Performance audit, Department of Transportation, sunset factors and summary report

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DOUGLAS R NORTON. CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
LINDA J. BLESSING, CPA
DEPUTY AUDITOR GENERAL
October 30, 1987
Members of the Arizona Legislature
The Honorable Evan Mecham, Governor
Mr. Charles L. Miller, Director
Arizona Department of Transportation
Transmitted herewith is a report of the Auditor General, A Performance Audit
of the Arizona Department of Transportation- Sunset Factors and Summary
Report. This report is in response to a July 26, 1985, resolution of the Joint
Legislative Oversight Committee.
Previous reports have addressed problems on the Department's two largest
divisions. Audits were conducted on the Revenue Group Audit section and the
commercial weight enforcement function of the Motor Vehicle Division, and on
the highway maintenance equipment management, and construction
management functions of the Highways Division. This report provides responses
to the twelve statutory Sunset factors, and addresses recurring central
management problems found in the Highways Division. The report also includes
summaries of our five department audits.
My staff and I will be pleased to discuss or clarify items in the report.
Respectfully submitted,
~ o u w Rs. Norton
Auditor General
Staff: William Thomson
Peter Francis
Deborah Klein
Enclosure
2700 NORTH CENTRAL AVE @ SUITE 700 0 PI- iOENIX, ARIZONA 85004 8 ( 602) 255- 4385
TABLE OF CONTENTS
Page
SUNSETFACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RECURRING PROBLEMS FOUND I N THE HIGHWAYS D I V I S I O N . . . . . . . . . . 11
SUMMARIES OF DEPARTMENT OF TRANSPORTATION AUDITS . . . . . . . . . . 15
( REPORT NO. 86- 7) MOTOR VEHICLE D I V I S I O N , REVENUE GROUP. . . . . . 15
( REPORT NO. 86- 9) MOTOR VEHICLE D I V I S I O N , WEIGHT ENFORCEMENT . . . 19
( REPORT NO. 87- 5) H l GHWAYS D I V IS I ON, H l GHWAY MA l NTENANCE
FUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
( REPORT NO. 87- 91 HIGHWAYS D l VI SION, EQUIPMENT MANAGEMENT . . . . 27
( REPORT NO. 87- 1 1 ) H l GHWAYS D I V I S I ON, CONSTRUCT l ON
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DEPARTMENT RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . 34
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit of the
Arizona Department of Transportation ( ADOT) in response to a July 26, 1985,
resolution of the Joint Legislative Oversight Committee. The performance audit
was conducted as part of the Sunset Review set forth in Arizona Revised Statutes
( A. R. S.) 9941- 2351 through 41- 2379. This report, the final in a series on ADOT,
presents a response to the 12 statutory sunset factors and summarizes results of
previous reports.
ADOT was established in 1973 by Senate Bill 1143, which combined the duties of the
former Aeronautics and Highways Departments into a single agency. ADOT is
responsible for providing an integrated and balanced state transportation system.
The Department is divided into five divisions under the Director's office.
0 Highways Division ( Estimated full- time equivalent employees ( FTEs): 1,774) -
Designs, constructs and maintains State highways. The Division is comprised of
two major groups: Highway Development and Highway Operations. The
Highway Development Group takes a project from inception to the point that a
contract is awarded by the State Transportation Board. The Highway
Operations Group is responsible for coordination, management and oversight of
all construction to ensure that i t meets specifications and that contractors
f u l f i l l their contractual obligations. The Group is also responsible for
maintaining State highways.
0 Motor Vehicle Division ( Estimated FTEs: 841) - The Division is organized
into five major groups: Field Services, Safety and Driver Responsibility,
lntegrated Services, Revenue, and Title and Registration. Field Services issues
driver's licenses and conducts the weight enforcement program. The Safety and
Driver Responsibility Groups administers the mandatory auto insurance law,
administers the driver improvement and pupil transportation safety programs,
and maintains records of D WI convictions. The lntegrated Services Group
maintains computerized records of vehicles registered, licensed drivers and
vehicle titles. The Revenue Group collects taxes and fees from vehicle
registrations and driver's licenses, oil companies, and motor carriers. The Title
and Registration Group is responsible for vehicle registration and titling.
e Aeronautics Division ( Estimated FTEs: 15) - The Division develops and
manages programs to assist and promote Arizona's aviation industry. The
Division also registers and licenses general aviation aircraft.
8 Transportation Planning Division ( Estimated FTEs: 98) - The Division
develops short- term policies, provides technical support, and periodically
updates ADOT's long- range plans for integrated multimodal transportation.
a Administrative Services Division ( Estimated FTEs: 281) - Performs service
related functions for A DOT. Provides accounting and computer services for all
divisions, forecasts revenues for the highway construction program, prepares
the Department budget, prepares and implements all nonhighway contracts,
operates the Department warehouse, and maintains and remodels all ADOT
buildings in the Phoenix area.
Staffing and Budget
For fiscal year 1986- 87, A DOT employed an estimated 3,098 full- time employees.
Revenues for ADOT's operations are obtained from several sources, including the
State Highway Fund, the State Aviation Fund and the General Fund. In addition to
these funds, ADOT receives monies from the Federal government for highway
construction. Federal funds are expected to total $ 644 million over the next five
years. Table 1 itemizes the Department's expenditures by program and type of
expenditure, and the State fund summary.
TABLE 1
ADOT ACTUAL AM1 EST I MATED EXPEM) I TURES
BY DlV ISION AND EXPEND! TURE TYPE
AND ADO1 FUND SUUARY FOR
FISCAL YEARS 1985- 86 THROUGH 1987- 88
( UNAM I TED)
Actual
1985- 86
Estimated
1986- 87
Approved
1987- 88
Program Sumnary
Director's Staff
Highway Safety ( a )
Highways Division
Transportation Planning
Public Transit Division
Administrative Services
Motor Vehicle Division
Aeronautics Division
Special Support Group
Total Programs
Expendi tures
FTE Positions
Personal Se rv i ces
Employee Related Expenses
Professional And
Outside Services
Travel - State
Travel - Out of State
Other Operat i ng Expenses
Equ i pmen t
A l l Other Operating
Expenses
Reduction ( S. B. 1002)
Subtotal
Operat ion Subtotal
Highway Maintenance
Special Line Items
Total Appropriated
Fund Sumary
State Highway Fund $ 131,717,800 $ 147,201,000 $ 149,800,300
State Aviation Fund 527,200 694,200 709,500
General Fund 64,200 80,700 85,300
Total Funds $ 132--
( a) The Governor's O f f i c e of Highway Safety was transferred to the Department of Public
Safety e f f e c t i v e July 1 , 1987.
Source: State of Arizona Appropriations Report, fiscal year 1988
Scope of Audits
Our performance audits of ADOT focused on the Department's two largest
Divisions. Audits were conducted in the following areas.
Highways Division
Highway Maintenance
Equipment Management
Construction management
Motor Vehicle Division
Revenue Group
Commercial Vehicle Weight Enforcement
A third audit initiated within the Motor Vehicle Division - driver's licensing and
title processing - was discontinued due to numerous operational changes that were
being made at the time. ( 1 1
In this report, we present responses to the 12 statutory sunset factors. We also
discuss two central management problems we found in each of the three reviews we
conducted on the Highways Division. Summaries of each report can be found on
pages 15 through 33.
Our audits were conducted in accordance with generally accepted governmental
auditing standards.
The Auditor General and staff express appreciation to the Director and staff of
ADOT for their cooperation and assistance throughout each of our audits.
( ' 1 The J o i n t L e g i s l a t i v e Oversight Committee i n c l u d e d t h e Motor Vehicle D i v i s i o n ' s
d r i v e r ' s l i c e n s i n g and t i t l e processing f u n c t i o n on the l i s t of a u d i t s to be
conducted during the 1989 sunset cycle.
SUNSET FACTORS
In accordance with Arizona Revised Statutes 541- 2354, the Legislature should
consider the following 12 factors in determining whether the Arizona Department of
Transportation ( ADOT) should be continued or terminated.
1. Objective and purpose in establishing the Department
In 1973 the Legislature enacted Senate Bill 1143, which merged the Highways
and Aeronautics departments to form ADOT. ADOT's purpose is to provide an
integrated and balanced state transportation system. A. R . S. 928- 104.8 requires
ADOT to perform the following functions.
1. Register motor vehicles and aircraft, license drivers, collect
revenues, enforce motor vehicle and aviation statutes, and
perform related functions.
2. Do multi- modal state transportation planning, cooperate and
coordinate transportation planning with local governments, and
establish an annually updated priority program of capital
improvements for all transportation modes.
3. Design and construct transportation facilities in accordance
with a priority plan; and maintain and operate state highways,
state airports, and state public transportation systems.
4. Investigate new transportation systems and cooperate with and
advise local governments concerning the development and
operation of public transit systems.
5. Have administrative jurisdiction of transportation safety
programs and implement them in accordance with applicable
law.
2. The effectiveness with which the Department has met its objective and
purpose and the efficiency with which the Department has operated
We identified numerous ways ADOT could improve its efficiency and
effectiveness within each of the divisions we reviewed.
a The Revenue Group Audit Section within the Motor Vehicle Division
( MVD) could increase its effectiveness, and generate up to $ 10.9 million
per year in additional audit assessments by increasing its audit coverage
of commercial carriers. In addition, the Audit Section could increase its
effectiveness by improving its audit selection procedures. Further,
increasing the productivity of the Audit Section could increase revenue
recovered through audit assessments by $ 1.8 million to $ 2.8 million
annually. The Audit Section's effectiveness could be increased by
establishing adequate controls to ensure the quality and integrity of audit
modifications and taxpayer billings. Finally, the Audit Section's
effectiveness could be increased by reducing the increase in the number
of uncollectible accounts. ( See Auditor General Report No. 86- 7)
a The Motor Vehicle Division's effectiveness in enforcing commercial
vehicle weight limits needs to be strengthened to control costly damage
to roads caused by overweight trucks. MVD could improve its
effectiveness by taking steps to stop trucks from bypassing ports of entry,
fixing inoperative scales at MVD ports of entry, and increasing use of
mobile crews in the interior of the State. As we note in our report,
several statutory changes are also needed to support MVD enforcement.
More should be done to hold companies liable for damage caused by their
trucks when companies repeatedly violate weight limitations. ( See
Auditor General Report No. 86- 9)
0 ADOT's Maintenance Section could improve its efficiency by contracting
out more maintenance activities. Private contractors have been able to
perform several activities, such as curb sweeping and mowing, at less cost
than ADOT. Further, effectiveness of the Maintenance Section could be
improved by implementing needed improvements to the PeCos system
used by the Section to plan, budget and control maintenance activities,
and by establishing a method for evaluating district maintenance
conditions. ( See Auditor General Report No. 87- 51
a ADOT's Highways Division could improve its efficiency by increasing its
control of construction staffing levels. Our analysis of construction
engineering costs and other Statewide data indicates that overstaffing has
cost the State an estimated $ 7.4 million over the last four fiscal years.
Further, ADOT1s effectiveness could be increased by addressing system
deficiencies in the Construction Engineering Manpower Management
System ( CEM MS). Currently, the system is not being used to effectively
manage A DO T's construction engineering resources. In addition, A DOT
has not adequately supported CEMMS. ( See Auditor General Report No.
87- 1 1)
0 ADOT could improve its efficiency by reducing its fleet of cars and light
trucks. ADOT could save more than $ 1.7 million by not replacing 195
underutilized vehicles. Further, A DOT'S Equipment Services Section
could reduce the amount of time new vehicles remain unused before being
placed into service. ADOT had 92 pieces of equipment worth
approximately $ 1 million at purchase that remained idle for six to 30
months. Finally, AD OTIS Equipment Services Section could reduce the
amount of time that District 1' s critical highway maintenance equipment
is in the shop for repairs. ( See Auditor General Report No. 87- 9)
3. The extent to which the Department has operated within the public interest
ADOT's responsibility to provide an integrated and balanced State
transportation system serves the public interest. The Highways Division
designs, constructs and maintains State highways for public use. The Highways
Division is in the process of expanding the highway system to improve public
service. The Motor Vehicle Division's activities also serve the public interest.
The Division has implemented a driver's license renewal by mail program to
improve public convenience. Further, MVD has sought to implement changes in
the t i t l e and registration process to reduce the amount of time i t takes for the
public to receive their titles.
