2. Follow-Up Review of the Utility Street Cuts Audit (Dec. 2020) ABSTRACT
While some changes have been made to the structure
of the right-of-way permitting process, additional
construction standards and permitting system updates
would improve inspection effectiveness. Finally,
internal street cut restoration practices have improved;
City standards are expected to be adjusted to reflect
current practices.
Internal Audit Department
City Auditor
Madison Rorschach, CIA, CGAP
AUDIT OF UTILITY STREET Audit Staff
Neeraj Sama, MBA
CUTS
Follow-Up Report
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The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
Table of Contents
Follow-Up at a Glance..........................................................................................................................3
Introduction.........................................................................................................................................4
ManagementResponsibility.....................................................................................................................4
Audit Objectives, Scope, and Methodology..............................................................................................4
Recommendation Status Update .........................................................................................................5
Current City Standards do not Address all Aspects of Street Cut Restoration Quality.............................5
Dual Responsibility Complicates Quality Assurance.................................................................................6
Public Works Inspections Division Workload Hinders Effectiveness........................................................8
Water Utilities Occasionally Makes Cuts on Streets Under a Moratorium ..............................................9
Restoration Plans are not Always Necessary..........................................................................................10
Right of Way Permit Fee Structure is Ineffective....................................................................................10
Inspection Documentation Improvements Will Increase Effectiveness.................................................11
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The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
Follow-Up at a Glance
Why we did this Follow-Up:
This report is intended to provide information on what changes have been made in response to the
Utility Street Cuts Audit issued in August 2019. The original audit evaluated the effectiveness of utility
street cut controls to provide assurance that the City was properly safeguarding the integrity of$360
million in roadway assets. This follow-up is included on the City's Fiscal Year 2020-21 Audit Plan as
approved by the City Council.
What we Found:
A newly adopted Right-of-Way Construction Management Ordinance has provided some needed
changes to the right-of-way permit management process; however, additional construction standards
updates must still be formalized before implementation. Plans to implement an automated permit
management solution should enhance inspection efficiency. Finally, internal street cut restoration
practices have improved; City standards are expected to be adjusted to reflect current practices. The
status of each recommendation is summarized below:
Recommendation Mgmt. Response Status
1. Modify the City's Standard Details to require patch
Concur In Progress
joint sealing.
2. Develop patch ride quality testing criteria. Concur In Progress
3. Perform follow-up inspections on street patches
during the guarantee period. Concur In Progress
4. Require all restoration contractors to comply with City Partially Concur In Progress
standards.
5. Conduct a Forms inspection on all street restorations, Alternative
including those performed by City utilities. Concur Solution
6. Define what constitutes an emergency utility cut. Concur Implemented
7. Notify the Streets Division when utility cuts of
moratorium streets are made. Concur In Progress
8. Alter Division policy to only require restoration plans Concur Implemented
when deviations from City standards are requested.
9. Adjust the ROW permit fee structure to hinge on
length of time a permit will be open. Concur Implemented
10. Reevaluate the cost of ROW permit fees periodically. Concur In Progress
11. Request the City Council modify the ROW ordinance to Concur Implemented
include specific recourse for non-compliance.
12. Issue ROW permits and document inspections in an Not
automated permit management solution. Concur Implemented
13. Develop and implement standardized inspection
documentation to test for critical restoration criteria. Concur In Progress
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Audit report translations may be requested by emailing InternalAudit@CityofDenton.com.
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts (August 2019)
Introduction
The Internal Audit Department 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 Internal Audit Department has completed a follow-up review of the Utility Street Cuts Audit
issued in August 2019. 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 a progress update on recommendations from the Utility Street
Cuts Audit(August 2019),which evaluated the effectiveness of utility street cut controls to provide
assurance that the City was properly safeguarding the integrity of$360 million in roadway assets.
