Report 2010-122 Recommendation 1 Responses

Report 2010-122: California Department of Transportation: Its Capital Outlay Support Program Should Strengthen Budgeting Practices, Refine Its Performance Measures, and Improve Internal Controls (Release Date: April 2011)

Recommendation #1 To: Transportation, Department of

To improve accountability internally and with the public, Caltrans should create and incorporate an analysis of support cost budget variances in its quarterly report to the agency and in its annual report to the Legislature and the governor. The analysis should report on the number of completed projects with budget variances and on the number of open projects for which the estimates at completion predict budget variances. Further, the analysis should report on the overrun and underrun ratios for those projects, and the portions of the variances due to rates and hours. Also, Caltrans should include in its strategic plan a measurable goal for reducing variances.

Annual Follow-Up Agency Response From October 2013

The annual report was transmitted to the Legislature on November 15, 2012, and included the performance measure that targets support expenditures that are within a specified range of the support budget. The annual report can be found at http://www.dot.ca.gov/reports-legislature.htm.

As previously reported, Caltrans did not included in its report an analysis of variances due to rates or hours because the largest impact to the project costs are generally due to changes in scope of work such as additional permit requirements and mitigation requirements. As the audit report noted, the primary cause for cost overruns in the projects reviewed was the increase in hourly rates. Caltrans does not anticipate this being the case any time in the near future. However, Caltrans does perform a separate analysis of rates each year for planning purposes.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

As stated above, Caltrans included an analysis of overruns and underruns in its 2012 annual report to the Legislature. Further, we understand Caltrans' assessment of the ongoing usefulness of the rates-and-hours analysis. We acknowledged in the report on page 37 that a unique event--a substantial increase in engineer salaries following a union agreement--prompted our analysis to determine whether cost overruns were due primarily to the number of hours expended on projects or to the rate paid for those hours. We consider this recommendation fully implemented, but suggest Caltrans use this simple analysis periodically when there are significant changes to rates or hours.

Annual Follow-Up Agency Response From October 2012

This recommendation will be fully implemented when the report is transmitted to the Legislature on November 15, 2012. The performance measure that targets support expenditures that are within a specified range of the support budget was not included in the 2011 annual report to the Legislature due to timing issues, but will be included in the 2012 annual report.

Caltrans has not included in its report an analysis of variances due to rates or hours because the largest impact to project costs are currently due to changes in scope of work such as additional permit requirements and mitigation requirements. As the audit report noted, the primary cause for cost overruns in the projects reviewed was the increase in hourly rates. Caltrans does not anticipate this being the case any time in the near future. However, Caltrans does perform a separate analysis of rates each year for planning purposes.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

All Recommendations in 2010-122

Agency responses received after June 2013 are posted verbatim.