4. The extent to which rules and regulations promulgated by the Department are
consistent with the Legislative mandate
The Attorney General's Office is responsible for reviewing ADOT rules and
determining i f they are consistent with statute. The Attorney General's Office
reviews Department rules through the formal certification process required by
law.
5. The extent to which the Department has encouraged input from the public
before promulgating rules and regulations and the extent to which it has
informed the public as to its actions and their expected impact on the public
The Department has encouraged input from the public before promulgating
rules and regulations by advertising proposed changes in the news media.
Further, the Department holds public hearings before promulgating rules. In
cases where rules and regulations may impact a specific group, the Department
may send direct mailings notifying these groups of rule and regulation changes.
For example, the Department recently changed the rules and regulations
regarding prequalification of contractors. In this case, the Department sent a
notice to contractors informing them of the proposed change.
The Department also involves the public in decisions regarding transportation
projects. According to the Director of AD 0 T, " Citizens' advisory groups,
public forums, public hearings, and meetings before local governing bodies are
carried out routinely prior to construction projects being awarded."
6. The extent to which the Department has been able to investigate and resolve
complaints that are within its jurisdiction
This factor does not apply since the Department is not a regulatory agency
7. The extent to which the Attorney General or any other applicable agency of
State government has the authority to prosecute actions under enabling
legislation
According to AD 0 T's Attorney General representative, county attorneys
prosecute actions relating to the Motor Vehicle Division laws. In our audit of
the Motor Vehicle Division weight enforcement program, we found that the
courts were not imposing sufficient penalties for violations. While some courts
adhered to statutory fines, others reduced the amount of the fine. In June
1986, the Arizona Supreme Court issued a memo to all Arizona courts of
limited jurisdiction advising them to impose the minimum statutory penalties,
after this problem was brought to the Court's attention by our Office.
8. The extent to which the Department has addressed deficiencies i n i t s enabling
statutes which prevent it from fulfilling its statutory mandates
According to ADOT officials, ADOT has proposed legislation regarding the 65
mph speed limit bill, renewal of driver's licenses by mail, and the classification
of driver's licenses for truck drivers. Further, ADOT played a key role in the
legislation allowing counties to increase the sales tax by 112 cent with the
proceeds going toward transportation improvements in the respective counties.
9. The extent to which changes are necessary in the laws of the Department to
adequately comply with the factors listed in the Sunset Law
Our review of the Department indicated that statutes related to overweight
trucks need to be amended to: 1) allow overweight axle citations to be issued
even i f the load is shifted, 2) assess higher penalties for repeat violations in
excess of 2,500 pounds, and 3) permit courts to hold trucking companies or
individuals who own or lease trucks jointly responsible with drivers for all
weight violations.
10. The extent to which the termination of the Department would significantly
harm the public health, safety or welfare
Termination of the Department of Transportation would have a detrimental
impact on public welfare. A D O T designs, constructs and maintains the highway
system for the entire State. Termination of ADOT would result in the loss of a
Statewide system, and a perspective for planning, construction and maintenance
of roadways that cross jurisdictional boundaries. According to the Director of
the Department, termination of the Department would cause the functions
currently performed by the Department to be assumed by the local
communities. Further, he indicated that the cities and counties are not
equipped to design, construct and maintain transportation facilities.
11. The extent to which the level of regulation exercised by the Department is
appropriate and whether less or more stringent levels of regulation would be
appropriate
This factor does not apply since the Department is not a regulatory agency.
12. The extent to which the Department has used private contractors in the
performance of its duties and how effective use of private contractors could be
accomplished
ADOTts greatest use of contractors is in its Highways Division, where
contractors perform both construction and highway maintenance work.
Construction - Private contractors perform all road construction. In recent
years, A DOT has also hired outside firms to assist in design and oversight of the
construction program. However, ADOT may be able to expand its use of
private contractors to perform the construction oversight function. In our audit
of the construction function ( See Auditor General Report No. 87- 11), we found
that ADOT could avoid increasing its current staffing levles by utilizing
alternatives, such as contracting out more work, to meet anticipated
short- term increases in workload. The primary advantage is that ADOT would
only have to pay for the construction staff when they are needed. In addition to
contracting out the oversight function, ADOT may be able to avoid increasing
its staff size by contracting out specific functions such as surveying and lab
work.
Maintenance Contracting. - ADOT should continue to expand its use of
contracting for the highway maintenance function. AD 0 Tts Maintenance
Section of the Highways Division hires private firms for maintenance activities
such as rest area and picnic area maintenance, l i t t e r pickup, sweeping, trash
collection, mowing, pumping and landscaping. The contract maintenance
program has demonstrated that contractors are able to perform some
maintenance activities at a lower cost than ADOT, while generally providing an
improved level of service. In 1986, the approximate savings from the program
were more than $ 1.2 million.
Because of its cost effectiveness and improved level of service, the contracting
program should be expanded. Many maintenance activities such as shoulder
maintenance, culvert cleaning, guardrail repair and handpatching with premix
are successfully contracted in other states.
RECURRING PROBLEMS FOUND IN THE HIGHWAYS DIVISION
Our three audits of the Highways Division revealed two common central
management problems. First, management information systems that the Arizona
Department of Transportation ( ADOT) originally developed to provide better central
control have experienced serious problems and are largely ineffective. A second but
related problem is that ADOT's central office has not asserted a strong role in
overseeing district operations.
Data Systems
Are Deficient
The Highways Division is the largest division in ADOT, with operations throughout
the State. In order to obtain better control of the construction, maintenance and
equipment management functions, ADOT has spent considerable time and resources
developing data systems. However, the data systems in these three major areas do
not work as intended.
0 Construction - In our construction audit, we found that the Construction
Engineering Manpower Management System ( CEMMS) was not used effectively.
Since CEM MS was implemented in October 1982, ADOT has committed at least
$ 550,000 to the System, of which an estimated $ 460,000 has been incurred by
central office staff, with an additional $ 93,000 paid to consultants. CEM MS
was developed to plan and staff, budget, schedule, and monitor ADOT's
construction engineering resources. Because of the System's ineffectiveness,
it is not used to plan manpower needs. Further, CEMMS is not used to
determine construction costs or monitor project progress. In addition, the
construction orgs are not effectively using CEMMS to schedule personnel
assignments and communicate the assignments to employees. Finally, although
CEMMS is intended to identify significant problem areas, nearly half of the
construction orgs do not receive CEM MS reports on a regular basis.
0 Maintenance - In our maintenance audit, we found that the automated
management system for planning, budgeting and controlling highway
maintenance, called PeCos, did not work as intended. PeCos was implemented
in 1971 to provide management support through an objective basis from which
the maintenance program could be planned and executed. Despite its estimated
$ 720,000 annual cost, we found that PeCos was unreliable in projecting annual
maintenance requirements, setting production rates for field staff, and
assessing maintenance costs and resource requirements. Further, PeCos did not
provide adequate operational support for central office and field management.
For example, confidence in PeCos was so low that 11 of 12 of the org
supervisors interviewed do not use, or even consider, PeCos planned
accomplishments when scheduling maintenance work.
a Equipment - Central data management of the Equipment Services Section is
performed through the Equipment Management System ( EMS). However, the
EMS system has shortcomings which severely limit its usefulness to both
management and users. EMS was designed to track vehicle downtime.
However, because of numerous errors the downtime information is unreliable.
Further, we found shortcomings in the usefulness of the system for equipment
utilization. The system was supposed to track equipment utilization, provide
utilization analysis reports, provide fleet size analysis reports, set utilization
standards, and provide utilization exception reports of below standard usage,
However, the system is not used to monitor utilization.
Although problems have been brought to management's attention, ADOT has been
slow to implement needed changes. Eight internal and external studies conducted on
CEM MS pinpointed substantial changes needed to make the system viable. However,
ADOT has not dedicated the resources needed to improve the system. Further, both
a 1982 audit by our Office and a 1984 study conducted by a consultant hired by
ADOT made recommendations for improvements to PeCos. Again, however, the
recommendations of these studies have not yet been fully implemented. Finally,
ADOT indicated in our 1983 report on the Equipment Section that the EMS system
would be able to monitor utilization. Yet, the system is currently not performing
this function.
A DOT Needs To Strengthen
Central Oversight
ADOT's Central Office has not asserted a strong role in overseeing district
operations of the Highways Division.
a Maintenance - In our maintenance audit, we found that central office had
inadequate oversight of the maintenance function. Upper management, which
oversees district operations, did not take a sufficient interest in maintenance
management. The Deputy State Engineer of the Highway Operations Group,
who oversees district operations, did not review any reports prepared by the
Maintenance Section of the central office. Further, the Maintenance Section
prepares and allocates the budget and oversees the maintenance management
system; however, it had limited authority over district maintenance operations.
As a result of limited authority, there is confusion as to the Maintenance
Section's responsibility to monitor and control field performance. Thus,
although the Section generates detailed reports on maintenance efforts, the
Section does not review district conformance with performance standards or
dictate how resources should be allocated.
o Equipment Services - In our audit of the Equipment Services Section, we
found that oversight of equipment users was lacking. The Section had not
developed standards for equipment utilization. Thus, exception reports showing
users with inadequate utilization were not generated. Equipment Services
officials indicated that the Section had only limited authority to take action
when equipment was not sufficiently utilized. In addition to the lack of action
by the Equipment Services Section, central management also failed to take
action. Although central management was aware of problems with
underutilization identified in our 1983 audit report, sufficient steps were not
taken to ensure that recommendations were implemented.
a Construction - Central management has not taken a sufficiently aggressive
role in controlling staffing levels and ensuring that CEMMS is properly
utilized. Our audit revealed that ADOT's construction program was
overstaffed. ADOT construction staff had not been adjusted based on
workload. In addition, CEMMS, the manpower management system established
to assist in adjusting construction staff levels to meet workload fluctuations,
had not been fully utilized by ADOT. In fact, many orgs did not even receive
reports generated by CE M MS. According to an AD OT consultant, central office
staff involvement is essential for proper implementation of CEM MS. However,
ADOT's central office had relinquished control of manpower management to
the districts. Thus, ADOT lacks adequate Statewide management of
construction engineering manpower.
( REPORT NO. 86- 7) MOTOR VEHICLE DIVISION, REVENUE GROUP
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation ( ADOT) Motor Vehicle Division's Revenue Group, in
response to a July 26, 1985 resolution of the Joint Legislative Oversight Committee.
This performance audit is one in a series of audits on ADOT and was conducted as
part of the Sunset Review set forth in Arizona Revised Statutes ( A. R. S.) 9941- 2351
through 41- 2379.
The Revenue Group serves as the revenue processing arm of the Motor Vehicle
Division ( MVD). The Revenue Group handles all revenues resulting from A. R. S. Title
28 ( transportation code): approximately $ 424 million annually. The major duties of
the Revenue Group are to: 1) set up and monitor commercial carrier accounts to
ensure compliance with Title 28 and other requirements; 2) receive, process and
distribute all Title 28 tax and license revenues; and 3) audit commercial vehicle and
distributor tax accounts to ensure proper tax reporting.
t Could
Dollars in Revenue
The Revenue Group Audit Section does not conduct enough audits of commercial
carriers. Currently the Section audits only about 2 percent of its accounts annually,
resulting in potential lost assessments of as much as $ 10.9 million per year. While
audit coverage varies from state to state, Arizona's falls below that of several other
states in at least two tax types.
Expanded audit coverage would substantially increase audit collections and improve
compliance with Arizona tax laws. Increasing the Section's current coverage to 3.1
percent would produce approximately $ 1.5 million in additional assessments, and
could be accomplished with current staffing levels by implementing the productivity
improvements recommended in Finding Ill ( page 17). lncreasing coverage to the 10
percent level would require 38 additional auditors, but could result in an additional
$ 10.9 million in assessments. The Audit Section should develop a plan to increase
audit coverage and use the plan to request funding for needed staff.
Current Audit Selection Procedures
Are Not Effective
The Audit Section's effectiveness is reduced by poor audit selection procedures.
Currently, audits are selected based on individual, often arbitrary judgment and are
not selected randomly. As a result, the Audit Section has audited 57 percent of the
largest accounts we analyzed at least once in the past three years. Many of the
largest accounts were audited repeatedly. The other 43 percent of large accounts
and 96 percent of the remaining accounts we analyzed have not been audited.
