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A new state audit of the Colorado Department of Transportation cites lapses in its budget practices, including how it reports progress on construction projects.

Overall, the budget problems lead to a lack of transparency and accountability in how CDOT spends its money, the audit said.

The performance audit from the Colorado Office of the State Auditor focuses on CDOT's budget practices for fiscal year 2017, between July 1, 2016 and June 30, 2017. 

The report covers a period under previous Gov. John Hickenlooper when Shailen Bhatt was CDOT's executive director. The current director under Gov. Jared Polis is Shoshana Lew.

The audit did not uncover any fraud by the department, but it did say that “suspicious patterns and anomalies” were found.

The agency spent $582.7 million more than its $1.563 billion approved budget for 2016-17, the audit reported, due to funds left over from the previous budget year that the department failed to report to the General Assembly in its budget submission. Any dollars spent by an agency must be approved by the legislature.

"Not reporting that balance was a substantial omission," the audit says.

CDOT improperly carried forward more than $1 billion into the 2016-17 budget year that wasn't included in its budget plan, the audit reported. It said CDOT staffers were unaware that state law requires those carry-forward funds  be reported in the budget plan.

Auditors also said CDOT did not properly track how nearly $1.3 billion was spent.

While the audit found that CDOT spent $1.45 billion on construction projects, $45.3 million on grants, and $224.1 million on maintenance during the 2017 budget year, it said that "there was no direct way to track how much money the Department spent from each category in the Budget Plan that provided funds for these activities."

CDOT staff told auditors that "it regards the sum of budget categories labeled as 'contracted out work'" rather than reporting budgets for specific projects.

And CDOT failed to update its budget plan after receiving more federal dollars than originally anticipated, about $43.7 million more than was in the approval budget, out of a total $718.6 million in federal funding, the audit said.

Contract management practices at the agency also raised concerns for auditors; the report said some contracts had unapproved consultant labor rates, others lacked proper approvals, and still others failed to comply with state contracting requirements.

Incomplete information makes the agency's budget plan less effective as a management tool, the audit said, and it also reduces the budget's transparency and accountability. 

The audit also reported that CDOT's management views the budget plan as something to show to policymakers, contractors and the state Transportation Commission, which directs CDOT, rather than a blueprint on how it should spend its funding.

Management uses the budget "to show how they plan to allocate new revenue across the Department’s various programs and operational areas, not as a plan for how much the Department will spend during the ensuing fiscal year, or as a tool to track and manage its spending," the audit said.

There also appears to be conflict between the state Transportation Commission and the state controller's office over CDOT budget matters. The state controller, according to the audit, acts as an independent control over spending by state departments. However, since the Transportation Commission has control over CDOT's budget, the state controller is unclear whether it has authority to take actions -- such as reducing the budget in future years -- when the agency overspends its budget, the audit said. 

In its response, the Transportation Commission pushed back on the issue of budget authority. The commission said it "believes that it has exercised its full oversight authority over the Department and has adhered to statutory requirements, including the FY 2017 Budget Plan. Our Budget Plan has, in fact, been a Revenue Allocation Plan that does not incorporate carryovers from prior years and does not provide direct matching of expenditures."

CDOT also pointed out that the budget plan is often completed without knowing exactly how much federal funding the agency will receive. 

That said, the commission and CDOT agreed to revise the budget quarterly to reflect changes throughout the year; the agency said it had already implemented that recommendation last February.

With regard to the issue involving the state controller, the department said it would "either identify a process to comply with a requirement that they report spending as dictated by the budget plan, or if impractical, seek a change to statutory requirements."

In a statement to Colorado Politics, CDOT's Lew said the department "appreciates the work of the Office of the State Auditor and finds its recommendations constructive as we strive to constantly improve the Department and our business processes. It is important to understand that the underlying issue raised in the audit with respect to CDOT spending pertains not to whether the expenses were appropriate, but to when in the cycle of transportation planning those expenses were approved, relative to when expenses were spent down over the course of execution.

"However, as indicated in our responses, the Department is well prepared to address the recommendations of the audit; many of the recommendations align with initiatives already in progress, and in several cases recommendations have already been implemented. Next year's budget presentation from CDOT will look different than last year's, and the public should have a better understanding of the full scope of our work going forward."

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