Audit says NCDOT is still at risk of overspending, despite growing pile of cash
The N.C. Department of Transportation has been slow to change the way it budgets and monitors spending and was able to build up its cash reserves last fall “largely due to chance,” according to the state auditor’s office.
NCDOT ended 2020 with $1.1 billion in its accounts, up from less than $272 million the previous April when the department had less cash on hand than required by state law. The depleted balance forced NCDOT to lay off more than 350 temporary and contract workers and delay the start of dozens of major construction projects.
Despite the rebound, the practices that allowed the department to get in trouble financially remained in place through the end of the year, according to a report released Tuesday by the Office of the State Auditor. Without changes, the audit concludes, NCDOT would be at risk of overspending again in the future.
Spending not based on cost estimates
Specifically, the audit found that NCDOT’s spending plan was not based on cost estimates for specific scheduled projects and operations. Instead, the department often based its budget on past spending, said Beth Wood, the state auditor.
“They’re not projecting their budget based on what they plan to do or what they need to do,” Wood said in an interview. “You’ve got contracts to do work, why don’t you just add that up and say this is my budget, this is what I can get done next year?”
At the same time, Wood’s office found, NCDOT ‘s Chief Engineer’s Office didn’t monitor spending or enforce compliance with its spending plans. That monitoring was largely left up to each of the Highway Division’s 14 regional offices, resulting in inconsistencies, the audit concluded.
Wood says NCDOT failed to follow through on recommendations from a previous audit released in May 2020, which concluded that the department spent $742 million more than it expected to in the year ending June 30, 2019, because of poor budgeting and oversight.
NCDOT said it agreed with the basic findings of Tuesday’s report. But Transportation Secretary Eric Boyette said while the department has more work to do on its finances, “progress has been made and is continuing.”
The department says it does budget construction spending based on specific projects and that it now has software to allow it to do the same for maintenance work, such as road resurfacing and bridge repair. It also says it has hired accountants to oversee spending at each highway division office.
Wood says her conclusion that NCDOT is at-risk of overspending again is based on its practices at the end of 2020.
“Now they’re saying, while you were working on your audit, we’ve implemented some stuff,” she said. “We didn’t confirm anything or validate anything they said. But my next audit will be able to do that.”
Wood’s next audit will cover the final six months of 2021 and will likely be ready about this time next year. The General Assembly requires her office to do yearly audits of NCDOT, which generates its own revenue and doesn’t go through the same budgeting process as other state agencies.
The General Assembly also requires NCDOT to release a weekly snapshot of its spending and its cash balance. The most recent report put the total cash on hand at $2 billion, nearly double where it was at the end of 2020.
NCDOT spokeswoman Carly Olexik issued a statement Tuesday afternoon, thanking Wood and her staff for their work.
“We are both committed to making continued improvements to our process and how we do business,” Olexik said. “NCDOT’s finances have stabilized, and we continue to track below our spend plan. We appreciate her office’s help in getting to a strong financial position and look forward to continuing this partnership.
This story was originally published September 14, 2021 at 1:24 PM.
