Accountability - Audits

Report on Accountability for Public Resources prepared by the State Auditor’s Office for WSDOT’s Fiscal Year 2006 (July 1, 2005 to June 30, 2006).

The State Auditor’s Office provides an annual audit of WSDOT’s accountability for public resources and compliance with state laws and regulations and its own policies and procedures. The audit for FY 2006 was released on March 23, 2007.

The report is found at http://www.sao.wa.gov/Reports/AuditReports/AuditReportFiles/ar6627.pdf

Summary of the audit

The audit result stated, “In most areas the Department complied with state laws and regulations and its own policies and procedures,” subject to conditions reported as findings in three areas: (a) lack of adequate internal controls over ferry ticket sales and revenue collections; (b) lack of adequate internal controls to ensure compliance with laws for leased properties; and (c) lack of adequate internal controls to ensure gasoline purchases are for authorized purposes.

The audit does not examine every portion of WSDOT’s financial activities. The highest risk areas are examined, together with a rotating review of other areas. This audit evaluated WSDOT’s accountability in the following areas:

The audit also reviewed financial statements and tested account balances and financial activity related to:

The report thanked WSDOT management and personnel for their assistance and cooperation during the audit.

Secretary Doug MacDonald’s response to the audit.

Secretary MacDonald has thanked the State Auditor’s Office for executing a strong and thorough audit review and noted the positive outcome of the audit in all but a very small number of areas. With regard to the three topics of audit finding, WSDOT’s assessment of action steps is outlined below.

Internal controls over ferry system ticket sales and revenue collection.

The audit recounts that approximately $140 million is collected by WSF ticket sellers at 14 terminals and by independent contractors in the San Juan Islands and at Sidney, Brtish Columbia. The audit states that WSF relies on ticket sellers entries into the point-of-sale cash receipting system to determine how much has been collected.

Controls listed in the audit include electronic display of amounts due from customers and signs at each ticket booth notifying customers of the telephone number to call if they do not receive a correctly printed receipt (If a receipt is printed and received, the revenue is accounted for). The audit also notes that internal controls have been strengthened by analyzing revenue trends and monitoring ticket sellers’ activities.

However, better controls are required, according to the audit, to assure that all sales are recorded. Money from unrecorded sales could be lost or misappropriated. The audit also observes unless requested, a customer does not receive a receipt when payment is made from a frequent-user coupon book.

The audit determined that it could not estimate how much ticket revenue is lost due to unrecorded sales. (The audit finding does not question the accounting for the recorded sales that amount to almost $140 million).

The condition noted in the audit is being addressed by an expensive new revenue collection and receipting system that has now been installed throughout most of the ferry system. According to the audit:

“We acknowledge that progress is being made in this area through the purchase and use of a new revenue collection and receipting system. However, the system was not fully operational during the audit period [through June 30, 2006], and we were not able to audit it.”

The audit also listed the many strengthened controls the new system provides. The audit concluded:

“We appreciate the Department’s efforts in addressing this finding and will review its work to resolve this issue during our next regular audit.”

In light of the substantial progress made to date in the installation of the new revenue collection and receipting system – a process that by the date of the audit release on March 23, 2007 had reached all terminals and sellers except those at the southern most routes – Vashon Island, Southworth and Fauntleroy; and the Point Defiance to Vashon. The work at WSDOT/WSF to resolve the audit finding has now largely taken place. More information on the Wave2Go program can be found at http://www.wsdot.wa.gov/ferries/wave2go/.

Internal controls with respect to compliance with state and federal laws relating to real estate.

The finding noted that WSDOT manages an inventory of 448 properties that have been purchased as part of right of way for future highway construction.

The audit made a finding that one residence property has been determined by WSDOT not to be in decent, safe and sanitary condition, yet the property was occupied. WSDOT stated that it was in the process of relocating the resident.

The audit also found that the WSDOT’s internal controls were not adequate to assure that lease rates for properties were readjustment to fair market value and indicated that perhaps as many as 26 percent of the revenue-generating properties had not had their leases adjusted in a timely way.

WSDOT accepts this finding as noting an area in which more work is required to assure its compliance with all the legal requirements. More work will be done with the employees with responsibility in the area to assure timeliness of lease reviews. And, WSDOT has entered into a contract to install a new system to replace its current Real Estate Information System. The system is scheduled to be in place this year.

Internal controls with respect to use of gasoline for authorized purposes.

The finding noted that WSDOT manages a fleet of 2,421 vehicles. The audit examined practices in the Northwest and North Central regions. In examining a sample of 231 vehicles, it found many vehicles usage logs were missing, were incomplete or contained errors.

The audit also found that over the course of the year, WSDOT had reported 16 gas cards stolen that had led to losses from unauthorized use amounting to about $9,000. (WSDOT’s total annual fuel purchases are approximately $3 million.)

WSDOT agrees that improved practices and controls are required with respect to the vehicle logs and to the safeguarding of hundreds of gas cards. In addition to better enforcement of existing controls, new controls will be added to monitor use of fuel cards, including improvements in password procedures, and regular tracking of fuel by both headquarters and region staff. WSDOT appreciates the work of the State Auditor’s Office in reporting this audit condition and finding.

Have questions?

Contact Lloyd Brown, Communications Director, at (360) 705-7076 or Steve McKerney, Director of Internal Audit, at (360) 705-7004 with questions about the audit findings.