TxDOT Internal Audit Report
Local Government Project Oversight Report
Objective
To perform an evaluation of the monitoring and oversight of local government projects in
accordance with established agreements, laws, and regulations.
Opinion
Based on the audit scope areas reviewed, control mechanisms are effective and
substantially address risk factors and exposures considered significant relative to
impacting financial reporting reliability, operational execution, and regulatory
compliance. The organization's system of internal controls provides reasonable
assurance that most key goals and objectives will be achieved despite significant
control gap corrections and improvement opportunities identified. Control gap
corrections and improvement opportunities identified are likely to impact the
achievement of the organization's business/control objectives, but management has
agreed to corrective action plans to address the relevant risks within 6 months.
Overall Engagement Assessment
Title
Finding 1
Finding 2
Finding 3
Finding 4
Finding 5
Finding 6
Satisfactory
Findings
Control
Design
Completeness and Accuracy of
the Local Government Project
Listing
Documented Evidence to
Support Project Site Visits
Documented Evidence to
Support Bid Opening
Attendance and Verification of
Bid Opening Process
Improvements Needed for
Traffic Control Oversight
Timeliness of Local
Government Billings for TxDOT
Inspection Services
Timeliness of Reimbursement
Request Approval
Operating
Effectiveness
Rating
x
x
Unsatisfactory
x
x
Needs
Improvement
x
x
Needs
Improvement
x
x
Needs
Improvement
x
Needs
Improvement
x
Needs
Improvement
x
Management concurs with the above findings and prepared management action plans
to address deficiencies.
Internal Environment
The TxDOT districts maintain and manage the oversight responsibility for their
respective local government projects. Project managers in each district work with the
TxDOT Internal Audit – Full Scope
Local Government Project Oversight
local governments on the various requirements for necessary documentation on the
projects. While the newly established Local Government Project Office (LGPO) monitors
district performance for oversight of local government projects, they are also
responsible for providing policy and procedure guidance to the districts. However, the
District personnel interviewed expressed a desire for further statewide standardization
of the local government project process. Management has reviewed the findings
contained in the report and has agreed that additional actions are required to improve
the current processes.
Summary Results
Finding
Scope Area
1
Construction – Bid Opening
and Award
2
Construction –
Reimbursement Review
3
Construction – Bid Opening
and Award
4
Construction – Safety
5
Construction –
Reimbursement Review
6
Evidence
Projects from two LGPO listings did not
contain items such as:
 Beginning and ending construction
dates
 Federal funding amounts
 State funding amounts
 Local government funding amounts
9 of 38 (24%) projects had no documented
evidence to support site visits/documented
reviews performed by TxDOT personnel for
projects tested
12 of 38 (32%) projects had no documented
evidence to support bid opening attendance
 2 of 38 (5%) projects had no
evidence of on-site traffic control
reviews
 4 of 38 (11%) projects had
deficiencies with traffic control set up
and/or devices found on local
government projects
1 of 38 (3%) projects had not submitted billing
invoices for inspection services provided on a
local government project
1 of 38 (3%) projects had reimbursement
requests that took longer than 30 days to
approve
Audit Scope
The audit focused on TxDOT’s oversight by the districts for the construction phase of
the local government project process. The construction phase begins with contract
letting and ends before the project close-out phase. Testing was conducted in 18
districts, with site visits to the following 11 districts: Austin, Bryan, Corpus Christi,
Dallas, El Paso, Ft. Worth, Houston, Laredo, Pharr, San Antonio, and Waco. Testing
was performed to ensure:
 Third party selections were in compliance with state law
 Materials used on the project met TxDOT standards, specifications and/or
contract requirements
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TxDOT verified that traffic control devices were maintained by the local
government throughout project construction
Proper management and compliance of reimbursement requests for construction
project costs incurred by the local entities
The audit was performed by Lindsay Bibeau, Roy Jarbeaux, Robert Juarez, Jennifer
Stanush and Doug Binnion, (Engagement Lead). The audit was conducted during the
period from January 14 to April 5, 2013.
Methodology
Testing was based on the number of local government projects currently under
construction and/or the combined local government project dollar totals for their district.
