1. Audit of Roadway Quality Management ABSTRACT
Roadway improvement resources appear to be
used equitably throughout the City; however,
documentation of roadway quality controls is
lacking. This audit recommends improvements to
increase assurance over roadway quality and
provides suggestions to more efficiently provide
roadway services.
City Auditor's Office
AUDIT OF ROADWAY
QUALITY MANAGEMENT
i
jC011TFy4WMWjWJ
DENTON
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Table of Contents
ExecutiveSummary............................................................................................................................3
Introduction ......................................................................................................................................4
ManagementResponsibility.....................................................................................................................4
Audit Objectives, Scope, and Methodology..............................................................................................4
BackgroundInformation...........................................................................................................................5
WhatWorks Well?.............................................................................................................................7
Street Design Standards Address Critical Design Parameters..................................................................7
The City's Pavement Management System Provides for Equitable Use of Resources.............................7
Coordination Between Streets & Utilities is Improving............................................................................9
Opportunities for Improvement.......................................................................................................10
Roadway Rehabilitation Quality Cannot Always be Assured..................................................................10
Changes to Street GO Bond Administration Could Further Enhance Transparency...............................14
Data Issues Impede Pavement Monitoring Effectiveness ......................................................................16
Potential Cost Savings May Exist in the Purchasing Process ..................................................................19
Current Management Structure Indicates Redundancy.........................................................................20
Appendix A: Management Response Summary.................................................................................22
Appendix B: Remaining Bond Program Street Segments....................................................................25
N
v
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Executive Summary
Honorable Mayor and members of the City Council,
The City Auditor's Office has completed a performance audit of the roadway quality management
process. This was a scheduled audit on the FY 19 audit plan approved by the City Council. The Streets
Division of the Public Works Department is currently responsible for maintaining and improving a little
under 1,400 lane miles of roadway. Between fiscal years 2014 and 2018, an average of$11 million dollars
was expended annually from the Streets Improvement Fund.
The following are our salient findings:
• The Street division has planned rehabilitative activities and roadway improvements based on needs
for these services. This planning process results in ensuring sound decisions for appropriately
maintaining street infrastructure.
• The controls over ensuring the quality of contractor and in-house road rehabilitation projects for
meeting established standards need improvement. We verified that about 1.63 lane miles of road
were overlaid instead of being fully reconstructed as indicated by Overall Condition Index (OCI)
guidelines and consultant's recommendation (see Table 4). We did not find appropriate
documentation for deviating from these guidelines and recommendations. Evidence for approval
of these actions was not available. Furthermore, without retaining design standards or materials
testing results provided by the geotechnical engineer, compliance with the City's quality standards
cannot be assured after the project is complete.Similarly,there was no reviewable documentation
of Field Services Supervisor's inspections to assure compliance with standards.
• The current practice of accounting proceeds of multiple General Obligation (GO) bond issues in
one GO Streets fund hinders the tracking of project expenditures back to bond series. More
consistent and precise accounting of each bond series' proceeds may increase transparency and
accountability.
• Thirty-nine overlay work orders were completed on street segments with an inspected OCI less
than 30 indicating a need for reconstruction. This is because low OCI indicates the integrity of the
underlying layers of the roadway may be failing. The OCI score was raised from under 30(street in
poor condition) to 85 (a street in very good condition)with overlay activity, which is much limited
to reconstruction. This action could provide misleading information for future need for
maintenance or improvements on these segments.
Management has concurred with 9 of 12 recommendations made in this report and partially concurred
with the remaining three. Management's response is attached to this report in Appendix A. We
appreciate staff's cooperation during the audit. Please contact the City Auditor if you have any questions
or need more information.
Sincerely,
Umesh Dalal, City Auditor
m
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Introduction
The City Internal Auditor is responsible for providing: (a) an independent appraisal of City
operations to ensure policies and procedures are in place and complied with, inclusive of
purchasing and contracting; (b) information that is accurate and reliable; (c) assurance that assets
are properly recorded and safeguarded; (d) assurance that risks are identified and minimized; and
(e) assurance that resources are used economically and efficiently and that the City's objectives
are being achieved.
The City Auditor's Office has completed a performance audit of the roadway quality management
process.We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
Management Responsibility
City management is responsible for ensuring that resources are managed properly and used in
compliance with laws and regulations; programs are achieving their objectives; and services are
being provided efficiently, effectively, and economically.
Audit Objectives, Scope, and Methodology
This report is intended to provide assurance on the City's ability to:
• Maintain and improve the City's roadway network economically and efficiently; and
• Properly record and safeguard one of the City's largest and most valuable assets (streets)
by evaluating the effectiveness of controls over:
o The quality assurance process of street improvements; and
o The management and monitoring of pavement condition.
Audit fieldwork was conducted during March and April of 2019. The scope of review varied
depending on the procedure being performed. The following list summarizes major procedures
performed during this time:
• Reviewed documentation to develop criteria including industry standards, best practices,
policies, and procedures;
• Developed a process narrative to identify current control activities, which was certified by
the Streets Superintendent;
• Evaluated the methodology and functionality of Streets' pavement management system;
• Reviewed the documentation associated with all fiscal year 2018 Streets' purchase orders
to determine if applicable bidding laws were followed;
• Analyzed Streets' work orders completed during 2016-2018;
• Investigated the implementation of the 2012 and 2014 street rehabilitation bond
programs; and CL
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
• Interviewed City staff and observed some meetings to better understand Streets' project
clearance process.