Because the Section focuses its efforts on a limited number of large accounts, most
other taxpayers have l i t t l e incentive to report their taxes properly. For example, one
carrier who was reporting a zero monthly tax liability was assessed more than
$ 37,000 as the result of an audit. Such underreporting could be causing the State to
lose substantial tax revenue.
To improve the effectiveness of its audit coverage, the Audit Section needs to
develop selection criteria that ensure random coverage of accounts. Management
should also review accounts to determine factors upon which selection could be
based, including account size, to further maximize revenue recovery.
The Audit Section could increase revenue recovered through audit assessments by
approximately $ 1.8 million to $ 2.8 million annually by limiting special project
assignments and automating auditor duties. Currently, auditors spend approximately
35 percent of their time on nonaudit duties. Using auditors for special projects has
cost the State approximately $ 4.3 million in the past three years, because the
auditors were not using their time to generate audit assessments. MVD should limit
use of audit staff for special projects.
The Audit Section could further increase productivity and generate more revenue by
automating several audit processes. The experience of other audit organizations
shows that the use of personal computers by auditors can decrease the time needed to
complete each audit by 10 to 30 percent. This translates into additional audits with
an estimated $ 351,000 to $ 1.3 million in potential audit assessments. The Legislature
should consider funding the Audit Section's 1987- 88 budget request for eight
microcomputers and software. Based on MVD's progress in implementing a
computerized audit program, the Legislature should consider funding additional
requests for computers in subsequent years.
The Audit Section Lacks Adequate Controls
To Ensure Quality And Integrity O f Audit
Modifications And Taxpayer Billings
The Audit Section does not have adequate controls to ensure accurate, justifiable
audit assessment modifications and billings. Documentation to support audit
assessment modifications reviewed by our staff was either weak or not available,
even though the modifications resulted in reductions of the original assessment
amount and ranged from approximately $ 500 to $ 368,000. Further, MVD audit
supervisors did not sign- off on most of the modifications after the completion of
each audit. The Audit Section also lacks adequate controls over assessment
notifications, since individual auditors have control over both the audit and the
taxpayer billing.
The Audit Section needs to enforce existing standards and policies governing
assessment modifications and taxpayer notifications to ensure that all modifications
are adequately documented and reviewed. ADOT's Internal Audit Section should
periodically review the MVD Audit Section's internal controls over modifications and
taxpayer notifications to ensure that they are adequate and are working as intended.
MVD Could Reduce Growth In The Number Of
Uncollectible Accounts
The Revenue Group has difficulty collecting monies owed from commercial carrier
accounts after all allowable collections procedures have been attempted. In order to
prevent an increase in the number of such outstanding accounts, the Revenue Group
could implement various monitoring procedures. For example, MVD could use a local
publication to track in- State accounts entering bankruptcy proceedings so the State
can file as a creditor before bankruptcy proceedings are final. MVD could also
improve its ability to identify out- of- State accounts that may go bankrupt by
monitoring the financial reporting of all carriers in and out of the State. It could also
use an outside collection agency to track bankrupt out- of- State carriers.
( REPORT NO. 86- 9) MOTOR VEHICLE DIVISION, WEIGHT ENFORCEMENT
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation ( ADOT), Motor Vehicle Division ( MVD), weight
enforcement function in response to a July 26, 1985, resolution of the Joint
Legislative Oversight Committee. This performance audit is one in a series of audits
on ADOT, and was conducted as part of the Sunset Review set forth in Arizona
Revised Statutes ( A. R . S.) $ 941 - 2351 through 41 - 2379.
Overweight trucks accelerate pavement deterioration and increase stress on bridge
structures. This deterioration increases exponentially as truck weight increases. For
example, a 100,000 pound truck does three times as much damage as an 80,000 pound
truck. In order to mitigate the damage from overweight trucks, MVD has a weight
enforcement program. This weight enforcement operation is comprised of 18 fixed
ports of entry on the State's borders and several mobile scale crews that operate in
the interior of the State.
Enforcement
Bypassing of ports of entry and limited use of mobile crews weakens MVD's
enforcement effort. Although 33 paved roads lead into Arizona from surrounding
states and Mexico, only 13 have ports of entry with operating scales. Although there
is limited data on the number of trucks bypassing the ports, studies have shown that
from 10 percent to 33 percent of trucks on Arizona highways are exceeding weight
limits. MVD is preparing to implement a plan to prevent bypassing of ports; however,
this plan will be limited to only the eastern border and portions of the northern
border of the State.
Better enforcement is also necessary in the interior of the State to monitor those
truckers who operate within Arizona's borders. For example, trucks carrying
concrete, garbage, and sand and gravel frequently violate weight limits but travel only
short distances and do not pass through ports. MVD has placed a low priority on
intrastate weight enforcement activities. Officers assigned to interior based mobile
crews spend less than 50 percent of their time on weight enforcement.
Inoperative Scales Allow Many Trucks
To Pass Through Ports Of Entry Without
Being Weighed
Weight enforcement is further weakened because port scales are frequently
inoperative. Because of frequent scale malfunctions, more than one- quarter million
trucks, 13 percent of the trucks that could have been weighed in fiscal year 1984- 85,
were not weighed. One major cause of scale downtime is that port scales were not
designed for the high traffic volumes at the ports. Another problem is that some of
MVD's scale installations make maintenance and repair very difficult and costly. A
1985 ADOT report indicated that $ 600,000 was needed to repair scales with
significant maintenance problems.
MVD should consider purchasing heavier scales designed for high traffic volumes.
Such scales cost approximately 10 to 15 percent more than the scales MVD has
purchased in the past.
Overloaded Axles, Which Are Damaging And
Occur Frequently, Cannot Be Cited Under
Existing Law
Although overweight axles are a major cause of pavement damage, effective
enforcement action cannot be taken in most cases. Truck related pavement damage
is primarily caused by the weight on each of a truck's axles. Therefore, a truck with
overloaded axles can cause damage even though its gross weight may be legal.
However, current statutes require officers to allow shifting of a load when a vehicle
is only over axle weight, not over gross limits. If the load is shifted to be within legal
axle load limits, the driver cannot be cited. As a result, more than 90 percent of
Arizona's weight enforcement violations between fiscal years 1982 and 1984 could
not be cited.
The Legislature should consider modifying the statutes to allow citations for all
overweight axle violations.
More Than One Third Of All Violators Are Not
Assessed Minimum Statutory Fines
The judicial system often fails to enforce minimum statutory penalties against weight
violators. Many courts incorrectly believe they have the authority to lower or
suspend fines. As a result, 38 percent of overweight violators receive fines less than
the minimum fines specified in statutes. The average fine reduction is $ 750 for those
fines that are reduced. This not only diminishes the deterrent effect of the penalties,
but also translates into a revenue loss of approximately $ 600,000 per year.
MVD should monitor fines imposed by the courts to ensure that the weight fine
schedule established in statutes is applied. Noncompliance should be reported to the
Arizona Supreme Court in order to ensure future compliance.
Greater Enforcement Effort Should Be
Directed At Trucking Companies
Enforcement efforts should be directed at trucking companies as well as drivers.
Although owners and companies may be responsible for overloads, they are currently
not held accountable for weight violations committed with their trucks. Under
existing statutes, courts are generally constrained to hold only the truck driver
responsible for weight violations. This has provided sufficient enforcement problems
that the City of Tempe enacted an ordinance that holds owners and drivers jointly
liable for weight citation penalties.
Weight audits and civil penalties could also be used to direct enforcement action
toward truck companies and owners. Audits of truck company weight records are an
effective and efficient tool in identifying companies that repeatedly violate weight
laws. Weight audits are successfully used by the state of Minnesota. After repeat
violators are identified, civil suits can recover road damages they have caused.
Texas and Minnesota have found that this action can be a very effective deterrent
against intentional violations. For example, Texas collected more than $ 1.3 million
in damages in a seven- month period and has experienced a 30 percent reduction in
gross weight violations since its civil program began in late 1984. Minnesota
attributes a 55 percent reduction in overweight trucks between fiscal years 1982- 83
and 1984- 85 to weight audits and civil penalties.
The Legislature should consider amending the statutes to permit courts to hold
trucking companies or individuals who own or lease trucks jointly responsible with
drivers for all weight violations. In addition, the Legislature should consider giving
MVD the authority to conduct audits of trucking company weight records. MVD
should consider bringing civil action against companies that repeatedly violate weight
limits.
MVD Needs Better Information For Its
Weight Enforcement Program
MVD needs more and better data on weight citations and on the location and
movement of overweight trucks. lnformation on trucking company name, time and
location of violation, fine amount, and truck weight is not presently available. MVD
needs this information to evaluate its effectiveness, to enhance enforcement efforts
against repeat violators, and to monitor court adherence to statutory fines.
( REPORT NO. 87- 5) HIGHWAYS DIVISION, HIGHWAY MAINTENANCE FUNCTION
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation ( ADOT) in response to a July 26, 1985, resolution of
the Joint Legislative Oversight Committee. This performance audit was conducted
as part of the Sunset Review set forth in the Arizona Revised Statutes ( A. R. S.)
$ 541- 2351 through 41- 2379.
This is the third of several reports to be issued on the Arizona Department of
Transportation. The report focuses on the Highway Maintenance Section of the
Highways Division of ADOT.
Highway maintenance organizations ( orgs) perform numerous maintenance activities
including maintenance of paved surfaces, unpaved surfaces, unpaved shoulders,
vegetation, roadsides, rest areas and landscapes. Major highway maintenance
projects such as pavement overlays or reconstruction are generally performed by
private contractors through the Construction Section of the Highways Division.
A DOT Should Continue To Expand
Its Contract Maintenance Program
A DOT should expand its contracting of routine maintenance activities. AD OT's
Maintenance Section uses private firms for maintenance activities such as rest and
picnic area maintenance, l i t t e r pickup, sweeping, trash collection, mowing, pumping
and landscaping. The contract maintenance program has demonstrated that
contractors are able to perform some maintenance activities at a lower cost than
ADOT, while generally providing an improved level of service. In 1986, the
approximate savings from the program were more than $ 1,200,000.
Because of its cost effectiveness and improved level of service, the contracting
program should be expanded. Many maintenance activities such as shoulder
maintenance, culvert cleaning, guardrail repair, and hand patching with premix are
successfully contracted by other states. A t a minimum, ADOT should evaluate the
feasibility of contracting out these activities. In addition, the Legislature may wish
to establish a technical advisory committee ( consisting of representatives from
ADOT, private contractors and other persons knowledgeable in contracting and
highway maintenance), to conduct a systematic evaluation of all maintenance
activities to identify other activities that should be contracted.
ADOT's System For Planning, Budgeting And Controlling
Highway Maintenance Continues To Need Significant Improvement To Meet
Central Office And Field Management Needs
Despite its $ 720,000 annual cost, ADOT's system for planning, budgeting and
controlling highway maintenance, called PeCos, does not work as intended. PeCos is
designed to help the central office plan an annual work program and budget available
resources to accomplish the annual plan. PeCos should indicate the labor hours, and
amount of materials and equipment required to do a given amount of work.
PeCost usefulness is limited because key elements for: ( 1) projecting annual
maintenance requirements, ( 2) setting production rates for field crews, and ( 3)
assessing maintenance costs and resource requirements are inaccurate and
unreliable. In eight of 12 activities reviewed, actual field productivity had no
relationship to PeCos estimates. For example, for one of these activities, blading
unpaved shoulders, daily production is estimated at either 4.5 or 4.6 shoulder miles;
however, actual daily production ranged from .5 to 7.1 shoulder miles. This reduces
PeCos usefulness as a planning and budgeting tool because reliable production
estimates are necessary to develop a viable budget.
Nor does PeCos meet operational needs in the field. It does not enable area
personnel to effectively plan and control the work of maintenance crews. Our
analysis showed that confidence in PeCos is so low that 11 of the 12 org supervisors
interviewed do not use, or even consider, PeCos planned work when scheduling
maintenance activities.
AD 0 T Should Establish A Method For Evaluating
District Maintenance Conditions
In addition to implementing needed improvements to its maintenance management
system, ADOT needs to establish a method for evaluating the level of service
provided by maintenance field crews. Field staff report the amount of work done but
do not systematically survey and report highway conditions. As a result, A DOT
central office cannot compare highway conditions Statewide to direct resources to
areas and activities of greatest need.