The methodologies used to complete the objectives of this audit included:
 Review of applicable federal/state laws and regulations, department
policies/procedures, LGPO training and best practices
 Review of prior audit reports to including those from Federal Highway
Administration (FHWA) and the TxDOT Audit Office
 Interviews with key TxDOT and local government entity personnel
 Evaluation of control design and operating effectiveness for the local government
project oversight process
 Review of internal documents including:
o contract letting documentation
o Advance Funding Agreements (AFAs), proposals and plans for selected
projects
o documentation associated with traffic control reviews
o payment history and reimbursement requests
Background
This report is prepared for the Transportation Commission, TxDOT Administration and
Management. The report presents the results of the Local Government Project
Oversight Audit which was conducted as part of the Fiscal Year 2013 Audit Plan.
The Local Government Projects Office (LGPO) was created in March 2012 in order to
ensure statewide compliance on projects executed by local entities. The LGPO is
responsible for providing policy and procedure guidance, developing and delivering
training, and monitoring the district oversight of projects executed by local government
entities.
Local government entities, such as municipalities, counties and regional mobility
authorities, are responsible for maintaining compliance with all state, federal and
contractual requirements. The local government entities administer these projects,
which minimizes the use of TxDOT resources.
All districts are responsible for oversight of their projects to ensure they are developed,
managed, constructed and closed in accordance with approved governing policies,
procedures, plans and specifications.
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This performance audit was conducted in accordance with Generally Accepted
Government Auditing Standards and in conformance with the International Standards
for the Professional Practice of Internal Auditing. These standards require that the audit
be planned and performed in order to obtain sufficient, appropriate evidence to provide
a reasonable basis for findings and conclusions based on audit objectives. We believe
that the evidence obtained provides a reasonable basis for the findings and conclusions
based on the audit objectives.
Defined control objectives were utilized to focus on financial, operational and regulatory
goals for the identified scope areas. Our audit opinion is an assessment of the health of
the overall control environment based on (1) the effectiveness of the enterprise risk
management activities throughout the audit period and (2) the degree to which the
defined control objectives were being met. Our audit opinion is not a guarantee against
financial misstatement, operational sub-optimization, or regulatory non-compliance,
particularly in areas not included in the scope of this audit.
Best Practices
The Bryan District reviews accident reports for vehicle accidents occurring within the
local government project limits. A root cause analysis is performed and documented in
order to determine if the local government project traffic control adjustment is needed.
The Dallas District Area Office oversees local government projects in their areas, and is
responsible for performing and documenting a monthly inspection report. This
inspection report also includes the “percentage complete of construction” allowing
visibility to potential liquidated damages during construction. This structure allows for an
individual from the District Construction Office to perform quarterly inspections or “peer
review” providing additional oversight on each project. The documentation of all
inspections is included in the file maintained at the Dallas District Office. The District
also maintains a database of all construction projects, including local let, on their
website. This database is updated monthly with current activities and status on district
projects.
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Detailed Findings and Management Action Plans (MAP)
Finding No. 1: Completeness and Accuracy of the Local Government Project Listing
Condition
The statewide Local Government Project (LGP) listing is not comprehensive or accurate
as there is no defined or timely system reporting mechanism or standardized format for
the districts to report their local government projects to the Local Government Project
Office (LGPO).
Effect/Potential Impact
Without a comprehensive list of projects underway, statewide reporting is inaccurate
and may influence decisions made based off this listing. Reporting or inquiries could
be in the form of a request involving: future funding, open records or legislative
requests.
Criteria & Cause
The TxDOT Construction Contract Administration Manual, Chapter 4, Job Records,
Section 1, Importance of Accurate Records expresses that complete and accurate
records are important for proper administration of all contracts. The TxDOT
Construction Contract Administration Manual also expresses that proper contract
administration includes items such as “keeping and maintaining accurate project
records” and “setting and maintaining a high professional standard”.
All districts complete their own version of a local government project list, and they are
then consolidated by the LGPO without a documented and defined method to confirm
the completeness and accuracy of the list.
