RALEIGH — The Senate Transportation Committee heard from N.C. Auditor Beth Wood regarding a report from her office which says the state’s Department of Transportation overspent its budget by $742 million.
According to the audit, NCDOT committed mismanagement of its budget and spending plan. The audit calls out lack of oversight and monitoring by the chief engineer’s office and that the NCDOT’s spending plan was not based on actual cost estimates of specific projects.
The hearing comes as the NCDOT has announced an estimated $300 million revenue shortfall due to COVID-19 and rolling furloughs for all employees.
Wood said at the hearing that the NCDOT is “making moves” to improve things, but that there was “no evidence” that the department tried to slow spending.
Lawmakers asked if the NCDOT’s cash mismanagement contributed to its current situation and Wood replied, “absolutely.” She later added that the impact COVID-19 has had on gas tax revenues has been just as significant and perhaps even more so.
The state auditor responded to questions on how to make sure the NCDOT sets aside enough money for disaster-related spending. In her responses, she indicated that an average of such spending over a five or 10-year period might be a good start, but that rules governing how that money is spent might need addressing. Wood said that the NCDOT would need to be allowed to put any unspent funds back into its general operations fund.
When asked if any feedback from the governor on the audit had been received, Wood answered “no.”
Questions were asked about how long issues with overspending had been going on, whether it was years or decades. Wood said issues with spending had been going on “for decades” and for as long as she has been state auditor spanning three administrations.
“None of us are better than the secretaries they trust,” said Wood, adding that department secretaries are “where the buck should stop.”
In her presentation, Wood noted that the chief engineer’s office didn’t monitor compliance with the department’s cash spending plan nor did he reject a division’s contracts and unspent budget as insufficient. The audit states that “According to the CFO, the Chief Engineer was responsible for communicating to the division engineers of the 14 highway divisions and ensuring that the plan’s objectives were met.”
The current chief engineer is Tim Little, who was installed in September 2017 by former NCDOT Secretary James Trogdon.
Sen. John Alexander (R-Wake) asked Wood if she knew how long the CFO had been with the NCDOT or who appointed him. Wood responded that she did not know.
The CFO for the NCDOT is Evan Rodewald. He, like Little, was also installed by Trogdon at a March 9, 2018, NCDOT Board meeting. In the minutes, Trogdon said that Rodewald “spent the past 24 years working in various capacities at the North Carolina General Assembly Fiscal Research Division” and that he is “no stranger to transportation as he was on the transportation team from 1998 until 2005.”
Additionally, Wood’s presentation and audit both showed that the spending plan was not monitored within the 14 highway divisions and the engineers in those divisions managed spending “however they chose.”
When we perform an audit, we sit down with the findings and ask the department to prove us wrong,” said Wood. She said that the NCDOT agreed with all of her department’s findings and corrective actions were included in the report.
Top recommendations provided by the state auditor included improvement of oversight since the NCDOT was managing billions with no external controls and that spending plans were not adequately monitored. Better monitoring is needed to safeguard the state’s eligibility for Federal-Aid Highway dollars from the Federal Highway Administration.
Wood said that the $4.8 billion in advance construction spending should be both reported and monitored. There are currently no evaluation practices or reporting on spending in place for advance construction. It was suggested that lawmakers require the NCDOT to provide regular breakdowns of all projects and contracts associated with advance construction.
The committee plans to hold a second hearing to hear from NCDOT officials.