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IV. Lax Expenditure Controls


Background

CTRMA has a multi-step approval process for dealing with contractor and subcontractor invoices. As Exhibit 14 shows, CTRMA’s accountant and HNTB review all subcontractor or vendor invoices. The invoices then are sent to CTRMA’s executive director for review and approval. After the executive director approves the invoice, it is sent to TxDOT for review and payment approval. After TxDOT approves the invoice for payment, a warrant is issued and sent back to CTRMA for final approval and disbursement.

CTRMA’s invoice submittal and approval process is similar to the process used by most governmental entities, in that invoices pass through several different approval points both in and outside the agency before a payment is issued. These approval points are critical to ensure the appropriateness of the expenditure according to state law as well as agency policy.

Moreover, since CTRMA receives monies from the State Highway Fund and the uses of those funds are restricted by the Texas Constitution, it is critical that CTRMA accurately account for expenditures of funds from all sources.

Exhibit 15 shows HNTB’s invoice review and approval process. The process contains 11 approval points at which the invoice is reviewed and either approved or rejected.

Since HNTB and its subcontractors perform much of CTRMA’s work, HNTB is responsible for a majority of the authority’s bills; these go through both approval processes. A summary of CTRMA’s expenditures through 2004 can be found in Appendix 7.


Inappropriate Expenditures

The Comptroller’s review team found that CTRMA has made a number of questionable reimbursements. While the authority is not subject to state reimbursement requirements, these requirements do represent useful and appropriate guidelines for the expenditure of public tax dollars. CTRMA has approved purchases in travel, meals and mileage that would be considered inappropriate for a state agency and, in some cases, violate its own policies as well.

According to Chapter 370 of the Transportation Code and Section 9 of the CTRMA Bylaws, board members can be reimbursed for mileage and other expenses associated with the performance of their duties as board members.[87] While reimbursement for travel to and from board meetings and other official functions is an acceptable practice for state agency board members, many board member reimbursements paid by CTRMA would be unacceptable at a state agency.

According to the 2003 General Appropriations Act, reimbursements for transportation and incidental expenses incurred by state board and commission members must be provided at the same rate as state employees. Specifically, airfare for board and/or commission members can be reimbursed at the levels established in the State Travel Management Program (STMP), which vary by location and distance. Mileage costs for driving by board or commission members in their own vehicles can be reimbursed at a maximum of 35 cents per mile.

In addition, the 2003 General Appropriations Act caps in-state meal per diems for board members at $30 per day and in-state lodging expenses at no more than $80 per day. (The act does allow for higher reimbursements for legislators, but even these are capped at twice the amount available to state employees, or $60 per day for meals and $160 per day for lodging.)[88]

On January 26, 2005, the CTRMA board adopted a reimbursement and travel policy that provides guidelines for board members and staff concerning travel, lodging, meals and incidental expenses associated with their duties as CTRMA representatives.

CTRMA’s new travel policy provides only one cap for reimbursements: mileage accrued by CTRMA board members and staff in their personal vehicles can be reimbursed at the maximum level allowed by the federal government. The policy also disallows expenses for alcoholic purchases, entertainment (including hotel movies) and parking or traffic tickets. It also disallows reimbursement for expenses accrued by spouses or “significant others” of CTRMA board members or staff who accompany them on travel.

Other than these guidelines, the policy allows board members and employees to use their best judgment on the appropriateness for travel expenses.[89] It also fails to address expenses accrued by CTRMA contractors or subcontractors. In general, the new policy does not provide for the type of accountability one would expect in governmental agency dealing with taxpayers’ money.

From January 1, 2003 through December 31, 2004, CTRMA reimbursed its chairman a total of $11,066.30 for CTRMA-related expenses. A majority of this was for mileage to and from meals and meetings with various local and state officials, contractors and representatives of special-interest groups. Occasionally, the chairman received reimbursements for the cost of meals as well. State and local board members generally are not reimbursed for such expenditures.

For example, on November 20, 2003, the chairman bought lunch for a state representative, the TxDOT Austin District Engineer, the HNTB project manager, a Williamson County Commissioner who would become the CTRMA executive director and CTRMA’s general counsel at the University of Texas Club, at a cost of $92.10. CTRMA later reimbursed the chairman for the cost of the meal, mileage and parking, for a total cost to taxpayers of $125.63. The receipt filed for reimbursement simply stated “RMA meeting.”

CTRMA also has reimbursed the chairman for administrative work performed by the staff of his own company. These totaled more than $3,000, at $19 per hour and later at $23.08 per hour, between August 2003 and December 2004. CTRMA did not have a contract with the chairman’s staff to perform this administrative work.

