oversight

Highway Funding: The Federal Highway Administration's Funding Apportionment Model

Published by the Government Accountability Office on 1997-06-05.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to Congressional Committees




June 1997
                  HIGHWAY FUNDING
                  The Federal Highway
                  Administration’s
                  Funding
                  Apportionment Model




GAO/RCED-97-159
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-276879

      June 5, 1997

      The Honorable John H. Chafee
      Chairman
      The Honorable Max Baucus
      Ranking Minority Member
      Committee on Environment and Public Works
      United States Senate

      The Honorable Bud Shuster
      Chairman
      The Honorable James L. Oberstar
      Ranking Minority Member
      Committee on Transportation and Infrastructure
      House of Representatives

      The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA),
      which authorized $155 billion from 1992 through 1997 for surface
      transportation programs, is due for reauthorization in fiscal year 1997. As
      part of the reauthorization debate, a number of legislative proposals have
      been made to alter the existing formula by which federal-aid highway
      funds are apportioned to the states. The current formula determines the
      distribution of funds for 13 funding categories. These categories include
      eight individual programs and five separate mechanisms for increasing
      individual states’ funding in order to achieve certain goals for equity
      among the states.1 The formula has evolved over many decades as new
      programs and apportionment factors have been layered on top of existing
      rules. The result is a complex, multistep process in which calculations
      occur in a strict sequence, incorporating one or many apportionment
      factors.2

      Altering the existing formula will affect the distribution of highway funds
      among the states. Accurate estimates of the impacts of funding under the
      various proposals are imperative to support the Congress’s
      decision-making process. Therefore, the Federal Highway Administration
      (FHWA) has developed and is operating, through the use of a contractor, a
      new apportionment model to estimate the expected distribution of


      1
       Equity adjustments ensure a level of federal-aid highway funding to states beyond that provided by
      the states’ basic program apportionments and are intended to address concerns about such things as
      states’ share of highway user tax contributions or other considerations.
      2
       For more detail on the apportionment process, see Highway Funding: Alternatives for Distributing
      Federal Funds (GAO/RCED-96-6, Nov. 28, 1995).



      Page 1                                                       GAO/RCED-97-159 Highway Funding
                   B-276879




                   federal-aid funds under the proposals.3 Because of the importance of the
                   accuracy and reliability of these estimates, you asked us to validate the
                   model. We agreed with your offices to examine whether the model
                   matches the current highway funding formula and whether it is adaptable
                   to a variety of reauthorization proposals.


                   FHWA’s new apportionment model matches the highway funding formula
Results in Brief   contained in the governing legislation. The model captures the structure of
                   the overall apportionment process, accurately representing the
                   interrelationships among programs and equity categories and how each
                   builds on the other. The model is internally consistent to the extent that
                   the various parts of it work well together and that the operation of one
                   part does not adversely affect another part. Furthermore, the model is
                   adaptable to reflect the provisions of new highway funding proposals.
                   However, the model is complex because of the complexity of current law,
                   and this complexity does not lend itself well to the widespread use of the
                   model by staff not trained in its structure and programming language.
                   Furthermore, as with any model, the precision of its estimates will depend
                   on the accuracy of the data and subroutines that are used for alternative
                   legislative proposals.4 However, we found that the FHWA office responsible
                   for overseeing the model does not verify new input data, nor does it have
                   staff with the technical expertise to verify the accuracy of new subroutines
                   developed by the contractor.


                   Each fiscal year, FHWA apportions highway funds to the states on the basis
Background         of the governing laws—specifically, provisions of title 23 of the United
                   States Code and uncodified sections of both ISTEA and the National
                   Highway System Designation Act of 1995. During the reauthorization
                   process, the Congress reviews the continuing need for each highway
                   spending program and the appropriateness of the apportionment formula.
                   FHWA assists the Congress in its deliberations on the impact and equity of
                   alternative proposed formulas by estimating for each state the
                   apportionment that would flow from each of the alternatives. Producing
                   these estimates can be complex and time-consuming.



