BNUMBER:  B-275490
DATE:  December 5, 1996
TITLE:  Corrections to the Federal Highway Trust Fund

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Matter of:Corrections to the Federal Highway Trust Fund  

File:     B-275490

Date:     December 5, 1996
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DIGEST

Because of a clerical error, the Financial Management Service, 
Department of the Treasury, failed to credit actual excise tax 
receipts to the Highway Trust Fund for the quarters ending June 30, 
September 30, and December 31, 1993, as required by law.  26 U.S.C.  sec.  
9601, 9503.  The Secretary of the Treasury has the authority to 
correct the clerical accounting and reporting errors by restating the 
fiscal year 1994 and 1995 income statements for the Highway Trust Fund 
provided to the Department of Transportation.  The Secretary of 
Transportation has no authority to administratively adjust, modify, or 
correct Highway Trust Fund income data provided by the Department of 
the Treasury and is bound to make apportionments to the States based 
on the data reported by the Treasury.
____________________________________________________________________
DECISION

The Department of the Treasury (Treasury) and the Department of 
Transportation (Transportation) ask whether they are authorized to 
correct certain clerical accounting and reporting errors relating to 
appropriations in the Highway Trust Fund (HT Fund).  Treasury believes 
that it has the authority to, and should, correct errors made in 
recording collections and resulting appropriations attributable to the 
HT Fund by restating the fiscal years (FY) 1994 and 1995 income 
statements for the HT Fund provided Transportation.  Transportation 
believes that it must apportion HT funds to the states based on the 
income statements provided by the Treasury.  For the reasons explained 
below, we agree that Treasury may adjust the FY 1994 and 1995 HT Fund 
income statements and that Transportation must base its apportionment 
on the corrected income statements.  

BACKGROUND

Federal Aid Highway Program

The Federal Aid Highway Program distributes billions of dollars of 
federal funding  annually to the 50 states, the District of Columbia, 
and Puerto Rico for highway construction, repair, and related 
activities.  To finance the highway program, Congress established the 
HT Fund as a trust fund account in the Treasury of the United States, 
26 U.S.C.  sec.  9503(a) (1994), designating the Secretary of the Treasury 
as trustee, 26 U.S.C.  sec.  9602(a).  Congress has provided the HT Fund 
with a permanent indefinite appropriation of amounts received in the 
Treasury from certain gasoline, diesel fuel, and other excise taxes 
paid by highway users.          26 U.S.C.  sec.  9503(b).

Statutory Responsibilities of Secretary of the Treasury

The Secretary of the Treasury (Secretary), as trustee of the HT Fund, 
must fulfill certain accounting and administrative functions.[1]  
Specifically, the Secretary is required to transfer at least monthly 
from the general fund of the Treasury amounts appropriated to the HT 
Fund based on Treasury estimates of the specified excise taxes for the 
month.  26 U.S.C.  sec.  9601.  The Secretary is further directed to make 
"proper adjustments . . . in the amounts subsequently transferred to 
the extent prior estimates were in excess of or less than the amount 
required to be transferred."  Id.

To discharge its duties as trustee, Treasury uses estimates provided 
by the Treasury's Office of Tax Analysis (OTA).  Each month OTA 
submits to the Treasury's Financial Management Service (FMS) an 
estimate of the specified excise taxes that will be covered into the 
general fund for the upcoming month.  Upon receipt of the monthly OTA 
estimate, FMS records the amount of the estimate and on the 8th 
business day of the month transfers from the general fund 50 percent 
of the estimated amount to the HT Fund and the remaining 50 percent of 
the estimated amount to the Fund on the 18th business day of the 
month.  

