A Follow-up Audit Report on the Department of Transportation's Financial Forecasting and Fund Allocation
August 2010
Report Number 10-039
Overall Conclusion
The Department of Transportation (Department) has fully or substantially implemented 14 (78 percent) of 18 recommendations in An Audit Report on the Department of Transportation's Financial Forecasting and Fund Allocation (State Auditor's Office Report No. 08-045, August 2008). That audit report cited weaknesses related to the Department's processes over (1) managing internal communications and preparing external reports; (2) approving amounts available for construction contract awards; (3) preparing, reviewing, and communicating its cash forecast reports; and (4) communicating the effect on district offices when other district offices accelerate construction projects.
Because its construction projects last for many years, the Department forecasts its cash balances for the current fiscal year and the next 11 fiscal years to ensure that its future expenditures will not exceed its anticipated revenues. The Department uses a cash forecast system to produce reports of projected revenues, expenditures, and cash balances. Those reports are the Department's primary tool for identifying projected cash shortages. The Department avoids projected cash shortages by adjusting contract awards or other expenditures to reach the desired cash level.
Since the 2008 audit, the Department has implemented policies and procedures related to its construction contract award and cash forecast processes, and it has formalized its communication with district offices when construction projects are accelerated. It has also improved transparency by adding monthly workshops to most meetings of the Texas Transportation Commission and by posting briefing documents for Texas Transportation Commission meetings on its Web site.
The Department's new cash forecast system is not yet fully operational. The Department anticipates that the new system will automate several manual processes, more efficiently forecast multiple funding sources, and allow adjustments to the cash forecast assumptions and report formats to be made more easily. The Department is developing the new system internally and has revised the implementation date from December 2008 to December 2010.
While the Department has made progress in improving its financial forecast and fund allocation processes, it should make additional improvements in (1) the clarity, quality, and timeliness of reports it provides to external parties and (2) formally documenting and consistently implementing its policies and procedures.
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