Background Information
The City of Denton's Streets Division of the Public Works Department is currently responsible for
maintaining and improving a little under 1,400 lane miles of roadway. Between fiscal years 2014
and 2018, an average of$11 million dollars was expended annually from the Streets Improvement
Fund. In addition to these monies, citizens approved $44 million of bond issues via election in 2012
and 2014 to fund the rehabilitation of certain streets throughout the City. Compared to similar
organizations,the Division's staffing level is about average by lane miles.
Figure 1: Staffing Comparison—Lane Miles per Full Time Equivalent
100.00
80.00
60.00
40.00 — - - - - - - - _ — - - - - -
20.00
College Amarillo TXDOT Denton Frisco Arlington Fort Worth
Station Dallas
District
No matter how well constructed, a roadway will deteriorate over time due to the effects of traffic
loads and the environment. Roadway maintenance and improvements are used to slow down or
reset this deterioration process. Generally, there are three different classifications of roadway
maintenance and improvements that are further described below. Each of these maintenance and
improvement techniques are useful at different points in the pavement's life cycle and typically
cost decreasing amounts of money from rehabilitative to corrective to preventative techniques.
Rehabilitative improvements repair portions of an existing pavement to reset the deterioration
process. The City uses asphalt overlays and concrete panel replacements to rehabilitate the
pavement surface of a road. An overlay involves milling away the existing pavement surface and
then laying new asphalt to repave the roadway.Similarly,a panel replacement removes the existing
concrete pavement and replaces it with a new panel.
The reconstruction of a roadway involves the stabilizing and compacting of the naturally occurring
material, called the subgrade. Additionally, a base layer, typically made of compacted aggregate
material, may be added on top of the subgrade to further improve the structure's integrity. Finally,
the pavement surface is lain to protect these underlying pavement layers (see Picture 1).
a�
tin
a
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
PavementSurface
Road Base
7oadVugra e
Picture 1:Simplified Roadway Cross Section
Corrective maintenance helps to slow the rate of deterioration by repairing localized failures of the
underlying layers. Specifically, the City repairs potholes, utility cuts, and base failures through the
use of patching and level ups. Patching and level ups involve replacing an area of the pavement
surface with new material after repairing an underlying deficiency.While patching is a maintenance
technique, it weakens the pavement's surface and cannot fully replicate the integrity of the original
road's structure. These weaknesses can only be corrected through rehabilitative improvements
such as milling and overlay techniques.
Preventative maintenance and improvements help to slow the rate of deterioration by addressing
minor deficiencies on the pavement surface caused by the passage of time. Specifically, the City
utilizes crack sealing and micro sealing techniques to prolong the useful life of a pavement. Crack
sealing is the process of individually filling cracks along the pavements surface to prevent the entry
of water, weeds, rocks, etc.; a similar technique, called joint sealing, may be used for concrete
pavements. These techniques help to prevent the deterioration of the roads underlying layers.
Micro sealing is the process of adding a thin layer of asphalt to an existing pavement surface,
extending the useful life of that surface;this technique is also considered a roadway improvement.
a�
a
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
What Works Well?
Throughout this report,the City's controls over the quality assurance of roadway rehabilitation and
pavement condition management and monitoring have been compared to the City's policies and
procedures and pavement management best practices compiled by Pavement Interactive.
Pavement Interactive is a curated information resource for the pavement community, which
provides a reference on common pavement topics, methods, and practices. Pavement Interactive
was developed by the Pavement Tools Consortium, a partnership between several state
Department of Transportations,' the Federal Highway Administration, and the University of
Washington, as part of their effort to further develop and use computer-based pavement tools.
Street Design Standards Address Critical Design Parameters
According to Pavement Interactive, there are three fundamental design parameters to consider
during street construction or rehabilitation: 1) subgrade characteristics, 2)traffic loads, and 3)
environmental factors. Pavement design standards must be met to provide the pavement useful
life expected by the owning agency.The auditors found the following:
• Pavement standards were designed by an engineering consultant based on a 20-year useful
life for asphalt streets and 40-year useful life for concrete streets and codified in the
Transportation Design Criteria Manual.
• Design standards are based on street classifications (i.e. arterial, collector, etc.) which are
determined by traffic loads.
o Standards define street minimum and maximum grading, minimum subgrade
stabilization depth, minimum pavement thickness, and minimum steel bar
reinforcement size.
• City Ordinance requires all street improvements to comply with the street design
specifications contained in the Transportation Design Criteria Manual.
The Pavement Management System Provides for Equitable Use of Resources
Pavement Interactive defines a pavement management system as the "concept of providing
pavements and maintaining them in acceptable condition" and identifies five key components of
a management system. These components include: 1) pavement condition survey, 2) pavement
information database, 3) pavement analysis scheme, 4) decision criteria, and 5) implementation.
The auditors found the following:
• The City of Denton hires a consultant about every five to six years to identify an overall
condition index (OCI) number for each street segment (similar to a block). The most recent
consultant used a pavement assessment methodology that conforms to best practices and
was similar to that of benchmark municipalities. v
CL
'The Texas Department of Transportation was apart of this Consortium.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
o The OCI is based on the size of visible pavement distresses, road roughness, and —for
collectors' and above—the street's structural integrity based on samples of the
underlying layers of roadway.
