2. Follow-Up Review of Roadway Quality Management Audit (Oct. 2021) 0"
CIT Office of the City Auditor
OF
DENTON Accountability • Transparency • Integrity • Quality
The Streets Division has developed
and has generally implemented
processes to improve roadway
construction quality assurance.
-- In addition, the Division has improved
its usage of the work order system
R through training and correction of
some system update errors. Finally, all
procurement concerns have been
corrected.
Audit of Roadway Quality
Management Audit
Follow-Up Review
Audit Team
City Auditor
Madison Rorschach, CIA, CGAP
Audit Staff
Amber Jackson, MBA, CFE
215 E. McKinney St., Denton, TX 76201 • (940) 349-7228
Audit of Roadway Quality Management: Follow-Up Review October 2021
Table of Contents
Follow-Up at a Glance .................................................................................................3
Introduction ...................................................................................................................4
Management Responsibility .......................................................................................4
Audit Objectives, Scope, and Methodology ...........................................................4
Recommendation Status Update................................................................................6
Roadway Rehabilitation Quality Cannot Always be Assured................................6
Changes to Street GO Bond Administration Could Further Enhance
Transparency ................................................................................................................7
Data Issues Impede Pavement Monitoring Effectiveness.......................................9
Potential Cost Savings May Exist in the Purchasing Process ................................. l 1
Current Management Structure Indicates Redundancy...................................... 12
Appendix A: Roadway Maintenance & Improvements Terminology.................... 14
Audit Project #: 006 Page 12
Audit of Roadway Quality Management: Follow-Up Review October 2021
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 Audit of Roadway Quality Management issued in October 2019. The
original audit evaluated the City's ability to safeguard and improve the City's roadway
network. This follow-up review was included on the City's fiscal year 2020-21 Annual Audit
Plan as approved by the City Council.
What we Found:
The Streets Division has developed and has generally implemented processes for
approving street rehabilitation design adjustments, inspecting in-house roadway
rehabilitations, and retaining quality assurance documentation. In addition, the Division
has generally improved its usage of the work order system through training and correction
of some system update errors. Finally, all procurement and Division structure issues
identified in the original audit have been corrected. The status of each recommendation is
summarized below:
Recommendation Mgmt. Response Status
1. Develop standardized process for recording/approving Concur Implemented
street rehabilitation design adjustments.
2. Develop a record retention system for inspections & Concur Implemented
geotechnical reports.
3. Require Streets Field Supervisors to submit periodic
Concur In Progress
inspection reports.
4. Consider including street connectors in bond program Concur Implemented
proposals in the future.
5. Develop a process to document street segments in
Concur Implemented
each project.
6. Consider accounting for each GO bond series in a Partially Concur Implemented
separate fund.
7. Include up-to-date installed date info in Cartegraph. Partially Concur Implemented
8. Consider adjusting the amount of OCI points added for Partially Concur Implemented
street overlays.
9. Provide training for crew leaders entering WO info Concur Implemented
into Cartegraph.
10. Check for HUBS when obtaining applicable quotes. Concur Implemented
11. Contract for the rental of signs and barricades. Concur Implemented
12. Revise the Streets Operations Manager & Streets & Concur Implemented
Traffic Superintendent job descriptions.
Audit report translations may be requested by emailing InternalAudit@CityofDenton.com.
Audit of Roadway Quality Management: Follow-Up Review October 2021
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 Audit of
Roadway Quality Management issued in October 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 Audit of Roadway Quality Management (October 201 K, which evaluated
the City's ability to safeguard and improve its roadway network.
Audit fieldwork was conducted during September 2021 . The scope of review
varied depending on the procedure being performed. The following list
summarizes major procedures performed during this time:
Reviewed documentation from the original audit to develop criteria
including industry standards, best practices, policies, procedures, and the
issued report;
Analyzed Streets Division work orders completed since October 2019 to
determine if they contained complete information;
The City of Denton's Internal Audit Department is considered structurally independent as
defined by generally accepted government auditing standard 3.56.
