REPORT DIGEST

 

DEPARTMENT OF TRANSPORTATION

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2005

 

 

 

Summary of Findings:

Total this audit††††††††            † 21

Total last audit††††††††            † 13

Repeated from last audit†††††††††† 8

 

Release Date:

March 28, 2006 

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

 

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

 

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.state.il.us/auditor

 

SYNOPSIS

 

  • Department contract files lacked basic information, such as individual scoring sheets, documentation to support the award to a particular vendor based on criteria delineated in the Request for Proposal (RFP), and other decision documentation to adequately document the evaluation, selection and contracting process.
  • The Department used evaluation criteria to evaluate vendor proposals that were not stated in the Request for Proposals (RFP).
  • The Department allowed a winning vendor to extensively revise its proposal during the contract negotiation process after initial scoring evaluations were completed.There was no documentation in the procurement files to show that, after these changes, the winning vendor's proposal remained superior to other proposers who were not afforded the opportunity to make those revisions.
  • In 40 percent (4 of 10) of the procurements we reviewed, the Department awarded the contract to a vendor that was not the lowest priced proposer and did not publish this in the Procurement Bulletin as required by the Procurement Code for professional and artistic contractors.
  • In 60 percent (6 of 10) of the procurements we reviewed, the Department failed to have information on subcontractors included in the contract.The estimated value of these contracts is approximately $13 million.
  • In 80 percent (8 of 10) of the procurements we reviewed, the Department either was not timely in executing a written contract after the announcement of the award or allowed vendors to initiate work on the project without a formal written agreement in place.
  • We reviewed billings for 7 projects for which there were payments in FY05 and determined there were questionable expenditures in 86 percent (6 of 7) of those projects.A lack of supporting documentation submitted by contractors and the Department's lack of adequate review led us to question $699,597 or 15 percent of $4.5 million paid to these contractors through the end of FY05.

 

 

 

 

{Expenditures and Activity Measures are summarized on the reverse page.}

 


DEPARTMENT OF TRANSPORTATION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2005

 

EXPENDITURE STATISTICS

FY 2005

FY 2004

         Total Expenditures (All Appropriated Funds)..

 

$3,632,759,296

$4,036,617,670

†††† OPERATIONS TOTAL..........................

†††††††† % of Total Expenditures..................

$594,603,245

16.37%

$604,558,401

14.98%

†††††††† Personal Services............................

††††††††††† % of Operations Expenditures....

††††††††††† Average No. of Employees........

$345,443,270

58.10%

5,944

$354,888,242

58.70%

6,272

†††††††† Other Payroll Costs (FICA,

†††††††† Retirement)............................................

††††††††††† % of Operations Expenditures....

 

$90,110,124

15.15%

 

$85,848,075

14.20%

†††††††† Contractual Services.......................

††††††††††† % of Operations Expenditures....

$82,177,271

13.82%

$87,784,349

14.52%

†††††††† All Other Operations Items..............

††††††††††† % of Operations Expenditures....

$76,872,580

12.93%

$76,037,735

12.58%

†††† GRANTS TOTAL...................................

†††††††† % of Total Expenditures..................

$1,362,220,885

37.49%

$1,429,568,916

35.41%

†††† CONSTRUCTION TOTAL.........................

†††††††† % of Total Expenditures..................

$1,670,948,543

46.00%

$1,997,658,875

49.49%

††† CAPITAL IMPROVEMENTS TOTAL...

†††††††† % of Total Expenditures......................

$4,986,623

0.14%

$4,831,478

0.12%

††† CAPITAL ASSETS Ė GROSS

†††††††† Infrastructure......................................

†††††††† All Other............................................

†††††††††††††† Total............................................

 

$21,152,272

2,469,059

$23,621,331

 

$20,695,800

2,386,056

$23,081,856

 

SELECTED ACTIVITY MEASURES (Unaudited)

FY 2005

FY 2004

         Number of bridges maintained/improved................

206

219

         Percent of bridges in repair..................................

8%

8%

         Lane miles of state-controlled highways................

42,774

42,799

         Construction investment/lane mile.........................

$38,369

$45,872

         Miles of pavement maintained/improved................

919

1,155

         Percent of roads in repair ....................................