These reimbursements appear to have violated several sections of the Transportation Code. Section 370.252(a)(6) of the Transportation Code prohibits a director of an RMA from having a personal interest in any agreement executed by the authority. Section 370.252(b)(1)-(3) of the Transportation Code provides that a person is ineligible to serve as a director of an RMA if the person: (1) is employed by or participates in the management of a business entity or other organization that receives funds from the RMA; (2) directly or indirectly owns or controls more than a 10 percent interest in a business or other organization that receives funds from the RMA; or (3) receives a substantial amount of funds from the RMA. It is a ground for removal of a director from an RMA board if the director at the time of appointment or at any time during the director’s term is ineligible to be a director under Section 370.252 of the Transportation Code.

Section 370.260(a) of the Transportation Code prohibits a director of an RMA from contracting with the RMA or being directly or indirectly interested in a contract with the RMA. And Section 370.260(b) provides that a director who violates this prohibition is liable for a civil penalty to the RMA in an amount not to exceed $1,000.

CTRMA also paid $2,400 for the chairman’s personal membership in the Austin Area Research Organization (AARO). According to its Web site, AARO is a group of business leaders who gather to discuss “mutual concerns.” This membership is not a requirement of his role with CTRMA and he was a member of AARO before being appointed to the board. Interestingly, another CTRMA board member belongs to AARO and was not reimbursed for his membership fee.

CTRMA also reimbursed a board member for $780 in round-trip airfare from New York City to Austin. The board member asked to be reimbursed because she “was on business and would have missed the monthly board meeting had the board member not bought an additional ticket to fly to Austin and return to New York to continue the board member business.”[90]

The Transportation Code does not specify which RMA board member expenses are eligible for reimbursement. CTRMA bylaws, however, state that board members “will be reimbursed for their actual expenses of attending each meeting of the Board and for such other expenses as may be reasonably incurred in their carrying out of their duties and functions.”[91] The bylaws do not set any limits on such reimbursements, and the new reimbursement policy only limits mileage expenses.

CTRMA also paid the $400 registration fee for a conference attended by its executive director for which he registered before he became a CTRMA employee. He registered for the Institute for Participatory Management and Planning conference on November 17, 2003, was hired on December 5, 2003, and attended the conference in Monterey, California from January 12 to 18, 2004. He did not bill CTRMA for his room or airfare, but did bill the authority for copies, a long-distance call, alcoholic drinks, meals, parking and taxi fare. He approved his own expense statement (Appendix 8). The CTRMA expense statement does not include a section explaining the purpose of the trip.

Such examples may represent common practice for executives of some private businesses with expense accounts. These expenses may represent a very small portion of CTRMA’s total expenditures. Such practices, however, generally would be considered unacceptable for government agency employees and board members. If CTRMA does not establish policies limiting the range of acceptable reimbursements and capping their amounts, it puts itself at risk of approving exorbitant, inappropriate or illegal expenditures.

In addition, it appears the policies that CTRMA has regarding travel and meal expenses for its board members are applied inconsistently. There have been several occasions in which one board member has been reimbursed for an expense while other board members have not.

The lack of reimbursement caps for travel, meals and other incidental expenditures accrued by CTRMA board members, staff, contractors and subcontractors, as well as the inconsistent applications of the limited policies they do have, make it impossible for the authority to budget for these types of expenditures accurately.


Contractor Travel Expenses

State agencies in the executive branch of government must participate in the Texas Building and Procurement Commission’s (TBPC’s) State Travel Management Program (STMP), using existing state contracts for travel services. These contracts include travel agency services, charge card services, rental car companies, airlines and hotels. Other entities such as cities and counties, school districts and public community colleges can use the STMP as well. State law does not identify RMAs as an entity eligible to participate in the STMP.

STMP services and contracts are available for business-related travel for elected and appointed state officers; state agency employees; prospective employees, when their travel is being paid by the state; and other persons traveling on behalf of state agencies when their travel expenses are being paid by the state in accordance with guidelines established by the Comptroller’s office. All travel made through the STMP is reimbursable according to guidelines established in the 2003 General Appropriations Act.

CTRMA has reimbursed travel expenses far in excess of state guidelines. One HNTB employee flew first class while on CTRMA business from Austin to Kansas City at a one-way cost of $677.31 including taxes and fees. The documentation obtained from the Peña Swayze accounting firm regarding this travel includes a handwritten note—“flight plans changed at clients [sic] request.” Upgrading from coach-class airfare to first class directly conflicts with the guidelines and expenditure levels established in the STMP.

