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ODOT amends audit guidelines to conform with federal regulations

State's unduly restrictive cost limits ended

The Ohio Department of Transportation has amended its controversial Audit Circulars to conform with federal audit guidelines, meaning the state will no longer disallow overhead costs that are permissible under federal guidelines.

ACEC Ohio sought to have the circulars modified or repealed virtually since the day they were unveiled by then ODOT Director Gordon Proctor in 2005, arguing that they imposed limitations on indirect costs that went well beyond federal audit standards.

The department's decision to rewrite the circulars to conform to federal guidelines was the result of a fortunate confluence of events: the election of a new state administration in 2006 and the rewriting of the Uniform Audit & Accounting Guide published by the American Association of State Highway and Transportation Officials (AASHTO), which began in 2007.

In 2008, Governor Ted Strickland issued an executive order on "Common Sense Business Regulation" that directed state agencies to "reduce or eliminate areas of state regulation where federal regulation now adequately regulates the subject matter."

Last year a special assistant to the governor got involved in the issue, mediating with ACEC Ohio and ODOT, just as AASHTO was completing its massive update of the Uniform Audit & Accounting Guide.

The new guide is the work product of state transportation officials – including a representative of ODOT – ACEC national staff, and officials from the Federal Highway Administration.  It provides detailed guidance on interpretation of federal auditing guidelines, as set out in the Federal Acquisition Regulation.

Federal officials who participated in developing the new manual said at an ACEC conference in California last fall they would encourage state DOTs to abandon their "home-grown" cost restrictions and audit rules and conduct audits of consulting firms in conformance with the new AASHTO guide.

On November 30, ODOT Director Jolene Molitoris told ACEC Ohio representatives that ODOT will conduct audits in conformance with the FAR, on which the new AASHTO guide is based. ODOT will no longer seek to exclude costs for things such as employee welfare, professional liability insurance and other costs that are allowed under the FAR.

ODOT would not repeal its audit circulars, she said, because they provide consultants with valuable guidance on deciding whether certain indirect costs are allowable, but would rewrite them to conform with the AASHTO manual and the FAR.

The revised circulars were posted on ODOT's web site in early February.

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