• The inspected OCI of each street segment is maintained in the City's pavement management
software.This software depreciates the OCI as time passes based on the pavement's
subgrade strength and traffic load. In addition, it accounts for maintenance and improvement
activities completed by the Division.
• This estimated OCI is then used to determine when and where maintenance and
improvement techniques should be used based on guidelines provided by the pavement
management survey consultant. This practice helps to ensure resources are used equitably
throughout the City.
o Similarly,the Streets Division typically identifies street segments with very-low OCIs to
be targeted as part of street rehabilitation bond programs.
o Pictures 2 and 3 below compare planned roadway improvement activities to the
current condition of the City's roadway network based on the estimated OCI. These
pictures illustrate a connection between planned rehabilitative activities and roadway
improvement needs based on estimated OCI.
nh'm -
I
F
Non _d
li ,III iF Pa _ r
°,YF I��Ij j11:411 Dfta�yl- p p6 'eu`I ° _I ',
oenron sF't .� c-iii",Si�'c ill ,� G _ l I
r F,
Park
P:.
t�.
Corinth
Picture 2:Planned Improvements Picture 3:Road Quality
00
v
W
a
2"Collector streets"collect the associated traffic from residential and rural streets,commercial streets,or industrial streets.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Coordination Between Streets & Utilities is Improving
Utility lines are typically placed alongside or under the City's roadways; however, this means that
it is frequently necessary to remove sections of roadway for a utility to perform work on their
assets. Therefore, agencies should coordinate their maintenance and improvement activities to
most efficiently and effectively provide both utility and roadway services to residents.The auditors
found the following:
• The City has developed a process to clear street improvement projects (i.e. micro seals,
overlays, and reconstructs) through the City's Water Utilities Department and Atmos Energy.3
Clearing a project may require the utility to replace or repair their utility lines before Streets
can begin their work.
o The Wastewater Department uses an algorithm to identify necessary repair actions to
take before clearing a street project.This algorithm takes into account planned repairs,
repair history, current inspection information, choke or clog history, and a pipe-risk
index.'
o The Water Department determines necessary repair actions manually based on pipe
age and breakage rates. Water is currently developing a similar algorithm to
Wastewater's which should further improve effectiveness.
o After clearance, roadway improvement activities are performed, and the
corresponding street segments are placed under a moratorium, as determined by
Streets Division practices, for the periods defined in Table 1.
Table 1: Moratorium Periods
Improvement Moratorium
Micro Seal 3 Years
Overlay 7 Years
Reconstruct 12 Years
• In addition to this clearance process, monthly coordination meetings are held to help facilitate
communication between City departments and external utilities.At these meetings scheduling
and status information about each entity's current projects is discussed.
• There has not always been a focus on the coordinated scheduling of utility and street projects;
however,this has recently been changing as the Water,Wastewater, and Streets Divisions have
developed their own construction schedules. While these scheduling efforts are still being
integrated and refined, they should increase efficiency moving forward.
Cn
v
a
3 These utilities accounted for about 97%of all utility street cuts in 2018.
4 Wastewater pipe-risk is based on breakage rates,tree root density,and other factors.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Opportunities for Improvement
Between 2016 and 2018, the City's Streets work order system —Cartegraph—recorded a total
cost of almost$19.7 million; street maintenance and improvement techniques made up about
77%of these expenditures, which are broken out by activity type in Table 2. These activities are
paid through several funding sources including general obligation bond revenues and the Streets
Improvement Fund operations and maintenance budget.
Table 2: Maintenance & Improvement Cost Breakdown (2016-2018)
Preventative Techniques Total Cost
Crack Sealing $171,000
Micro Sealing $1,743,000
All: $1,914,000
Corrective Techniques Total Cost
Level Ups $214,000
Potholes $412,000
Utility Cuts $1,004,000
Base Failures $1,945,000
All: $3,575,000
Rehabilitative Techniques Total Cost
Mill &Overlays $3,988,000
Reconstructs $5,691,000
All: $9,679,000
All Techniques $15,168,000
Roadway Rehabilitation Quality Cannot Always be Assured
According to Pavement Interactive, there are generally three components to quality assurances
consisting of, 1)quality control (QC), performed by those doing the work;2) independent assurance
(IA), performed by an unrelated third-party; and 3) quality acceptance (QA), performed by the
owning agency. Acceptance activities include the sampling, testing, and assessment of test results
to determine whether construction meets the design specifications.
Inspectors monitor and observe the construction of roads and typically file daily reports for their
supervisors to review as part of the acceptance process. Pavement Interactive specifies that
inspectors must be in a separate chain of command from the crews who are building the roads to
ensure appropriate segregation of duties. If this is not possible, compensating controls should be
designed to ensure quality standards are met.A well-designed quality assurance process decreases
the likelihood that street improvements do not meet their expected useful life, which would
require more maintenance faster than expected.
O
v
a
5 Quality assurance is defined as those planned and systematic actions necessary to provide confidence that a product or facility will perform
satisfactorily in service,including continued evaluation of all activities in the process.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
What We Found?
• Quality control activities (i.e. street construction activities) may be performed by either in-
house Streets Division crews or contractor crews. Both types of crews are required to conform
to the City's Transportation Design Criteria Manual.
Controls Over Contractor Crews
• A third-party civil engineer provides construction plans or design minimums for contracted
reconstructs.
• A separate third-party geotechnical engineer tests the quality of rehabilitation construction
materials upon request of the City.