Audit fieldwork was conducted during November 2020. The scope of review varied depending on
the procedure being performed.The following list summarizes the major procedures performed:
• Reviewed documentation from the issued audit to develop criteria including industry
standards, best practices, policies, and procedures;
• Examined inspection and work order documentation for a randomly selected statistical
sample of 76 right-of-way permits issued and closed during fiscal year 2019-20 that involved
asphalt and concrete surfaces;
• Reviewed the revised Right-of-Way Construction Management ordinance adopted in
November 2019 and the draft Standard Construction Specifications; and
• Interviewed City staff from the Public Works Inspections Division, Streets Division, and Water
Utilities Department.
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1 The City of Denton Internal Auditor's Office is considered structurally independent as defined by generally accepted government auditing
standard 3.56.
2 This sample provides with 95%confidence that the true population is±10%of the sample estimate.
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
Recommendation Status Update
This report summarizes the Audit of Utility Street Cuts' recommendations, management responses, and
the Internal Audit Department's follow-up findings, which describe to what extent City management has
implemented Internal Audit's recommendations since the publication of the original report (August 2019).
For reference, utilities must occasionally cut into streets to perform work on utility lines that run
underneath the City's roadway network. Figure 1 illustrates a cross-section of a road that has been cut and
restored to perform such work.
Figure 1: Utility Street Cut Illustration
Road Base Trench
Backfill
Road Subgrade •
In order to cut into a street to make a repair, the City requires a utility to acquire a right-of-way' permit
issued by the Public Works Inspections Division. Under this permit, Public Works Inspections may perform
several types of inspections at the construction site while the permit is active.These include:
➢ Safety Inspections are performed while the permit is active to ensure that traffic control devices
and safety equipment are being used appropriately to protect construction workers and residents
in the right-of-way;
➢ Forms Inspections are performed before the patch pavement is placed to ensure that trench form
and Backfill compaction align with the City's standards as set by the Engineering Department; and
➢ Final Inspections are performed after the patch pavement is placed to ensure the right-of-way has
been returned to a condition as good or better than before the work was conducted.
Current City Standards do not Address all Aspects of Street Cut Restoration Quality
1. Engineering Services needs to modify the City's standard details to require pavement patch
joint sealing.
Management Response: Concur
Capital Projects Comments: Staff is currently implementing this recommendation in the new City of
Denton Construction Specifications to be completed by the end of[2019].
Audit Follow-Up Finding: In Progress
Since the publication of the original audit, the City has not adopted new Standard Construction L()
Specifications; however, City staff has drafted new Standard Construction Specifications. These new
3 The right-of-way is the legal right,established by usage or grant,to pass along a specific route through grounds or property belonging to
another;particularly in this report,the right-of-way typically means the use of a roadway owned by the City of Denton.
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
Specifications require joint sealing for both concrete and asphalt utility trench repairs and are
expected to be finalized before the end of calendar year 2020.
Furthermore,during fiscal year 2019-20,about 88 percent of a statistical sample of street cut patches
had sealed joints. This is a significant improvement from the previous audit and appears to be
primarily driven by the Streets Division's decision to begin sealing asphalt patch joints. Formally
requiring patch joints to be sealed will provide clear direction and further assurance that streets will
last for their entire useful lives.
2. Engineering Services needs to develop criteria to determine when patch ride quality should
be tested.
Management Response: Concur
Capital Projects Comments: Staff will adopt later this summer [2019] a standard procedure for
determining the level of ride quality required when assessing a patch.Staff will review other agencies
and city's requirements as a reference for the City of Denton's standard procedure.
Audit Follow-Up Finding: In Progress
The City's Standard Construction Specifications require utility cut patches to meet certain ride quality
standards; however, Public Works Inspections staff was not verifying that patches met ride quality
standards during the original audit period.
Based on discussions with City staff, a procedure to begin testing ride quality has not been formally
adopted or implemented; however, a standard operating procedure has been developed.That being
said, Public Works Inspections Management has finalized a method to test ride quality in the field
with a ten-foot straight edge. Once necessary equipment is received, they plan to begin testing a
sample of all patches each month.
Dual Responsibility Complicates Quality Assurance
3. Public Works Inspections needs to develop a standard procedure to perform follow-up
inspections on street cut restorations during the guarantee period.
