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 project costs in accordance with the contract, change orders, extra work orders and the project agreement.

Final vouchers are subject to a complete fiscal and engineering and right-of-way review. A number of projects are subjected to in-depth engineering and fiscal audit by FHWA to insure the integrity of the State’s project administration and documentation.

In 1921 when Chief MacDonald was organizing the Bureau for the basic Federal-aid highway program, he included a Division of Control responsible for program and project accounting, budget activities, fiscal accounting, payroll, purchasing, and equipment and supplies.

The accounting activity was the only functional element that was specifically created by law. Until 1921 the Bureau had kept program and fiscal records, but the function was fragmented and treated as a routine clerical operation. Congress, recognizing that administration of the Federal-aid highway program would require detailed accounting records, directed in the 1921 Act that an accounting division be established. This later was to become the Finance Division and the Program Analysis Division in the Bureau. Over the years, the function has progressed from a routine bookkeeping operation to a very professional financial management organization.

Because of the need to maintain very detailed financial and project records, a records section was established in 1921 with the primitive data processing equipment of the day—a tabulating machine, a key punch and a sorter. As the data processing technology and equipment developed and became more sophisticated, the increased data processing capability became one of the primary tools in the administration of the highway program and made it possible to cope with the program without a corresponding growth in the staffing requirements.

The finance function in the Bureau extended beyond the Bureau’s internal financial management operations to the development of the financial management operation in the States. The American Association of State Highway Officials created a Subcommittee on Uniform Accounting in 1926 to assist the States in developing a uniform system of highway accounting, but little progress was made because of the diversity among the States. By 1936 BPR had joined in this effort, but no formal procedures were established before World War II suspended operations of the AASHO Subcommittee.

It was not until 1955 that the AASHO Executive Committee directed that work resume on a uniform accounting system and that a uniform accounting manual be developed. Between 1957 and 1960 a uniform accounting manual was developed, and today virtually all the States have adopted the principles of this manual.

After the passage of the 1956 Highway Act, it became evident that the State highway departments would need assistance in modernizing their accounting systems and the Bureau of Public Roads would have to improve its own internal accounting system. In 1959, a special staff was created to develop and implement a cooperative financial management improvement program with the States and to strengthen the Bureau’s accounting operations.

The cooperative financial management improvement program with the States focused its immediate attention on the modernization of the State highway departments’ accounting systems, particularly in the areas of establishing reimbursement claims and substantiating them, and in providing advice to the States. This program was called “current billing.” Current billing is a concept whereby the States were encouraged to centralize their financial operations and relate all highway construction costs to projects through project cost accounting techniques. To achieve this, it was necessary to revise their accounting procedures, install sophisticated data processing systems, and make some organizational changes. An important feature of current billing was the computer-produced tabulation of costs supporting the billing voucher to the Bureau for reimbursement of the Federal share. All 50 States, Puerto Rico, and the District of Columbia have implemented current billing procedures.

The adoption of current billing enabled the Bureau auditors to change their audit techniques. Formerly, it was necessary to audit the transactions of each project due to the lack of adequate centralized cost accounting techniques. This resulted in portions of claims being prepared from other than the States’ accounting records, costs being omitted, variations in cost methods and controls from project to project, and similar peculiarities in the States’ accounting systems. As a result of the improvements made under the current billing concept, the auditors were able to concentrate their reviews on the States’ procedures and controls, thus substantially eliminating the time-consuming examination of project documentation.

Under the authority and direction of the Budget and Accounting Act of 1950, the U.S. General Accounting Office (GAO), an administrative support tool of the Congress, initiated comprehensive management-type audits of the departments and agencies in the Executive Branch. These audits were designed to evaluate for Congress the administration and effectiveness of agency operations and programs. The provisions of the Act also encouraged the agencies and departments to initiate their own internal audit or review programs. As a result of these review efforts, the GAO approved FHWA’s accounting systems and procedures in 1967, one of the few to receive GAO’s approval up to that time.

Of course, the financial operation includes cost accounting, but the information necessary for this function is so complex that early in the highway program, a special division was created to maintain the data on project obligations on a nationwide project-by-project basis.

Program analysis is the continuous maintenance of the official records of the current status of all Federal-aid and other FHWA program authorizations together with the current status, cost, and physical characteristics of each project authorized for financing. Over and beyond this generalization, it also includes the determination of the apportionments of authorizations (and obligational limitations) which are made available to the individual States; the control and maintenance of the record of transfers of funds between apportionments ; the determination of the maximum percentage of Federal participation on Federal aid, emergency relief and other special categories of 232