11%

10%

 

AGENCY SECRETARY(S)

†††† During Audit Period:Mr. Timothy Martin

†††† Currently:Mr. Timothy Martin


 

 

 

 

 

 

 

 

 

 

 

 

 

Files lacked basic information

 

 

 

 

 

 

No individual score sheets

 

 

 

 

Official not on selection committee involved in selection process

 

 

 

 

 

Files could not be located by Department

 

 

Final contract price arrived at not documented in file

 

 

 

Certain scope of service information set forth in RFP excluded from contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Price evaluation criteria actually used different than that set forth in RFP document

 

 

 

 

 

 

 

Contract awarded to a vendor who did not receive the highest scoring total based on criteria in RFP document

 

 

 

 

 

 

 

 

 

 

 

 

 


Extensive revisions to proposal during the final contracting process

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department disagrees with finding

 

 

 

Auditorís comment

 

 

 

 

 

 

 

 

 

 

 

 

Procurement Code requires all professional and artistic contracts to include names and addresses of all subcontractors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department disagreed with finding

 

 

 

 

Auditorís comment

 

 

 

 

 

 

 


Delays in filing contracts with the Office of the State Comptroller

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auditors question $699,597 due to inadequate supporting documentation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

†††††† This report presents our financial audit and State compliance examination for the year ended June 30, 2005.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

LACK OF DOCUMENTATION IN CONTRACT FILES

 

††††† Department contract files lacked basic information, such as individual scoring sheets, documentation to support the award to a particular vendor based on criteria delineated in the Request for Proposal (RFP), and other decision documentation to adequately document the evaluation, selection and contracting process.We reviewed ten procurements awarded by the Department in FY05, totaling a maximum award amount of $45 million.Among the conditions noted by the auditors:

 

        In 7 of 10 procurement files reviewed, we found no evidence of individual scoring sheets.October 2004 guidance from the Department of Central Management Services states, "An evaluation form must be completed by each committee member for each proposal. . ."

        For the procurement of public relations services for the Dan Ryan/Kingery Expressway Project, a Department official, who was not on the Selection Committee, was involved in the selection process.For the same procurement, the Department awarded the project to multiple vendors.Each vendor had bid on the entire project and the Department made an award to two vendors and each award exceeded the proposed costs that each had originally bid to do the entire project.

        For a procurement estimated at $900,000, the Department could not locate the contract file or the working files for the procurement.

        For a procurement estimated at $625,000, the decision recommendation lists two cost scenarios proposed by the winning vendor.However, neither scenario went into the actual contract and the Department had no documentation to show how this changed during contract negotiations.

        For another procurement estimated at $1,370,000, some elements from the scope of services section of the RFP were excluded from the contract with the vendor and no documentation existed to show why.

 

††††† We recommended the Department maintain adequate supporting documentation in the procurement files.The Department responded by agreeing, agreeing in part, and disagreeing with various elements of the finding.For instance, the Department maintains that individual scoresheets were not required under the Department procedure applicable to procurements and that use of a non-member facilitator in the selection committee process was standard.For all elements, the Department indicated corrective action that would be taken to address the finding and recommendation.(Finding 05-01, pages 11 to 19)

 

 

CHANGES IN AWARD EVALUATION CRITERIA NOT COMMUNICATED TO PROPOSERS

 

††††† The Department used evaluation criteria to evaluate vendor proposals that were not stated in the Request for Proposals (RFP).

 

         In the Procurement Process Review procurement, the Department changed the price evaluation from what was stated in the RFP.Price proposals from 3 of the 11 proposers were opened. Price points were assigned based on the calculation in the RFP, using total price.The Department then requested Best and Final Offers from these 3 vendors.At this time, price points were calculated by using both the total price and the hourly rate.When compared to the other vendor under consideration, the winning vendor's hourly rate was $1.39 less but its total price was $151,792 or 46% higher.

         Additionally, in 1 of 10 procurements we reviewed, the Department awarded a contract to a vendor that had not received the highest scoring total based on evaluation criteria set out in the RFP.There was no documentation to show why the vendor, which had the lowest ranked technical proposal and the third highest price, was awarded the project.(Finding 05-02, pages 20 to 22)

 

††††† The Department agreed with our recommendation that it follow evaluation criteria stated in RFPs and develop addendum to RFPs when it determines there needs to be a change to the evaluation criteria.