This upgrade also conflicts with HNTB’s Employee Policy Memo 66, which states, “All employees are expected to travel in coach class with only one exception: For international travel...all charges associated with upgrades to first class are not job chargeable or overhead chargeable. The employee will bear the costs of upgrades.” Yet HNTB, CTRMA and TxDOT all approved this reimbursement.


Sales Taxes

As a publicly funded entity, CTRMA is exempt from state and local sales and use taxes.[92] In a detailed review of CTRMA expenditures, the Comptroller review team found that the authority usually exercises its exemption, but it has unnecessarily paid sales and use tax on a number of expenditures. It is entitled to and should seek reimbursement for the sales and use tax it has paid.


Human Resources Expenses

CTRMA hired and contracted to pay an independent consultant $4,000 at $250 per hour to help develop a job description for the authority’s chief financial officer (CFO) position. The consultant developed a job “model” based upon interviews and surveys with key stakeholders and an analysis written by CTRMA’s executive director. The consultant described the characteristics of the person most suited for the CFO role; appropriate terms for creating a job description; and a survey to be used in evaluating applicants.

This consultant was hired without competitive bidding, upon the recommendation of a friend of the executive director’s who has no formal connection with the authority.[93] According to Section 8.3 of CTRMA’s procurement policies, the executive director may obtain consulting services for less than $25,000 via such a single-source contract if he determines that only one consultant possesses the knowledge, competence and qualifications to provide the needed services at a reasonable fee and within the time limits required by the authority.

Nothing furnished to the Comptroller’s review team indicated that these criteria were satisfied. A glance at the Austin phone directory identified 13 “Human Resource Consultants,” 21 “Employment Consultants” and 82 “Executive Search Consultants.” Neither the consultant nor her company, “Between the Lines,” is listed in the directory.


Food and Beverage Expenses

Employees and contractors of CTRMA often are reimbursed for meals and beverages that would be considered unjustified by both state and local government agencies. While the amounts involved are negligible in terms of the overall budget, these incidents—and the fact that they were approved for reimbursement—demonstrate a lack of appropriate oversight over the expenditure of tax dollars by both CTRMA and TxDOT.

For example, CTRMA’s executive director received reimbursement for alcoholic beverages purchased in Monterey, California. Other reimbursements cover beer purchased by contractors. When asked about reimbursement for alcoholic beverages, CTRMA told the Comptroller review team that its policy does not allow such purchases.[94]

Another difference between CTRMA and government practice is the reimbursement of in-town meals. State guidelines reimburse employees only for meals taken out of town when on government business, and only on a per diem basis. CTRMA staff, board members and contractors, however, commonly receive reimbursement for meals while in town. As noted earlier, CTRMA has reimbursed its board chairman and its executive director for meals in both Williamson and Travis counties. CTRMA also has reimbursed an employee of HDR, a subcontractor for HNTB, for meals with temporary HNTB employees.

Some of the executive director’s meals reimbursed by CTRMA were taken with CTRMA board members, county commissioners, TxDOT officials, CTRMA’s general counsel, Pete Peters of The Communicators (an HNTB subcontractor), Trey Salinas of Martin & Salinas (an HNTB subcontractor) and CTRMA contractor Everett Owen.

On September 30, 2003 HNTB held a “CTRMA Kick-off” event, billed to and paid for by CTRMA, at the Omni Austin Hotel South for new subcontractors, at a cost of $309.90.

The CTRMA Planning Committee met on April 23, 2004. As part of the meeting, lunch was served at a cost of $219.64 for four CTRMA board members, CTRMA staff and contractors. The cost of the lunch was billed through Locke Liddell & Sapp.


More Guidelines, Employees Needed

CTRMA hired a professional engineer experienced in transportation matters to review HNTB documents and billings. When questioned about CTRMA expenditures, he said he was concerned about some HNTB purchases and travel billings. In addition, he said he thought CTRMA could have negotiated a better deal for the GEC contract and that the 15 percent profit-margin clause in the GEC contract is probably too high.