• Field Services Supervisors record inspection results in their personal project journals and
verbally communicate any project issues to Streets upper management and contractor crew
leaders. Inspection reports are not physically documented.
• Contracted work orders are closed by the Project/Construction Coordinator after the
submitted invoice has been reviewed by the Field Services Supervisor.
Controls Over In-House Crews
• A third-party geotechnical engineer typically provides design minimums for in-house
rehabilitations; design decisions are occasionally made by Field Services Supervisors when a
geotechnical engineer is not engaged.
• Typically, the same third-party geotechnical engineer tests the quality of rehabilitation
construction materials upon request of the City.
• Field Services Supervisors record inspection results in their personal project journals and
verbally communicate any project issues to Streets upper management and in-house crew
leaders. Inspection reports are not physically documented.
• In-house work orders are then closed by the Field Services Supervisor or the Crew Leader.
Available Documentation of Quality
• OCI maintenance guidelines promulgated by the City's pavement survey consultant suggest
the following maintenance and improvement techniques (see Picture 4).
Relative
OCI Range Desortpticn Remaining Life Definition
85—100 Excellent 15 to 25 Years Like new condition—We b no maintenance required when
new,muune maintenance such as crack and join sealing.
75—55 Very Good 12 to 20 Vears Routine maintenance such as patching and crack sealing with
sudace treatments such as seal coats or slumes.
55—75 Good 10 to 15 Years Heavier surface veatments and thin overlays.Localized panel
replacements.
45—55 Fair to Marginal 7 to 12 Vears Heavy surface-based inlays or overlays with localized repairs.
Moderate to extensive panel replacements.
30—45 Poor 5 to 10 years Sections will require very Nick overlays,—face replacement,
base reconsi-ctwn,and possible subgrade stabilization.
0—30 Very Poor 0 to 5 Years High percentage of full reconstruction.
Picture 4:00 Guidelines
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
o These definitions were used to develop the criteria shown in Table 3. These criteria
were applied to the average inspected OCI of about $11.4 million of street
improvement projects to target projects for review.6 Maintenance techniques were
not reviewed because they are generally localized projects that do not impact the OCI
of the whole street segment.
Table 3:Targeted Review Criteria
Improvement Activity Project Average Inspected OCI
Micro Seal Below 45
Mill&Overlay Below 30
Reconstruct Above 50
• Based the criteria in Table 3, we selected no micro seal projects, 9 mill &overlay projects, and
15 reconstruction projects' for targeted review. These selected projects totaled about $2.1
million dollars (i.e. 18% of street improvement project work order costs); about half of this
amount was spent via contract. After reviewing the available supporting documentation for
these projects, we found the following:
o About $141,000 of rehabilitative activities on 1.63 lane miles of roadway had
documentation that supported an alternative action being taken—specifically the road
was overlaid instead of reconstructed. There was no management approval of these
unsupported actions documented.
■ About 87%of these unsupported expenditures were made in contradiction to
the opinion issued by the geotechnical engineering company. The remaining
amount appear to have been overlaid in response to pressure from residents,
however, they were scheduled to be reconstructed as part of the bond
program.
Table 4:Summary of OCI Rehabilitation Exceptions Documentation (2016-2018)
Audit Determination$ Reconstruct Amount Overlay Amount Total Amount
Unsupported $0 $141,000 $141,000
Lack of Design Standards $197,000 $102,000 $299,000
Supported $1,619,000 $44,000 $1,663,000
All OCI Exceptions: $1,816,000 $287,000 $2,103,000
o Relevant materials testing results prepared by the City's geotechnical engineer could
not be provided for three of fifteen reconstruction projects and seven of nine overlay
projects about$443,000.
o Quality inspection documentation could not be provided for any of these projects.
N
6 A project was determined by matching multiple street segment street names,activities completed,and dates completed.
7 Two of these reconstruct projects used mill&overlay activity codes,however,we were able to verify that they were reconstructed.
8 An activity was determined to be unsupported if there was documentation that a different action had been recommended.Those projects
identified as part of a bond program or bond program"connectors"were determined to be supported.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Why Does It Matter?
Table 5 summarizes the controls currently being performed to ensure the quality of contractor and
in-house road rehabilitation projects meets standards;the current control deficiencies exist:
a. Field Services Supervisors occasionally make decisions contrary to geotechnical
engineer design recommendations (QC step in Table 5). Justification or support for
these decisions is not adequately documented (see Table 4).
b. Design standards and materials testing results prepared by the geotechnical engineer
are not always retained by the Division (IA step in Table 5).
c. The Field Services Supervisor's quality inspections of contractor and in-house
rehabilitation projects are not documented in a reviewable form (QA step in Table 5).
Table 5: Quality Assurance Controls over Road Rehabilitations
Step Control Activity Contractor I In-House
Design Standards Civil Engineer Geotechnical Engineer or
QC Field Services Supervisor
Crew Supervision Crew Leader Leaderm Crew Leaders
IA Materials Testing Geotechnical Engineer Geotechnical Engineer
QA Quality Inspections Field Services Supervisor Field Services Supervise
Quality Acceptance Field Services Supervisor Field Services Supervisor or Crew Leaders
Risk Level: * High High
*Risk that roadway improvements will not comply with the City's standards.