ADOT should consider adopting some methods used in other states. Florida and Ohio
have supplemented their maintenance management systems by developing systematic
approaches to evaluating maintenance conditions throughout their highway systems.
Both states have developed condition standards. For example, one Florida standard
requires that shoulders have no more than a 3 inch drop- off. Another standard
requires that potholes be no greater than 1.5 square feet in area and 1.5 inches deep.
Both Florida and Ohio send observers into the field each quarter to test for
compliance with their standards.
Central Office Needs To Strengthen Its Oversight
Of The Maintenance Function
Central office needs to strengthen its Statewide oversight of the maintenance
function. Upper management, which oversees district operations, needs to take a
greater interest in maintenance management. The Deputy State Engineer of the
Highway Operations Group, who oversees district operations, does not review any
reports prepared by the Maintenance Section of the central office. The Maintenance
Section prepares and allocates the budget and oversees the maintenance management
system; however, i t has no line authority over district maintenance operations. As a
result, Statewide oversight and enforcement is lacking. Deviations in field
performance, such as an org that performs 100 percent less work on an activity than
was planned, are not routinely pursued to determine i f problems exist and corrective
action is needed.
( REPORT NO. 87- 9) HIGHWAYS DIVISION
EQUIPMENT MANAGEMENT FUNCTION
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Transportation ( ADOT) equipment management function in response
to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. This
performance audit is one in a series of audits on ADOT, and was conducted as part of
the Sunset Review set forth in Arizona Revised Statutes 9941- 2351 to 41- 2379.
ADOT owns and maintains a fleet of approximately 3,450 pieces of equipment, with a
total estimated replacement cost of $ 64 million. The fleet consists of heavy
equipment such as loaders, graders and snowplows, and lighter equipment, including a
large passenger fleet. The Equipment Services Section is responsible for purchasing,
maintaining and disposing of the equipment. However, according to Equipment
Services officials, i t does not have authority to control the size of the fleet.
Vehicles
More than 15 percent of ADOT's cars and light trucks are underutilized and could be
eliminated from ADOT's fleet, saving more than $ 1.7 million in replacement costs
alone. Based on a conservative measure of usage, we determined that A DOT could
reduce its fleet by an estimated 195 vehicles. We believe this estimate is
conservative because observations of construction field offices revealed that nearly
35 percent of assigned vehicles sat idle at each observed time during the day. The
practice of assigning vehicles to individuals rather than pooling or using other
alternatives contributes to the low usage. ADOT should require or encourage its
employees to use alternative methods of transportation, including pooling vehicles
and using personal cars.
Although ADOT has been aware of problems with underutilization, it has not taken
sufficient action since our previous audit. In response to our 1983 audit, ADOT
reduced the number of heavy equipment units in its fleet, and reduced the number of
planned purchases of cars and pickups. However, ADOT did not develop a utilization
standard, and vehicle usage is not routinely reviewed. Further, the administrator of
Equipment Services had not been given authority to recall or transfer any equipment
that was underutilized or not justified. As a result, percentage of vehicles with low
utilization ( less than 1,000 miles per month) has increased from 43 to 48 percent.
ADOT Has Allowed $ 1 Million Worth Of New Equipment
To Sit Idle Too Long Before Placing It Into Service;
Individual Units Have Been Delayed From Six Months To
Two And One- Half YE
Ninety- two pieces of equipment worth approximately $ 1 million at purchase have
remained unused for six to 30 months before being placed into service. In contrast,
other large fleet operations set goals of issuing new equipment well under two
months. The following case examples illustrate the ADQT delays.
e In August 1984 ADOT accepted delivery of a number of 1- ton truck chassis, to
which special beds were to be added. Five of these chassis, costing a total of
$ 48,000 at purchase, were not issued to users until January 1987.
a In mid- 1985 ADOT accepted delivery of still more 1- ton truck chassis. As of
June 24, 1987, 11 of these chassis were still on the Equipment Services lot,
awaiting fabrication and attachment of special bodies.
Equipment Services' failure to issue equipment in a timely manner has resulted in
wasted State funds as well as problems for some users. At a minimum, such
extensive delays have led us to question whether several vehicles were really needed,
at least at the time the purchases were made. Poor management and planning appear
to have caused the excessive delays in issuing new equipment.
ADOT. - Could. Reduce . E quipment Downtime And - . . . - Speed Repair Of Equipment Critical To Users
The amount of time critical highway maintenance equipment is in the Central shop
for repairs is excessive. In extreme instances, equipment considered by highway
maintenance foremen to be critical to their operations spent 100 days or more during
a recent 12- month period in Equipment Services' central repair shop. A combination
of factors have caused this equipment to experience unnecessary downtime.
Inadequate shop procedures for repair scheduling and tracking have contributed to the
downtime. Changes that could decrease downtime include contracting out more
repairs, keeping the shops open at night, improving the availability of parts for
repairs, and evaluating equipment refurbishing decisions.
( REPORT NO. 87- 11) HIGHWAYS DIVISION, CONSTRUCTION MANAGEMENT
The Office of the Auditor General has conducted a performance audit of the
Arizona Department of Transportation ( ADOT), construction management function
in response to a July 26, 1985, resolution of the Joint Legislative Oversight
Committee. This performance audit is one in a series of audits on ADOT and was
conducted as part of the Sunset Review set forth in Arizona Revised Statutes
$ 341 - 2351 through 41 - 2379.
ADOT oversees highway construction of all interstate, primary and secondary
roadways to ensure that specifications are met and that contractors f u l f i l l their
legal obligations. To perform the oversight function, AD 0 T has approximately 600
construction staff located throughout the State. In recent years, ADOT has also
contracted with private sector engineering consulting firms to provide oversight on
some projects.
ADOT Has Not Adequately Controlled Construction Staffing Levels,
Resulting In Overstaffing That Has Cost The State
An Estimated $ 7.4 Million Over The Last Four Fiscal Years
Over the last four years ADOT has overstaffed its construction function by 21 to 101
unnecessary staff annually, costing the State approximately $ 7.4 million. Our
estimate of overstaffing is based on analysis of data on three variables: 1)
construction engineering ( CE) costs, 2) the substantial variations in staff
productivity, and 3) excessive amounts of non construction time charged by staff.
Our estimates were further supported by Auditor General staff field visits to
construction orgs and ADOT's own field reviews which provided several examples of
overstaffing.
0 A District Two official acknowledges his district will be overstaffed by an
average of 44 employees over the next 12 months.
0 District Four maintains a permanent construction staff ( averaging approximately
70 staff) year- round, although construction activities vary during the year due to
climatic conditions. As a result, one resident engineer stated his org was
overstaffed from eight to 14 positions for nine months of the year. Further,
ADOT field reviews recently reported a surplus of 22 out of an average of 47
staff in two District Four orgs.
0 ADOT field reviews also found significant amounts of excess hours charged to
the survey function for several projects. ADOT found one project's survey
charges overrunning estimates by 240 to 315 percent. Another project overran
estimates by 6,000 hours. Central office staff attributed the overruns to staff
charging excess time to this function.
ADOT's construction program will expand in three of the next five years. Before
increasing staff size, ADOT should first consider making more use of consultant
engineers, contracting out more of the construction engineering functions ( such as
surveying) and making better use of its own staff resources. These actions will help
prevent staffing for peak workloads and the resultant overstaffing once the peaks
have passed.
Because ADOT has failed to properly adjust past staffing levels to meet fluctuations
in workload, we recommend that the Legislature consider setting and monitoring
construction staffing levels, as is done in several other states. We also recommend a
follow- up performance audit in two years to review ADOT's progress in managing
construction staff size.
ADOT'S Construction Engineering Manpower Management System
Is Not Being Utilized Effectively And
Needs Greater Management Support
ADOT has not effectively used its construction engineering manpower management
system ( CEMMS) to adjust staffing levels based on workload. CEM MS was
implemented in October 1982 to provide construction managers with tools to plan,
schedule and control construction engineering personnel and costs.
We found, however, that despite the $ 550,000 A DOT has committed to CEM MS since
1982, CEM MS is not being effectively utilized to manage CE resources.
0 ADOT has not effectively used CEMMS' long- range labor planning and
short- range project staffing functions to ensure that staffing levels are
appropriate.
e The CEMMS budget function is not well understood or used by district personnel.
0 ADOT has misused the CEM MS scheduling function, which i f used properly,
assesses short- term staffing needs and plans for efficient personnel use. For
example, resident engineers have, in some cases, overstated staffing needs.
0 CEMMS reports identifying ADOT construction engineering hours and cost
overruns are not received by nearly half of the construction orgs. Some districts
have stopped distribution of the reports. Without feedback, action cannot be
taken to control costs. District personnel stated that even when problem
projects are identified, l i t t l e or no formal action is taken.
Although repeatedly informed of problems with CEM MS, A DOT management has
taken little action to correct deficiencies or ensure system utilization. Problems
with management direction, adequate district staff commitment, system analyses and
updating and training have been reported to ADOT management regularly over the
last five years by outside consultants and ADOT staff. ADOT upper management
needs to make a firm commitment to address the problems with i t s manpower
management system to ensure that ADOT uses i t s s t a f f and other resources
efficiently and effectively.
I,
ARIZONA DEPARTMENT OF TRANSPORTATION
206 South Seventeenth Avenue Phoenix, Arizona 85007
I,
EVAN MECHAM CHARLES L MILLER
Governor October 29,1987 Director
Mr. Douglas R. Norton
Auditor General
2700 N. Central Avenue, Suite 700
phoenix, Arizona 85004
Dear Mr. Norton:
We are submitting the attached comments in regard to
the Performance Audit of the Arizona Department of
Transportation, Sunset Factors and Summary Report ( No.
87- 12). I appreciate the opportunity to provide these
comments and have them included in the final report.
Sincerely,
Charles L. Miller
Director
CLM: RE: VN
Attachment
rn HIGHWAYS AERONAUTICS MOTOR VEHICLE PUBLIC TRANSIT ADMINISTRATIVE SERVICES TRANSPORTATION PLANNING
COMMENTS ON AUDITOR GENERAL'S REPORT 87- 12
" A PERFORMANCE AUDIT OF THE
ARIZONA DEPARTMENT OF TRANSPORTATION
SUNSET FACTORS AND SUMMARY REPORT"
October 28, 1987
Auditor General's Report 87- 12 contains the findinss of the
Auditor General concerning the twelve statutory sunset factors.
In addition to these factors, the Auditor General has included
summaries of recently completed audits conducted within the
Arizona Department of Transportation.
Following are brief comments relative to each of the performance
audits conducted in the Arizona Department of Transportation:
PERFORMANCE AUDIT 86- 7
MOTOR VEHICLE DIVISION - REVENUE GROUP
This audit contains five findings relating to the operation of
the Revenue Group. The department agrees with each of the find-ings
and has taken action to respond to specific Auditor General
recommendations. The department's detailed response to this
report can be found in Audit No. 86- 7, dated August 1986.
PERFORMANCE AUDIT 86- 9
MOTOR VEHICLE DIVISION - WEIGHT ENFORCEMENT
Audit 86- 9 contains six findings: five relating to the operation
of the Weight Enforcement Section of the Motor Vehicle Division
and one directed to the judicial system. The department has ini-tiated
steps to respond to each of the ADOT recommendations pre-sented
in the audit report. The department s detailed response
to this report can be found in Audit No. 86- 9, dated December
1986.
PERFORMANCE AUDIT 87- 5
HIGHWAYS DIVISION - MAINTENANCE FUNCTION
Audit Report No. 87- 5 contains four findings relating to the
Maintenance function within the Highways Division. The depart-ment
generally agrees with these findings and has initiated
action to respond to the specific recommendations made by the
Auditor General. The department's detailed response to this
report can be found in Audit No. 87- 5, dated August 1987.
PERFORMANCE AUDIT 87- 9
DEPARTMENT OF TRANSPORTATION - EQUIPMENT MANAGEMENT
Audit 87- 9 contains three findings relating to equipment manage-ment
within the department. The department concurs with two
recommendations and partially concurs with the other. Steps have
been taken to respond to each of the recommendations presented
by the Audit General. The department's detailed response to this
report can be found in Audit No. 87- 9, dated October 1987.
