Response to the Audit
CALIFORNIA STATE TRANSPORTATION AGENCY
March 1, 2016
Elaine M. Howle, California State Auditor
California State Auditor’s Office
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle:
Attached please find a response from the California Department of Transportation (Department) to your draft audit report entitled “California Department of Transportation: Its Maintenance Division’s Allocations and Spending for Field Maintenance Do Not Match Key Indicators of Maintenance Needs” (#2015-120). Thank you for allowing the Department and the California State Transportation Agency (Agency) the opportunity to respond to the report.
Your findings and recommendations are timely because the Administration currently has a proposal before the Legislature to augment transportation funding to address the backlog of highway maintenance and rehabilitation. I agree with your findings that expenditures should be better linked to performance outcomes, and that is why the Administration’s proposal includes ongoing performance targets, reporting, and transparency. The Agency also appreciates that your report includes mention of the significant backlog of pavement and culvert maintenance and rehabilitation, which is a major component of the new spending in the Administration’s plan.
As noted in its response, the Department concurs with the recommendations in the report and already has established timelines to implement corrective action. Additionally, we appreciate your confirmation that there is no clear correlation between field maintenance spending and income levels or race and ethnicity. Further, we are pleased that you determined Caltrans appropriately manages highway maintenance projects and that your testing indicated positive results for some of the largest highway and field maintenance expenditures, as well as for payments and corresponding invoices.
If you need additional information regarding the Department’s response, please do not hesitate to contact Michael Tritz, Agency Deputy Secretary for Audits and Performance Improvement, at (916) 324-7517.
BRIAN P. KELLY
cc: Malcolm Dougherty, Director, California Department of Transportation
CALIFORNIA DEPARTMENT OF TRANSPORTATION
February 25, 2016
Brian P. Kelly
California State Transportation Agency
915 Capitol Mall, Suite 350B
Sacramento, CA 95814
Dear Mr. Kelly:
Thank you for the opportunity to review and comment on the California State Auditor’s (CSA) report entitled “California Department of Transportation: Its Maintenance Division’s Allocations and Spending for Field Maintenance Do Not Match Key Indicators of Maintenance Needs.”
At the request of the Joint Legislative Audit Committee, the CSA conducted an audit of the methods used by the California Department of Transportation (Caltrans) to make spending decisions related to the Maintenance Program and to assess the timeliness and effectiveness of the program’s funding for fiscal years 2010-11 through 2014-15. The CSA concluded improvements are needed in allocating and spending field maintenance funds, reporting to the Legislature the allocation methodology, strategically planning field maintenance activities, demonstrating the timeliness of performing maintenance work, and exercising controls over maintenance work orders. Further, the CSA determined the Maintenance Division appropriately manages highway maintenance projects, but that some backlogged maintenance work is increasing.
It should be noted, however, that another of the CSA’s objectives was to identify the current socioeconomic demographics of each district receiving funding and determine the amounts received by those districts in each of the years reviewed. The CSA found that all 12 district offices received funding in each of the five years reviewed and that there was no clear correlation between the levels of spending and income levels or race and ethnicity. The CSA also found that there were areas of both high and low spending in each of the three districts on highway sections that pass through areas where the income level and race and ethnicity of the majority of the population varies.
Additionally, the CSA reviewed some of the largest expenditures for highway maintenance projects and some of the largest expenditures for field maintenance activities. We are pleased that the CSA found that the expenditures were generally reasonable and allowable, and that payments were supported with invoices that were properly reviewed and approved.
One point of clarification we think is important regards the CSA’s determination that Caltrans developed a budget model in 2009 but never implemented it. Caltrans could not fully implement the budget model because it was not compatible with the upgraded financial system implemented in July 2010. Specifically, supporting spreadsheets integral to the functionality of the budget model were linked to the former financial system and were not compatible with the new financial system. Additionally, the budget model recommended significant fluctuations in field allocations (both personal services and operating expenses) from year to year. These fluctuations cannot be implemented with current civil service procedures on a year-to-year basis. However, Caltrans did use the budget model to establish 30 zones based on climate and traffic, and these zones are used to establish dashboard activities.