Audit Project #: 006 Page 14
Audit of Roadway Quality Management: Follow-Up Review October 2021
➢ Evaluated 15 rehabilitation work orders2 to determine if quality assurance
documentation was appropriately retained;
➢ Examined Streets Division purchase orders issued during fiscal year 2019-20
as well as streets bundle bid plans finalized since October 2019 and the
signs and barricades rental contract executed in June 2019;
➢ Interviewed City staff from the Finance Department, Public Works
Department, and Engineering & Capital Improvement Projects
Department; and
Reviewed select Streets Division job descriptions as well as the City's fiscal
year 2020-21 general pay plan.
2 Rehabilitation work orders include roadway reconstructions and roadway overlays; see
Appendix A for additional information on the types of roadway maintenance and
improvements performed by the Streets Division.
Audit Project #: 006 Page 15
Audit of Roadway Quality Management: Follow-Up Review October 2021
Recommendation Status Update
This report summarizes the Audit of Roadway Quality Management's
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
publication of the original report in October 2019.
Roadway Rehabilitation Quality Cannot Always be Assured
1. Develop a standardized process for recording and approving design
adjustments to in-house street rehabilitation projects.
Management Response: Concur
Staff will implement process controls for deviation from
recommendations. This will include written documentation escalated and
signed by management to approve the deviation. SOPs (standard
operating procedures) will be created and all employees will be trained
on the process.
Audit Follow-Up Finding: Implemented
The Streets Division has developed a change order form that they intend
to use to document requests and approvals of changes to street
rehabilitation projects; however, the Division has not had an opportunity
to use this form since its creation during the summer of 2021 . A standard
operating procedure was implemented in October 2021 to formalize this
change order 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.
Management Response: Concur
Staff will establish SOPs (standard operating procedures) for record
retention. Cartegraph, our internal work order system, can be structured
so that all pertinent documents to the specific job are stored in the
system and reports can be run to retrieve the data.
Audit Follow-Up Finding: Implemented
The Streets Division adopted a standard file folder format for their
rehabilitation projects in 2019. Based on a review of eight reconstruction
projects completed since October 2019, the file folders for five of the
projects appear to align with the adopted format. In addition, six of these
projects had appropriate subgrade testing documentation that was
retained and could be found. While two projects did not have retained
subgrade testing documentation, these projects were completed in 2019.
Audit Project #: 006 Page 16
Audit of Roadway Quality Management: Follow-Up Review October 2021
Projects completed since then generally appear to have adequately
retained subgrade testing documentation.
3. Require Streets Field Supervisors to submit periodic inspection reports as
part of the quality acceptance decision-making process for street
rehabilitation projects.
Management Response: Concur
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.
Audit Follow-Up Finding: In Progress
Based on discussions with staff from the Streets and Public Works
Inspections Divisions, Streets has worked with Public Work Inspections to
design an inspections process for Streets in-house rehabilitation projects.
Under this process, the Streets Division would request an inspection
through the City's construction management software. The inspection
would then be performed by Public Works Inspections staff using
standardized inspection checklists that are also used for the City's capital
improvement projects. The results of these inspections would then be
retained in the construction management software.
While this process appears to be designed effectively, Public Works
Inspections has not begun performing inspections for Streets' in-house
projects. These inspections are scheduled to begin in early fiscal year
2021-22.
Changes to Street GO Bond Administration Could Further Enhance
Transparency
4. Consider including street connectors3 in bond program proposals in the
future to better estimate costs and provide greater transparency to
residents.
Management Response: Concur
3 Street connectors are those street segments near or in between street segments with a low
overall condition index-or OCI -score that have higher OCIs that would typically indicate the
street segment does not need to be rehabilitated.
Audit Project #: 006 Page 17
Audit of Roadway Quality Management: Follow-Up Review October 2021
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.
Audit Follow-Up Finding: Implemented
After completion of the original audit, the City held an election in
November 2019 for citizens to vote on the issuance of new general
obligation bonds.4 Some of this funding was intended to be used to
rehabilitate street segments with low overall condition index- or OCI -
scores.5 Once the issuance of these general obligation bonds was
approved, this set of street segments was known as the 2019 Street Bond
Program.