The statutory scheme recognizes that the actual amount of highway 
taxes covered into the general fund may be greater or less than the 
amounts previously estimated and transferred to the Fund.  Pursuant to 
26 U.S.C.  sec.  9601, the Secretary is directed to adjust any differences 
between the transferred estimated amounts and the actual amounts 
collected.  FMS makes these adjustments based on an Internal Revenue 
Service (IRS) quarterly certification of the actual amounts of taxes 
collected (IRS actuals).  FMS receives the IRS actuals approximately 6 
to 9 months after the end of each quarter and records the necessary 
upward or downward adjustment to the HT Fund income statement in the 
fiscal year in which it receives the IRS actuals.  The Federal Highway 
Administration (FHWA) uses the HT Fund income statements as the base 
figures for apportioning federal aid-highway "contract authority" to 
each state.[2]  

FMS Clerical Accounting and Reporting Errors

The HT Fund consists of a Highway Account and a Mass Transit Account.  
26 U.S.C.  sec.  9503(a) and (e).  According to Treasury, prior to the 
receipt of the IRS actuals for the quarter ended June 30, 1993, the 
form which IRS used to report actuals to FMS combined in a single 
column the amounts attributable to both the Highway Account and the 
Mass Transit Account.  Starting with the IRS actuals for the quarter 
ended June 30, 1993, IRS separated the amounts attributable to the 
Highway and Mass Transit Accounts into two separate columns.  IRS 
apparently did not notify FMS of the change in format nor did FMS 
notice the change.  Consequently, when calculating its adjustments to 
the OTA estimates, FMS used the amounts listed in the Highway Account 
column, instead of using the sum of the Highway Account and the Mass 
Transit columns.  Because of FMS failure to properly transcribe the 
IRS  actuals in FY 1994 when the data was received,[3] the FMS 
adjustments made in     FY 1994 for the quarters ended June 30 
($529,683,300), September 30 ($547,256,400), and December 31, 1993 
($513,533,200), understated the HT Fund income in the aggregate by 
approximately $1.59 billion.    

In November 1994, when the FMS forwarded to the FHWA the year-end FY 
1994 HT Fund income statement, the FHWA discovered the FMS error.  On 
November 30, 1994, the FHWA advised FMS of the error.  The FHWA asked 
FMS to reflect the correction in the HT Fund income statement for FY 
1994.  Instead, on December 21, 1994, FMS adjusted upward the HT Fund 
account by $1.59 billion, reporting the adjustment as income in FY 
1995, the fiscal year in which FHWA advised FMS of the mistake.  In 
contrast to Treasury's standard procedure, this had the effect of 
understating the FY 1994 HT Fund income by $1.59 billion and 
overstating the     FY 1995 HT Fund income by the same amount.  

As previously noted, FMS has implemented the statutory scheme by 
crediting the HT Fund in the fiscal year in which they received the 
IRS actuals.  The FMS' failure to follow their standard practice in 
this instance significantly affects the FHWA's allocations of HT Fund 
contract authority.[4]  Treasury and Transportation have informed us 
that due to the interactions between the 90 percent payment 
apportionments[5] and the obligational limitation imposed by Congress 
for FY 1997,[6] the FMS reporting error will result in approximately 
24 states receiving lower distributions of obligational authority in 
FY 1997, with some of the adjustments ranging up to $50 million.[7]

The Treasury has concluded that it should adjust the fiscal year 1994 
income statements by crediting the HT Fund with the $1.59 billion in 
the year in which IRS reported the actuals to FMS.  If Treasury 
corrects the error by adjusting the FY 1994 and FY 1995 Fund income 
statements to credit the IRS actuals to the fiscal year in which they 
were originally reported to FMS, Transportation would ask the Office 
of Management and Budget for a reapportionment of FY 1996 contract 
authority.  This would mean, according to FHWA, a redistribution of 
approximately $300 million in contract authority among the States for 
FY 1996. 