 

 

EXTENSIVE VENDOR REVISIONS TO PROPOSAL DURING CONTRACT NEGOTIATION PROCESS

 

††††† The Department allowed the winning vendor for the EEO Supportive Services Program procurement to extensively revise its proposal during the contract negotiation process after initial scoring evaluations were completed.For instance, between scoring the original proposals in November 2004 and filing an executed contract with the Comptroller in March 2005, the following changes occurred:

 

         After scoring the vendor proposals, the Department reduced the estimated total number of statewide hours for the project from the 14,600 stated in the RFP to 6,397 in the negotiated contract.Of six vendor proposals evaluated, the winning vendor had the highest overall proposed cost for the project.

         The winning vendor was allowed to decrease its hours from 10,343 in its proposal to 4,375 in the contract - a 58% decrease.The vendor's cost was reduced from $1.6 million in the proposal to $685,000 in the contract.

         Some subcontractors identified in the winning proposal were not actually used in the project.

 

††††† Despite the significant changes made to the winning vendor's proposal during the contract negotiation process, there was no documentation in the procurement files to show that, after these changes, the winning vendor's proposal remained superior to other proposers who were not afforded the opportunity to make those revisions.(Finding 05-03, pages 23 and 24)

 

††††† The Department agreed with our recommendation to examine its negotiation process to ensure fair and equitable treatment for all responsive proposers.

 

 

FAILURE TO PUBLISH THAT CONTRACT WAS AWARDED TO OTHER THAN THE LOWEST PRICED VENDOR

 

††††† In 40 percent (4 of 10) of the procurements we reviewed, the Department awarded the contract to a vendor that was not the lowest priced proposer and did not publish this in the Procurement Bulletin as required by the Procurement Code for professional and artistic contractors.The contracts totaled a maximum contract amount of $11.8 million.(Finding 05-04, pages 25to 28)

 

††††† The Department disagreed with the finding, stating that these 4 procurements were not professional and artistic services.In an auditors' comment we reiterated our belief that these consultant contracts fall under the definition of professional and artistic services.We further noted that the Department had followed certain procedures with regard to these procurements that are applicable only to professional and artistic service contracts, such as using the Department's "Professional And Artistic Services Administrative Review" form and filing "Professional & Artistic" affidavits for three of the four procurements.

 

FAILURE TO INCLUDE SUBCONTRACTOR INFORMATION IN CONTRACTS

 

††††† In 60 percent (6 of 10) of the procurements we reviewed, the Department failed to have information on subcontractors included in the contract.The estimated value of these contracts is approximately $13 million.The Procurement Code requires all professional and artistic contracts to include the names and addresses of all subcontractors and the expected amount of money each will receive under the contract.We found:

 

         For one of the vendors on the Dan Ryan/Kingery Expressway Public Relations project, billings indicated the use of subcontractors that were not detailed in the contract.Even though written notice for changing subcontractors is part of the contract, Department staff reported this vendor changes staff on the project without notifying the Department.For another vendor on this project, Department staff reported that another Department official instructed the winning vendor to put an individual on the payroll as a subcontractor.This individual was not listed in the vendor's proposal but was named in the contract.

         In another project (EEO Supportive Services), the proposal from the winning vendor listed subcontractors to be utilized, but the contract did not.Additionally, the winning vendor made changes to the subcontractors it had proposed - including using some of the losing vendors that bid on the procurement.We found no documentation in the files to show any prior written consent from the Department for subcontractor changes on this project. (Finding 05-05, pages 29 to 32)

 

††††† The Department disagreed with the finding, stating that 5 of the 6 procurements were not professional and artistic services.In an auditors' comment we reiterated our belief that each of these contracts falls under the definition of professional and artistic services.We further noted that the Department had followed certain procedures with regard to these procurements that are applicable only to professional and artistic service contracts, such as using the Department's "Professional And Artistic Services Administrative Review" form and filing "Professional & Artistic" affidavits for 3 of the 6 procurements.

 

NOT TIMELY IN EXECUTING CONTRACTS

 

††††† In 80 percent (8 of 10) of the procurements we reviewed, the Department either was not timely in executing a written contract after the announcement of the award or allowed vendors to initiate work on the project without a formal written agreement in place.On average, the length of time between the announcement of the award and the filing of a contract with the Comptroller was 92 days (with a range of 56 days to 161 days).The average length of time between beginning work on the contract and the filing of the contract with the Comptroller was 60 days (with a range of 20 days to 104 days).These contracts were estimated to have a maximum contract value of $17 million. We also noted for one contract, the vendor was not only allowed to start working without an executed contract, but documentation showed that invoiced work was for dates prior to the announcement of the award.(Finding 05-06, pages 33 to 36)

 

††††† We recommended that the Department take the necessary steps to increase timeliness in reducing a contract to writing and the Department agreed.