Management Response: Concur
Capital Projects Comments: Staff will establish a standard procedure and schedule for follow up
inspection on street patches during the guarantee period. This procedure will be established by the
end of June 2019.
Audit Follow-Up Finding: In Progress
The adoption of a new Right-of-Way Construction Management ordinance in November 2019
extended the right-or-way permit warranty period from one year to two years. This ordinance also
requires utilities to begin repair work within ten days of the City's request. Extending this warranty
period gives Public Works Inspections staff additional time to perform follow-up inspections and
increases the likelihood that a poorly placed patch will be identified before the warranty period is
over.
Staff has begun scheduling follow-up inspections for work completed under the new Right-of-Way
Construction Management ordinance; however, no warranty inspections have been conducted to
date. In the future, staff plans to schedule warranty inspections in a new permit management a,
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software; this software implementation is expected to be complete in calendar year 2021.
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts (August 2019)
4. Water Utilities needs to require their restoration contractors to comply with the City's
standards for all right of way permits.
Management Response: Partially Concur
Water Utilities Comments: The Utility has begun requiring adherence to City standards on non-
emergency work. Staff is working with engineering and inspections to determine if alternative
standards are acceptable. If so,these will be noted in later revisions of the standard details.
Audit Follow-Up Finding: In Progress
During the original audit, the City's standard construction details
required utilities to backfill the top of their utility trenches with a
concrete "flowable" backfill. The original audit found that the
City's Water Utilities were not using this required backfill material
and instead would often use the material that had been excavated ==
or a crushed aggregate material known as "flexbase" as shown in — -
Picture 1.These Standard Details have not been updated since the Picture 1:city utility eackfill material
publication of the original audit.
Based on review of the inspection documentation of 56 utility street cut patches, only two appeared
to be backfilled with the required flowable material. Table 1 details the results of this review. As
illustrated by the table, most street cuts are made by the City's Water and Wastewater utilities, who
appear to be consistently using flexbase instead of the required flowable backfill material.
Table 1: Street Cut Backfill Sample Results
Atmos Water Wastewater
Flowable Fill 2 0 0
Flexbase 1 20 19
Could Not Determine 0 10 4
As reported in the original audit, flexbase is generally used when constructing large sections of
roadway and is not necessarily an inappropriate backfill material for utility street cut trenches. While
this practice does not comply with the City's standards, it is an improvement from the previous
practice of backfilling with excavated material. In addition, Water Utilities has recently acquired
compaction equipment that allows their crews to compact the flexbase appropriately and developed
standard operating procedures that require their crews to conform with the City's backfill
compaction standards. Proper compaction decreases the risk that a patch will sink and cause a
pothole.
That being said, requiring external utilities to meet a different standard of quality than internal
utilities creates inequity.According to City staff, Public Works Inspections has begun allowing external
utilities to use flexbase upon request; however,this practice has not been formalized, meaning some
external utilities may not be aware of this option. According to City staff, this will be reflected in the
new Construction Specifications, which are set to go into effect on January 1, 2021.
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The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
Public Works Inspections Division Workload Hinders Effectiveness
5. Public Works Inspections needs to conduct a Forms inspection on all asphalt and concrete
street restorations completed as part of a right of way permit, including City utilities.
Management Response: Concur
Capital Projects Comments: Staff will make this a requirement with the adoption of the City's right of
way ordinance for compliance on both publicly and privately funded projects.
Water Utilities Comments: Water/Wastewater staff will work with public works inspections to
determine if there are ways in which we can speed up the inspection process.
