHWA also noted that this is only a one-time accounting error – meaning it is not recurring or compounding in successive fiscal years.

However, of concern to state DOTs going forward is how this discrepancy is fixed – particularly if a rescission of federal funding from state DOT contract authority is imposed, for that would directly impact ongoing or planned infrastructure projects.

“State DOTs are greatly concerned about the $3.5 billion accounting discrepancy,” emphasized Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.

“State DOTs are working hard to improve quality of life for every community across the country through the IIJA, and any disruptions to the availability of federal highway funding could stall that progress,” he pointed out.

“AASHTO and its members are committed to working with USDOT officials to ensure that any potential solution to this accounting error does not have an adverse impact on the critical work being done by state DOTs across the country,” Tymon said.