PERFORMANCE AUDIT 87- 10
DEPARTMENT OF TRANSPORTATION - CONSTRUCTION MANAGEMENT
The Arizona Department of rans sport at ion adamantly and totally
disagrees with Finding I contained in Audit 87- 10. The
Department concurs with ind ding I1 regarding the improvement and
utilization of the Construction Engineering Manpower Management
System.
The Department's detailed responses to this report can be found
in Audit No. 87- 9, dated October 1987.

Description

Rating
TITLE	Performance audit, Department of Transportation, sunset factors and summary report
CREATOR	Arizona. Office of the Auditor General.
SUBJECT	Arizona--Dept. of Transportation; Highway departments--Arizona; Roads--Design and construction--Arizona.Sunset reviews of government programs--Arizona;
Browse Topic	Government and politics
DESCRIPTION	35 pages (PDF version). File size: 1174.605 KB. A report to the Arizona State Legislature October 1987, Report No. 87-12.
Language	English
Publisher	Arizona. Office of the Auditor General.
TYPE	Text
Material Collection	State Documents House Received Reports
Acquisition Note	Publication or link to publication sent to reports@lib.az.us
RIGHTS MANAGEMENT	Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution.
DATE ORIGINAL	1987-10-30
Time Period	1980s (1980-1989)
ORIGINAL FORMAT	Paper
Source Identifier	LG 6.2:T 61/12
Location	17433451
DIGITAL IDENTIFIER	87-12.pdf
DIGITAL FORMAT	PDF (Portable Document Format)
DIGITIZATION SPECIFICATIONS	Digitized into PDF form through scanning at the Records Management Division, Arizona State Library.
REPOSITORY	Arizona State Library. Archives and Public Records--Law and Research Library.
File Size	1174.605 KB
Full Text	DOUGLAS R NORTON. CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL LINDA J. BLESSING, CPA DEPUTY AUDITOR GENERAL October 30, 1987 Members of the Arizona Legislature The Honorable Evan Mecham, Governor Mr. Charles L. Miller, Director Arizona Department of Transportation Transmitted herewith is a report of the Auditor General, A Performance Audit of the Arizona Department of Transportation- Sunset Factors and Summary Report. This report is in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. Previous reports have addressed problems on the Department's two largest divisions. Audits were conducted on the Revenue Group Audit section and the commercial weight enforcement function of the Motor Vehicle Division, and on the highway maintenance equipment management, and construction management functions of the Highways Division. This report provides responses to the twelve statutory Sunset factors, and addresses recurring central management problems found in the Highways Division. The report also includes summaries of our five department audits. My staff and I will be pleased to discuss or clarify items in the report. Respectfully submitted, ~ o u w Rs. Norton Auditor General Staff: William Thomson Peter Francis Deborah Klein Enclosure 2700 NORTH CENTRAL AVE @ SUITE 700 0 PI- iOENIX, ARIZONA 85004 8 ( 602) 255- 4385 TABLE OF CONTENTS Page SUNSETFACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 RECURRING PROBLEMS FOUND I N THE HIGHWAYS D I V I S I O N . . . . . . . . . . 11 SUMMARIES OF DEPARTMENT OF TRANSPORTATION AUDITS . . . . . . . . . . 15 ( REPORT NO. 86- 7) MOTOR VEHICLE D I V I S I O N , REVENUE GROUP. . . . . . 15 ( REPORT NO. 86- 9) MOTOR VEHICLE D I V I S I O N , WEIGHT ENFORCEMENT . . . 19 ( REPORT NO. 87- 5) H l GHWAYS D I V IS I ON, H l GHWAY MA l NTENANCE FUNCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ( REPORT NO. 87- 91 HIGHWAYS D l VI SION, EQUIPMENT MANAGEMENT . . . . 27 ( REPORT NO. 87- 1 1 ) H l GHWAYS D I V I S I ON, CONSTRUCT l ON MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 DEPARTMENT RESPONSE . . . . . . . . . . . . . . . . . . . . . . . . . 34 INTRODUCTION AND BACKGROUND The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT) in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. The performance audit was conducted as part of the Sunset Review set forth in Arizona Revised Statutes ( A. R. S.) 9941- 2351 through 41- 2379. This report, the final in a series on ADOT, presents a response to the 12 statutory sunset factors and summarizes results of previous reports. ADOT was established in 1973 by Senate Bill 1143, which combined the duties of the former Aeronautics and Highways Departments into a single agency. ADOT is responsible for providing an integrated and balanced state transportation system. The Department is divided into five divisions under the Director's office. 0 Highways Division ( Estimated full- time equivalent employees ( FTEs): 1,774) - Designs, constructs and maintains State highways. The Division is comprised of two major groups: Highway Development and Highway Operations. The Highway Development Group takes a project from inception to the point that a contract is awarded by the State Transportation Board. The Highway Operations Group is responsible for coordination, management and oversight of all construction to ensure that i t meets specifications and that contractors f u l f i l l their contractual obligations. The Group is also responsible for maintaining State highways. 0 Motor Vehicle Division ( Estimated FTEs: 841) - The Division is organized into five major groups: Field Services, Safety and Driver Responsibility, lntegrated Services, Revenue, and Title and Registration. Field Services issues driver's licenses and conducts the weight enforcement program. The Safety and Driver Responsibility Groups administers the mandatory auto insurance law, administers the driver improvement and pupil transportation safety programs, and maintains records of D WI convictions. The lntegrated Services Group maintains computerized records of vehicles registered, licensed drivers and vehicle titles. The Revenue Group collects taxes and fees from vehicle registrations and driver's licenses, oil companies, and motor carriers. The Title and Registration Group is responsible for vehicle registration and titling. e Aeronautics Division ( Estimated FTEs: 15) - The Division develops and manages programs to assist and promote Arizona's aviation industry. The Division also registers and licenses general aviation aircraft. 8 Transportation Planning Division ( Estimated FTEs: 98) - The Division develops short- term policies, provides technical support, and periodically updates ADOT's long- range plans for integrated multimodal transportation. a Administrative Services Division ( Estimated FTEs: 281) - Performs service related functions for A DOT. Provides accounting and computer services for all divisions, forecasts revenues for the highway construction program, prepares the Department budget, prepares and implements all nonhighway contracts, operates the Department warehouse, and maintains and remodels all ADOT buildings in the Phoenix area. Staffing and Budget For fiscal year 1986- 87, A DOT employed an estimated 3,098 full- time employees. Revenues for ADOT's operations are obtained from several sources, including the State Highway Fund, the State Aviation Fund and the General Fund. In addition to these funds, ADOT receives monies from the Federal government for highway construction. Federal funds are expected to total $ 644 million over the next five years. Table 1 itemizes the Department's expenditures by program and type of expenditure, and the State fund summary. TABLE 1 ADOT ACTUAL AM1 EST I MATED EXPEM) I TURES BY DlV ISION AND EXPEND! TURE TYPE AND ADO1 FUND SUUARY FOR FISCAL YEARS 1985- 86 THROUGH 1987- 88 ( UNAM I TED) Actual 1985- 86 Estimated 1986- 87 Approved 1987- 88 Program Sumnary Director's Staff Highway Safety ( a ) Highways Division Transportation Planning Public Transit Division Administrative Services Motor Vehicle Division Aeronautics Division Special Support Group Total Programs Expendi tures FTE Positions Personal Se rv i ces Employee Related Expenses Professional And Outside Services Travel - State Travel - Out of State Other Operat i ng Expenses Equ i pmen t A l l Other Operating Expenses Reduction ( S. B. 1002) Subtotal Operat ion Subtotal Highway Maintenance Special Line Items Total Appropriated Fund Sumary State Highway Fund $ 131,717,800 $ 147,201,000 $ 149,800,300 State Aviation Fund 527,200 694,200 709,500 General Fund 64,200 80,700 85,300 Total Funds $ 132-- ( a) The Governor's O f f i c e of Highway Safety was transferred to the Department of Public Safety e f f e c t i v e July 1 , 1987. Source: State of Arizona Appropriations Report, fiscal year 1988 Scope of Audits Our performance audits of ADOT focused on the Department's two largest Divisions. Audits were conducted in the following areas. Highways Division Highway Maintenance Equipment Management Construction management Motor Vehicle Division Revenue Group Commercial Vehicle Weight Enforcement A third audit initiated within the Motor Vehicle Division - driver's licensing and title processing - was discontinued due to numerous operational changes that were being made at the time. ( 1 1 In this report, we present responses to the 12 statutory sunset factors. We also discuss two central management problems we found in each of the three reviews we conducted on the Highways Division. Summaries of each report can be found on pages 15 through 33. Our audits were conducted in accordance with generally accepted governmental auditing standards. The Auditor General and staff express appreciation to the Director and staff of ADOT for their cooperation and assistance throughout each of our audits. ( ' 1 The J o i n t L e g i s l a t i v e Oversight Committee i n c l u d e d t h e Motor Vehicle D i v i s i o n ' s d r i v e r ' s l i c e n s i n g and t i t l e processing f u n c t i o n on the l i s t of a u d i t s to be conducted during the 1989 sunset cycle. SUNSET FACTORS In accordance with Arizona Revised Statutes 541- 2354, the Legislature should consider the following 12 factors in determining whether the Arizona Department of Transportation ( ADOT) should be continued or terminated. 1. Objective and purpose in establishing the Department In 1973 the Legislature enacted Senate Bill 1143, which merged the Highways and Aeronautics departments to form ADOT. ADOT's purpose is to provide an integrated and balanced state transportation system. A. R . S. 928- 104.8 requires ADOT to perform the following functions. 1. Register motor vehicles and aircraft, license drivers, collect revenues, enforce motor vehicle and aviation statutes, and perform related functions. 2. Do multi- modal state transportation planning, cooperate and coordinate transportation planning with local governments, and establish an annually updated priority program of capital improvements for all transportation modes. 3. Design and construct transportation facilities in accordance with a priority plan; and maintain and operate state highways, state airports, and state public transportation systems. 4. Investigate new transportation systems and cooperate with and advise local governments concerning the development and operation of public transit systems. 5. Have administrative jurisdiction of transportation safety programs and implement them in accordance with applicable law. 2. The effectiveness with which the Department has met its objective and purpose and the efficiency with which the Department has operated We identified numerous ways ADOT could improve its efficiency and effectiveness within each of the divisions we reviewed. a The Revenue Group Audit Section within the Motor Vehicle Division ( MVD) could increase its effectiveness, and generate up to $ 10.9 million per year in additional audit assessments by increasing its audit coverage of commercial carriers. In addition, the Audit Section could increase its effectiveness by improving its audit selection procedures. Further, increasing the productivity of the Audit Section could increase revenue recovered through audit assessments by $ 1.8 million to $ 2.8 million annually. The Audit Section's effectiveness could be increased by establishing adequate controls to ensure the quality and integrity of audit modifications and taxpayer billings. Finally, the Audit Section's effectiveness could be increased by reducing the increase in the number of uncollectible accounts. ( See Auditor General Report No. 86- 7) a The Motor Vehicle Division's effectiveness in enforcing commercial vehicle weight limits needs to be strengthened to control costly damage to roads caused by overweight trucks. MVD could improve its effectiveness by taking steps to stop trucks from bypassing ports of entry, fixing inoperative scales at MVD ports of entry, and increasing use of mobile crews in the interior of the State. As we note in our report, several statutory changes are also needed to support MVD enforcement. More should be done to hold companies liable for damage caused by their trucks when companies repeatedly violate weight limitations. ( See Auditor General Report No. 86- 9) 0 ADOT's Maintenance Section could improve its efficiency by contracting out more maintenance activities. Private contractors have been able to perform several activities, such as curb sweeping and mowing, at less cost than ADOT. Further, effectiveness of the Maintenance Section could be improved by implementing needed improvements to the PeCos system used by the Section to plan, budget and control maintenance activities, and by establishing a method for evaluating district maintenance conditions. ( See Auditor General Report No. 87- 51 a ADOT's Highways Division could improve its efficiency by increasing its control of construction staffing levels. Our analysis of construction engineering costs and other Statewide data indicates that overstaffing has cost the State an estimated $ 7.4 million over the last four fiscal years. Further, ADOT1s effectiveness could be increased by addressing system deficiencies in the Construction Engineering Manpower Management System ( CEM MS). Currently, the system is not being used to effectively manage A DO T's construction engineering resources. In addition, A DOT has not adequately supported CEMMS. ( See Auditor General Report No. 87- 1 1) 0 ADOT could improve its efficiency by reducing its fleet of cars and light trucks. ADOT could save more than $ 1.7 million by not replacing 195 underutilized vehicles. Further, A DOT'S Equipment Services Section could reduce the amount of time new vehicles remain unused before being placed into service. ADOT had 92 pieces of equipment worth approximately $ 1 million at purchase that remained idle for six to 30 months. Finally, AD OTIS Equipment Services Section could reduce the amount of time that District 1' s critical highway maintenance equipment is in the shop for repairs. ( See Auditor General Report No. 87- 9) 3. The extent to which the Department has operated within the public interest ADOT's responsibility to provide an integrated and balanced State transportation system serves the public interest. The Highways Division designs, constructs and maintains State highways for public use. The Highways Division is in the process of expanding the highway system to improve public service. The Motor Vehicle Division's activities also serve the public interest. The Division has implemented a driver's license renewal by mail program to improve public convenience. Further, MVD has sought to implement changes in the t i t l e and registration process to reduce the amount of time i t takes for the public to receive their titles. 