Evidence
Two separate listings were obtained from the LGPO (October 2012 and January 2013).
The following was determined from the October 2012 listing, which maintains 195
projects across 18 districts:
 116 of 195 (59%) projects within the listing did not contain items such as
beginning and ending construction dates, federal funding amounts, state funding
amounts, and local government funding amounts
 When comparing individual funding amounts (i.e. federal, state, or local) to the
total funding amount within the listing, it was noted that 15 of 195 (8%) project
aggregate totals were inaccurate in comparison to their individual funding
amounts resulting in a $13.0M overstatement.
The following was determined from the January 2013 listing, which maintains 139
projects from 18 districts:
 99 of 139 (71%) projects within the listing did not contain items such as
beginning and ending construction dates, federal funding amounts, state funding
amounts, and local government funding amounts
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When comparing individual funding amounts (i.e. federal, state, or local) to the
total funding amount within the listing it was noted that 9 of 139 (6%) project
aggregate totals were inaccurate in comparison to their individual funding
amounts resulting in a $8.2M overstatement.
In addition, the audit team selected a sample of 38 projects out of the 139 to perform
on-site testing within 11 of the 18 districts reviewed and the following was noted:
 12 of 38 (32%) projects tested were noted as “under construction”, however,
based on testing performed within the districts construction had not yet started
 2 of 38 (5%) projects tested included projects classified as “Comprehensive
Development Agreements (CDA’s)”. Based on conversations with the LGPO,
CDA’s are not overseen by the LGPO and should not have been included on the
list as these projects do not have local government oversight.
Management Action Plan (MAP):
MAP Owner: David Millikan, Director - LGPO
MAP 1.1 –
Task 1 – LGPO will work with other divisions to identify an existing TxDOT database to
use as the source of all necessary LG project data (it is anticipated that the Design and
Construction Information System (DCIS) contains all necessary data.) LGPO will work
with appropriate divisions to identify methodology to filter all DCIS project data to
consistently retrieve only information on desired LG projects.
Completion Date: September 15, 2013
MAP 1.2 –
LGPO will work with appropriate divisions and districts to implement any necessary
changes to database project data to allow extraction of desired information for all LG
projects. Cross check and verify all desired data is accurate and retrieved. This will
allow extraction of data at any time. It is anticipated that LGPO will extract data on a
monthly basis.
Alternate Task 2 - If it is determined in performing Task 1 that there is no efficient
method of extracting desired LG project data from any existing TxDOT database, LGPO
will refine the current manual process of requesting LG project data from the districts on
a quarterly basis. This will include creation of clear definition of LG projects, provide a
standardized template to be completed by districts, expanded spreadsheet tabulation of
data received from districts, a method of validation of data through checking in DCIS,
and provide training for district personnel on district responsibilities in this process.
Completion Date: October 15, 2013
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Finding No. 2: Documented Evidence to Support Project Site Visits
Condition
Documented evidence to support project site visits and/or document reviews performed
by TxDOT’s district personnel does not exist in some districts. The local government
entities are responsible for the day-to-day project management with TxDOT providing
oversight by verifying compliance with contractual and regulatory obligations on a
periodic basis.
Effect/Potential Impact
Without TxDOT oversight on local government projects, contractual obligations may be
overlooked. The safety of travelling public could be jeopardized due to the contractor
using materials that do not meet the specifications in the contract and/or plans.
Subsequently, federal funding could be lost for nonconformance with contract
requirements.
Criteria & Cause
TxDOT’s Local Government Project Procedures Manual (LGPP) states that districts
should “conduct at least two site visits per project for the purpose of verifying items
being billed exist, are legitimate, and are within the scope of the contract” and should
“spot check project records for compliance” with the approved practices during periodic
inspections.
Evidence
Testing was performed to verify that TxDOT is conducting project site visits as required
by the Local Government Project Procedures (LGPP) Manual. A total of 38 local
government projects were judgmentally selected by considering the total number of
projects and their total funding from the 11 districts reviewed on-site.