 

CONTRACT MONITORING DEFICIENCIES

 

††††† We tested 10 FY05 procurements, of which 7 had payments during FY05.Of these 7 projects for which there were FY05 payments, our review determined there were questionable expenditures in 86 percent (6 of 7) of those projects.A lack of supporting documentation submitted by contractors and the Department's lack of adequate review led us to question $699,597 or 15 percent of $4.5 million paid to these contractors through the end of FY05.Specifically, we found:

 

         There are three vendors performing work for the Dan Ryan/Kingery Expressway Public Relations project.

 

For the first vendor, the contract was to run from November 2003 through December 2006; however, the funding under the original contract was exhausted by December 2004.A $1.48 million amendment was effective January 1, 2005, but not signed by the Department until April 2005.Of $1.2 million in billings, we found numerous errors such as:

--†† $320,070 in billings that lacked detailed support, such as timesheets, and invoices or activities for subcontractors that had no supporting documentation;

--†† $18,688 in math errors or incorrect hourly rates on billings that were approved by the Department;

--†† $8,397 for other questioned expenses, including $5,352 for invoiced services that included work dates prior to the announcement of the award.

 

For a second vendor, we questioned:

--†††††††† $19,286 in items billed (such as vehicle rentals and event sponsorship fees) that were not listed in the "Pricing and Compensation" section of the contract;

--†††††††† a $25,016 billing for Uniforms and Promotional Items because there was no documentation to show that the items (sweat suits, polo shirts, pens, etc.) were actually purchased;

--†††††††† $36,400 that was paid to a subcontractor by this vendor.Timesheets submitted for this individual were not signed by the subcontractor and Department staff indicated there were questions surrounding this billed work.According to the Department officials, another Department official instructed the vendor to put this subcontractor on the payroll.

 

For the final vendor, because of inadequate or missing documentation, we could not evaluate $1.3 million in billings.We noted many invoices did not contain any names, position titles, rates or number of hours worked.For invoices that did contain a name, title, rate and hours worked, many were not for employees or rates that were listed in the contract.Further, the Department paid the vendor numerous times for media buys without any invoice from the media outlet itself.Also, over $318,000 was paid in FY06 for services performed in FY05.

 

         For the EEO Supportive Service Program Contract, we:

 

--†††††††† Found while the State paid $348,000 for the last six months of FY05, there were only 39 job referrals and only 38 placements of individuals in jobs during that period.Only 5 of the 38 placements were individuals identified as being recruited by this vendor;

--†††††††† Questioned $129,755 in billings because many individuals billed were not listed in the contract and so we could not verify the rate billed for those individuals.There were also instances that lacked documentation for activities billed at an hourly rate;

--†††††††† Questioned $14,362 in billings for such items as overhead and copying that were listed in the RFP as "non-billable items";

--†††††††† Questioned $5,200 in travel costs that were not pre-approved by the Department as required by the RFP.

 

         For the Procurement Process Review project, the Department allowed vendor staff to work more hours than was proposed by the vendor and the Department approved payment for travel in excess of the contractual limit - all within the first 51 days of work even though the contract was for 13 months.We also questioned $19,180 because staff billed hours prior to the start date of the contract and billed for individuals who were not listed in either the proposal or the contract. (Finding 05-07, pages 37 to 44)

 

††††† We questioned several other payments made for this and other contracts we reviewed.The Department agreed with the finding, noting that it already had protocols and processes in place addressing the issues noted with these contracts.

 

OTHER FINDINGS

 

††††† The remaining findings are reportedly being given attention by the Department.We will review progress toward implementing these recommendations in our next compliance audit.

 

††††† Responses to the recommendations were provided by Mr. Ron McKechan, Chief of Audits.

 

 

AUDITORSí OPINION

 

††††† Our auditors state the basic financial statements of the Department as of and for the year ended June 30, 2005 are fairly presented in all material respects.

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:SES:pp

 

 

 

 

SPECIAL ASSISTANT AUDITORS

 

††††† BKD, LLP were our special assistant auditors for this audit.