4. The extent to which rules and regulations promulgated by the Department are consistent with the Legislative mandate The Attorney General's Office is responsible for reviewing ADOT rules and determining i f they are consistent with statute. The Attorney General's Office reviews Department rules through the formal certification process required by law. 5. The extent to which the Department has encouraged input from the public before promulgating rules and regulations and the extent to which it has informed the public as to its actions and their expected impact on the public The Department has encouraged input from the public before promulgating rules and regulations by advertising proposed changes in the news media. Further, the Department holds public hearings before promulgating rules. In cases where rules and regulations may impact a specific group, the Department may send direct mailings notifying these groups of rule and regulation changes. For example, the Department recently changed the rules and regulations regarding prequalification of contractors. In this case, the Department sent a notice to contractors informing them of the proposed change. The Department also involves the public in decisions regarding transportation projects. According to the Director of AD 0 T, " Citizens' advisory groups, public forums, public hearings, and meetings before local governing bodies are carried out routinely prior to construction projects being awarded." 6. The extent to which the Department has been able to investigate and resolve complaints that are within its jurisdiction This factor does not apply since the Department is not a regulatory agency 7. The extent to which the Attorney General or any other applicable agency of State government has the authority to prosecute actions under enabling legislation According to AD 0 T's Attorney General representative, county attorneys prosecute actions relating to the Motor Vehicle Division laws. In our audit of the Motor Vehicle Division weight enforcement program, we found that the courts were not imposing sufficient penalties for violations. While some courts adhered to statutory fines, others reduced the amount of the fine. In June 1986, the Arizona Supreme Court issued a memo to all Arizona courts of limited jurisdiction advising them to impose the minimum statutory penalties, after this problem was brought to the Court's attention by our Office. 8. The extent to which the Department has addressed deficiencies i n i t s enabling statutes which prevent it from fulfilling its statutory mandates According to ADOT officials, ADOT has proposed legislation regarding the 65 mph speed limit bill, renewal of driver's licenses by mail, and the classification of driver's licenses for truck drivers. Further, ADOT played a key role in the legislation allowing counties to increase the sales tax by 112 cent with the proceeds going toward transportation improvements in the respective counties. 9. The extent to which changes are necessary in the laws of the Department to adequately comply with the factors listed in the Sunset Law Our review of the Department indicated that statutes related to overweight trucks need to be amended to: 1) allow overweight axle citations to be issued even i f the load is shifted, 2) assess higher penalties for repeat violations in excess of 2,500 pounds, and 3) permit courts to hold trucking companies or individuals who own or lease trucks jointly responsible with drivers for all weight violations. 10. The extent to which the termination of the Department would significantly harm the public health, safety or welfare Termination of the Department of Transportation would have a detrimental impact on public welfare. A D O T designs, constructs and maintains the highway system for the entire State. Termination of ADOT would result in the loss of a Statewide system, and a perspective for planning, construction and maintenance of roadways that cross jurisdictional boundaries. According to the Director of the Department, termination of the Department would cause the functions currently performed by the Department to be assumed by the local communities. Further, he indicated that the cities and counties are not equipped to design, construct and maintain transportation facilities. 11. The extent to which the level of regulation exercised by the Department is appropriate and whether less or more stringent levels of regulation would be appropriate This factor does not apply since the Department is not a regulatory agency. 12. The extent to which the Department has used private contractors in the performance of its duties and how effective use of private contractors could be accomplished ADOTts greatest use of contractors is in its Highways Division, where contractors perform both construction and highway maintenance work. Construction - Private contractors perform all road construction. In recent years, A DOT has also hired outside firms to assist in design and oversight of the construction program. However, ADOT may be able to expand its use of private contractors to perform the construction oversight function. In our audit of the construction function ( See Auditor General Report No. 87- 11), we found that ADOT could avoid increasing its current staffing levles by utilizing alternatives, such as contracting out more work, to meet anticipated short- term increases in workload. The primary advantage is that ADOT would only have to pay for the construction staff when they are needed. In addition to contracting out the oversight function, ADOT may be able to avoid increasing its staff size by contracting out specific functions such as surveying and lab work. Maintenance Contracting. - ADOT should continue to expand its use of contracting for the highway maintenance function. AD 0 Tts Maintenance Section of the Highways Division hires private firms for maintenance activities such as rest area and picnic area maintenance, l i t t e r pickup, sweeping, trash collection, mowing, pumping and landscaping. The contract maintenance program has demonstrated that contractors are able to perform some maintenance activities at a lower cost than ADOT, while generally providing an improved level of service. In 1986, the approximate savings from the program were more than $ 1.2 million. Because of its cost effectiveness and improved level of service, the contracting program should be expanded. Many maintenance activities such as shoulder maintenance, culvert cleaning, guardrail repair and handpatching with premix are successfully contracted in other states. RECURRING PROBLEMS FOUND IN THE HIGHWAYS DIVISION Our three audits of the Highways Division revealed two common central management problems. First, management information systems that the Arizona Department of Transportation ( ADOT) originally developed to provide better central control have experienced serious problems and are largely ineffective. A second but related problem is that ADOT's central office has not asserted a strong role in overseeing district operations. Data Systems Are Deficient The Highways Division is the largest division in ADOT, with operations throughout the State. In order to obtain better control of the construction, maintenance and equipment management functions, ADOT has spent considerable time and resources developing data systems. However, the data systems in these three major areas do not work as intended. 0 Construction - In our construction audit, we found that the Construction Engineering Manpower Management System ( CEMMS) was not used effectively. Since CEM MS was implemented in October 1982, ADOT has committed at least $ 550,000 to the System, of which an estimated $ 460,000 has been incurred by central office staff, with an additional $ 93,000 paid to consultants. CEM MS was developed to plan and staff, budget, schedule, and monitor ADOT's construction engineering resources. Because of the System's ineffectiveness, it is not used to plan manpower needs. Further, CEMMS is not used to determine construction costs or monitor project progress. In addition, the construction orgs are not effectively using CEMMS to schedule personnel assignments and communicate the assignments to employees. Finally, although CEMMS is intended to identify significant problem areas, nearly half of the construction orgs do not receive CEM MS reports on a regular basis. 0 Maintenance - In our maintenance audit, we found that the automated management system for planning, budgeting and controlling highway maintenance, called PeCos, did not work as intended. PeCos was implemented in 1971 to provide management support through an objective basis from which the maintenance program could be planned and executed. Despite its estimated $ 720,000 annual cost, we found that PeCos was unreliable in projecting annual maintenance requirements, setting production rates for field staff, and assessing maintenance costs and resource requirements. Further, PeCos did not provide adequate operational support for central office and field management. For example, confidence in PeCos was so low that 11 of 12 of the org supervisors interviewed do not use, or even consider, PeCos planned accomplishments when scheduling maintenance work. a Equipment - Central data management of the Equipment Services Section is performed through the Equipment Management System ( EMS). However, the EMS system has shortcomings which severely limit its usefulness to both management and users. EMS was designed to track vehicle downtime. However, because of numerous errors the downtime information is unreliable. Further, we found shortcomings in the usefulness of the system for equipment utilization. The system was supposed to track equipment utilization, provide utilization analysis reports, provide fleet size analysis reports, set utilization standards, and provide utilization exception reports of below standard usage, However, the system is not used to monitor utilization. Although problems have been brought to management's attention, ADOT has been slow to implement needed changes. Eight internal and external studies conducted on CEM MS pinpointed substantial changes needed to make the system viable. However, ADOT has not dedicated the resources needed to improve the system. Further, both a 1982 audit by our Office and a 1984 study conducted by a consultant hired by ADOT made recommendations for improvements to PeCos. Again, however, the recommendations of these studies have not yet been fully implemented. Finally, ADOT indicated in our 1983 report on the Equipment Section that the EMS system would be able to monitor utilization. Yet, the system is currently not performing this function. A DOT Needs To Strengthen Central Oversight ADOT's Central Office has not asserted a strong role in overseeing district operations of the Highways Division. a Maintenance - In our maintenance audit, we found that central office had inadequate oversight of the maintenance function. Upper management, which oversees district operations, did not take a sufficient interest in maintenance management. The Deputy State Engineer of the Highway Operations Group, who oversees district operations, did not review any reports prepared by the Maintenance Section of the central office. Further, the Maintenance Section prepares and allocates the budget and oversees the maintenance management system; however, it had limited authority over district maintenance operations. As a result of limited authority, there is confusion as to the Maintenance Section's responsibility to monitor and control field performance. Thus, although the Section generates detailed reports on maintenance efforts, the Section does not review district conformance with performance standards or dictate how resources should be allocated. o Equipment Services - In our audit of the Equipment Services Section, we found that oversight of equipment users was lacking. The Section had not developed standards for equipment utilization. Thus, exception reports showing users with inadequate utilization were not generated. Equipment Services officials indicated that the Section had only limited authority to take action when equipment was not sufficiently utilized. In addition to the lack of action by the Equipment Services Section, central management also failed to take action. Although central management was aware of problems with underutilization identified in our 1983 audit report, sufficient steps were not taken to ensure that recommendations were implemented. a Construction - Central management has not taken a sufficiently aggressive role in controlling staffing levels and ensuring that CEMMS is properly utilized. Our audit revealed that ADOT's construction program was overstaffed. ADOT construction staff had not been adjusted based on workload. In addition, CEMMS, the manpower management system established to assist in adjusting construction staff levels to meet workload fluctuations, had not been fully utilized by ADOT. In fact, many orgs did not even receive reports generated by CE M MS. According to an AD OT consultant, central office staff involvement is essential for proper implementation of CEM MS. However, ADOT's central office had relinquished control of manpower management to the districts. Thus, ADOT lacks adequate Statewide management of construction engineering manpower. ( REPORT NO. 86- 7) MOTOR VEHICLE DIVISION, REVENUE GROUP The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT) Motor Vehicle Division's Revenue Group, in response to a July 26, 1985 resolution of the Joint Legislative Oversight Committee. This performance audit is one in a series of audits on ADOT and was conducted as part of the Sunset Review set forth in Arizona Revised Statutes ( A. R. S.) 9941- 2351 through 41- 2379. The Revenue Group serves as the revenue processing arm of the Motor Vehicle Division ( MVD). The Revenue Group handles all revenues resulting from A. R. S. Title 28 ( transportation code): approximately $ 424 million annually. The major duties of the Revenue Group are to: 1) set up and monitor commercial carrier accounts to ensure compliance with Title 28 and other requirements; 2) receive, process and distribute all Title 28 tax and license revenues; and 3) audit commercial vehicle and distributor tax accounts to ensure proper tax reporting. t Could Dollars in Revenue The Revenue Group Audit Section does not conduct enough audits of commercial carriers. Currently the Section audits only about 2 percent of its accounts annually, resulting in potential lost assessments of as much as $ 10.9 million per year. While audit coverage varies from state to state, Arizona's falls below that of several other states in at least two tax types. Expanded audit coverage would substantially increase audit collections and improve compliance with Arizona tax laws. Increasing the Section's current coverage to 3.1 percent would produce approximately $ 1.5 million in additional assessments, and could be accomplished with current staffing levels by implementing the productivity improvements recommended in Finding Ill ( page 17). lncreasing coverage to the 10 percent level would require 38 additional auditors, but could