                   3
                    This new model is only used to estimate the apportionments that a state might receive if a particular
                   proposal were adopted. Once new legislation is signed into law, a separate model will be developed
                   that actually establishes the apportionments (and set-asides) required by the new legislation.
                   4
                    A subroutine is a sequence of computer instructions, written in the model’s programming language,
                   that actually does the apportionment calculations for a specific highway program.



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                        B-276879




                        To improve its responsiveness to the Congress and ensure the accuracy of
                        its estimates, FHWA contracted for the development of a general
                        apportionment model. FHWA’s contractor based the model on current law,
                        but the model must be adapted at each use to match the provisions of the
                        particular formula proposal. The new model was intended to improve on
                        the existing one that had been used for a number of years to make
                        apportionment estimates for policy decision-making. The new model
                        currently is being used to provide the information that the Congress needs
                        in reauthorizing surface transportation programs.


                        We found that the new model matches the provisions of current law. The
The Model Accurately    model captures the structure of the overall apportionment process,
Replicates the          accurately representing the interrelationships among programs and equity
Provisions of the       categories and how each builds on the other. Furthermore, the model is
                        internally consistent to the extent that the various parts of it work well
Current Formula         together and that the operation of one part does not adversely affect
                        another part.

                        FHWA told us that transportation interest groups, state departments of
                        transportation, and congressional staff have indicated that they would like
                        copies of the model for their own use and modification. However, current
                        law relating to highway apportionments is complex because of the number
                        of interrelated programs, apportionment calculations, and equity
                        adjustments. Estimating these apportionments requires a complex model,
                        which makes it difficult for anyone not very familiar with the model’s
                        structure, calculation processes, and programming language (Visual Basic)
                        to use or modify the model accurately. FHWA expressed concern that
                        different users could produce different apportionment estimates for the
                        same legislative proposal. These different estimates may not be easy to
                        reconcile without a detailed analysis of the model’s subroutines. We
                        believe that FHWA’s concern is valid in light of the complexity of the law
                        and model. Therefore, FHWA needs to maintain accountability for the model
                        to help ensure that the estimates used during reauthorization are
                        consistent.


                        Because the model is based on current law, it can be used to generate a
The Model Is            baseline forecast of future apportionments. Although this capability is a
Adaptable for New       necessary starting point, the primary purpose of the model is to estimate
Legislative Proposals   apportionments for prospective changes to current law. Therefore, the




                        Page 3                                        GAO/RCED-97-159 Highway Funding
                        B-276879




                        model must be readily adaptable and flexible enough to reflect the
                        provisions of a variety of proposed reauthorization bills.

                        To test this capability, we modified and added subroutines to the baseline
                        model to reflect the provisions of a specific proposed formula that was
                        under discussion at the time of our review. We found the model
                        well-suited to the task. As a result of our work, we have made some
                        suggestions directly to the designers of the model for technical changes
                        that may improve the model’s flexibility and FHWA’s ability to verify
                        modifications. The model’s designers agreed with our suggestions and
                        plan to make the changes.


                        As with any model, the precision of the model’s estimates depends on the
Inaccurate Data Could   accuracy of the input data that are entered into the model. The data must
Affect the Model’s      be accurate and based on correct weights. For instance, existing law
Precision               requires that 55 percent of the funds for the Interstate maintenance
                        program be apportioned on the basis of Interstate lane miles and that
                        45 percent be apportioned on the basis of vehicle miles traveled on the
                        Interstate. Once the type of data and weights are determined, each state’s
                        share of federal-aid highway funds must be calculated.

                        Individual FHWA offices, which are responsible for producing data used to
                        actually apportion federal highway funds, are required to certify that the
                        data are correct. The office within FHWA that oversees the model and its
                        contractor use this same information when it is applicable to alternative
                        model estimates. However, when a proposed formula requires data not
                        used for distributing federal highway funds, the new data do not receive a
                        similar level of scrutiny. Currently, there is no internal certification by
                        FHWA that such new data are accurate.