Transportation has concluded that it cannot administratively correct 
or modify HT Fund Treasury income statement by substituting data other 
than that reported by Treasury on the HT Fund income statement.  
Memorandum from Chief Counsel, FHWA, to General Counsel, 
Transportation, October 4, 1996.  Transportation determined that in 
furtherance of its duty to administer the Federal Aid Highway Program, 
it must apportion funds authorized to be apportioned to the states 
under 23 U.S.C.  sec.  104 and section 1015 of the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA) (23 U.S.C.  sec.  104, note) 
on the basis of the data reported by Treasury.  Based on its legal 
analysis of the Secretary's statutory responsibilities, Treasury has 
concluded, and Transportation agrees, that it has the authority to 
make the correction in FY 1994.  We agree.

ANALYSIS

Authority of Treasury to Correct Errors

Consistent with the statutory scheme and his duties as trustee of the 
HT Fund, the Secretary of the Treasury credits on a monthly basis 
estimated amounts of specified excise taxes to the HT Fund and 
subsequently adjusts the estimated amounts to reflect the amount of 
the specified excise taxes actually collected.  For three quarters in 
calendar year 1993, FMS misread the IRS form reporting the actual 
amount of excise taxes collected.  As a result, FMS credited the HT 
Fund with $1.59 billion less in income in FY 1994 than it otherwise 
would have had they properly read the IRS form.  When notified of the 
mistake, FMS "corrected" the error by recording the $1.59 billion as 
income to the HT Fund in FY 1995, apparently based on the view that 
they should make the correction effective when they learned of the 
error, as opposed to when they were initially advised of the amount of 
taxes collected.  The issue is whether Treasury may credit the $1.59 
billion to FY 1994, the fiscal year that would have been credited had 
FMS not misread the IRS form.  We think that the answer is clearly 
yes.

Our decisions in this area over the years stand for the proposition 
that an act of Congress is not required to correct clerical or 
administrative errors.  41 Comp. Gen. 16, 19 (1961).  In B-251287, 
September 29, 1993, we concluded that when Treasury is presented with 
convincing evidence that a reporting error affecting the balance of an 
appropriation account has occurred as a result of an obvious clerical 
error, it may adjust the account balance to correct the mistake.  In 
that particular case, had Treasury not been able to adjust the 
appropriation account balance to correct the mistake, the erroneously 
reported amount would have been treated as canceled in accordance with 
the applicable account closing procedures contained in the National 
Defense Authorization Act of 1990, Pub. L. No. 101-510, 104 Stat. 1674 
(1990).  Id.  Similarly, Treasury may adjust its accounting records to 
credit an appropriation account with the amount improperly credited to 
the general fund of the Treasury.  45 Comp. Gen. 724, 730 (1966); see 
also B-126738, April 11, 1956.  Where the evidence of the error is 
unreliable or inconclusive, B-236940, October 17, 1989, we have 
objected to an administrative adjustment.  In this case this 
limitation does not apply.

As explained above, had FMS officials properly understood the IRS form 
reporting the actual amount of excise taxes collected for the three 
quarters in question, they would have recorded the appropriate amounts 
in the FY 1994 HT Fund income statements.  The fact that FMS officials 
recorded the amount, the $1.59 billion, in the FY 1995 HT Fund income 
statement when FHWA advised them of their oversight is as much a 
deviation from their established practice of recording amounts 
collected in the fiscal year current when IRS reports the actual 
amounts collected as was the failure to properly read the IRS form in 
the first place.  To now adjust the FY 1994 and FY 1995 income 
statements to reflect what FMS officials should have done had they 
followed their established procedures, consistently and regularly 
applied, does no more than restore the accounts to where they should 
have been.  Apart from whatever responsibilities the Secretary may 
have to accurately state the accounts of the United States, the 
Secretary in his capacity as trustee of the HT Fund has the duty to 
accurately account for the amounts in the Fund consistent with the 
terms of the appropriation made thereto and the applicable 
administrative procedures adopted to effectuate his statutory 
responsibilities.[8]