Adequate Assurance of Compliance
Some Assurance of Compliance
ittle Assurance of Compliant
We verified that about 1.63 lane miles of road were overlaid instead of being fully reconstructed
as indicated by OCI guidelines and a geotechnical engineer's recommendation.While there may be
justification for these decisions there is not documentation available to show appropriate approval
of these actions. Furthermore, without retaining design standards or materials testing results
provided by the geotechnical engineer, compliance with the City's quality standards cannot be
assured after the project is complete. Similarly, there is no reviewable documentation of Field
Services Supervisor's inspections, meaning there is little assurance that standards are being met.
These documentation issues prevent independent determination of a rehabilitation project's
compliance with the City's standards. If projects are not constructed to standards, they may not
meet the expected useful life — potentially costing the City more money more quickly than
expected. Without more complete documentation, our Office cannot provide assurance on the
quality of rehabilitation projects, even if the activity aligns with OCI guidelines.
Recommendations (High Priority):
1. Develop a standardized process for recording and approving design adjustments to in-house
street rehabilitation projects. While not all projects need to have engineered design
minimums, adjustments to these minimums need to be approved by Streets management. m
Public Works Comments: Staff will implement process controls for deviation from
recommendations. This will include written documentation escalated and signed by a
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
management to approve the deviation. SOPS (standard operating procedures) will be created
and all employees will be trained on the process.
2. Develop a record retention system to store inspection reports and geotechnical reports for
each street rehabilitation project according to the Texas State Library and Archives
Commission's regulations.
Public Works Comments: Staff will establish SOPS (standard operating procedures)for record
retention. Cartegraph, our internal work order system, can be structure so that all pertinent
documents to the specific job are stored in the system and reports can be run to retrieve the
data.
3. Require Streets Field Services Supervisors to submit periodic inspection reports as part of the
quality acceptance decision-making process for street rehabilitation projects.
Public Works Comments: Standardized inspection documentation will be created and
implemented. These documents will be specific to the work being performed, (mill and overlay,
micro seal, reconstruction, etc.), archived in the Cartegraph system, and tied to the work order.
SOPs(standard operating procedures) will be created and all employees will be trained.
Changes to Street GO Bond Administration Could Further Enhance Transparency
In order to facilitate the rehabilitation of the City's roadway network, citizens approved $44 million
of general obligation (GO) bond issues via election in 2012 and 2014 to fund the rehabilitation of
streets throughout the City.The use of GO bonds is intended to increase transparency as only those
expenditures authorized via the bond election can be funded with GO revenues.
What We Found?
Bond Program Planning
• When developing street propositions for GO bond elections, the Streets Division has typically
identified street segments with very-low OCIs as rehabilitation targets and advertised these
areas as part of the election materials.
o The Division's progress on completing these areas is monitored by the City's Bond
Oversight Committee, which is composed of five Denton citizens who are appointed
by the City Council. As of April 2019, the rehabilitation of about 56% of lane miles
identified in the 2012 and 2014 bond programs has been completed. Figure 2 shows
the current status of these lane miles in more detail.'
a�
a
9 Appendix B details the street segments that are remaining(i.e.no progress has been made towards their rehabilitation).
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Figure 2: 2012 &2014 Street Rehabilitation Bond Program Status
In Progress/
Planned '
25% Status Segments Lane Miles
Coordinating Complete 226 72.8
11 w/Utilities In Progress/Planned 99 32.4
Complete 18% Coordinating w/Utilities 72 23.4
Remaining 6 1.8
All: 403 130.4
Remaining
1%
• Street segments near or in between the very-low OCI segments with higher OCIs — called
"connectors"—were not included as part of the bond program in these advertised materials.10
o However, current Division practices typically include these connectors in rehabilitation
projects, especially if the segments are all located in one neighborhood or will be
disturbed by utilities.
o While not all rehabilitation costs are part of bond programs, about 35% of our $2.1
million of projects targeted for documentation review (i.e. Table 4)11 were
"connectors" and about 41% were identified as part of the bond program in the
advertised materials.
Bond Program Accounting
• General obligation bond funds from different elections are currently co-mingled in one fund
by business unit. For example,the revenues from$44 million of 2012 and 2014 approved bond
issues are recorded in one GO Streets fund; GO revenues and associated expenditures for a
separate business unit, such as Parks, are recorded in a separate fund
• Street project descriptions do not always clearly specify the street segments included in the
project's scope. Additionally, project numbers are not always included in Cartegraph. These
practices hinder the tracking of bond expenditures to specific rehabilitation work.
Why Does It Matter?
Bond Program Planning
As mentioned previously,selecting street segments to be targeted as part of a bond program using
the very-low OCI criteria is an appropriate practice that helps ensure resources are used equitably
throughout the City. However, not considering connectors in bond program planning requires the
Streets Division to spend more money than anticipated on these projects to remain effective; not L-f)
planning for these connectors means either: rl
a�
bn
I. Money from the operational fund must be spent to supplement the bond program; or a
10 According to staff,planning for the 2019 GO election will consider street connectors when identifying streets for rehabilitation.
11 This information is included for reference and should not be taken as a reflection of all Streets rehabilitation activities.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
II. General obligation bond revenues must be spent to rehabilitate fewer lane miles.
Bond Program Accounting
The City's current project accounting method is appropriate for tracking expenses related to each
street rehabilitation and provides adequate transparency to the Bond Oversight Committee;
however, consistent and specific project documentation would facilitate tracking GO bond fund
expenditures. Similarly, accounting for both the 2012 and 2014 bond revenues in one GO Streets
fund hinders the tracking of project expenditures back to bond series. More consistent and precise
accounting of bond revenues and expenditures would further enhance transparency and
accountability.
