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 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
1. Allowability of Specific Transactions and Activities
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.
2. Allowability of Activities for Subrecipients - Not Applicable
F. Equipment and Real Property Management
Under this program, FAA is authorized by sections 511(a)(13) and (14) of the Airport and Airway
Improvement Act (AAIA) of 1982 (49 USC 2210(a)(13)-(14)), 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.
2.1 Level of Effort - Maintenance of Effort - Not Applicable
2.2 Level of Effort - Supplement Not Supplant - 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 Transaction Report - Applicable
2. Performance Reporting - Not Applicable
3. Special Reporting - Not Applicable
N. Special Tests and Provisions
1. Revenue Diversion
Compliance Requirement - Section 511(a)(12) of the AAIA (42 USC 2210(a)(12)), requires
that all revenues generated by a public airport 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. This section also provides that 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. Program guidance is provided in FAA
Order 5190.6A, Airport Compliance Requirements, chapter 4, section 5.
Audit Objective - Determine whether the airport owner or operator accounted for all revenue
and expenditures in compliance with the provisions of Section 511(a)(12) of the AAIA (49 USC
2210(a)(12)).
Suggested Audit Procedures
a. Review the policy for using airport revenue.
b. Test revenue use transactions (e.g., analysis of airport fund transfers, loans from the fund,
interest payments to and from the fund, and expenditures) to verify that airport revenue is used
for the capital or operating cost of the airport, or for the excepted costs specified in section
511(a)(12) of the AAIA (49 USC 2210(a)(12)).
c. Perform tests of airport revenue generating activities (e.g., leases, telephone contracts, etc.) to
ascertain that all airport generated revenue is accounted for.
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. It is normal and permissible for
municipal airport sponsors to use the services of its other municipal departments to obtain support
services for the airport. However, the auditor should inquire as to whether the sponsor, other
governmental entities, or related parties may receive airport-generated revenue without providing
commensurate services or products to the airport.
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 highway agencies (SHAs) to pay for a defined portion of the
planning, research, and construction costs of approved projects. Funds can also be made available
through SHAs to local public agencies (LPAs), such as cities, counties, tribal governments,
metropolitan planning organizations (MPOs), and other political subdivisions. In some cases,
projects may be administered by the SHA under certification acceptance (CA) procedures or
special rules procedures of 23 USC 117 or 106(c), respectively, approved by the Federal Highway
Administration (FHWA).
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. Allowability of Specific Transactions and Activities
a. Although State-owned lands may be exchanged for lands required 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).
b. 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, 630.114, 630.205, 630.303, and 630.304).
c. Administrative and overhead costs that are considered necessary for the management,
supervision, and administrative control of a suitably equipped, staffed and operational State
Highway Agency are unallowable, except that those costs incurred for salaries and wages of the
administrative organization of the highway planning, research, and development units may be
eligible in the ratio of the time spent on federally-funded work to the unit's working hours as a
whole (23 CFR sections 1.11, 140.705, and 140.713).
d. 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 SHA legal counsel and approved in advance by FHWA (23 CFR section 140.505).
e. Costs incurred by the SHA or MPO for highway planning and research work are subject to a
work program approved by FHWA (23 CFR section 420.109).
f. 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)).
g. Bond projects authorized prior to November 28, 1995, under 23 USC 115, Advance
Construction, and under Section 122, Payment to States for Bond Retirement, are subject to the
requirements in effect on the date of project authorization. Bond related costs are an eligible cost
of construction on projects, including Intermodal Surface Transportation Efficiency Act (ISTEA)
demonstration projects, which were authorized by FHWA on or after November 28, 1995 (23
USC 122).
h. Expenditures for highway maintenance are not eligible ( 23 USC 116), except for Interstate
Maintenance Program and Preventive Maintenance (23 USC 119) (23 CFR section 1.27).
i. Federal funds may be used to reimburse for tuition and direct educational costs of continuing
highway-related education of SHA and LPA employees, but not for travel, subsistence, or salaries
of students (23 CFR section 260.407).
j. Payroll and related expenses are reimbursable for project employees while attending training
courses which directly benefit Federal-aid highway projects. These training costs may be charged
to Federal-aid projects as a miscellaneous function (23 CFR part 140(g)).
2. Allowable Activities for Subrecipients - Not Applicable
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 (23 USC 323).
2.1 Level of Effort - Maintenance of Effort - Not Applicable
2.2 Level of Effort - Supplement Not Supplant - Not Applicable
3. Earmarking
Items included in estimates (obligations) for construction engineering for a State, for a Federal
fiscal year, shall not exceed, in the aggregate, 15 percent of the total estimated costs (obligations)
of all projects financed with Federal-aid highway funds in that fiscal year, after excluding from
such total estimated costs, the estimated costs of right-of-way, preliminary engineering, and
construction engineering costs (23 USC 106(c)).
J. Program Income
The Federal share of net income from airspace rights-of-way obtained by the States for sales,
uses, or leases shall be used by the State for projects eligible under 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 Transaction 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)
f. FHWA-1447, Voucher for Payment Under Certification Acceptance (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 SHA 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 is 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 under certification
acceptance (CA) or special rule procedures (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 SHA or LPA must have a sampling and testing program for
projects on the NHS 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.
c. For failed materials, verify that there was a price adjustment based on an engineering analysis
by the SHA.
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 SHA 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). Construction projects administered
under certification acceptance (CA) or special rule procedures require only FHWA authorization
to proceed (23 USC 106; 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.