 9 of 12 (75%) projects tested within 4 districts (Bryan, Houston, Ft. Worth, and
Waco) had no documented evidence to support site visits or documented reviews
performed by TxDOT personnel in order to ensure appropriate approval of local
government billings
 Documented evidence to support the remaining 26 project site visits was
substantiated in the remaining 7 districts (Austin, Corpus Christi, Dallas, El Paso,
Laredo, Pharr and San Antonio) tested
Management Action Plan (MAP):
MAP Owners: Catherine Hejl, Bryan District Engineer; Chris Cowen, Bryan District
Director of Construction
MAP 2.1 –
 The Bryan District currently has a standard operating procedure (SOP) in place
which requires TXDOT PMs to utilize the Local Government Construction
Inspection Report for documentation purposes when providing oversight on LG
projects.
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The District Construction Office (DCO) will review the district SOP to ensure it
contains the current requirements and best practices provided by the Local
Government Project Office.
The DCO will review these procedures with the Area Offices and conduct project
reviews, one at approximately 50% complete and another during the final review
of records, to ensure project site visits are being documented.
Completion Date: April 15, 2013
MAP Owners: Mike Alford, Houston District Engineer; Houston District Area
Engineers; Houston District Construction Office
MAP 2.2 –
 The District Construction Office will meet with the Area Engineers to discuss the
importance of properly documenting all monitoring, including site visits on Local
Let Projects. This documentation must be incorporated into our electronic project
files. Project site visits are to be made monthly in accordance with the guidance
provided by the Local Government Projects Summary of TxDOT Best Practices,
Version 1.1 date January 2013. We expect there to be exceptions that may
include, but are not limited to, limited work activity, complex construction activity
or other reasons that may warrant either less or more frequent site visits.
 The District Construction Office will review TxDocs (our electronic document
management system) quarterly to insure the Area Offices are properly
documenting their monitoring including site visits of these local let projects.
Completion Date: May 15, 2013
MAP Owners: Maribel Chavez, Fort Worth District Engineer; RPIC – Post-Letting
Phase, TxDOT Project Managers
MAP 2.3 –
The District Construction Office (DCO) will implement a process that mandates
inspection reports are completed. It will further request that the project managers
submit these reports to be reviewed by the DCO.
Completion Date: June 15, 2013
MAP Owner: Jim Reed, Waco District Design Project Coordinator
MAP 2.4 –
 Implement a process that mandates field reviews are conducted by the District
Project Development Support Office a minimum of one review each week (or
more frequently as needed). The field review will be conducted in the company of
the on-site City representative or their consulted project manager. The findings
and detailed results of these visits will be documented in the District files with
photo evidence of the progress and issues encountered during these visits. Any
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immediate corrective actions needed on the part of the contractor will be
discussed in the field in detail with the on-site City representative during the
weekly review.
In addition, monthly, or more frequently as needed, a formal written progress
report will be generated by the District Project Development Support Office that
details the issues discussed during the weekly field reviews and any on-going
concerns. This report will request that the City representative respond in writing
to each issue highlighted.
Completion Date: June 15, 2013
MAP Owner: David Millikan, Director – LGPO
MAP 2.5 –
The current LGPP training emphasizes the need for TxDOT personnel making and
documenting periodic site visits during construction. It is also reviewed and discussed
during the LGPO district project reviews. The LGPO will continue these efforts and also
include an article stressing the need for these visits and documentation in a future issue
of the LGPO electronic newsletter which is available to all personnel on Crossroads.
Notification of new newsletters is sent by email to all past TxDOT attendees of the
Summary of Best Practices training, and the LGPP training classes since September 1,
2012. These efforts will complement and reinforce the efforts of the districts on this
finding.
Completion Date: July 15, 2013
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Finding No. 3: Documented Evidence to Support Bid Opening Attendance and
Verification of Bid Opening Process
Condition
Documented evidence, necessary to support bid opening attendance by the district
personnel, does not exist in some districts. The local government entities are
responsible for the day-to-day project management with TxDOT providing oversight on
key milestones to ensure compliance with contractual and regulatory obligations.