Recommendations:
4. Consider including street connectors in bond program proposals in the future to better
estimate costs and provide greater transparency to residents.
Public Works Comments: Staff will recommend implementing this practice to the Bond
committee. The ultimate decision is left up to the committee. Staff will follow Bond Committee
and City Council direction.
5. Develop a process to consistently document the street segments included in each project.
Public Works Comments: Staff will restructure the intake portion of the workorder system to
more efficiently tie street segments together on larger jobs. SOPs (standard operating
procedures) will be created and all employees will be trained in the new process.
6. Finance should consider accounting for each general obligation bond series in a separate fund.
Finance Comments: The consolidation of bond funds was implemented in 2014 to streamline
the tracking of project costs and expenses of bond proceeds. Among other benefits,
consolidation limits the number of funds necessary to account for project construction costs.
The City's Bond Counsel approved of consolidation, and the City's annual external audits have
approved capital projects expenditures related to bond related projects.
Following the approval of a new bond program, staff will consider all options for bond fund
accounting.
Data Issues Impede Pavement Monitoring Effectiveness
As mentioned previously,a pavement management system typically has five components including
a pavement information database. This database should allow the user to view and manipulate
pavement data in a meaningful way. The City's database is stored in its Cartegraph system which
contains two types of pavement information: 1) street asset information by segment and 2)
maintenance and improvement work order information.
What We Found?
Street Segment Asset Information Q0
• Street segment asset information is generally complete and accurate; however, the installed
date of most assets was not up-to-date.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
o This data is currently stored in the City's geographic information system (GIS).
According to staff, Streets is working with Technology Services to link this data to
Cartegraph.
• Certain work order activities increase the OCI of the associated asset. These point increases
are set by the City's OCI consultant based on their professional judgment.
o We believe these point increases are generally appropriate with the exception of
overlay work orders, which may result in overestimating the overlays effectiveness—
especially for lower OCI assets.Table 6 shows the point increases.
Table 6: Street Asset OCI Updates by Work Order Activity
Activity OCI Increased To Activity OCI Increased By
Reconstruct 100 Micro Seal 10%
Overlay 85 Crack Seal 7%
• Visual inspection and analysis of estimated OCI data found that about 228 work orders
completed between 2016 and 2018 did not properly update the asset's OCI.
o After communicating this information to staff, they found that there were issues in
Cartegraph's update formula. This issue has since been corrected — increasing the
City's roadway network's average estimated OCI by about half a point.
Work Order Information
• The Cartegraph work order system had 6,847 completed work orders recorded at the
beginning of our audit period.These work orders finished construction between May 2015 and
February 2019, and about 56% appear to be directly related to street maintenance or
improvements.The auditors found:
o A total of 83 different work order activity codes are recorded in the City's work order
data. Some of these activities are obsolete, duplicates of other activities, or steps in a
different activity's process. These redundancy issues appear to have improved over
time from 68 activity codes in 2016 to 49 in 2018; however, they still complicate
attempts to analyze activity costs over this period.
o Over 5% of completed work orders do not have a construction start date, however,
only one work order was missing a construction stop date. It is unclear why these start
dates are omitted.
o Almost 7% of completed work orders do not have any related cost information; of
these work orders, 163 (about 2%of completed work orders) were directly related to
street maintenance or improvements.
Why Does It Matter?
Without installed date information,the Division is not able to conduct analysis on the useful life of
pavements to identify potential issues in the City's standards or pavement quality. In addition,
without consistent work order information such as activity, cost, start dates, and stop dates, the
City cannot conduct effective cost analysis.
a
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Similarly, 39 overlay work orders were completed on street segments with an inspected OCI less
than 30, which would indicate a reconstruction is more appropriate,typically because the integrity
of the underlying layers of the roadway are failing. If the underlying integrity of these segments
was failing, increase the OCI to 85 — or very good condition — could lead to the segment not
receiving needed maintenance or improvements.
In summary, without capturing adequate data,the City cannot effectively monitor the condition of
its roadway network. While the deficiencies noted previously do not prevent monitoring, the
effectiveness of the Division will be enhanced through more accurate, consistent, and complete
data entry and analysis.
Recommendations:
7. Include up-to-date installed date information in the Cartegraph system.
Public Works Comments: Staff will work with IT to update the installed date for older
infrastructure pulling information from GIS. While the install date is important it is not vital.
With regular pavement studies the street condition is evaluated at that time and a maintenance
plan is established on the current condition.
8. Consider adjusting the amount of OCI points added to a street segment for overlays. Increasing
the OCI by a percentage, similarly to micro seals and crack seals, may be more appropriate for
lower OCI streets than increasing the OCI to a flat 85 which is the current practice.
Public Works Comments: Staff will discuss the recommendation with the Pavement survey
contractor.All performance curves and OCI adjustments after completion of work is a base line
set by pavement analysis company. This company will be conducting another survey in the next
fiscal year and will reevaluate at that time.
9. Provide training for crew leaders entering work order information into the Cartegraph system.
The training's content should be focused on generating data that will be useful for the Division
when analyzing the cost of work orders and useful life of assets and should be informed by
management's needs.
Public Works Comments: Staff will create SOPS (standard operating procedures) and all
employees will be trained on the process of work order entry.