CSA’s recommendations and Caltrans’ responses are listed below:
Recommendation No. 1:
To better align the maintenance division’s allocations with districts’ maintenance needs, the Legislature should consider including language in the Budget Act that requires the maintenance division to develop and implement a budget model for field maintenance by June 30, 2017, that takes into account key indicators of maintenance need, such as traffic volume, climate, service scores, and any other factors the maintenance division deems necessary to ensure that the model adequately considers field maintenance need. Once developed, Caltrans should use the model to inform appropriate allocations to the districts.
The first part of this recommendation is addressed to the Legislature; therefore, Caltrans will respond only to the second part of the recommendation.
Caltrans is committed to developing a budgeting and allocation tool that incorporates traffic volume, climate, and level of service. The allocation tool will be performance-based and will consider maintenance needs and allocate to the district region level. Caltrans will evaluate the feasibility of incorporating the ten highest priority field maintenance activities across all district regions in a new budget and allocation tool. The ten highest priority field maintenance activities are:
- Pavement (potholes/cracks/spalls)
- Bridge field maintenance activities
- Striping/pavement markers
- Traffic signals
- Roadway lighting
- Tree/brush encroachment
The paragraph below is also referenced in our rebuttal point 2
These ten activities represent 75 percent of the field maintenance budget allocation and are also aligned with the Governor’s “fix it first” approach to preserving transportation infrastructure. Caltrans will coordinate with the California State Transportation Agency to update and implement this budget and allocation tool by June 2017.
Recommendation No. 2:
Caltrans should revise the language in its future five-year maintenance plans to accurately describe the method it uses to allocate field maintenance funding to its districts.
Caltrans will revise the language used in future five-year maintenance plans to more accurately describe the method used to budget and allocate maintenance funding. The revisions will be reflected beginning with the 2017 update.
Recommendation No. 3:
To ensure that it performs field maintenance work consistently on highways with similar needs, the maintenance division should do the following:
- Assess whether districts are using funds in a manner commensurate with indicators of need included in its new budget model.
- Implement the zone-level evaluation of service scores contemplated in the earlier budget model that it abandoned.
- Establish zone-specific service score goals for all of the field maintenance activities it deems critical to ensuring a safe and usable state highway system and require districts to meet those goals for all the zones within their borders.
- Implement the requirements for strategically planning field maintenance work that it previously included in its maintenance manual or develop similar requirements that it believes are feasible and ensure that supervisors plan and schedule field maintenance work based on service scores. Caltrans should require superintendents and regional managers to approve those plans. Caltrans should also require supervisors and superintendents to monitor progress toward improving service scores.
Once Caltrans develops and implements the new budgeting and allocation tool (discussed in the response to Recommendation No.1), it will ensure districts are using funds in a manner commensurate with the indicators included in the tool.
Caltrans has already categorized the state highway system into zones based on traffic and climate data. Caltrans will determine an LOS score for each of the ten maintenance field activities (noted in the response to Recommendation No. 1) by zone in each district region and establish LOS goals for each district region. Caltrans will implement the items discussed above concurrently with the new budgeting and allocation tool discussed in the response to Recommendation No. 1.
In addition, Caltrans will require Maintenance Field Supervisors to develop an annual work plan to achieve the LOS goals established through the zone-level evaluation for each district region. Region managers will be required to review/monitor Integrated Maintenance Management System (IMMS) work orders to ensure work plan consistency and timely work completion. Caltrans will implement this by December 2016.
Recommendation No. 4:
Caltrans should require its staff to verify and update the status of all outstanding service requests. Additionally, Caltrans should require supervisors to monitor completion of service requests by reviewing the data from the service request system monthly to identify service requests not completed after a period of time that Caltrans deems appropriate, such as 30 days. For all service requests outstanding after this period, Caltrans should require its supervisors to determine the status of the service request by reviewing the related work order that records what work Caltrans completed and ensure the work is appropriately prioritized. Also, Caltrans should require its staff to record all service requests it receives via methods other than Caltrans’ website, such as by phone, mail, or email, in its service request system to ensure it captures all service requests in one central repository.