Audit Follow-Up Finding:Alternative Solution
The utility street cut process can generally be simplified into four steps as illustrated in Figure 2:
Figure 2: Utility Street Cut Process
Review by Public I
Works Inspections I
2. Excavate
Restore
1. Issue ROW Portion of a 3. Complete Excavated Pavement
Permit City Street Utility Work Area Surface
Completed by
Completed by
Utility Crews Restoration
Contractor
Generally, Public Works Inspections inspectors conduct a Forms inspection between steps four and
five of Figure 2 to ensure that the trench form and backfill compaction of each street restoration
complies with City standards. During the original audit, most street cuts were made by the City's
Water Utilities, however, Forms inspections were only being performed on external utilities' street
cuts. This increased the chance that utility street cut patches would not be constructed to meet the
City's standard—potentially decreasing the useful life of the affected street. This was particularly an
issue as there was evidence that City utilities were not complying with the applicable standards as
discussed previously.
As of this follow-up, Public Works Inspections has not begun conducting Forms inspections on street
cut restorations completed as part of a City right-of-way permit; however, improvements in the
Water Utilities' and Streets Division's street cut restoration practices have generally mitigated the
associated risk. These improved practices provide assurance that patches are restored adequately
while making effective use of the City's resources. These changes include the following:
• Water Utilities has stopped using excavated materials to backfill their street cut trenches;
• Water Utilities has developed a standard operating procedure that requires their crews to
appropriately compact their street cut backfill and has acquired necessary compaction
equipment;
• The Streets Division has begun taking before and after pictures of their construction projects — 00
including utility cut patching—and uploading them into their work order system;
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
• The Streets Division has begun sealing all asphalt patch joints and ensuring new patch pavement
extends past the excavated area, decreasing the likelihood that the patch pavement will sink;
and
• Public Works Inspections has developed a standard operating procedure to review a random
sample of internal street patches each month to ensure that they are restored to as good or
better condition than before the work took place. In addition, this random selection process
should allow Public Works Inspection to verify that the work performed was constructed
correctly. Staff plans to implement this random sampling process during fiscal year 2020-21.
Water Utilities Occasionally Makes Cuts on Streets Under a Moratorium
6. Water Utilities needs to work with the Streets Division and Public Works Inspections to
define what constitutes an emergency utility cut.
Management Response: Concur
Water Utilities Comments: Staff will establish documented criteria for emergency utility work.
Audit Follow-Up Finding: Implemented
As of November 2019, the City adopted a new Right-of-Way Construction management ordinance
that defined Emergency Activity in the right-of-way as follows:
"An activity to respond to any event that may threaten public health or safety . . . Upgrading of
Facilities, new service installation and neighborhood improvement projects expressly do not qualify
as emergency operations."
7. Water Utilities needs to notify the Streets Division when utility cuts of moratorium streets
are made.
Management Response: Concur
Water Utilities Comments: The Utility currently notifies the Streets Department when such streets
are disturbed and uses the Moratorium Streets Map for planning and decision-making purposes.The
Utility will work with the Streets Department to ensure appropriate staff are notified in the future.
Audit Follow-Up Finding: In Progress
In the City of Denton, streets that have recently been improved are placed under a moratorium by
the Streets Division. Per Streets' practices, "utilities should request authorization to be able to
construct in [moratorium] areas." This is because street cuts — even when restored perfectly —
fundamentally reduce the structural integrity of a roadway because they introduce weaknesses into
the pavement that can accelerate deterioration. For this reason, non-emergency utility cuts on
moratorium streets should be minimized as much as possible.
If an emergency arises, utilities may conduct work on moratorium streets without requesting this
authorization and before receiving a permit. That being said, the original audit found that Water
Utilities occasionally made cuts on moratorium streets that did not appear to be emergencies and
without receiving authorization from the Streets Division.
Based on review of a statistical sample of 76 right of way permits, only three street cuts were made 0)
on moratorium streets. All three appeared to be for emergencies and were restored by the Streets
Division. Still, based on discussions with City staff, Water Utilities has not developed a process to
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
request documented authorization from the Streets Division before making non-emergency utility
street cuts on moratorium streets.
Restoration Plans are not Always Necessary
8. Public Works Inspections needs to alter Division policy to require restoration plans only when
deviations from the City's standards are requested to reduce administrative burden.
Management Response: Concur
Capital Projects Comments: This policy will be revised as recommended with the finalization of the
City's standard specifications later [in 2019].