00
rl
v
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Potential Cost Savings May Exist in the Purchasing Process
In order to protect its residents from misappropriation or malfeasance of municipal funds, Texas
state law requires different bidding requirements at differing levels of purchases.12 These
requirements are summarized in Table 7; however, it should be noted that there are some
exceptions, which are outlined in Texas Local Government Code Section 252.002.
Table 7:Texas Purchasing Law Summary
• Invite competitive sealed bidding
Greater than$50,000 • Award a contract to the lowest responsible bidder
• Acquire at least three quotes
Between$3,000&$50,000 • Contact at least two historically underutilized businesses(HUB)
Less than$3,000 • None
What We Found?
• During 2018, a total of $14.9 million dollars purchase orders were issued from the Streets
Improvements Fund. About $14.5 million of this amount was covered under a contract. The
remaining$408,868 were spent as shown in Table 8.
• Based on a review of available documentation, the Division purchased two commodities —
totaling $40,977 — without obtaining three quotes or having adequate exception
documentation.
o Documentation showed that $31,117 of this amount was spent on purchases of lime
after the previous contract had expired. A new contract was executed later that year.
o The other $9,860 for railroad signal maintenance may be a sole source exception,
however,there is not adequate documentation to verify this conclusion.
• We identified one commodity that had a relevant historically underutilized business; a quote
was not obtained from this vendor and there was no documentation that they were contacted.
• Eight purchase orders issued during 2018 were for the rental of signs and barricades to mark
road construction areas.These purchases—made for different constructions sites—total more
than $50,000.
al
rl
v
12 Texas Local Government Code prohibits the use of"separate,sequential,or component purchases"as a means of avoiding bidding
requirements.
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Table 8: Streets Improvement Fund Purchases without a Contract
Commodity Compliant? Total Purchases
Sign & Barricade Rentals Contract Needed $89,894
Materials Disposal HUB Quote Missing $50,000
Sampling Yes $50,000
Guard Rails Yes $49,000
Backhoe Rental Yes $38,743
Patching Material Yes $35,700
Lime Quotes Needed $31,117
Skid Steer Loader Rental Yes $30,032
Signal Maintenance Quotes Needed $9,860
Heavy Equipment Purchase Yes $8,371
Professional Service Exempt $7,500
Light Tower Rental Yes $4,700
Tree Trimming Yes $2,950
Training Yes $1,000
All: $408,868
Why Does It Matter?
Without proper documentation, we cannot determine if the City has completely complied with
Texas law for about $40,977 of purchases; however, these issues have been addressed in a
separate audit of Procurement. This being said, departments are responsible for obtaining quotes
when purchases are between $3,000 and $50,000 according to the City's Materials Management
& Payment Procedures Manual—meaning the Streets Division must ensure compliance with Texas
law regarding historically underutilized businesses.
Finally, sign and barricade rentals totaled more than $50,000, which is a violation of state law. The
City should contract for these purchases in order to comply with state law going forward. In
addition, the City may be able to save money on these expenditures through the contracting
process.
Recommendations:
10. Check the Texas State Comptroller's for related historically underutilized businesses
when obtaining quotes for purchases between $3,000 and $50,000.
Public Works Comments:Staff has been trained on the correct process for properly quoting jobs.
Continued education will continue as other Purchasing procedures are updated.
11. Contract for the rental of signs and barricades to mark road construction sites.
Public Works Comments: Contract was approved by City Council June 18tn
Current Management Structure Indicates Redundancy
Responsibility should be assigned to discrete units of an organization to operate in an efficient and
effective manner according to the Government Accountability Office's Standards for Internal �
Control. During the audit period, Streets was a division of Capital Projects under the operations v
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
side of the department; the Traffic and Drainage divisions were also a part of Capital Projects'
operations.
What We Found?
• The Traffic and Drainage Divisions are managed by a single operations manager who reports
to the Deputy Director of Operations.
• Differently, the Streets Division has two levels of upper management, a Streets Operations
Manager and a Streets &Traffic Superintendent.
o The two upper management positions of the Streets Division have similar
competency requirements.
o The Streets & Traffic Superintendent does not provide managerial support or
supervision for the Traffic Division.
Why Does It Matter?
Managerial redundancy typically increases the complexity of high-level decision making,
decreasing the efficiency of the division. Similarly, the City may be paying more than necessary in
salary to provide managerial support and supervision for the Streets Division.
As of May 2019, the employee currently holding the Streets &Traffic Superintendent position has
elected to retire from the City. Streets Division management has stated that they do not intend to
fill this position, which would functionally alleviate the redundancy identified.
Recommendations:
12. Revise the Streets Operations Manager and Streets &Traffic Superintendent job descriptions
to more accurately reflect currentjob responsibilities. Consideration should be given to thejob
responsibilities assigned to the Construction Projects Manager and Field Services Supervisors
so as not to create managerial redundancy. If total job responsibilities do not warrant two
positions, they should be combined into one.
Public Works Comments: Duplicate level of Supervision was eliminated with the retirement of
the Streets Superintendent.
rl
N
v
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Appendix A: Management Response Summary
The following summarizes the recommendations issued throughout this report. Based on management's
request, our Office has designated recommendations 1, 2, and 3 to be high priority. The auditors found
that staff and the Division was receptive and willing to make improvements to controls where needed.
Management has provided their response to each recommendation.