The statutory scheme for apportioning contract authority among the 
states for the Federal Aid Highway Program makes it essential that the 
Secretary maintain an accounting of the HT Fund in the most accurate 
manner possible.  The interplay between the HT Fund and the statutes 
providing federal aid to the states for highways reflects a complex 
congressional plan to equitably distribute the HT Fund proceeds for 
the various highway programs among the states.  This entire statutory 
scheme is dependent upon the Treasury accurately performing the 
ministerial    duty of collecting, accounting for and reporting the 
revenues.  For example, the    90 percent payment adjustment provided 
by section 1015(b) of ISTEA directs Transportation to base its 
computation on "the estimated tax payments attributable to highway 
users in the State paid into the Highway Trust Fund * * * in the 
latest fiscal year in which data is available."  The failure to 
properly account for funds in the correct year can dramatically affect 
the amount of funds each state is entitled to receive from the HT 
Fund.

Thus, Treasury's accounting for the funds in the correct year is 
critical.  Although section 9601 does not contain a specific time 
limit in which the Secretary must make the proper adjustments to 
reflect the actual amounts of the applicable excise taxes received in 
the Treasury, Treasury has implemented section 9601 by making the 
adjustment to the HT Fund income statement for the fiscal year current 
at the time of receipt of the IRS report on the actual amount 
collected.  We understand that, with the exception of the adjustments 
at issue here, this has been the consistent practice of Treasury.  
Although this may not be the only way to implement this statutory 
scheme, it is entitled to deference unless clearly wrong.  Chevron 
U.S.A. Inc. v. Natural Resources Defense Counsel Inc., 467 U.S. 837, 
844 (1984).  As noted above, Treasury has advised us that it received 
all IRS actuals in fiscal year 1994.  Accordingly, we have no 
objection to Treasury adjusting the FY 1994 and FY 1995 HT Fund income 
statements to conform to their established practice of accounting for 
these amounts.  

Authority of Transportation to Adjust HT Fund Income Data

As mentioned above, Transportation has concluded that it cannot 
administratively correct erroneous HT Fund Treasury income 
statements.[9]  We agree.  Transportation is statutorily charged with 
administering the Federal Aid Highway Program and it may only 
apportion funds authorized to be appropriated to the states under 23 
U.S.C.  sec.  101, et seq.  As discussed above, as trustee of the HT Fund, 
Treasury is solely responsible for making transfers and adjustments to 
the HT Fund under 26 U.S.C.  sec.  9601 and 9602.  Transportation has no 
role in administratively adjusting, modifying, or correcting Highway 
Trust Fund income statements provided by the Department of the 
Treasury.  Thus, Transportation is bound to make apportionments to the 
States based on the data reported by Treasury.[10]

CONCLUSION

Treasury may adjust the FY 1994 and 1995 HT Fund income statements to 
credit the HT Fund with the excise taxes originally not included in 
the HT Fund income statements' just as if Treasury had credited such 
amounts upon receipt of the reports from the IRS.  Transportation has 
advised us that upon the adjustment of the FY 1994 and FY 1995 HT Fund 
income statements to reflect the actual receipt of revenue consistent 
with their standard practice, Transportation will seek a 
reapportionment of contract authority from the Office of Management 
and Budget for FY 1996.  Once Treasury has issued its HT Fund income 
statement, Transportation's duty is to effectuate the statutory 
apportionment formula, including the 90 percent payment apportionment, 
based on the data provided by Treasury.

/s/Robert P. Murphy
for Comptroller General 
of the United States

1. The Secretary is responsible for maintaining an effective and 
coordinated system of accounting and financial reporting, 31 U.S.C.  sec.  
3513, managing the trust funds, and reporting to Congress on their 
financial conditions and operations.  26 U.S.C.  sec.  9601 and 9602.