Audit Follow-Up Finding: Implemented
In November 2019, the City adopted a new Right-of-Way Construction Management ordinance.This
ordinance outlines a specific process for right-of-way users to request a variance to right-of-way
construction requirements including submitting detailed plans of the substituted restoration
construction.This process eliminated the requirement for utilities to submit a restoration plan when
applying for a permit and now only requires it when the Standard Construction Specifications or
Details will not be followed. This will reduce any administrative burden associated with submitting a
restoration plan that follows the City's standards while still allowing right-of-way users flexibility.
Right of Way Permit Fee Structure is Ineffective
9. Public Works Inspections needs to adjust the right of way permit fee structure to hinge on
the length of time a permit will be open.
Management Response: Concur
Capital Projects Comments:Staff has engaged a consultant to recommend a new permit fee structure
as part of an overall assessment of all development fees.
Audit Follow-Up Finding: Implemented
The newly adopted Right-of-Way Construction Management ordinance restructured the City's right-
of-way permit fees including allowing for a Permit Expiration fee to be charged if the work on a permit
is not completed before the permit expires.This should incentivize permit holders to either promptly
complete work on their open permits or request a permit extension.
10. Public Works Inspections needs to reevaluate the cost of right of way permit fees
periodically.
Management Response: Concur
Capital Projects Comments:
Audit Follow-Up Finding: In Progress
While the November 2019 Right-of-Way Construction Management ordinance restructured the
right-of-way permitting fees, it did not set a fee schedule. Instead it states that a separate ordinance
will set the actual cost of each new fee type. Based on a sample of 76 right-of-way permits closed
during fiscal year 2019-20, Public Works Inspections charged a $100 fee for each inspection. This is
the same fee structure that was used prior to the original audit issuance.
C)
According to City staff, the new right-of-way permitting fee structure is set to be adopted as part of `v
the fiscal year 2020-21 Development Services fee update. Including right-of-way permitting fees as �°
The City of Denton Internal Audit Report December 2020
Audit of Follow-Up of Utility Street Cuts(August 2019)
part of the Development Services fee schedule should ensure that right-of-way permitting fees are
periodically reviewed and updated as needed.
11. Public Works Inspections needs to request the City Council modify the right of way ordinance
to include specific recourse for non-compliance with the ordinance or the permit
requirements.
Management Response: Concur
Capital Projects Comments: The current draft of the right of way ordinance provides for such
recourse.
Audit Follow-Up Finding: Implemented
The newly adopted Right-of-Way Construction Management ordinance includes specific recourse for
noncompliance with the right-of-way ordinance as well as any requirements of an issued permit.This
recourse includes monetary penalties of up to $2,000 as well as the ability to deny, suspend, or
revoke of a permit.
Inspection Documentation Improvements Will Increase Effectiveness
12. Public Works Inspections needs to issue right of way permits and document corresponding
inspections in an automated permit management solution.
Management Response: Concur
Capital Projects Comments: Staff is currently evaluating such a system as part of a request for
qualifications. Staff anticipates this system to come online by the end of [2019].
Audit Follow-Up Finding: Not Implemented
Public Works Inspections has not begun managing right-of-way permits and their associated
inspections in an automated permit management solution. According to City staff, Public Works
Inspections plans to begin using the City's Development Services' permitting system after it is
updated in calendar year 2021.
13. Public Works Inspections needs to develop and implement standardized inspection
documentation to test for all critical restoration criteria and allow for future analysis.
Management Response: Concur
Capital Projects Comments: Staff will develop standardized inspection documentation as
recommended.This will be implemented with the City's new standard construction specifications.
Audit Follow-Up Finding: In Progress
Public Works Inspections has developed right-of-way permit inspection guidance to aid their right-
of-way inspectors when reviewing right-of-way construction sites.This guidance includes inspectable
items for each inspection type and defines an inspection pass and fail result. While this guidance has
been developed, right-of-way inspection results are documented in a format that allows for easy
analysis of restoration performance.
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