Effect/Potential Impact
Without TxDOT oversight on the local government project bid opening process, TxDOT
cannot ensure impartiality within contractor selections. However, mitigating controls,
tested as part of this audit, such as multiple bid tabulation reviews and TxDOT
concurrences with bid award selection, will alleviate bias within the letting and award
process.
Criteria & Cause
TxDOT’s Local Government Project Procedures Manual (LGPP) states “FHWA policy
requires all bids to be opened publicly and read aloud either item-by-item or by total
amount”. Transportation code 223.004 also states that “All bids must be sealed, filed
with the LG and opened in a public meeting. Bidders may not be prohibited from
attending the public meeting. All bids must be opened in the presence of the meeting
attendees”. To ensure compliance with this regulation, TxDOT must be in attendance
during the opening of the bids.
Evidence
By obtaining items such as respective sign in sheets or TxDOT personnel meeting
notes, testing was performed to verify that TxDOT personnel was in attendance at the
local government project bid opening. A total of 38 local government projects were
judgmentally selected by considering the total number of projects and their total funding,
from the 11 districts reviewed on-site.
 12 out of 17 (71%) projects tested within 4 districts (Ft. Worth, Corpus Christi,
Austin, and Dallas) visited had no documented evidence to support bid opening
attendance
 Documented evidence of bid opening attendance for the remaining 21 projects
was substantiated in the remaining 7 districts (Bryan, El Paso, Houston, Laredo,
Pharr, San Antonio, and Waco) tested
Management Action Plan (MAP):
MAP Owners: Maribel Chavez, Fort Worth District Engineer; Ft. Worth District RPIC –
Pre-Letting Phase, TxDOT Project Managers
MAP 3.1 –
 The need to document attendance at all bid openings will be stressed to the
RPIC – Pre-Letting Phase, Area Engineers and Project Managers. It will be
stated that if no sign-in sheet is present they should, at a minimum, create a note
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to the project file with the date, activity, bids opened and that they confirmed that
the LG did not read any bids considered “non-responsive”
The District Construction Office (DCO) will communicate this documentation
requirement with the Fort Worth Director of Transportation Planning and
Development to ensure that all potential Fort Worth district employees
responsible for pre-letting phase work will be aware of this requirement
Completion Date: April 15, 2013
MAP Owners: Paula Sales-Evans, Corpus Christi District Director of Transportation
Planning and Development; Jason Alvarez, Corpus Christi District Transportation
Engineer, CRP TP&D
MAP 3.2 –
The designated representative who attends the bid openings for TxDOT will obtain a
copy of the bid opening, log of attendees, and insure it is kept in district files.
Completion Date: April 15, 2013
MAP Owner: Greg Malatek, Austin District Engineer
MAP 3.3 –
The District Design staff will continue to attend and assure documentation of TxDOT
attendance at all Local let bid openings. The District Central Texas Regional Mobility
Authority (CTRMA) project team will assure documentation of attendance at all CTRMA
let bid openings.
Completion Date: March 15, 2013
MAP Owners: Bill Hale, Dallas District Engineer; Tracey Friggle Logan, Dallas
Director of Construction; Moosa Saghian, Dallas Director of TP&D
MAP 3.4 –
In an effort to eliminate the lack of documentation regarding TxDOT’s attendance at the
bid openings, we will



Collect a copy of any sign-in sheet to show our attendance
If no sign in sheet is available, we will write a letter to the project file to document
our attendance
Request that the local government provide documentation of the date time and
attendance of the bid opening.
Completion Date: April 15, 2013
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MAP Owner: David Millikan, Director – LGPO
MAP 3.5 –
 The current LGPP training emphasizes the need for TxDOT personnel to attend
pre-bid conferences, bid openings, and pre-construction conferences and to
document their attendance. It is also reviewed and discussed during the LGPO
district project reviews.
 We will continue these efforts and will incorporate this topic in the future issue of
our LGPO electronic newsletter discussed in response to Finding 2. These efforts
will complement and reinforce the efforts of the districts on this finding.
