Audit Release- ODOT: The Oregon Fuels Tax System Accurately Assesses and Collects Fuels Taxes for Oregon and Local Jurisdictions

Report Highlights


The Secretary of State’s Audits Division found that the Oregon Fuels Tax System (OFTS) accurately assesses and collects fuels taxes for Oregon and local jurisdictions, collecting over $564 million in 2016. However, processes for issuing fuels tax refunds and system design flaws result in minor overpayments and reporting inaccuracies. Additionally, ODOT should enhance processes for testing system backup files, granting and monitoring user access, setting user password parameters, implementing safeguards over personally identifiable information, and identifying security weaknesses.

Read full report here.

Background

In 2013, ODOT contracted with Avalara to implement a new fuels tax system for $2.8 million, replacing an outdated paper based system previously used to handle Oregon Fuels Tax returns.

Purpose

The purpose of our audit was to review and evaluate the effectiveness of key general and application controls that protect and ensure the integrity of the Oregon Fuels Tax System and its data.

Key Findings

1. OFTS accurately calculates, assesses, and collects fuels tax for the state of Oregon and local jurisdictions, but manual processes governing refund payments should be improved to ensure accurate refund payments.
2. Application design flaws result in a small number of refund overpayments and minor reporting inaccuracies.
3. Changes to OFTS computer code are appropriately managed to reasonably ensure that the system and its data will not be compromised as the result of a code change.
4. System back-up processes have never been tested to ensure system data can be restored in the event of a disruption.
5. Security weaknesses exist in processes for granting and reviewing system access, monitoring activities of internal and third-party users with significant system access, and identifying and remediating system security vulnerabilities. In addition, password parameters should be more robust, and safeguards protecting some Personally Identifiable Information (PII) need improving.

Recommendations

The report includes nine recommendations to the Oregon Department of Transportation focused on addressing weaknesses in the refund review processes, fixing system design flaws, testing backups, and correcting security weaknesses.

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State of Oregon Financial Condition Report: Fiscal Year 2016

The Oregon Secretary of State Audits Division releases an annual financial condition report for the previous fiscal year, which covers revenues and expenditures and reports on the State’s overall fiscal health. Enjoy our summary below, or read the full report here.

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Audit Release: Automated Medicaid eligibility is processed appropriately at OHA, yet manual input accuracy and eligibility override monitoring need improvement

AUDIT PURPOSE

In Oregon, over one million individuals have Medicaid coverage. Medicaid expenditures totaled $9.3 billion in fiscal year 2016, including $1.2 billion in state general funds. We conducted this audit to determine if two critical automated computer programs managed by the Oregon Health Authority accurately verify Medicaid client eligibility and accurately issue payments to healthcare providers. If these programs do not function properly, clients may inappropriately receive, or be denied, Medicaid benefits.

FINDINGS IMPACT

Manual input errors and lack of monitoring of overrides can cause inappropriate eligibility determinations and payments to providers. If agency leadership implements more effective monitoring of caseworker eligibility overrides and improves manual input accuracy, the state will better comply with eligibility requirements and increase accuracy of payments. Inaction will allow overrides and manual input errors to continue causing inappropriate payments to providers.

Read full report here.

KEY FINDINGS

  • Two critical automated computer programs appropriately determined eligibility, enrolled Medicaid clients in coordinated care organizations, and made appropriate payments to those organizations based on eligibility information received.
  • Automated computer processes appropriately validated the Social Security number and citizenship status of applicants over 99.7% of the time in our review of over 425,000 records.
  • We reviewed 30 eligibility determinations and found seven (23%) had manual input errors. While only one error resulted in a client being determined eligible when they were not, each of the errors related to application information that could have resulted in inappropriate eligibility determinations.
  • Although their volume has significantly decreased over time, overrides of eligibility are not sufficiently monitored, meaning unauthorized overrides of Medicaid eligibility could occur.
  • Our review of 72 overridden eligibility segments showed caseworkers did not take proper action to clear 25 (35%). Overridden segments are not subject to automated processes that redetermine eligibility for certain clients.
  • Our 2011 audit recommendations to OHA and DHS concerning access to the Medicaid Management Information System have not been fully implemented, increasing security risk.

RECOMMENDATIONS SUMMARY

  • OHA should continue efforts to improve caseworker manual input accuracy through additional training, and implement a review process for input where errors negatively affect eligibility determination.
  • OHA managers should monitor eligibility overrides to prevent unauthorized validation and ensure state resources are spent appropriately.
  • OHA and DHS should fully implement our 2011 audit logical access recommendations.
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Audits in the News: ODOT could do more to scrutinize construction costs

Audits in the News: ODOT could do more to scrutinize construction costs

We here in the audits division are proud that the work we do makes a difference. Our work attracts the attention of the legislature, statewide news sources, and even local media outlets. Local media coverage of our audits is just another way we communicate with the people of Oregon about the work that we’re doing on their behalf to make government better. This is part of an ongoing series of posts rounding up recent instances in which the Oregon Audits Division makes a cameo in the local news.

