We are pleased to provide updated guidance to help FHWA division offices implement key funds management principles. The attached guide summarizes current statutes, regulations, and policies for project funds management with a supplemental question and answer document. Also attached is a list of recommended documents that should be maintained by the grant recipient to support completed project payment.

The guide has been revised to address the implementation of the governmentwide uniform administrative requirements and cost principles (2 CFR 200), provide guidance on the use of period of performance in project agreements, clarify and correct the previous version of the guidance, and address issues identified from improper payment testing.

This guide applies most specifically to projects authorized in the Fiscal Management Information System (FMIS), including discretionary funded and congressionally designated (earmarked) projects. This guidance applies to FHWA's division offices' oversight of recipients of Federal funding (e.g., State departments of transportation) and associated subrecipients (e.g., local governments or other eligible subrecipients).

Although this guidance is not intended to cover all types of projects or situations - such as innovative financing or contracting methods, projects with other unique or experimental features, Federal Lands "Direct Federal" projects, or projects authorized through processes other than FMIS - this guidance can be used as a reference for ensuring proper processes are in place for these projects also.

The primary points of this guidance include:

• The project authorization must reflect the Federal funds needed based on an accurate cost estimate for the scope of work that is ready to proceed for an allowed purpose.
• An obligation is proper when supported by a documented binding agreement supporting the amount of Federal funds recorded to reflect the Federal Government's potential liability.
• A reasonable period of performance needs to be established in which the recipient is to incur eligible costs on the project.
• Projects must be monitored to ensure Federal funds and project agreement estimates reasonably align with current cost estimates and the performance schedule.
• Obligations should be adjusted and projects should be closed within a reasonable timeframe after all required work and applicable administrative actions (e.g., reporting and final billings) have been completed.
• The period of performance must be monitored to ensure cost are incurred during the authorized period and billed as provided in the regulations.
• Records must be properly retained by the recipient or subrecipient in accordance with the regulations.

Reducing improper payments is a multidisciplinary issue. Improper payments can be reduced if this guidance is used for project development, agreement, implementation, and funds management. Record retention, proper authorization including delegation of authority and segregation of duties, and proper obligation and billing with respect to Federal share are areas that should be reviewed to ensure appropriate processes are in place to meet applicable requirements.

This document is intended to be a guide on the implementation of applicable laws and regulations, which are referenced. This guidance may not be used to limit any flexibilities that may be permitted by those provisions but should be used as recommended practices to make efforts to ensure improper payments do not occur, projects do not become inactive, completed projects are closed promptly, and Federal provisions are followed in a more uniform approach.

Please direct questions to Tony DeSimone in the Office of Financial and Management Programs (HCFB-31) at 317-226-5307 or anthony.desimone@dot.gov.

Attachments

• Attachment1: Project Funds Management Guide for State Grants
• Attachment 2: Recommended Final Project Records Retention, By Phase
• Project Funds Management Guide for State Grants: Questions & Answers

Cc: Associate Administrators
Chief Counsel
Chief Innovation Officer
Director, Technical Services
Directors of Field Services
Federal Lands Highways Division Directors