Completion Date: July 15, 2013
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Finding No. 4: Improvements Needed for Traffic Control Oversight
Condition
Documentation to support on site traffic control reviews performed by district personnel
does not exist in some districts. Reviews are necessary to ensure deficiencies with
traffic control set up and/or devices found on local government projects are remediated
timely. The local government entities are responsible for the day-to-day project
management with TxDOT providing oversight by verifying compliance with contractual
and regulatory obligations on a periodic basis.
Effect/Potential Impact
Without TxDOT oversight on local government projects, the safety of traveling public
could be jeopardized due to improper traffic control. Subsequently, federal funding could
be lost for nonconformance with contract requirements.
Criteria & Cause
Temporary Traffic Control Devices Final Rule 23 CFR 630 Subpart K requires that there
is “A level of inspection necessary to provide ongoing compliance”.
Also, TxDOT’s Local Government Project Procedures Manual (LGPP) states that for
projects with federal funds, TxDOT districts should ensure the local government
maintains the quality and adequacy of the temporary traffic control devices.
Evidence
By reviewing documented support such as inspection reports (599s) or inspection
checklists, testing was performed to ensure the local governments maintain the traffic
control devices throughout construction. A total of 38 local government projects were
judgmentally selected by considering the total number of projects and total project
funding, from the 11 districts reviewed on-site.



2 out of 4 (50%) projects tested within 2 districts (Bryan and Waco) had no
documented evidence to support on-site traffic control reviews performed by
TxDOT personnel
4 out of 8 (50%) projects tested within 3 districts (Ft. Worth, Waco, and Bryan)
had deficiencies (i.e. improper signage, broken reflectivity, etc.) with traffic
control set up and/or devices found on local government projects
Documented evidence for the remaining 26 projects was substantiated and no
traffic control deficiencies were found in the remaining 8 districts (Austin, Corpus
Christi, Dallas, El Paso, Houston, Laredo, Pharr, and San Antonio) tested
Management Action Plan (MAP):
MAP Owners: Catherine Hejl, Bryan District Engineer; Chris Cowen, Bryan District
Director of Construction
MAP 4.1 –
 The Bryan District currently has a standard operating procedure (SOP) in place
which requires TXDOT PMs to utilize the Local Government Construction
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Inspection Report for documentation purposes when reviewing items such as
Traffic Control.
The District Construction Office (DCO) will review the district SOP to ensure it
contains the current requirements and best practices provided by the Local
Government Project Office
The DCO will review these procedures with the Area Offices and conduct interim
project reviews, one at approximately 50% complete and another during the final
review of records, to ensure traffic control reviews are being documented during
project site visits.
Completion Date: April 15, 2013
MAP Owner: Jim Reed, Waco District Design Project Coordinator
MAP 4.2 –
Implement a process that utilizes the existing form reporting (Form 599, Traffic Control
Devices Inspection Checklist) approved for use by the Local Government Project Office.
 Our initial step will be to schedule meetings with field inspectors assigned to the
existing LPA construction projects and provide them with detailed instructions on
the use of the form.
 Routine follow ups with the field inspectors shall be performed during the weekly
site visits performed by the District Project Development Support Office.

For all projects not currently under construction, detailed guidance will be
provided by the District RPIC during the preconstruction conference.

Initially an email will be sent to the LPA RPIC explaining the need for the form to
be utilized in the field by their on-site representative. The email will also detail the
mandatory requirement that for all future pay requests a completed separate
daytime and nighttime form will need to be included to provide evidence that this
reporting is properly being done. The LPA will be again be briefed on the total
pay request package (Including the Form 599 Reporting) that is required by the
District to approve reimbursing the LPA for eligible construction costs expended
Completion Date: April 15, 2013
MAP Owners: Maribel Chavez, Fort Worth District Engineer; RPIC – Post Letting
Phase, TxDOT Project Managers
MAP 4.3 –
Traffic control reviews will continue to be done by the area office project managers or
inspectors.


This item will be discussed at the next area engineers meeting
District Construction Office will send out reminder e-mails regarding traffic control
reviews.
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Completion Date: June 15, 2013
MAP Owner: David Millikan, Director - LGPO
MAP 4.4 –
 The current LGPP training emphasizes the need for TxDOT personnel to verify
and document their periodic review of traffic control device reviews.
