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B-290744 1 (2002-09-13)

handle is hein.gao/gaobacyap0001 and id is 1 raw text is: I GAO 7=Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 B-290744 September 13, 2002 The Honorable John McCain Ranking Minority Member Committee on Commerce, Science and Transportation United States Senate Subject: Use of Proceeds from the Sale of Real Property Purchased with Federal Highway Funds Dear Senator McCain: This is in response to your letter dated April 3, 2002, requesting our views regarding the Federal Highway Administration's (FHWA) interpretation of 23 U.S.C. § 156 (2000). As explained below, § 156 authorizes states to use the proceeds from sales of real property purchased with federal funds for other eligible projects. Your letter asks whether the proceeds from real property sales retain their character as federal funds under § 156; you also ask questions about how the states have applied § 156. This opinion addresses the proper interpretation of § 156. The remaining issues you raise will be addressed in a separate GAO report. Under § 156, and in particular, § 156(c), states disposing of excess property acquired with Federal Highway Trust (title 23) funds are authorized to reapply the federal share of the proceeds to other eligible title 23 projects. The FHWA construes § 156 as allowing states to treat the proceeds of excess property sales as state funds. FHWA believes that the federal government retains no residual interest in those proceeds. It has informed the states that projects funded through proceeds from such transactions are not subject to restrictions that would otherwise apply if such funds were treated as federal funds. As your letter points out, the Department of Transportation's (DOT's) Office of Inspector General (DOT-IG) questioned FHWA's interpretation of § 156 in its report, October2001 Finance Plan for the Central Arteiy/Tunnel Project, IN-2002-086, March 11, 2002. You ask us to examine the issues raised in the DOT-IG's report and determine whether FHWA's interpretation is correct. In this regard, you would also like us to consider whether states (1) can convert federal money to state money by buying and selling property, (2) can use such means to reduce or avoid their obligation to provide matching funds, and (3) can thus avoid normal safeguards on the use of federal funds.

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