Caltrans has a web-based system which receives thousands of Maintenance Service Requests (MSR) annually from the public. The system currently generates a ten-day alert; however, Caltrans will require supervisors to verify and update the status of all outstanding MSRs within thirty days. Caltrans will require regional managers to prioritize and develop a plan to complete all MSRs outstanding after 30 days.
In addition, Caltrans will establish guidance that requires its staff to record all MSRs received via methods other than its website and maintain them in a central repository. This recommendation will be implemented by December 2016.
Recommendation No. 5:
To detect and prevent fraud, waste, and abuse, and to ensure costs are appropriate, the maintenance division should strengthen its controls over reviewing and approving work order costs by requiring its supervisors and superintendents to document their review and approval of work orders in the maintenance management system. For example, supervisors or superintendents could include a note in the comment field of the work order indicating their review and approval. The maintenance division could also establish a reasonable dollar threshold for those work orders that would require documented review and approval.
The maintenance division will review its current controls over reviewing and approving work orders and find ways to strengthen those controls. The maintenance division will look into establishing a dollar threshold for work orders and require that supervisors and superintendents document their review and approval in the maintenance management system. In addition, the maintenance division will remind all its employees of the requirement to follow proper procurement practices in the acquisition of materials, service contracts, and purchase orders/requests, which include varying levels of supervisor/ management review and approval. This recommendation will be implemented by December 2016.
Recommendation No. 6:
To ensure that field maintenance work orders are completed in a timely manner, the maintenance division should require supervisors to initiate work orders in the maintenance management system at the time that they identify field maintenance work that needs to be performed and record the date that work was started and the date work was completed. Superintendents should periodically review work orders to ensure that identified work is completed in a timely manner.
Caltrans will revise current guidance to require each supervisor to initiate an IMMS work order when field maintenance work begins. The IMMS work order will be closed out and will reflect the date when work is completed. Superintendents will be required to periodically review IMMS work orders to validate work is being completed in a timely manner. This recommendation will be implemented by July 2016.
Caltrans appreciates the opportunity to provide a response to the draft audit report. If you have any questions or require further information, please contact Steve Takeaway, Deputy Director, Maintenance and Operations, at (916) 654-6823, or William E. Lewis, Assistant Director, Audits and Investigations, at (916) 323-7122.
c: Steve Takigawa
William E. Lewis
California State Auditor’s Comments on the Response From the California Department of Transporation
To provide clarity and perspective, we are commenting on the California Department of Transportation’s (Caltrans) response to our audit. The numbers below correspond to the numbers we have placed in the margin of Caltrans’ response.
To clarify, as we state in the Appendix, we analyzed more precisely where the districts spent their field maintenance funding by focusing on three selected districts: district 4 (Oakland), district 6 (Fresno), district 7 (Los Angeles). Because we had this detailed spending information for the three districts, we attempted to focus our review of socioeconomic demographics in the three districts as well.
The purpose of the budget model was to establish baseline field maintenance funding needs and allocations needed to maintain similar highways within the state at a specified maintenance performance level. Notwithstanding the challenges with implementing the budget model that Caltrans described in its response, we are pleased that it agrees with our recommendation to develop and implement a budget model that takes into account key indicators of maintenance need and use the model to inform appropriate allocations to the 12 districts.
The maintenance division has not established a time frame for completing service requests. The 10 day alert that Caltrans mentions in its response refers to the requirement to respond to the individual who submitted the service request within 10 days, stating whether the district commits to perform the work or stating the reasons why it is not going to perform the work. In contrast, we recommend that Caltrans require supervisors to monitor actual completion of service requests to identify those not completed within a certain period of time that Caltrans deems appropriate, such as 30 day and determine their status.
We are concerned that in its response Caltrans’ proposed revision to its current guidance will not adequately address our concern. In particular, we recommend that supervisors initiate work orders in the integrated maintenance management system once they identify needed field maintenance work rather than when the work begins as Caltrans mentions in its response. As we state, unless the maintenance division initiates work orders when work is identified, the true length of time it takes from the date the work is identified to the date it is completed is not captured, and the maintenance division cannot accurately monitor whether it is addressing field maintenance needs in a timely manner.