 The LGPP requires the LG to perform at least one daytime and one nighttime
review of the traffic control devices each month. These are to be documented
(TxDOT Form 599 is available for their use in the Summary of Best Practices, if
they do not have their own similar form). TxDOT’s review of the LG’s records
inspecting traffic control devices is reviewed and discussed during the LGPO
district project reviews.
 Since this was identified as a major area of deficiency by FHWA in their periodic
site visits during 2012, the LGPO has increased our emphasis on this topic in our
district project reviews. This is a feature topic in the March issue of the LGPO
electronic newsletter. These efforts will be continued and used to complement
and reinforce the efforts of the districts on this finding.
Completion Date: March 15, 2013
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Finding No. 5: Timeliness of Local Government Billings for TxDOT Inspection Services
Condition
Invoices totaling approximately $1.1 million for inspection services provided by TxDOT
on a locally let project were not billed timely to the local entity. Local governments are
contractually obligated to obtain inspection services for each project.
Effect/Potential Impact
Delayed billings for inspection services provided by TxDOT would reduce current
funding that could be utilized to finance other projects and/or operations. This would
also increase the risk for inaccurate billing amounts due to calculation and reviewing
times being condensed at the end of the project. Lastly, this resulted in inaccurate
financial reporting as no accounts receivable was established for these services.
Criteria & Cause
Development Agreement states that “TxDOT shall deliver to the Authority (i.e., Local
Governments) monthly expense reports describing reimbursement or payment of its
costs”. The project contract stated that TxDOT would bill monthly for services provided.
Evidence
One of thirty-eight (3%) projects tested did not have appropriate invoicing performed for
TxDOT inspection services provided from October 1, 2010 through February 28, 2013.
Upon review of the executed El Paso District contract and accounting support, it was
noted that TxDOT had committed to monthly billing. In addition no accounts receivable
was established for FY11 or FY12.
Management Action Plan (MAP):
MAP Owner: Ken Barnett, El Paso District Director of Operations
MAP 5.1 –
 Invoice has been prepared for submission to Regional Mobility Authority (RMA).
The invoice will be discussed and reviewed with the RMA prior to the end of
March 2013.
 Project Office will coordinate with accounting staff to put into place procedures to
assure that invoices are processed in a timely fashion.
Completion Date: April 15, 2013
MAP Owner: Suzette McCandless (FIN) – West Region Accounting Manager
MAP 5.2 –
The Finance Division, West Region Accounting office, will meet with the El Paso district
staff to assist them on implementing the existing procedures for setting up and
monitoring a receivable in FIMS, Segment 04. This will enable them to invoice in a
timely manner for the remainder of this contract and for future contacts.
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Completion Date: May 15, 2013
MAP Owner: David Millikan, Director - LGPO
MAP 5.3 –
The LGPO will continue to stress the need for timely billing of TxDOT project oversight
costs on LG projects in our training and district project reviews. Our efforts of district
project reviews and training will complement efforts being undertaken by the El Paso
District. The LGPO will also broadcast this message to a broader audience within the
other districts by incorporating this topic in a future issue of our LGPO electronic
newsletter.
Completion Date: July 15, 2013
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Finding No. 6: Timeliness of Reimbursement Request Approval
Condition
Invoices totaling approximately $235,000 submitted by a local entity for reimbursement
were not processed by TxDOT in a timely manner. As part of the Local Government
Project Process, local entities are required to submit reimbursement requests to TxDOT
for review and approval in order to receive payment of state or federal funding.
Effect/Potential Impact
Untimely review and approval of reimbursement requests could result in the local
government not being able to fulfill their monetary obligations.
Criteria & Cause
Government Code §2251.021 states that “a payment by a governmental entity under a
contract executed on or after September 1, 1987, is overdue on the 31st day after the
later of: the date the governmental entity receives an invoice for the goods or service.”
TxDOT currently has a policy within the Contract Management Manual, Ch.1, Section
16, 30 Day Rule to make all payments within a 30 calendar-day time period for goods or
services received by the Department.