He indicated that while the 15 percent profit margin is within a generally accepted profit margin of 10 to 15 percent for GEC services, it could have been negotiated for a figure closer to 10 percent. Unfortunately, at the time of the negotiation, CTRMA had no staff. He indicated that CTRMA should have hired an in-house general counsel with contract negotiation experience before it sought its GEC contractor.[95]

He also thought the authority needed more formal, written policy guidelines regarding HNTB’s work, and stated that some functions could be performed more cost-effectively by CTRMA employees rather than by HNTB. As noted in Chapter 2, he also stated that CTRMA should have hired staff more quickly to allow it to evaluate HNTB’s work effectively.[96]

In October 2004, CTRMA’s executive director told the Comptroller review team that he expected to hire more staff over the following year.[97] On November 29, 2004, CTRMA’s chief financial officer (CFO) began working full-time for the authority. In February 2005, CTRMA hired a director of operations and a communications director.


Public Relations

Of $16.5 million in work authorized by CTRMA thus far, $2 million has been approved for public relations contracts. At least 12 firms are providing public involvement and public relations work.

CTRMA may need some survey and market research related to toll tags and toll rates, and gathering public input is critical, but its spending on public outreach in parts of Travis County far removed from the path of its only project, US 183-A, raises questions.

When asked why it was spending money for public outreach in Southwest and East Austin, miles away from any impact US 183-A may have, CTRMA responded that such spending was legitimate because US 183-A is part of a larger transportation program, and that the amount of funding TxDOT would provide for US 183-A depended upon CAMPO’s approval of the overall program. CTRMA also noted that such public outreach spending was “encouraged by several CAMPO board members.”[98]

CAMPO, however, has already approved the plan; TxDOT has committed toll equity funding; and CTRMA continues to spend on public outreach. Furthermore, TxDOT is building all roads in the plan aside from US 183-A, and thus TxDOT would seem to be the entity that should take responsibility for public outreach in the areas of Travis County where their construction projects will have the greatest impact.

As discussed in Chapter 2, CTRMA controls work and compensation through the use of work authorizations (WAs). Each WA is dated and numbered and approved by board resolution. The first “Public Involvement Services for 183-A” (Board Resolution 03-46,WA 3.3) specifically included reference to a grant of $12.7 million from TxDOT and tasked HNTB with performing various public involvement activities within 12 months at a cost of no more than $350,000. The scope of services was defined as “Public Involvement Services...for the development of US 183-A from SH 45 at US 183 to a connection with US 183, north of Leander, a distance of approximately 11 miles.”[99]

On September 29, 2004 the CTRMA board extended and expanded “Public Involvement Services for 183-A.” Board Resolution No. 04-44 extended Work Authorization 3.3 for 12 additional months and compensation not to exceed $744,630—a 113 percent increase from the first year’s work. The scope of work was defined as “Public Involvement Services associated with the development of the US 183-A Turnpike.”[100]

On March 31, 2004, the board approved Resolution 04-10, adding more than $156,000 to public involvement and marketing efforts regarding electronic toll tags.[101] Resolution No. 04-48, approved on September 29, 2004, authorized $750,000 in payments to TateAustin, an Austin-based public relations firm, for marketing efforts over the next two years.[102] Compensation authorized through 2006 for public relations and public involvement totals $2,000,875.

Exhibit 16 indicates the amounts that have been authorized for public involvement and public information work.

EXHIBIT 16
CTRMA Public Involvement/Information Authorizations
Board Resolution Number Date Amount Authorized Source Service
03-46 9/24/03 $350,000 GEC WA 3.3 Public involvement services for US 183-A
04-10 3/31/04 $156,245 GEC WA 3.5 Public involvement and marketing for toll tags
04-44 9/29/04 $744,630 GEC WA 3.3 Supplement 1 Public involvement services for US 183-A
04-48 9/29/04 $750,000 Resolution to retain TateAustin Marketing plan, advise on public information
  Total $2,000,875    
Source: Central Texas Regional Mobility Authority.


Political Advocacy

Chapter 556 of the Texas Government Code forbids governmental agencies from engaging in lobbying.[103] In a November 2003 status report, however, HNTB subcontractor Amos “Pete” Peters stated that “elected officials have been shored-up and alliances have been formed to see the HWY 183-A through to completion.”

In addition, an April 15, 2004 memo from Don Martin of Martin & Salinas, a public relations firm contracting with HNTB, to TxDOT’s Austin District Engineer and CTRMA’s executive director concerned what Martin referred to as “the appropriate time to move into ‘campaign mode’ with the toll efforts.” In that memo, Martin discussed examples of previous efforts and proposed establishing a private citizen’s group to raise money and run the campaign, separate from the public education efforts authorized and funded through CTRMA. Martin’s proposal included participation by some groups already contracting with CTRMA, such as Adelante Solutions, Martin & Salinas and Peters.[104] A copy of this memo can be found in Appendix 9.