result in an additional $ 10.9 million in assessments. The Audit Section should develop a plan to increase audit coverage and use the plan to request funding for needed staff. Current Audit Selection Procedures Are Not Effective The Audit Section's effectiveness is reduced by poor audit selection procedures. Currently, audits are selected based on individual, often arbitrary judgment and are not selected randomly. As a result, the Audit Section has audited 57 percent of the largest accounts we analyzed at least once in the past three years. Many of the largest accounts were audited repeatedly. The other 43 percent of large accounts and 96 percent of the remaining accounts we analyzed have not been audited. Because the Section focuses its efforts on a limited number of large accounts, most other taxpayers have l i t t l e incentive to report their taxes properly. For example, one carrier who was reporting a zero monthly tax liability was assessed more than $ 37,000 as the result of an audit. Such underreporting could be causing the State to lose substantial tax revenue. To improve the effectiveness of its audit coverage, the Audit Section needs to develop selection criteria that ensure random coverage of accounts. Management should also review accounts to determine factors upon which selection could be based, including account size, to further maximize revenue recovery. The Audit Section could increase revenue recovered through audit assessments by approximately $ 1.8 million to $ 2.8 million annually by limiting special project assignments and automating auditor duties. Currently, auditors spend approximately 35 percent of their time on nonaudit duties. Using auditors for special projects has cost the State approximately $ 4.3 million in the past three years, because the auditors were not using their time to generate audit assessments. MVD should limit use of audit staff for special projects. The Audit Section could further increase productivity and generate more revenue by automating several audit processes. The experience of other audit organizations shows that the use of personal computers by auditors can decrease the time needed to complete each audit by 10 to 30 percent. This translates into additional audits with an estimated $ 351,000 to $ 1.3 million in potential audit assessments. The Legislature should consider funding the Audit Section's 1987- 88 budget request for eight microcomputers and software. Based on MVD's progress in implementing a computerized audit program, the Legislature should consider funding additional requests for computers in subsequent years. The Audit Section Lacks Adequate Controls To Ensure Quality And Integrity O f Audit Modifications And Taxpayer Billings The Audit Section does not have adequate controls to ensure accurate, justifiable audit assessment modifications and billings. Documentation to support audit assessment modifications reviewed by our staff was either weak or not available, even though the modifications resulted in reductions of the original assessment amount and ranged from approximately $ 500 to $ 368,000. Further, MVD audit supervisors did not sign- off on most of the modifications after the completion of each audit. The Audit Section also lacks adequate controls over assessment notifications, since individual auditors have control over both the audit and the taxpayer billing. The Audit Section needs to enforce existing standards and policies governing assessment modifications and taxpayer notifications to ensure that all modifications are adequately documented and reviewed. ADOT's Internal Audit Section should periodically review the MVD Audit Section's internal controls over modifications and taxpayer notifications to ensure that they are adequate and are working as intended. MVD Could Reduce Growth In The Number Of Uncollectible Accounts The Revenue Group has difficulty collecting monies owed from commercial carrier accounts after all allowable collections procedures have been attempted. In order to prevent an increase in the number of such outstanding accounts, the Revenue Group could implement various monitoring procedures. For example, MVD could use a local publication to track in- State accounts entering bankruptcy proceedings so the State can file as a creditor before bankruptcy proceedings are final. MVD could also improve its ability to identify out- of- State accounts that may go bankrupt by monitoring the financial reporting of all carriers in and out of the State. It could also use an outside collection agency to track bankrupt out- of- State carriers. ( REPORT NO. 86- 9) MOTOR VEHICLE DIVISION, WEIGHT ENFORCEMENT The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT), Motor Vehicle Division ( MVD), weight enforcement function in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. This performance audit is one in a series of audits on ADOT, and was conducted as part of the Sunset Review set forth in Arizona Revised Statutes ( A. R . S.) $ 941 - 2351 through 41 - 2379. Overweight trucks accelerate pavement deterioration and increase stress on bridge structures. This deterioration increases exponentially as truck weight increases. For example, a 100,000 pound truck does three times as much damage as an 80,000 pound truck. In order to mitigate the damage from overweight trucks, MVD has a weight enforcement program. This weight enforcement operation is comprised of 18 fixed ports of entry on the State's borders and several mobile scale crews that operate in the interior of the State. Enforcement Bypassing of ports of entry and limited use of mobile crews weakens MVD's enforcement effort. Although 33 paved roads lead into Arizona from surrounding states and Mexico, only 13 have ports of entry with operating scales. Although there is limited data on the number of trucks bypassing the ports, studies have shown that from 10 percent to 33 percent of trucks on Arizona highways are exceeding weight limits. MVD is preparing to implement a plan to prevent bypassing of ports; however, this plan will be limited to only the eastern border and portions of the northern border of the State. Better enforcement is also necessary in the interior of the State to monitor those truckers who operate within Arizona's borders. For example, trucks carrying concrete, garbage, and sand and gravel frequently violate weight limits but travel only short distances and do not pass through ports. MVD has placed a low priority on intrastate weight enforcement activities. Officers assigned to interior based mobile crews spend less than 50 percent of their time on weight enforcement. Inoperative Scales Allow Many Trucks To Pass Through Ports Of Entry Without Being Weighed Weight enforcement is further weakened because port scales are frequently inoperative. Because of frequent scale malfunctions, more than one- quarter million trucks, 13 percent of the trucks that could have been weighed in fiscal year 1984- 85, were not weighed. One major cause of scale downtime is that port scales were not designed for the high traffic volumes at the ports. Another problem is that some of MVD's scale installations make maintenance and repair very difficult and costly. A 1985 ADOT report indicated that $ 600,000 was needed to repair scales with significant maintenance problems. MVD should consider purchasing heavier scales designed for high traffic volumes. Such scales cost approximately 10 to 15 percent more than the scales MVD has purchased in the past. Overloaded Axles, Which Are Damaging And Occur Frequently, Cannot Be Cited Under Existing Law Although overweight axles are a major cause of pavement damage, effective enforcement action cannot be taken in most cases. Truck related pavement damage is primarily caused by the weight on each of a truck's axles. Therefore, a truck with overloaded axles can cause damage even though its gross weight may be legal. However, current statutes require officers to allow shifting of a load when a vehicle is only over axle weight, not over gross limits. If the load is shifted to be within legal axle load limits, the driver cannot be cited. As a result, more than 90 percent of Arizona's weight enforcement violations between fiscal years 1982 and 1984 could not be cited. The Legislature should consider modifying the statutes to allow citations for all overweight axle violations. More Than One Third Of All Violators Are Not Assessed Minimum Statutory Fines The judicial system often fails to enforce minimum statutory penalties against weight violators. Many courts incorrectly believe they have the authority to lower or suspend fines. As a result, 38 percent of overweight violators receive fines less than the minimum fines specified in statutes. The average fine reduction is $ 750 for those fines that are reduced. This not only diminishes the deterrent effect of the penalties, but also translates into a revenue loss of approximately $ 600,000 per year. MVD should monitor fines imposed by the courts to ensure that the weight fine schedule established in statutes is applied. Noncompliance should be reported to the Arizona Supreme Court in order to ensure future compliance. Greater Enforcement Effort Should Be Directed At Trucking Companies Enforcement efforts should be directed at trucking companies as well as drivers. Although owners and companies may be responsible for overloads, they are currently not held accountable for weight violations committed with their trucks. Under existing statutes, courts are generally constrained to hold only the truck driver responsible for weight violations. This has provided sufficient enforcement problems that the City of Tempe enacted an ordinance that holds owners and drivers jointly liable for weight citation penalties. Weight audits and civil penalties could also be used to direct enforcement action toward truck companies and owners. Audits of truck company weight records are an effective and efficient tool in identifying companies that repeatedly violate weight laws. Weight audits are successfully used by the state of Minnesota. After repeat violators are identified, civil suits can recover road damages they have caused. Texas and Minnesota have found that this action can be a very effective deterrent against intentional violations. For example, Texas collected more than $ 1.3 million in damages in a seven- month period and has experienced a 30 percent reduction in gross weight violations since its civil program began in late 1984. Minnesota attributes a 55 percent reduction in overweight trucks between fiscal years 1982- 83 and 1984- 85 to weight audits and civil penalties. The Legislature should consider amending the statutes to permit courts to hold trucking companies or individuals who own or lease trucks jointly responsible with drivers for all weight violations. In addition, the Legislature should consider giving MVD the authority to conduct audits of trucking company weight records. MVD should consider bringing civil action against companies that repeatedly violate weight limits. MVD Needs Better Information For Its Weight Enforcement Program MVD needs more and better data on weight citations and on the location and movement of overweight trucks. lnformation on trucking company name, time and location of violation, fine amount, and truck weight is not presently available. MVD needs this information to evaluate its effectiveness, to enhance enforcement efforts against repeat violators, and to monitor court adherence to statutory fines. ( REPORT NO. 87- 5) HIGHWAYS DIVISION, HIGHWAY MAINTENANCE FUNCTION The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT) in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. This performance audit was conducted as part of the Sunset Review set forth in the Arizona Revised Statutes ( A. R. S.) $ 541- 2351 through 41- 2379. This is the third of several reports to be issued on the Arizona Department of Transportation. The report focuses on the Highway Maintenance Section of the Highways Division of ADOT. Highway maintenance organizations ( orgs) perform numerous maintenance activities including maintenance of paved surfaces, unpaved surfaces, unpaved shoulders, vegetation, roadsides, rest areas and landscapes. Major highway maintenance projects such as pavement overlays or reconstruction are generally performed by private contractors through the Construction Section of the Highways Division. A DOT Should Continue To Expand Its Contract Maintenance Program A DOT should expand its contracting of routine maintenance activities. AD OT's Maintenance Section uses private firms for maintenance activities such as rest and picnic area maintenance, l i t t e r pickup, sweeping, trash collection, mowing, pumping and landscaping. The contract maintenance program has demonstrated that contractors are able to perform some maintenance activities at a lower cost than ADOT, while generally providing an improved level of service. In 1986, the approximate savings from the program were more than $ 1,200,000. Because of its cost effectiveness and improved level of service, the contracting program should be expanded. Many maintenance activities such as shoulder maintenance, culvert cleaning, guardrail repair, and hand patching with premix are successfully contracted by other states. A t a minimum, ADOT should evaluate the feasibility of contracting out these activities. In addition, the Legislature may wish to establish a technical advisory committee ( consisting of representatives from ADOT, private contractors and other persons knowledgeable in contracting and highway maintenance), to conduct a systematic evaluation of all maintenance activities to identify other activities that should be contracted. ADOT's System For Planning, Budgeting And Controlling Highway Maintenance Continues To Need Significant Improvement To Meet Central Office And Field Management Needs Despite its $ 720,000 annual cost, ADOT's system for planning, budgeting and controlling highway maintenance, called PeCos, does not work as intended. PeCos is designed to help the central office plan an annual work program and budget available resources to accomplish the annual plan. PeCos should indicate the labor hours, and amount of materials and equipment required to do a given amount of work. PeCost usefulness is limited because key elements for: ( 1) projecting annual maintenance requirements, ( 2) setting production rates for field crews, and ( 3) assessing maintenance costs and resource requirements are inaccurate and unreliable. In eight of 12 activities reviewed, actual field productivity had no relationship to PeCos estimates. For example, for one of these activities, blading unpaved shoulders, daily production is estimated at either 4.5 or 4.6 shoulder miles; however, actual daily production ranged from .5 to 7.1 shoulder miles. This reduces PeCos usefulness as a planning and budgeting tool because reliable production estimates are necessary to develop a viable budget. Nor does PeCos meet operational needs in the field. It does not enable area personnel to effectively plan and control the work of maintenance crews. Our analysis showed that confidence in PeCos is so low that 11 of the 12 org supervisors interviewed do not use, or even consider, PeCos planned work when scheduling maintenance activities. AD 0 T Should Establish