Evidence
One of thirty-eight (3%) projects selected for testing had reimbursement requests
totaling $235,700 that were not processed timely. Per review of the Houston project
documentation, the requests took between 6 and 11 months to review and approve.
Management Action Plan (MAP):
MAP Owners: Mike Alford, Houston District Engineer; Houston District Area
Engineers; Houston District Construction Office; Regional Accounting Supervisor
MAP 6.1 –
 The District Construction Office will discuss this finding with our Area Engineers
and insure they follow the Local Government Projects Summary of TxDOT Best
Practices – Version 1.1 – January 2013; TxDOT will insure the request for
reimbursement from the LG is checked against the project work and agrees with
the plans and the funding agreements. When all required documentation (like
CSJ specific billing and canceled checks) have been received, the payment
request will approved as appropriate and forwarded to the Regional Accounting
Office for final processing and payment.
 As a result of this audit we will request that the area offices make every effort to
review the completed reimbursement request within 10 days, to insure the final
payment is made within 30 days of receiving the completed reimbursement
request.
 The LG’s final reimbursement requires a more extensive “Final Records Review”
be conducted and all project records, submittals be documented prior to paying
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the final payment. Upon completion of this final review, the area office will follow
the same guidance as given above
Completion Date: May 15, 2013
MAP Owner: David Millikan, Director - LGPO
MAP 6.2 –
It is critical that the Department provide timely processing and payment of invoices from
LGs. There are instances when LGs may submit an invoice with incomplete
documentation. When this occurs, the district should quickly review the invoice, identify
the deficiency, and respond to the LG in writing (with a copy to the file) that the invoice
is incomplete along with clearly stating what items must be provided to allow processing
of the invoice. The district should follow up with the LG regularly until the additional
documentation is received. It also is possible that some districts/area offices may have
process inefficiencies which result in unacceptable delay in processing and paying
some LG invoices. We will work with the districts in our project reviews to identify
potential process deficiencies which could delay processing and payment. We will also
incorporate this topic in a future issue of our LGPO electronic newsletter.
Completion Date: July 15, 2013
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Observations and Recommendations
Audit Observation (a): No root cause analysis performed or verified
Ten of eleven districts visited do not currently verify or review documentation in order to
determine if the project’s traffic control may need adjusting. Adjustments may be
needed due to vehicle accidents occurring within the local government project limits.
Effect/Potential Impact: Without TxDOT oversight on local government projects, the
safety of travelling public could be jeopardized due to improper traffic control.
Subsequently, federal funding could be lost for nonconformance with contract
requirements.
Audit Recommendation: The LGPP should be updated to include guidance for
determining if the project traffic control was a factor for vehicle accidents occurring
within the local government project limits and whether documentation of remediation of
the traffic controls should be maintained.
The District should conduct or verify that the local government is conducting a root
cause analysis to determine if the project traffic control was a factor for vehicle
accidents occurring within the local government project limits and maintain any
documentation of remediation of the traffic controls based on any guidance from the
LGPP.
Audit Observation (b): Tracking of Liquidated Damages during the Construction Phase
Four of eleven districts visited do not assess liquidated damages throughout the
construction phase for local government projects. Liquidated damages arise when a
contractor does not meet the contractual time requirements, resulting in a deduction of
monies per additional day spent working on the project.
Effect/Potential Impact: Without TxDOT oversight of construction progress for local
government projects, FHWA may determine project overages are not reimbursable after
TxDOT has reimbursed the local entities for the contract in its entirety.
Audit Recommendation: Districts should evaluate liquidated damages by tracking
project time charges and verifying them to the local government assessment of
liquidated damages.
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Summary Results Based on Enterprise Risk Management Framework
Rating Assessment Grid
Exemplary
Satisfactory
Needs
Improvement
Unsatisfactory
Closing Comments
The results of this audit were discussed with the Local Government Project Office
Director and District Engineers.
We appreciate the assistance and cooperation received from the local government
entities, as well as the Local Government Project Office, Construction Division, Austin,
Bryan, Corpus Christi, Dallas, El Paso, Ft. Worth, Houston, Laredo, Pharr, San Antonio,
and Waco Districts contacted during this audit.
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