CTRMA’s executive director appears to be aware that governmental agencies are prohibited from lobbying, because he responded to the Martin memo with an April 21, 2004 letter stating that:

...as you note in your memo, it is essential that any ‘advocacy efforts’ be separate and distinct from the educational efforts which may be undertaken by CTRMA. CTRMA cannot and will not, engage in advocacy efforts. All public relations efforts on behalf of CTRMA will be educational in nature.[105]

Yet the public may have difficulty distinguishing and separating the roles of these contractors. For example, the Citizens for Mobility Web site lists Don Martin of Martin & Salinas as its “media relations” coordinator. Citizens for Mobility, according to its Web site, is a “privately funded committee formed to support the recently proposed toll road funding initiative.”[106]

Thus Don Martin, who, according to the Martin & Salinas Web site, is a Central Texas real estate developer, is under contract to perform public relations work for CTRMA’s general engineering consultant, while at the same time working for groups actively trying to build public and political support for CTRMA’s plan.[107]

Furthermore, CTRMA has hired Adelante Solutions, an “entity” of Martin & Salinas, to answer public inquires it receives. In other words, a public relations firm owned in part by a developer who has a vested interest in seeing US 183-A and other road projects completed, is responding to questions posed to CTRMA by members of the public.[108]

The letter from CTRMA’s executive director cited above recognized the need to separate the authority’s public outreach and education efforts from political advocacy. CTRMA’s reliance on contracted public relations firms engaged in parallel public advocacy efforts, however, makes it difficult to ensure that its money is not spent on political advocacy.

CTRMA only recently hired a public information officer. CTRMA has relied on outside contractors for guidance concerning how much to spend on public relations and what to spend it on.


Recommendations

20. State law should be amended to require RMAs to follow the restrictions detailed in Article IX of the state General Appropriations Act concerning the reimbursement of staff and board member expenses. State law should be amended to allow RMAs to participate in the State Travel Management Program (STMP).

RMAs should adopt spending policies that reflect the organizations’ use of public funds and should limit reimbursements to expenses directly related to RMA board meetings and other official business. As part of these policies, RMAs should establish rules requiring a written contract or memorandum of understanding between any board member and the RMA before the authority can reimburse the member for any work, including administrative and clerical work, performed by a business in which he or she has any financial interest.

If state law allows, CTRMA should participate in the STMP.

21. CTRMA should seek a refund of all sales and use taxes charged to it for purchases it has made.

CTRMA is a tax-exempt governmental agency and should declare its exempt status. CTRMA should have its new CFO examine its purchases and retroactively seek refund of any sales and use tax it has paid.

22. CTRMA and other RMAs should assume responsibility and be held accountable for ensuring that all expenses submitted for reimbursement are appropriate.

CTRMA and TxDOT have approved questionable expenses, including some that would violate state law if the RMA were a state agency, and some that violate the authority’s own policies as well. TxDOT, under the guidance of the Texas Transportation Commission, has granted a great deal of local control to RMAs. It is important, therefore, that CTRMA ensure that all of its expenditures are appropriate.

CTRMA should make its in-house staff responsible and accountable for ensuring that only legal and appropriate expenses are reimbursed. CTRMA should give its new CFO or his designee the responsibility for reviewing and approving all requests for reimbursement from CTRMA staff, board members, contractors and subcontractors.

23. CTRMA and other RMAs should employ an in-house general counsel to ensure that the taxpayers’ best interests are protected.

According to one of CTRMA’s consultants, the authority might have negotiated a better deal for GEC services had it had an in-house general counsel with contract negotiation experience looking out for its interests.

24. CTRMA should not reimburse contractors for food, entertainment, meetings or social functions without previous approval by the CTRMA executive director, who must justify the cost of the event.

25. CTRMA and other RMAs should limit public relations and public information contracts to projects directly under their authority.

US 183-A is the only road for which CTRMA is responsible at present. CAMPO is responsible for planning the region’s mobility projects and TxDOT approves them. The authority worked with TxDOT to create the current plan for Central Texas, but it is not responsible for the construction of any road other than US 183-A at this time, and should dedicate any public information spending to that project.

26. Shortly after their formation, RMAs should employ public information officers to limit their dependence on public relations contractors.

CTRMA’s recently hired communications director should help the authority prioritize its public relations spending and reply to questions received from the public.

27. State law should be amended to prohibit RMAs from contracting for public relations or public involvement services with any entity engaged in transportation-related advocacy efforts.

RMAs should establish clear policies prohibiting any public relations or public outreach contractor or subcontractor from working on political advocacy efforts connected with their projects.