According to the Streets Division, they worked with the City's utilities to
identify street segments that would need to be replaced soon due to
utility work that were near low OCI segments identified as part of the 2019
Street Bond Program. The City has since awarded two solicitations for
rehabilitation of street bundles - or several street segments in the same
area - to begin completing construction on the 2019 Bond Program.
Based on review of the construction plans included in these solicitations,
both street bundles included connector street segments as identified by
the Streets Division.
5. Develop a process to consistently document the street segments
included in each project.
Management Response: Concur
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.
Audit Follow-Up Finding: Implemented
The Streets Division has identified a way to link different work orders
together under one project in their work order system and are currently in
the process of completing the first project using this methodology. Once
this project is complete, they plan to formalize this process in a standard
operating procedure and use it for projects going forward.
4 General obligation bonds are a common type of municipal bond that is secured by a local
government's pledge to use legally available resources, including tax revenues, to repay bond
holders.
5 The overall condition index score is an indicator of a streets condition based on visible
pavement distresses, road roughness, and structural integrity.
Audit Project #: 006 Page 18
Audit of Roadway Quality Management: Follow-Up Review October 2021
6. Finance should consider accounting for each general obligation bond
series in a separate fund.
Management Response: Partially Concur
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 project expenditures related to bond related projects.
Following the approval of a new bond program, staff will consider all
options for bond fund accounting.
Audit Follow-Up Finding: Implemented
The City is currently accounting for 2012 and 2014 general obligation
bond revenues in one fund as identified in the original audit; however,
general obligation bond revenues associated with the 2019 Bond
Program are being accounted for in a separate fund. Table 1 summarizes
allocated general obligation bond program revenues for street
reconstruction.
Table 1: Summary of Street Reconstruction GO Bond Funding (Millions)
Bond Series Allocated Bond Amount Revised Project Cost Spent Amount
2012 $20.0 $22.8 $25.9
2014 $24.0 $32.8 $28.9
2019 $70.0 $70.0 $5.2
All: $1 14.0 $125.6 $60.0
Data Issues Impede Pavement Monitoring Effectiveness
7. Include up-to-date installed date6 information in the Cartegraph system.
Management Response: Partially Concur
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.
Audit Follow-Up Finding: Implemented
6 The install date is when the road was constructed and put into service.
Audit Project #: 006 Page 19
Audit of Roadway Quality Management: Follow-Up Review October 2021
As part of the City's periodic OCI update process, the Streets Division
asked the consultant to estimate the install date for all of the City's
roadways. This estimated information will be entered into the City's work
order system along with the updated OCI. Similarly, the install date for all
newly constructed street segments is recorded in the work orders system.
In addition, the Streets Division appears to have corrected an issue in the
work order system that now allows a street segment's replace date to be
updated when a reconstruction work order is completed. Based on
review of eight reconstruct projects completed since October 2019, all
had a reasonable replacement date.
8. Consider adjusting the amount of OCI points added to a street segment
for overlays.
Management Response: Partially Concur
Staff will discuss the recommendation with the Pavement survey
contractor. All performance curves and OCI adjustments are 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.
Audit Follow-Up Finding: Implemented
The Streets Division has been working with a consultant to inspect all City
roadways to update each street segment's OCI. This reinspection process
generally occurs every five years to ensure that the City is effectively
monitoring the condition of its roadway network.
As part of the current reinspection process, Streets plans to discuss the
amount of OCI points added to a street segment for overlays, however, a
decision has not yet been made. While the process for updating OCI
after an overlay has not necessarily been changed, periodically
reevaluating this with the consultant adequately addresses the identified
risk.
9. Provide training for crew leaders entering work order information into the
Cartegraph system.
Management Response: Concur
Staff will create SOPS (standard operating procedures) and all employees
will be trained on the process of work order entry.
Audit Follow-Up Finding: Implemented
The original audit found that there were some consistency issues in the
information that was being entered into the Streets Division's work order
system. Specifically, there were:
Redundancy issues in the work order activity codes;
Audit Project #: 006 Page 1 10
Audit of Roadway Quality Management: Follow-Up Review October 2021
Missing construction start dates from completed work orders; and
Missing cost information from completed work orders.
