Thursday, September 23, 2010

Audit of VDOT Finds Hundreds of Millions of Dollars In Unspent Funds

An inattentive Virginia transportation bureaucracy left nearly $500 million unspent last year as interstate rest stops were shuttered and maintenance projects deferred by emergency budget cuts, a private audit to be released today shows.

The four-month review of the Virginia Department of Transportation's finances shows that the recouped cash combined with steps to redirect other state funds will add $614 million to backlogged road maintenance and construction projects through June 2011.

And by 2016, the newfound cash, savings and efficiencies available for the state's six-year road building and maintenance master plan will total nearly $1.5 billion, Transportation Secretary Sean Connaughton told The Associated Press.

Gov. Bob McDonnell, who ordered the audit in April, plans to release the findings and remedial steps the administration will take at a news conference this afternoon. The Republican unsuccessfully called for a private VDOT audit two years ago, while still attorney general, and pledged one while campaigning for governor in 2009.

The findings depict a VDOT central office where "burdensome internal processes and financial controls" allowed millions of dollars in cash to languish, sometimes for years, after projects it was intended to fund became inactive.

Auditors did not find any fraud or criminal misconduct relating to agency operations.

"The process is broken," Connaughton said. "Even though we have modern technology and a lot of modern practices employed in the actual construction operations, the processes that support those are still in the paper and memo stages. They've never gone back and looked at the processes they have employed for a very long time."

The Richmond-based accounting firm of Cherry Bakaert & Holland found that dwindling state revenues during a sharp recession made VDOT extremely conservative in committing money to projects starting in 2006.

The audit shows the trend worsened over four years when the General Assembly twice rejected then-Gov. Timothy M. Kaine's appeals to levy new fees and taxes for a growing backlog of highway construction needs, particularly in Virginia's congested Hampton Roads region and its Washington, D.C., suburbs.

In 2009, with Kaine's administration decrying deep fiscal woes, he ordered 19 of Virginia's 42 rest areas closed at a savings of $9 million annually. Other measures included sharply reduced mowing on highway rights of way, reduced freeway motorists' aid patrols and ending the $21,000 annual state stipend for the historic Hatton Ferry on the James River, the last known hand-poled ferry in the United States.

The tight finances led to layoffs at VDOT, and the Commonwealth Transportation Board last year made cuts to its six-year master road projects program by about $4.6 billion.

But in fiscal year 2010, VDOT left $488 million in maintenance allocations unspent and, by this past June 30, the unspent balance had grown to $529 million, the audit found.

Kaine, chairman of the Democratic National Committee, would not comment on the audit before seeing its details, spokeswoman Lynda Tran said yesterday.

The audit concludes that by procrastinating for months each year in obligating federal highway funds for Virginia projects, VDOT often pushed contracts late into the calendar year, often missing the prime summer construction season. For instance, the agency in federal fiscal year 2010 received $826 million from the U.S. government, but after six months had obligated only 5 percent of the money.

There was little monitoring of unused federal money for dozens of canceled or dormant projects. It averaged about $130 million a year that could have been redirected elsewhere, the audit found.

VDOT commissioner Gregory A. Whirley said that if a project is completed or canceled and there's still money for it, the money should be moved to another project.

"That money was just sitting there," he said.

McDonnell last year proposed selling the state-owned liquor monopoly to raise about $500 million to jump start deferred maintenance. But as he became aware of the cash and savings the audit was uncovering, McDonnell altered his proposal, recommending that profits from auctioning liquor store licenses be plowed into an "infrastructure bank" to finance new projects, not maintain existing roads.

Other faults found during the audit included: taking months -- sometimes a year -- for VDOT to hire private road design consultants; poor communication between VDOT's district headquarters across the state and the central office; and outmoded criteria for assessing how well the district and central office professionals manage projects.

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