This was the first performance audit released since Secretary Dennis Richardson assumed the office of Oregon’s Secretary of State. The audit team examined the Oregon Department of Transportation and the agency’s efforts to monitor bidding, costs and other changes in construction projects.

You can read the entire audit here.


The Oregonian/OregonLive – ODOT loses money on contractors gaming the system, auditors say, but agency questions accuracy

Read the story here.

“The Oregon Department of Transportation could save money if it cracked down on bidding practices contractors can use to rig low bids to produce higher payouts, according to an audit released Monday by the Secretary of State’s Office.”


The Statesman Journal – Contractors could be gaming ODOT contracts, state audit finds

Read the story here.

“The Oregon Department of Transportation could save a significant amount of money by monitoring construction project changes, a state audit released Monday found. ODOT doesn’t track so-called “unbalanced bid items” on about $400 million per year spent on highway, bridge and other construction projects, the Secretary of State Audits Division said.”


The Portland Tribune – New audit of ODOT contracting system finds same old flaws

Read the story here.

“A decade ago, state investigators found that Oregon Department of Transportation contracting had become a cynical sport for one highway construction company — the executives there submitting low bids, then wagering over ways they could subsequently increase project costs to boost profits. While that case is old history, a new state audit of ODOT suggests that its contracting system remains vulnerable despite a decade of warnings from the department’s own employees of contractor gamesmanship and fraud.”

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City of Portland Audit Services: Financial Condition Report released

As part of our Regional Roundup beat, we are starting to feature the work of other audit shops. Check out the recent financial condition audit released yesterday by the City of Portland Auditor’s Audit Services Division. 


Portland Audit Services DivisionThe Financial Condition report, produced by the Portland City Auditor’s Office every other year, focuses on historical trends over five years and allows decision-makers to visualize the City’s course, consider options, and make adjustments to improve the City’s long-term financial health.

Portland Spending

Auditors found that although Portland’s financial condition is stable, the City must address long term challenges.

Some City assets are losing value faster than the City can make repairs.  While the City is making significant investments in water, sewer and stormwater assets, most transportation infrastructure is in fair to poor condition.

Portland Construction

The City has also seen a declining net position – partly due to increased liabilities, such as the City’s pension system for police and fire, as well as policy changes for the Oregon Public Employees Retirement System.

Report highlights

Read the full report


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Audit Release: ODOT should better scrutinize construction costs and project changes by tracking line-item bids with abnormally high or low prices

AUDIT PURPOSE

The Oregon Department of Transportation spends about $400 million a year on highway, bridge, and other construction projects. The purpose of this audit was to determine if ODOT is effectively monitoring project changes to prevent unwarranted costs. Because unbalanced bidding can lead to increased project costs, we examined the agency’s efforts to monitor project changes related to those bids.

FINDINGS IMPACT

These bids could impact ODOT project costs for state contracts. If agency leadership decides to implement enhanced tracking and scrutinize unbalanced bidding, the state could potentially realize significant savings by avoiding project cost increases. Inaction will continue the status quo of incomplete data that prevents ODOT from evaluating unbalanced bidding that can lead to project cost increases.

 

Read full report here.

KEY FINDINGS

  • ODOT has processes in place to manage changes to its construction projects, but the agency does not track which bid items are unbalanced or project changes related to unbalanced bid items.
  • State and federal laws generally require ODOT to award construction contracts to the lowest bidder, so contractors sometimes submit abnormally high or low prices on certain line items, known as “unbalanced bidding.” Contractors may bid high on line items for which they think ODOT might have underestimated the quantity, with the goal of maximizing profits while keeping the overall bid low.
  • ODOT is unable to look across all projects for patterns of unbalanced bid items related to project changes. These bid items can lead to increased costs if projects are later changed, but not all project changes are problematic or avoidable.
  • We reviewed data for all 413 ODOT-run construction projects completed from 2011 to 2015 and found that over 90% of these projects had at least one unbalanced bid item, and 61% had one or more unbalanced bids that were at least double their estimated cost.
  • Total cost for the 413 projects was $1.8 billion, slightly below the total estimated costs of $1.9 billion, but 69% of projects exceeded their bid amounts. However, total project costs contain other expenditures not included in the contractor’s original bid amount, such as performance pay factors for meeting specific quality standards.

RECOMMENDATIONS

  • ODOT should track unbalanced bid items, either within existing systems or separately
  • Include bid item numbers in project changes and track them.
  • ODOT should conduct regular analyses of project changes related to unbalanced bid items and evaluate whether unbalanced bidding is negatively affecting project costs or bid competition.
  • ODOT should provide Project Managers with more guidance on how to manage unbalanced bid items.
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