According to Streets Division staff, Streets crews were trained in June 2020
on how to create and update work orders. While trainings were
temporarily halted due to the COVID-19 Pandemic, they have begun
again as of August 2021 . The Division has aslo developed a list of
acceptable work order activities in an effort to reduce redundancy.?
Based on an analysis of work orders, between fiscal year 2019-20 and
fiscal year 2020-21 , the percentage of work orders used by the Street
Division that were on the acceptable activities list increased from 87.5
percent to 91 .2 percent, indicating that consistency has increased.
Similarly, the percentage of work orders missing start dates and cost
information has significantly decreased as shown in Table 2.
Table 2: Work Order Information Completion Comparison
FY2019-20 FY2020-21
Total Work Orders 2,049 2,911
Percent Acceptable Activity 87.5% 91.2%
Percent Missing Start Date 8.0% 0.9%
Percent Missing Cost Info 9.0% 1.8%
While the June 2020 training appears to have corrected most of the data
issues, Streets should continue to ensure that field crew staff receive
training on work order information entry completion to ensure these data
issues do not return. According to Division management, they acquired a
training program from the work order system company, which will be
used to help train administrative and field staff in the future.
Potential Cost Savings May Exist in the Purchasing Process
10. Check the Texas State Comptroller's website for related historically
underutilized businesses when obtaining quotes for purchases between
$3,000 and $50,000.
Management Response: Concur
Staff has been trained on the correct process for properly quoting jobs.
Continued education will continue as other Purchasing procedures are
updated.
7 Work orders not on the acceptable activities list are not necessarily inappropriate for Streets
crews to perform, but are similar to or part of activities on the acceptable list.
Audit Project #: 006 Page 1 11
Audit of Roadway Quality Management: Follow-Up Review October 2021
Audit Follow-Up Finding: Implemented
During fiscal year 2019-20, the Streets Division issued a total of $8.2 million
in purchase orders. About $8.1 million was covered under a contract.
The remaining $121 ,41 1 were spent as shown in Table 3.
Table 3: Non-Contracted Streets Improvement Fund Purchases
Commodity Compliant? Total Purchases
Concrete Road Construction Quotes Needed $36,428
Asphalt Yes $30,000
Guard Rails Yes $30,000
Backhoe Rental Yes $12,328
Skid Steer Loader Rental Yes $10,545
Professional Service Exempt $2,1 10
All: $121,411
Based on review of the available purchasing documentation, all but
one of these purchases appear to have been procured in accordance
with Texas procurement regulations.
That being said, this purchase for concrete road construction was
procured with a vendor that had a contract for similar work; however, it
was not clear if this purchase was under this contract based on the
documentation available in the City's financial system.
11. Contract for the rental of signs and barricades to mark road construction
sites.
Management Response: Concur
Contract was approved by City Council June 18th.
Audit Follow-Up Finding: Implemented
The City entered into a contract for the rental of signs and barricades in
June 2019. The City has spent $314,266 under this contract to date.
Current Management Structure Indicates Redundancy
12. Revise the Streets Operations Manager and Streets & Traffic
Superintendent job descriptions to more accurately reflect current job
responsibilities.
Management Response: Concur
Duplicate level of supervision was eliminated with the retirement of the
Streets Superintendent.
Audit Follow-Up Finding: Implemented
Audit Project #: 006 Page 1 12
Audit of Roadway Quality Management: Follow-Up Review October 2021
The Streets & Traffic Superintendent position has been eliminated and is
no longer on the City's pay plan. The Streets Operations Manager job
description adequately covers the responsibilities of both of the previous
positions' job descriptions.
Audit Project #: 006 Page 1 13
Audit of Roadway Quality Management: Follow-Up Review October 2021
Appendix A: Roadway Maintenance & Improvements
Terminology
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 ).
Picture 1: Simplified Roadway Cross Sections
Pavement Surface _
Road Base
Road Subgrade
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
Audit Project #: 006 Page 1 14
Audit of Roadway Quality Management: Follow-Up Review October 2021
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.
Audit Project #: 006 Page 1 15