1. Mn/DOT AUDIT 2011 COUNTY HIGHWAY ACCOUNTANTS CONFERENCE SINGLE AUDIT DISCUSSION

2. SINGLE AUDIT OUTLINE 3 How Your Project Gets Selected For Audit 3 ARRA Requirements 3 Contract Item Payments 3 Material Testing 3 Single Audit Report Process

3. HOW YOUR PROJECT GETS SELECTED FOR AUDIT Single Audit Act of 1984: Highway Planning and Construction Program Agreement With Office of Legislative Audit Letter of Agreement and Stewardship Plan Between Mn/DOT and the Federal Highway Administration Population of Highway Construction Payments for the State Fiscal Year Ended June 30 15-18 Highway Construction Projects Selected for Audit (some trunk highway and some city/county) Factors Influencing Selection: Project Size, American Recovery and Reinvestment Act (ARRA), Project Type, Location FHWA guidance to us for this year: audit 2/3 city/county projects and 1/3 trunk highway projects; also, 50% ARRA projects

4. AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) REQUIREMENTS See www.whitehouse.gov/omb/assets/a133_compliance/arra_addendum_1.pdf pages 29-53 and specific page references below, also incorporated into the March 2010 A-133 Compliance Supplement www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2010www.whitehouse.gov/omb/assets/a133_compliance/arra_addendum_1.pdf www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2010 Going Well Certification that ARRA Buy America provisions are met for Iron, Steel, and Manufactured Goods; Buy America provision in ARRA project proposals, page 33 of 301 Proposal language and practices addressing use of debarred contractors the same between Federal and non-federal (state aid) projects, page 33 of 301 Schedule of Federal Expenditures in annual financial reports separately documents ARRA expenditures, page 52 of 301 Data Collection Form (SF-SAC) in Single Audit Clearing House (http://harvester.census.gov/sac) needs to separately document ARRA expenditures, page 52 of 301http://harvester.census.gov/sac Contractors submitting reports indicating hiring for ARRA projects Needs Additional Attention Cities and Counties must be registered in the Central Contractor Registration (CCR) database (https://www.bpn.gov/ccr/default.aspx ), page 45 of 301https://www.bpn.gov/ccr/default.aspx

5. CONTRACT ITEM PAYMENTS Going Well Documentation for most contract item payments Material on hand payments (high risk area, continue to monitor invoices closely) Needs Additional Attention Partial Payment Timeliness (every 35 days per M.S. 471.425 unless modified in special provisions) Mobilization

6. MATERIAL TESTING Assess Measures Taken to Accomplish Compliance With Material Testing Requirements Grading and Base Testing Requirements Concrete Production/Testing Compliance Bituminous Production/Testing Compliance

7. Recent Audit Results: Material Testing (Grading & Base) Single Audit Report Finding for 4 Consecutive Years (2007-2010) Going Well Significant decrease in total questioned costs and the number of projects with exceptions to requirements Needs Additional Attention Payment reductions need to be taken at the time of payment for work rather than at the end of the project (bitumen content) Payment reductions need to be taken at the time of payment for work rather than at the end of the project (bitumen content) Preliminary and Final Grading and Base Reports Need to be Completed correctly and Sent in to the Grading and Base Unit (Grading and Base Manual, 5-692.301) Preliminary and Final Grading and Base Reports Need to be Completed correctly and Sent in to the Grading and Base Unit (Grading and Base Manual, 5-692.301) QA gradations need to be done with Random Sampling Method per Schedule of Materials Control and Grading and Base Manual Chapter 7 (also Random Sampling Acceptance Report – Grading and Base Manual) QA gradations need to be done with Random Sampling Method per Schedule of Materials Control and Grading and Base Manual Chapter 7 (also Random Sampling Acceptance Report – Grading and Base Manual) Moisture Content Tests Must be Done to Verify 5% Moisture to Achieve Compaction (Schedule of Materials Control, 2005 Specification 2211.3 C2, C3, Special Provisions) Moisture Content Tests Must be Done to Verify 5% Moisture to Achieve Compaction (Schedule of Materials Control, 2005 Specification 2211.3 C2, C3, Special Provisions) QC and QA Percent Crushing (Schedule of Materials Control, Specification 3138.2C) QC and QA Percent Crushing (Schedule of Materials Control, Specification 3138.2C) Aggregate Quality (Schedule of Materials Control, Specification 3138.2D, 2E) Aggregate Quality (Schedule of Materials Control, Specification 3138.2D, 2E) Need to Verify Maximum of 3% Bitumen Content for Aggregate Base Class 7(B) (Specification 3138.2 A2a(a)) Need to Verify Maximum of 3% Bitumen Content for Aggregate Base Class 7(B) (Specification 3138.2 A2a(a)) Materials Certification Exceptions Summary needs to list missed tests and failing tests and resolution during the project as well as when the project is finaled(Contract Admin Manual 5-591.430 page MATLCERT-4) Materials Certification Exceptions Summary needs to list missed tests and failing tests and resolution during the project as well as when the project is finaled(Contract Admin Manual 5-591.430 page MATLCERT-4)

