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Rail News: High-Speed Rail

California Inspector General: CHSRA making progress on project controls, but still not prepared to distribute stimulus funds


Yesterday, the California Inspector General Laura Chick released a report on the California High Speed Rail Authority (CHSRA) based on observations made during a review of the authority’s business procedures for a period ending June 30. Conducted by the Office of Inspector General, American Recovery Act Funds, THE REVIEW follows up on one conducted earlier this year by the Bureau of State Audits (BSA).

Issued in April, the BSA report outlined 10 recommendations for CHSRA to improve its policies and procedures. Since the authority has been awarded $2.25 billion in high-speed stimulus funds, the recovery act inspector general decided to review CHSRA’s progress in implementing the recommendations, and determine if the agency has proper controls and procedures in place to oversee and administer the recovery act funds in accordance with applicable laws and regulations, according to the audit report.

Among the findings: CHSRA’s new management has made “significant progress in implementing changes and improvements in a very short period of time,” the report states. However, some issues still need to be addressed. For example, Chick’a audit found that CHSRA issued $72,000 over a four-month period to public outreach consultants with no back-up documentation. During that same timeframe, the authority paid more than $1 million to Ogilvy Public Relations, which serves as the overall communications consultant, resulting in potentially duplicative public outreach efforts.

CHSRA has not fully implemented all the recommendations included in the BSA report, but has made “significant” progress on the majority of them, the report states.

Recommendations that the authority has either fully or partially implemented include:
• implementing planned actions for managing risk;
• determining if open meeting act applies to peer review group;
• tracing expenditures by type and develop long-term spending plan;
• increasing board participation and following policies and procedures;
• reviewing progress reports for accuracy and consistency;
• following conditions of contracts and including amendments in writing; and
• including sufficient detail for invoice processing in policies and procedures.

CHSRA still needs to address several other recommendations, such as publishing alternative funding scenarios, specifying details of planned revenue guarantees and requiring staff to follow procedures for processing invoices, the report states. In addition, the agency should approve funding plans and corridor selection criteria, amend contracts to include all recovery act requirements, and create detailed policies and procedures to oversee stimulus funds.

As a result, CHSRA “is not fully prepared to distribute and monitor ARRA funds,” according to Chick, although it is making progress.

“The BSA findings showed the authority as not ready to do serious business. Our report reveals an organization that took that audit seriously,” Chick said. “With top new management now in place, and additional personnel resources on their way, the rail authority is better poised to make its next round of decisions.”

Chick’s report included a response sent to the Inspector General’s office by CHSRA Chief Executive Officer Roelof van Ark, who noted that Chick’s review was completed only two months after the BSA report was issued on April 29.

Since then, CHSRA has made additional progress, such as implementing controls to ensure that invoices are paid only when adequate supporting documentation is available. In addition, CHSRA amended a contract with Parsons Brinckerhoff on July 1 that states the firm is no longer responsible for any public outreach efforts, and directed those responsibilities to Ogilvy. CHSRA also plans to ensure future material and construction contracts incorporate language to address ARRA requirements, van Ark said in the letter.

“The authority continues to prepare itself to receive and monitor ARRA funds on this important project for the state of California,” he said.

Contact Progressive Railroading editorial staff.

More News from 10/28/2010