Michigan

MICHIGAN

OFFICE OF THE AUDITOR GENERAL

AUDIT REPORT

PERFORMANCE AUDIT OF THE

REAL ESTATE DIVISION

BUREAU OF HIGHWAY DEVELOPMENT MICHIGAN DEPARTMENT OF TRANSPORTATION

March 2011

591-0172-10

THOMAS H. MCTAVISH, C.P.A. AUDITOR GENERAL

The auditor general shall conduct post audits of financial transactions and accounts of the state and of all branches, departments, offices, boards, commissions, agencies, authorities and institutions of the state established by this constitution or by law, and performance post audits thereof.

? Article IV, Section 53 of the Michigan Constitution

Audit report information can be accessed at:

Mi c h i gan

Of f ice of t h e Au dit or Gen er al REPORT SUMMARY

Per f or m ance Audi t

Real Est at e Di vi si on Bur eau of Hi ghw ay Devel opm ent Mi chi gan Depar t m ent of Tr anspor t at i on

Report Number: 591-0172-10

Released: March 2011

The Michigan Department of Transportation's (MDOT's) mission is to provide the highest quality integrated transportation services for economic benefit and improved quality of life. The Real Estate Division (RED) is one of two areas within the Bureau of Highway Development. It provides real estate services and right-of-way management, along with a variety of permit services, for all areas of MDOT, including 7 regional offices and 26 transportation service centers.

Audit Objective: To assess the effectiveness and efficiency of MDOT's efforts to ensure that the fee and permit processes result in safety and financial related outcomes that are in the best interest of the State.

Audit Conclusion: We concluded that MDOT's efforts to ensure that the fee and permit processes result in safety and financial related outcomes that are in the best interest of the State were moderately effective and efficient. We noted three reportable conditions (Findings 1 through 3).

Reportable Conditions: MDOT should review its fee structure for issuing transport permits to help ensure that fee revenues are sufficient to cover all related costs (Finding 1).

MDOT needs to improve its process for issuing transport permits for operating oversize and overweight vehicles and loads to minimize the safety and financial

risks related to Michigan trunklines (Finding 2).

MDOT did not ensure that staff entered complete and accurate information into the Construction Permit System, which is essential for timely billing, collection, and deposit of customer fees and monitoring of permit activity (Finding 3).

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Audit Objective: To assess the effectiveness and efficiency of MDOT's real estate management activities.

Audit Conclusion: We concluded that MDOT's real estate management activities were effective and efficient. However, we noted two reportable conditions (Findings 4 and 5).

Reportable Conditions: MDOT needs to improve its process for managing property that may no longer be needed for transportation projects (Finding 4).

MDOT did not ensure that it entered complete and accurate property acquisition information into the Real Estate Management Information System (Finding 5).

Noteworthy Accomplishments:

RED informed us that, because of limited

resources, the Federal Highway

Administration stopped conducting

quality assurance reviews and asked RED

whether it was interested in conducting

its own reviews. After visiting another

state's quality assurance section, RED

developed and implemented the Quality

Assurance and Quality Control (QA/QC)

Program in 2002. The QA/QC Program

reviews the various functions of the real

estate process, which include right-of-

way plans, appraisals, property

acquisition,

relocation,

property

management, right-of-way certification,

and condemnations. A quality assurance

review field team, consisting of both RED and MDOT region staff, conducts on-site reviews in each of MDOT's seven regions, concentrating on the critical requirements of the various functions. After a site visit, RED staff prepare a written report, which is distributed to all of the other regions, identifying best practices that are observed and measuring continuous improvement of processes and procedures. The strength of the QA/QC Program is to share best practices and allow for continuous improvement of real estate processes.

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Agency Response:

Our audit report includes 5 findings and

5 corresponding

recommendations.

MDOT's preliminary response indicates

that it agrees with all of the

recommendations and has complied or

will comply with them.

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A copy of the full report can be obtained by calling 517.334.8050

or by visiting our Web site at:

Michigan Office of the Auditor General 201 N. Washington Square Lansing, Michigan 48913

Thomas H. McTavish, C.P.A. Auditor General

Scott M. Strong, C.P.A., C.I.A. Deputy Auditor General

STATE OF MICHIGAN

OFFICE OF THE AUDITOR GENERAL

201 N. WASHINGTON SQUARE LANSING, MICHIGAN 48913

(517) 334-8050 FAX (517) 334-8079

March 31, 2011

THOMAS H. MCTAVISH, C.P.A. AUDITOR GENERAL

Mr. Jerrold M. Jung, Chair State Transportation Commission and Kirk T. Steudle, P.E., Director Michigan Department of Transportation Murray Van Wagoner Transportation Building Lansing, Michigan

Dear Mr. Jung and Mr. Steudle:

This is our report on the performance audit of the Real Estate Division, Bureau of Highway Development, Michigan Department of Transportation.

This report contains our report summary; description of agency; audit objectives, scope, and methodology and agency responses and prior audit follow-up; comments, findings, recommendations, and agency preliminary responses; two exhibits, presented as supplemental information; and a glossary of acronyms and terms.

Our comments, findings, and recommendations are organized by audit objective. The agency preliminary responses were taken from the agency's responses subsequent to our audit fieldwork. The Michigan Compiled Laws and administrative procedures require that the audited agency develop a plan to address the audit recommendations and submit it within 60 days after release of the audit report to the Office of Internal Audit Services, State Budget Office. Within 30 days of receipt, the Office of Internal Audit Services is required to review the plan and either accept the plan as final or contact the agency to take additional steps to finalize the plan.

We appreciate the courtesy and cooperation extended to us during this audit.

AUDITOR GENERAL

591-0172-10

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