CONSTRUCTION AUDIT

Excerpt from audit:  We identified approximately $663,000 of questionable payments to contractors that should be further examined by EISD as to whether reimbursements to EISD for these payments are warranted.

In September 2005 and again January 2006, I requested access (pursuant to the Texas Public Information Act) to the attached PDF document.  I received the attached document 15 months later in December 2006 and then, only after filing a complaint with the Travis County Attorney David Escamilla.  An investigator from the County Attorney's office accompanied me to Eanes ISD when I finally obtained this construction audit.  Following is a sample of the findings uncovered in the audit and never made public by the school district. We need to strengthen access to public information about our public schools, demand effective recordkeeping and quick enforcement of Chapter 552 when districts refuse to comply.

LINK:  Deloitte Internal Audit Report May 10, 2004 of Construction Management

Following are excerpts from the full report: 

- "Assessment performed from October 2003 through December 2003 in accordance with the terms of our engagement letter dated June 12, 2003"

- Report dated May 10, 2004

- "The primary objective of this assessment was to determine whether Eanes has established a construction management program with an effective set of internal controls that assist in appropriately managing construction-related costs.........we identified a number of opportunities for improvement that are highlighted in the Executive Summary..."

Executive Summary  - ...a number of opportunities exist for EISD to improve controls in the program to appropriately manage construction-related costs. We identified approximately $663,000 of questionable payments to contractors that should be further examined by EISD as to whether reimbursements to EISD for these payments are warranted.

 - EISD should consider developing and implementing standard construction agreements that adequately protect the interests of EISD. The contracts should be clear, concise and free of ambiguous terms

- EISD should consider establishing additional guidelines for contractors to follow for the submission of payment requests.......should require that sufficient supporting documentation and appropriate explanations be provided with the payment request.

- EISD should consider appointing a single EISD employee to perform a review of payment requests rather than the cursory review that is currently being performed.

- The Change Order Policy approved on August 28, 2002 should be complied with or consideration should be given to further revising the procedures to reflect current practice.

- .EISD should also consider improving its internal procedures to improve overall management of change orders.

- The physical maintenance of construction agreements and payment documents should be improved

- Formal documented policies and procedures for the construction management process should be developed and communicated to relevant staff for consistent and timely application.

Specific Findings and Recommendations

- Two contracts did not stipulate the nature and amounts of insurance coverage to be carried by the contractor.

- Three contracts did not provide for the securing of a performance bond by the contractor

- Three contracts did not state procedures to be followed where extras or revisions are required

- Three contracts did not contain "right to audit" clause in regarded to contractor's records

- None of the contracts reviewed provided explanations on how "back billing to the contractor for services supplied by the location is to be handled.

- General charges, such as raw materials, labor and installation charges, totaling $324,650 were paid without a breakdown of the components

- Charges totaling $42,125 that are considered to be part of the Basic Services Fee were separately reimbursed by EISD

- A difference of $26,392 between the amount billed and the contracted amount for Avnet was noted.

- Charges of $24,400 were paid using funds from an unrelated project.

- EISD risks paying for overcharges or unsupported or unauthorized charges due to relying on an architect to review payment requests instead of assuming full responsibility for careful, thorough reviews of charges         prior to payment.

- Given the extent and magnitude of the potential questioned costs identified within this report, EISD should consider appointing an EISD employee to closely review and approve payment requests.

- EISD did not fully comply with the Change Order Policy.  Specifically, several changes in scope were made to the Avnet contract without processing a change order as required by the procedures.  Our review of this contract indicated that the project drastically changed from what was originally agreed upon...

- The maintenance of Change Order documents was substandard and is in need of improvement...

- EISD may not be able to effectively monitor contracts or track payment history if documents can not be easily located or if files are so cumbersome and disorganized that the paper trail for contracts cannot be         followed.  Additionally, EISD could be reimbursing contractors for charges that may not have been appropriately authorized through approved change orders.

- EISD's construction processes are not documented in the form of written policies and procedures.

- During this process, we noted that an unclear understanding of responsibility among EISD personnel was observed.  By not having formal written policies and procedure, the processes cannot be appropriately audited for compliance with management directives.  Also, without documented polices and procedures, may not be performed as management intended.