                        The precision of the model’s estimates also depends on the accuracy of the
                        modifications made to the model to match the various proposed formulas.
                        Every time new estimates are produced, there is a potential for
                        introducing undetected errors into the model. Therefore, for FHWA to have
                        confidence in the model’s modifications, there must be some method,
                        independent of the contractor, for ensuring that the subroutines
                        accurately reflect the proposed formula and that the structure of the
                        model remains internally consistent. While the office within FHWA that
                        oversees the model has staff that reviews the results of the model’s various
                        analyses, this office does not currently have staff that can verify the
                        accuracy of new subroutines.



                        Page 4                                        GAO/RCED-97-159 Highway Funding
                  B-276879




                  FHWA and its contractor have produced a model that incorporates the
Conclusions       current complexities of the highway apportionment process. Furthermore,
                  the model can be adapted with varying degrees of difficulty for new
                  proposals, depending on their complexity and level of divergence from
                  existing law. However, strong quality assurance measures are needed to
                  help ensure that reliable results are produced when changes to the input
                  data and the model are made to reflect new proposed formulas.
                  Maintaining accountability for the model within FHWA would help to ensure
                  that the estimates used during reauthorization are consistent.


                  To ensure the accuracy of the model’s estimates and to provide the
Recommendation    Congress with confidence in the model’s results, we recommend that the
                  Secretary of Transportation direct the Administrator, FHWA, to establish a
                  quality assurance process to ensure the integrity of any changes to the
                  model’s input data and validation of any changes to the model, including
                  new subroutines developed for the model.


                  We provided copies of a draft of this report to the Department of
Agency Comments   Transportation for review and comment. We met with Department
                  officials—including the Deputy Assistant Secretary for Budget and
                  Programs in the Office of the Secretary and the Director of FHWA’s Office
                  of Budget and Finance. The Department agreed with the facts presented as
                  well as the recommendation and indicated that it would be responsive to
                  the recommendation. Technical comments provided by the Department
                  have been incorporated where appropriate.


                  To validate FHWA’s apportionment model, we first studied its structure,
Scope and         including the spreadsheets, the main calculation module, and the
Methodology       calculation subroutines. As part of our examination, we verified the
                  internal consistency of the model, including the structural relationships,
                  the use of input data, and the reporting of results. We next studied title 23
                  of the United States Code, ISTEA, and the National Highway System
                  Designation Act of 1995. We then cross-checked the model and
                  subroutines with the specific applicable sections of the laws, ensuring that
                  all aspects of the model were contained in the laws and that all relevant
                  provisions of the laws were contained in the model. Our assessment of the
                  model, however, provides no basis for validating any future changes to it.




                  Page 5                                         GAO/RCED-97-159 Highway Funding
B-276879




To test the model’s adaptability, we modified its subroutines to match the
provisions of one of the legislative proposals under consideration at the
time of our review, the ISTEA Integrity Restoration Act (STEP-21). Finally,
we resolved with the model designers and FHWA all of the uncertainties
that arose during our review.

As agreed with your offices, we did not verify the accuracy of the input
data that various units within FHWA supply as calculation factors for the
model. We conducted our review from February through May 1997 in
accordance with generally accepted government auditing standards.


As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report for 30 days. At that
time, we will send copies of the report to the Secretary of Transportation;
the Administrator, FHWA; and other interested parties. We will also send
copies to others upon request.

If you have any questions, please call me at (202) 512-3650. Major
contributors to this report are listed in appendix I.




Phyllis F. Scheinberg
Associate Director, Transportation Issues




Page 6                                         GAO/RCED-97-159 Highway Funding
Page 7   GAO/RCED-97-159 Highway Funding
Appendix I

Major Contributors to This Report


               Mark Dayton
               Gary L. Jones
               SaraAnn W. Moessbauer
               Yvonne C. Pufahl




(342937)       Page 8                  GAO/RCED-97-159 Highway Funding
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