2. The Federal Aid Highway Program is essentially a "reimbursable" 
program, that is, the federal government reimburses states for costs 
actually incurred in building or repairing its highways.  Congress, 
primarily in the highway authorization acts, authorizes 
Transportation, through the FHWA and its other agencies, to incur 
obligations (using contract authority) on behalf of the federal 
government.  The FHWA apportions authorized amounts of contract 
authority to the states, in effect establishing lines of credit upon 
which the states may draw for a particular project.  See Financing 
Federal Aid Highways, FHWA Publication No. FHWA-92-016 (1992).

3. Treasury has advised that FMS received the IRS actuals as follows:  
for the quarter ended June 30, 1993, the FMS received the IRS actuals 
on May 26, 1994; for the quarter ended September 30, 1993, the FMS 
received the IRS actuals on July 5, 1994; for the quarter ended 
December 31, 1993, the FMS received the IRS actuals on September 15, 
1994.

4. Treasury officials have informally advised us that they could not 
recall any cases in which a clerical error was made that required 
corrective action. 

5. The 90 percent payments apportionment is one of a number of 
provisions Congress has built into the Federal Aid Highway Program to: 
(1) insure funding equity among the states, (2) address the concerns 
of states that contribute more highway user taxes than they would 
receive in federal aid highway funds, and (3) provide each state with 
the same relative share of overall funding that it had received in the 
past.  Specifically, the 90 percent payments apportionment ensures 
that each qualifying state will receive an allocation in an amount 
that ensures its apportionments for the fiscal year and allocations 
for the previous fiscal year will be at least 90 percent of its 
contributions to the Highway Account of the HT Fund.  Financing 
Federal Aid Highways, FHWA Publication No. FHWA-92-016 (1992).

6. The obligation limitation for FY 1997 is $18 billion.  Pub. L. No. 
104-205, 110 Stat. 2958 (1996).

7. The law requires that Transportation base the 90 percent payment 
apportionments on the latest fiscal year in which data is available.  
Pub. L. No. 102-240,  sec.  1015(b), 105 Stat. 1944 (1991).  Generally, the 
latest fiscal year for which data is available lags by two years.  For 
example, for fiscal year 1996, Transportation based the 90 percent 
payment apportionments of contract authority on data from the fiscal 
year 1994 HT Fund income statements.  Similarly, Transportation will 
base the 90 percent payment apportionments of contract authority for 
FY 1997 on data from the FY 1995 HT Fund income statements.  Thus, 
Treasury's correction of the FYs 1994 and 1995 HT Fund income 
statements will affect the allocations for FYs 1996 and 1997.  

8. Certainly, section 9601 contemplates that the Secretary will 
faithfully carry out his responsibilities as trustee of the HT Fund to 
credit the Fund with the amounts collected as reported by the IRS.  
Literally read, section 9601 only authorizes the Secretary to make 
"proper adjustments" necessary to reflect any differences between the 
estimated amounts provided by the OTA each month, and the amounts 
reported by the IRS several months later as actually collected.  In 
our opinion, the Secretary's authority to correct the FMS clerical 
accounting and reporting errors in this case is not dependent on the 
authority in section 9601 to make "proper adjustments." 

9. Earlier this year, Senator Baucus introduced an amendment to the 
Transportation appropriation for FY 1997 requiring Transportation to 
make appropriate adjustments to federal aid highway apportionments to 
correct Treasury's error.  142 Cong. Rec. S9266-9275 (daily ed. July 
31, 1996).  The amendment was agreed to by the Senate.  142 Cong. Rec. 
S9278 (daily ed. July 31, 1996).  The Conference Committee on the 
differing House and Senate versions of the FY 1997 Transportation 
appropriation eliminated the Baucus amendment from the Conference 
bill.  142 Cong. Rec. S10778 (daily ed. September 18, 1996). 

10. See generally, 41 Comp. Gen. 16 (1961), holding that when an 
apportionment under the federal highway program results in some states 
receiving funds in excess of the amount they were entitled to receive 
and others receiving less than their entitlement, the failure to 
apportion properly must be regarded as an act in excess of statutory 
authority and the incorrect apportionments need to be appropriately 
adjusted.