8. Recent Audit Results: Material Testing (Concrete) Going Well QC and QA Coarse and Fine Aggregate Gradation Tests Usually Done as Required QC and QA Coarse and Fine Aggregate Gradation Tests Usually Done as Required Cylinder Tests Done as Required Cylinder Tests Done as Required Needs Additional Attention Need to Complete and Submit Weekly Certified Ready Mix Plant Reports and Test Beam Data to the Concrete Unit (Concrete Manual, 5-694.701; 5-694.744(1)) Need to Complete and Submit Weekly Certified Ready Mix Plant Reports and Test Beam Data to the Concrete Unit (Concrete Manual, 5-694.701; 5-694.744(1)) Cores for Thickness need to be done or alternate method of control over thickness needs to be approved by the State Concrete Engineer and documented in the special provisions or on a Supplemental Agreement (Schedule of Materials Control) Cores for Thickness need to be done or alternate method of control over thickness needs to be approved by the State Concrete Engineer and documented in the special provisions or on a Supplemental Agreement (Schedule of Materials Control) Take payment reductions for concrete mixture not meeting specification when paying for placement of mixture Take payment reductions for concrete mixture not meeting specification when paying for placement of mixture Conduct Quality Testing, including Coarse Aggregate Testing on No. 200 sieve (Specification 3137.2D1(i), Schedule of Materials Control) Conduct Quality Testing, including Coarse Aggregate Testing on No. 200 sieve (Specification 3137.2D1(i), Schedule of Materials Control) Air and Slump Tests should be taken as required and Documented on the Weekly Concrete Report (Schedule of Materials Control, Concrete Manual 5-694.727) Air and Slump Tests should be taken as required and Documented on the Weekly Concrete Report (Schedule of Materials Control, Concrete Manual 5-694.727) Certified Mill Test Reports needed for Structural Steel (ASTM Standards/Schedule of Materials Control) Certified Mill Test Reports needed for Structural Steel (ASTM Standards/Schedule of Materials Control)

9. Recent Audit Results: Material Testing (Bituminous) Going Well Failing Materials Rarely Seen and are Properly Addressed Failing Materials Rarely Seen and are Properly Addressed Verification Testing is for the Most Part Done as Required Verification Testing is for the Most Part Done as Required Documentation, Including Test Summary Sheets, is Improving Documentation, Including Test Summary Sheets, is Improving Needs Additional Attention Ensure that all testing is done as required by the Special Provisions for Stabilized Full Depth Bituminous Pavement Reclamation Ensure that all testing is done as required by the Special Provisions for Stabilized Full Depth Bituminous Pavement Reclamation Special Provisions Should not Call for Contractor to Transport Verification Samples (23 CFR 637.205(d)) Special Provisions Should not Call for Contractor to Transport Verification Samples (23 CFR 637.205(d)) 1 Verification test per day required (2360.4N) 1 Verification test per day required (2360.4N) Asphalt Binder should be sampled and tested to verify Performance Grade characteristics (Schedule of Materials Control) Asphalt Binder should be sampled and tested to verify Performance Grade characteristics (Schedule of Materials Control)

10. Single Audit Report Process Meet With County Engineer at End of Week When Audit is Finished to Discuss Results of Audit for Specific Projects: Spring and Summer Meet With County Engineer at End of Week When Audit is Finished to Discuss Results of Audit for Specific Projects: Spring and Summer Results From 15-18 Highway Construction Audits Combined and Evaluated in October Results From 15-18 Highway Construction Audits Combined and Evaluated in October Meetings to Discuss Audit Results in October/November: Meetings to Discuss Audit Results in October/November: Office of Materials Office of Materials Office of Construction and Innovative Contracting Office of Construction and Innovative Contracting State Aid for Local Transportation Division State Aid for Local Transportation Division Mn/Dot Commissioners Staff Mn/Dot Commissioners Staff

11. ANOTHER EXCITING MEETING WITH THE AUDITORS

12. Single Audit Report Process Draft Report for Response Issued in December; Finding Recommendations Addressed to Mn/DOT Division Directors Draft Report for Response Issued in December; Finding Recommendations Addressed to Mn/DOT Division Directors Finding Recommendations Related to County Projects Addressed to Mn/DOT State Aid Engineer Finding Recommendations Related to County Projects Addressed to Mn/DOT State Aid Engineer Responses to Audit Findings Evaluated and Accepted by Mn/DOT Deputy Commissioner Responses to Audit Findings Evaluated and Accepted by Mn/DOT Deputy Commissioner Final Report With Responses Issued in January/February is a Public Document Final Report With Responses Issued in January/February is a Public Document www.dot.state.mn.us/const/tools/references.htmlwww.dot.state.mn.us/const/tools/references.html - Audit Report & Description of Audit Process Online www.dot.state.mn.us/const/tools/references.html

13. Single Audit Report Process Audit Findings and Associated Questioned Costs are Normally Based on Patterns and Trends (multiple exceptions to requirements for multiple projects) Audit Findings and Associated Questioned Costs are Normally Based on Patterns and Trends (multiple exceptions to requirements for multiple projects) Costs are Questioned by Individual Contract Item Value by Project Costs are Questioned by Individual Contract Item Value by Project 70% of Questioned Costs Relate to Material Testing (primarily missed tests and payment reductions not taken or not taken timely for materials not meeting specifications) 70% of Questioned Costs Relate to Material Testing (primarily missed tests and payment reductions not taken or not taken timely for materials not meeting specifications) The Questioned Cost Committee Evaluates Questioned Costs, Creating a List of Likely Questioned Costs Which are Submitted to FHWA The Questioned Cost Committee Evaluates Questioned Costs, Creating a List of Likely Questioned Costs Which are Submitted to FHWA The Questioned Costs Committee Sometimes asks Project Personnel to Attend Committee Meetings and Provide Information Regarding Exceptions to Requirements Related to Questioned Costs The Questioned Costs Committee Sometimes asks Project Personnel to Attend Committee Meetings and Provide Information Regarding Exceptions to Requirements Related to Questioned Costs

14. Your Questions

15. Thank You For Inviting Us! Dave Christensen Agency Policy Specialist Special Audits and Analysis Mn/DOT Office of Audit 7th Floor Transportation Bldg MS 190 395 John Ireland Blvd Saint Paul MN 55155 Office (651) 366-4147; fax 366-4155 dave.christensen@state.mn.us