We Looked At The Department of Transportation (DOT) reported $12.9 billion in general Property, Plant, and Equipment (PP&E) in its fiscal year 2022 Agency Financial Report (AFR), including $4.2 billion in capitalized equipment. Federal agencies are required to prepare accurate annual financial statements that adhere to accounting principles, as well as to establish internal controls to reduce risk and promote efficient use of property. This requirement exists to provide reliable, accurate descriptions of an agency’s financial position, which includes property. Given DOT’s significant investment in capitalized equipment and the importance of its management, we initiated this audit to assess DOT’s internal controls for managing capitalized equipment, specifically (1) policies for managing capitalized equipment; (2) oversight controls; and (3) guidance regarding capitalization thresholds. What We Found DOT’s policies and procedures for managing capitalized equipment are out-of-date and noncompliant with Federal law. For example, DOT Orders about managing capitalized equipment are dated as far back as 1992, and do not require Operating Administrations to conduct inventories in accordance with the Federal Personal Property Management Act of 2018. In addition, several Operating Administrations’ policies and procedures do not comply with these laws. The Department also lacks proper oversight controls, including an adequate reconciliation process, to ensure that Operating Administrations are maintaining accurate inventories of their equipment. This resulted in the Maritime Administration failing to correct misclassifications of nearly 70 percent of the Department’s total net value of capitalized equipment for fiscal year 2022. Further, we estimated that FRA did not capitalize up to $53 million of eligible equipment. Lastly, DOT also lacks clear guidance on deviating from standard capitalization thresholds, limiting its ability to establish effective internal controls for capitalized asset management. Our Recommendations We made seven recommendations to improve DOT’s internal controls to effectively manage capitalized equipment.
Open Recommendations
| Recommendation Number | Significant Recommendation | Recommended Questioned Costs | Recommended Funds for Better Use | Additional Details | |
|---|---|---|---|---|---|
| 1 | Yes | $0 | $0 | ||
| Update DOT Orders 4410.4 and 4600.2B to incorporate the requirements of Public Law Number (Pub. L. No.) 115-419. | |||||
| 5 | Yes | $0 | $0 | ||
| Update DOT Order 2700.13 to direct Operating Administrations to develop and implement a process to validate and reconcile capitalized equipment listings with DOTs Delphi financial system and provide confirmation of completion. | |||||
| 7 | Yes | $0 | $0 | ||
| Update DOT Order 2700.13 to clarify when Operating Administrations deviations from established DOT capitalization thresholds must be approved by the Office of the Secretary and implement a requirement for documentation justifying higher or lower thresholds. | |||||
| 2 | Yes | $0 | $0 | ||
| Direct the Federal Highway Administration (FHWA), National Highway Traffic Safety Administration (NHTSA), Maritime Administration (MARAD), and Federal Railroad Administration (FRA) to update the relevant orders or guidance to incorporate the requirements of Pub. L. No. 115-419 and require confirmation of completion. These orders and guidance are FHWA Order 4300.1; NHTSA Order 440-1D; MARADs Property, Plant, and Equipment Desk Guide; and FRA Order 4601.1E. | |||||
| 4 | Yes | $0 | $0 | ||
| Direct FRAs Office of the Chief Financial Officer to capitalize FRAs eligible equipment in accordance with DOT Order 2700.13 and provide confirmation of completion. | |||||
| 3 | Yes | $0 | $0 | ||
| Direct the Federal Motor Carrier Safety Administration (FMCSA) to implement policies and procedures for the management of capitalized equipment that incorporate the requirements of Pub. L. No. 115-419 and provide confirmation of completion. | |||||
