State Auditor Beth Wood said the North Carolina Department of Transportation (NCDOT) did not follow standard practices for its latest audit, leading to possible inaccuracies within the embattled state agency.
Wood laid out a slew of issues Wednesday with the NCDOT’s December audit to the Senate Committee on Transportation. She said the agency strayed from the government auditing standards issued by the comptroller general of the United States.
“When you see in an audit report that has been conducted in accordance with these standards, there are many, many things that you can count on from this audit that’s been done,” said Wood, noting the protocol creates more confidence in the report and the staff conducting the audit.
The NCDOT’s Office of Inspector General Internal Audit Division reviewed the Division of Highways’ bidding, advertising and contractor selection processes from July 1, 2017, through June 30, 2019. It found highway officials were effective in managing the processes, but Wood said the “lack of controls reported” did not support the conclusion.
The auditors published their findings, but they left out specifics, such as sample population, dollar values and other supporting evidence, Wood said. Most of all, Wood said, auditors did not examine the process to see whether fraud had occurred “when there was an indication that it possibly could have.”
The NCDOT auditors found three instances when officials went against policy and received independent estimates from the same firm as the contractor. In another incident, an NCDOT employee prepared the estimate.
“Policy requires the divisions and the contractors to prepare separate estimates of project cost, and then you’re supposed to compare the two estimates to make sure that the cost is reasonable,” Wood said.
The NCDOT’s internal audit was produced four months after the General Assembly’s Program Evaluation Division revealed the agency had not completed a performance audit since 2016. Evaluators told lawmakers performance audits could have detected and prevented the NCDOT from overspending by $742 million in fiscal year 2019 and maxing out its cash balances.
“An internal audit is a critical function in every agency, and they should be looking at the risk of things that could go wrong,” Wood said. “Then, auditing and being able to tell management, or this committee or the Board of Transportation, in this case, what needs to be fixed, what’s going wrong.”
The NCDOT agreed with Wood’s findings, but she told the legislative panel the agency should consider hiring independent audit directors. Wood believes it would reduce the risks of abuse and fraud and ensure a balanced auditing process.
Sen. Tom McInnis, R-Richmond, co-chair of the committee, said the panel would consider legislative action.
“I understand we have 186 [full-time employees], and the budget for those internal auditors is just shy of $20 million, but it sounds to me based on what I’m hearing you say, I don’t believe the taxpayers are getting their money’s worth,” McInnis said.