Expected
1 Develop a standardized process for recording and approving Concur Completion:
design adjustments to in-house street rehabilitation projects. 15T Quarter
2020
Public Works Comments: Staff will implement process controls for deviation from Responsibility:
recommendations.This will include written documentation escalated and signed by Daniel Kremer
management to approve the deviation. SOPS (standard operating procedures)will be
created and all employees will be trained on the process.
Develop a record retention system to store inspection reports Expected
and geotechnical reports for each street rehabilitation project Completion:
2 according to the Texas State Library and Archives Concur 1"Quarter
Commission's regulations. 2020
Public Works Comments: Staff will establish SOPS (standard operating procedures)for Responsibility:
record retention. Cartegraph, our internal work order system, can be structured so that Daniel Kremer
all pertinent documents to the specific job are stored in the system and reports can be
run to retrieve the data.
Require Streets Field Services Supervisors to submit periodic Expected
3 inspection reports as part of the quality acceptance decision- Concur Completion:
making process for street rehabilitation projects. 1st Quarter
2020
Public Works Comments: Standardized inspection documentation will be created and Responsibility:
implemented.These documents will be specific to the work being performed, (mill and Daniel Kremer
overlay, micro seal, reconstruction, etc.), archived in the Cartegraph system, and tied to
the work order. SOPS (standard operating procedures) will be created and all
employees will be trained.
Consider including street connectors in bond program Expected
4 proposals in the future to better estimate costs and provide Concur Completion:
greater transparency to residents. Fall 2019
Public Works Comments: Staff will recommend implementing this practice to the Bond Responsibility:
committee.The ultimate decision is left up to the committee. Staff will follow Bond Daniel Kremer
Committee and City Council direction.
Expected
Develop a process to consistently document the street Completion:
5 segments included in each project. Concur 1st Quarter
2020
Public Works Comments: Staff will restructure the intake portion of the workorder Responsibility: N
system to more efficiently tie street segments together on larger jobs. SOPS (standard Daniel Kremer N
CL
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
operating procedures)will be created and all employees will be trained in the new
process.
Finance should consider accounting for each general Expected
6 obligation bond series in a separate fund. Partially Concur Completion:
N/A
Finance Comments:The consolidation of bond funds was implemented in 2014 to Responsibility:
streamline the tracking of project costs and expenses of bond proceeds. Among other Finance
benefits, consolidation limits the number of funds necessary to account for project
construction costs.The City's Bond Counsel approved of consolidation, and the City's
annual external audits have approved capital projects expenditures related to bond
related projects.
Following the approval of a new bond program, staff will consider all options for bond
fund accounting.
Include up-to-date installed date information in the Expected
7 Cartegraph system. Partially Concur Completion:
Ongoing
Public Works Comments: Staff will work with IT to update the install date for older Responsibility:
infrastructure pulling information from GIS. While the install date is important it is not Daniel Kremer
vital. With regular pavement studies the street condition is evaluated at that time and a
maintenance plan is established on the current condition.
Expected
8 Consider adjusting the amount of OCI points added to a street partially Concur Completion:
segment for overlays. 2 ndQuarter
2020
Public Works Comments: Staff will discuss the recommendation with the Pavement Responsibility:
survey contractor. All performance curves and OCI adjustments after completion of Daniel Kremer
work is a base line set by pavement analysis company.This company will be conducting
another survey in the next fiscal year and will reevaluate at that time.
Expected
9 Provide training for crew leaders entering work order Concur Completion:
information into the Cartegraph system. V Quarter
2020
Public Works Comments: Staff will create SOPS (standard operating procedures) and all Responsibility:
employees will be trained on the process of work order entry. Daniel Kremer
Check the Texas State Comptroller's for related Expected
10 historically underutilized businesses when obtaining quotes Concur Completion:
for purchases between$3,000 and$50,000. 6/7/2019
Public Works Comments: Staff has been trained on the correct process for properly Responsibility:
quoting jobs. Continued education will continue as other Purchasing procedures are Daniel Kremer
updated.
(`n
Contract for the rental of signs and barricades to mark road Expected
N
11 Concur Completion:
construction sites. ,
6/18/2019
a
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Public Works Comments: Contract was approved by City Council June 181h. Responsibility:
Daniel Kremer
Revise the Streets Operations Manager and Streets& Traffic Expected
12 Superintendent job descriptions to more accurately reflect Concur Completion:
current job responsibilities. 6/28/2019
Public Works Comments: Duplicate level of Supervision was eliminated with the Responsibility:
retirement of the Streets Superintendent. Daniel Kremer
N
v
The City of Denton Internal Audit Report Audit of Roadway Quality Management
October 2019
Appendix B: Remaining Bond Program Street Segments
The street segments listed below were identified for rehabilitation as part of the 2012 and 2014 bond
program, however,we found no evidence that the rehabilitation process had begun.They are included
here as reference for the Streets Division.
Table 9: Remaining Street Segments
Bond Year Seg ID Street Route Back Route Ahead Lane Miles
2012 116-3 Bowling Green St Georgetown Dr Vanderbilt St 0.6807
116-4 Bowling Green St Vanderbilt St Auburn Dr 0.3659
407-7 Highland Park Rd Willowcrest Loop Willowcrest Loop 0.2155
666 Oakhurst St Bentoaks Dr Oakhurst St 0.1355
829 Sheraton PI Sheraton Rd Buckingham Dr 0.2604
959 Williams Ln Buckingham Dr Royal Acres Dr 0.1736
L!�
N
v