A Method For Evaluating District Maintenance Conditions In addition to implementing needed improvements to its maintenance management system, ADOT needs to establish a method for evaluating the level of service provided by maintenance field crews. Field staff report the amount of work done but do not systematically survey and report highway conditions. As a result, A DOT central office cannot compare highway conditions Statewide to direct resources to areas and activities of greatest need. ADOT should consider adopting some methods used in other states. Florida and Ohio have supplemented their maintenance management systems by developing systematic approaches to evaluating maintenance conditions throughout their highway systems. Both states have developed condition standards. For example, one Florida standard requires that shoulders have no more than a 3 inch drop- off. Another standard requires that potholes be no greater than 1.5 square feet in area and 1.5 inches deep. Both Florida and Ohio send observers into the field each quarter to test for compliance with their standards. Central Office Needs To Strengthen Its Oversight Of The Maintenance Function Central office needs to strengthen its Statewide oversight of the maintenance function. Upper management, which oversees district operations, needs to take a greater interest in maintenance management. The Deputy State Engineer of the Highway Operations Group, who oversees district operations, does not review any reports prepared by the Maintenance Section of the central office. The Maintenance Section prepares and allocates the budget and oversees the maintenance management system; however, i t has no line authority over district maintenance operations. As a result, Statewide oversight and enforcement is lacking. Deviations in field performance, such as an org that performs 100 percent less work on an activity than was planned, are not routinely pursued to determine i f problems exist and corrective action is needed. ( REPORT NO. 87- 9) HIGHWAYS DIVISION EQUIPMENT MANAGEMENT FUNCTION The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT) equipment management function in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. This performance audit is one in a series of audits on ADOT, and was conducted as part of the Sunset Review set forth in Arizona Revised Statutes 9941- 2351 to 41- 2379. ADOT owns and maintains a fleet of approximately 3,450 pieces of equipment, with a total estimated replacement cost of $ 64 million. The fleet consists of heavy equipment such as loaders, graders and snowplows, and lighter equipment, including a large passenger fleet. The Equipment Services Section is responsible for purchasing, maintaining and disposing of the equipment. However, according to Equipment Services officials, i t does not have authority to control the size of the fleet. Vehicles More than 15 percent of ADOT's cars and light trucks are underutilized and could be eliminated from ADOT's fleet, saving more than $ 1.7 million in replacement costs alone. Based on a conservative measure of usage, we determined that A DOT could reduce its fleet by an estimated 195 vehicles. We believe this estimate is conservative because observations of construction field offices revealed that nearly 35 percent of assigned vehicles sat idle at each observed time during the day. The practice of assigning vehicles to individuals rather than pooling or using other alternatives contributes to the low usage. ADOT should require or encourage its employees to use alternative methods of transportation, including pooling vehicles and using personal cars. Although ADOT has been aware of problems with underutilization, it has not taken sufficient action since our previous audit. In response to our 1983 audit, ADOT reduced the number of heavy equipment units in its fleet, and reduced the number of planned purchases of cars and pickups. However, ADOT did not develop a utilization standard, and vehicle usage is not routinely reviewed. Further, the administrator of Equipment Services had not been given authority to recall or transfer any equipment that was underutilized or not justified. As a result, percentage of vehicles with low utilization ( less than 1,000 miles per month) has increased from 43 to 48 percent. ADOT Has Allowed $ 1 Million Worth Of New Equipment To Sit Idle Too Long Before Placing It Into Service; Individual Units Have Been Delayed From Six Months To Two And One- Half YE Ninety- two pieces of equipment worth approximately $ 1 million at purchase have remained unused for six to 30 months before being placed into service. In contrast, other large fleet operations set goals of issuing new equipment well under two months. The following case examples illustrate the ADQT delays. e In August 1984 ADOT accepted delivery of a number of 1- ton truck chassis, to which special beds were to be added. Five of these chassis, costing a total of $ 48,000 at purchase, were not issued to users until January 1987. a In mid- 1985 ADOT accepted delivery of still more 1- ton truck chassis. As of June 24, 1987, 11 of these chassis were still on the Equipment Services lot, awaiting fabrication and attachment of special bodies. Equipment Services' failure to issue equipment in a timely manner has resulted in wasted State funds as well as problems for some users. At a minimum, such extensive delays have led us to question whether several vehicles were really needed, at least at the time the purchases were made. Poor management and planning appear to have caused the excessive delays in issuing new equipment. ADOT. - Could. Reduce . E quipment Downtime And - . . . - Speed Repair Of Equipment Critical To Users The amount of time critical highway maintenance equipment is in the Central shop for repairs is excessive. In extreme instances, equipment considered by highway maintenance foremen to be critical to their operations spent 100 days or more during a recent 12- month period in Equipment Services' central repair shop. A combination of factors have caused this equipment to experience unnecessary downtime. Inadequate shop procedures for repair scheduling and tracking have contributed to the downtime. Changes that could decrease downtime include contracting out more repairs, keeping the shops open at night, improving the availability of parts for repairs, and evaluating equipment refurbishing decisions. ( REPORT NO. 87- 11) HIGHWAYS DIVISION, CONSTRUCTION MANAGEMENT The Office of the Auditor General has conducted a performance audit of the Arizona Department of Transportation ( ADOT), construction management function in response to a July 26, 1985, resolution of the Joint Legislative Oversight Committee. This performance audit is one in a series of audits on ADOT and was conducted as part of the Sunset Review set forth in Arizona Revised Statutes $ 341 - 2351 through 41 - 2379. ADOT oversees highway construction of all interstate, primary and secondary roadways to ensure that specifications are met and that contractors f u l f i l l their legal obligations. To perform the oversight function, AD 0 T has approximately 600 construction staff located throughout the State. In recent years, ADOT has also contracted with private sector engineering consulting firms to provide oversight on some projects. ADOT Has Not Adequately Controlled Construction Staffing Levels, Resulting In Overstaffing That Has Cost The State An Estimated $ 7.4 Million Over The Last Four Fiscal Years Over the last four years ADOT has overstaffed its construction function by 21 to 101 unnecessary staff annually, costing the State approximately $ 7.4 million. Our estimate of overstaffing is based on analysis of data on three variables: 1) construction engineering ( CE) costs, 2) the substantial variations in staff productivity, and 3) excessive amounts of non construction time charged by staff. Our estimates were further supported by Auditor General staff field visits to construction orgs and ADOT's own field reviews which provided several examples of overstaffing. 0 A District Two official acknowledges his district will be overstaffed by an average of 44 employees over the next 12 months. 0 District Four maintains a permanent construction staff ( averaging approximately 70 staff) year- round, although construction activities vary during the year due to climatic conditions. As a result, one resident engineer stated his org was overstaffed from eight to 14 positions for nine months of the year. Further, ADOT field reviews recently reported a surplus of 22 out of an average of 47 staff in two District Four orgs. 0 ADOT field reviews also found significant amounts of excess hours charged to the survey function for several projects. ADOT found one project's survey charges overrunning estimates by 240 to 315 percent. Another project overran estimates by 6,000 hours. Central office staff attributed the overruns to staff charging excess time to this function. ADOT's construction program will expand in three of the next five years. Before increasing staff size, ADOT should first consider making more use of consultant engineers, contracting out more of the construction engineering functions ( such as surveying) and making better use of its own staff resources. These actions will help prevent staffing for peak workloads and the resultant overstaffing once the peaks have passed. Because ADOT has failed to properly adjust past staffing levels to meet fluctuations in workload, we recommend that the Legislature consider setting and monitoring construction staffing levels, as is done in several other states. We also recommend a follow- up performance audit in two years to review ADOT's progress in managing construction staff size. ADOT'S Construction Engineering Manpower Management System Is Not Being Utilized Effectively And Needs Greater Management Support ADOT has not effectively used its construction engineering manpower management system ( CEMMS) to adjust staffing levels based on workload. CEM MS was implemented in October 1982 to provide construction managers with tools to plan, schedule and control construction engineering personnel and costs. We found, however, that despite the $ 550,000 A DOT has committed to CEM MS since 1982, CEM MS is not being effectively utilized to manage CE resources. 0 ADOT has not effectively used CEMMS' long- range labor planning and short- range project staffing functions to ensure that staffing levels are appropriate. e The CEMMS budget function is not well understood or used by district personnel. 0 ADOT has misused the CEM MS scheduling function, which i f used properly, assesses short- term staffing needs and plans for efficient personnel use. For example, resident engineers have, in some cases, overstated staffing needs. 0 CEMMS reports identifying ADOT construction engineering hours and cost overruns are not received by nearly half of the construction orgs. Some districts have stopped distribution of the reports. Without feedback, action cannot be taken to control costs. District personnel stated that even when problem projects are identified, l i t t l e or no formal action is taken. Although repeatedly informed of problems with CEM MS, A DOT management has taken little action to correct deficiencies or ensure system utilization. Problems with management direction, adequate district staff commitment, system analyses and updating and training have been reported to ADOT management regularly over the last five years by outside consultants and ADOT staff. ADOT upper management needs to make a firm commitment to address the problems with i t s manpower management system to ensure that ADOT uses i t s s t a f f and other resources efficiently and effectively. I, ARIZONA DEPARTMENT OF TRANSPORTATION 206 South Seventeenth Avenue Phoenix, Arizona 85007 I, EVAN MECHAM CHARLES L MILLER Governor October 29,1987 Director Mr. Douglas R. Norton Auditor General 2700 N. Central Avenue, Suite 700 phoenix, Arizona 85004 Dear Mr. Norton: We are submitting the attached comments in regard to the Performance Audit of the Arizona Department of Transportation, Sunset Factors and Summary Report ( No. 87- 12). I appreciate the opportunity to provide these comments and have them included in the final report. Sincerely, Charles L. Miller Director CLM: RE: VN Attachment rn HIGHWAYS AERONAUTICS MOTOR VEHICLE PUBLIC TRANSIT ADMINISTRATIVE SERVICES TRANSPORTATION PLANNING COMMENTS ON AUDITOR GENERAL'S REPORT 87- 12 " A PERFORMANCE AUDIT OF THE ARIZONA DEPARTMENT OF TRANSPORTATION SUNSET FACTORS AND SUMMARY REPORT" October 28, 1987 Auditor General's Report 87- 12 contains the findinss of the Auditor General concerning the twelve statutory sunset factors. In addition to these factors, the Auditor General has included summaries of recently completed audits conducted within the Arizona Department of Transportation. Following are brief comments relative to each of the performance audits conducted in the Arizona Department of Transportation: PERFORMANCE AUDIT 86- 7 MOTOR VEHICLE DIVISION - REVENUE GROUP This audit contains five findings relating to the operation of the Revenue Group. The department agrees with each of the find-ings and has taken action to respond to specific Auditor General recommendations. The department's detailed response to this report can be found in Audit No. 86- 7, dated August 1986. PERFORMANCE AUDIT 86- 9 MOTOR VEHICLE DIVISION - WEIGHT ENFORCEMENT Audit 86- 9 contains six findings: five relating to the operation of the Weight Enforcement Section of the Motor Vehicle Division and one directed to the judicial system. The department has ini-tiated steps to respond to each of the ADOT recommendations pre-sented in the audit report. The department s detailed response to this report can be found in Audit No. 86- 9, dated December 1986. PERFORMANCE AUDIT 87- 5 HIGHWAYS DIVISION - MAINTENANCE FUNCTION Audit Report No. 87- 5 contains four findings relating to the Maintenance function within the Highways Division. The depart-ment generally agrees with these findings and has initiated action to respond to the specific recommendations made by the Auditor General. The department's detailed response to this report can be found in Audit No. 87- 5, dated August 1987. PERFORMANCE AUDIT 87- 9 DEPARTMENT OF TRANSPORTATION - EQUIPMENT MANAGEMENT Audit 87- 9 contains three findings relating to equipment manage-ment within the department. The department concurs with two recommendations and partially concurs with the other. Steps have been taken to respond to each of the recommendations presented by the Audit General. The department's detailed response to this report can be found in Audit No. 87- 9, dated October 1987. PERFORMANCE AUDIT 87- 10 DEPARTMENT OF TRANSPORTATION - CONSTRUCTION MANAGEMENT The Arizona Department of rans sport at ion adamantly and totally disagrees with Finding I contained in Audit 87- 10. The Department concurs with ind ding I1 regarding the improvement and utilization of the Construction Engineering Manpower Management System. The Department's detailed responses to this report can be found in Audit No. 87- 9, dated October 1987.

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Performance audit, Department of Transportation, sunset factors and summary report

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