Summary of Report 06-007

September 2005

Report Number 06-007

The Texas Department of Transportation's (TxDOT) accounting controls over the collection of revenue from motor vehicle registration and titling fees work as designed. For fiscal year 2004, TxDOT reported $1.4 billion in revenue transactions from registration and titling fees. It correctly processed and collected 99 percent of the revenue transactions that auditors tested.

TxDOT is not collecting all possible revenue from registration and titling operations, but the amount of revenue that remains uncollected may be small in comparison with the total amount collected from registration and titling fees. TxDOT is not collecting all revenue because it (1) does not require county tax assessor-collector offices to pay statutorily required interest penalties when they do not remit registration and titling fees on time and (2) does not ensure that it receives all fees from renewals of specialty license plates.

TxDOT has developed a process for operating a point-of-sale system used to print registration stickers. The point-of-sale computer system was tested and designed well and has controls that allow users to successfully renew vehicle registrations. However, auditors noted certain issues associated with this system:

• It is unclear whether TxDOT received the best value for the sticker paper used in the point-of-sale system. TxDOT could not produce any of the pricing information submitted by the bidders to which it did not award the contract for the sticker paper. Texas Government Code, Section 2156.009, requires agencies to retain this documentation.

• Project costs have increased more than $900,000 because TxDOT had to purchase new printers and printer accessories, although the request for proposal required that the sticker paper work with the existing printers. The costs of operating supplies also have increased significantly. The original cost of the sticker paper on the blanket purchase order was $97.65 per carton of 900 forms; however, as of May 2005, that cost had increased to $203.35 per carton of 1,500 forms. This resulted in an increase of approximately $0.03 (25 percent) per sheet. Based on average usage of 22 million stickers per year, the annual cost increase could be as much as $594,000, which results in a $2.4 million cost increase over the four-year term of the purchase order.

• TxDOT did test the sticker paper for a number of required specifications listed in the request for proposal, but it chose not to test other specifications that have become areas of concern.

• TxDOT's controls do not compensate for a number of possible methods to produce fraudulent stickers.

In addition, although staff from TxDOT's 17 regional offices regularly visit all 254 county tax assessor-collector offices, they do not consistently monitor the activities of those offices. TxDOT also does not perform statutorily required audits of registration and titling fees that are collected and remitted to the State by county tax assessor-collector offices. Regular monitoring and auditing are important to ensure that all policies and procedures are followed, to determine whether users have appropriate computer access, and to test for inappropriate financial activity.

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