State audit concludes NCDOT improperly spent millions on raises; the agency disagrees
The N.C. Department of Transportation misinterpreted a state law in a way that allowed it to pay $39 million more to its employees last year than lawmakers had intended, according to a report released by the State Auditor’s Office on Wednesday.
The audit looked at NCDOT’s use of a pilot program created by the General Assembly in 2018 to help the department attract and keep qualified employees. The two-year program aimed to provide flexibility in setting salaries at NCDOT, where officials said they were having trouble competing with the private sector.
The details of the program remain in dispute more than two years after it was included in the 266-page appropriations bill approved in June 2018.
The State Auditor’s Office says the program authorized NCDOT to spend up to $19.6 million more on salaries in its first year. But it says that extra pay was only for employees who agreed to forgo special payments for longevity and to give up “career status,” which provides some employment security.
Instead, NCDOT used the program to pay an extra $58.5 million to nearly 7,400 employees in the fiscal year ending June 30, 2019, according to the audit. And it didn’t require employees to relinquish claims to longevity pay or career status, the audit says.
“As a result, the Department gave its employees an unfair advantage over other state employees who were compensated in accordance with state compensation rules,” the audit concludes. “The Department also demonstrated to all other state agencies that noncompliance with state laws, whether intentionally or through lack of appropriate due diligence, has no consequences for the agency or management.”
The News & Observer first reported the raises in March 2019. The N&O reported at the time that more than 5,000 of the raises were in double-digit percentages and some were as high as 65%.
The auditor’s office says it reached its conclusion about the intent of the program after reviewing legislative records and talking to lawmakers and their staffs.
NCDOT has different interpretation
But NCDOT, in a response signed by Transportation Secretary Eric Boyette, says it reads the law differently and stands by its interpretation.
One dispute is over how much the law authorized NCDOT to spend on salary adjustments. The law says the department may use 2% “of the total Highway Fund and Highway Trust Fund appropriation for the applicable fiscal year for the payroll expenses of the Department.” The audit says that means 2% of payroll expenses, or $19.6 million for that fiscal year.
But NCDOT reads the clause to say it could use up to 2% of the two funds, or up to $75 million, for payroll expenses. In his response to the audit, Boyette says NCDOT’s interpretation is consistent with discussions it had with lawmakers before and after the bill became law. He also says that if the department was looking to adjust salaries by up to 2% of its payroll it could have done that within existing pay structures and wouldn’t have needed the pilot program.
Another dispute is whether employees would be required to give up longevity pay and career status to receive a raise under the program. NCDOT says that provision of the law is separate from the section that authorized the raises, not a condition for someone receiving one.
Boyette wrote that if NCDOT’s interpretation or implementation “was inconsistent with the law or the intent of the legislature, the legislature has had numerous opportunities to change the law or otherwise direct the Department to take corrective action. The legislature has issued no such directive.”
But some legislators said in early 2019 that NCDOT had misinterpreted the law and was spending too much on raises. House budget writers twice sought to rein in the provision when they wrote a new budget that spring, but they couldn’t persuade their colleagues to go along.
This is the second critical report on the Department of Transportation from the State Auditor’s Office this year. In May, the auditor’s office concluded that NCDOT spent $742 million more than it expected to in the year that ended June 30, 2019. The audit helped inspire an overhaul of NCDOT finances in a spending bill approved last month and signed into law over the weekend.
This story was originally published July 8, 2020 at 4:08 PM.
