Transportation departments throughout the U.S. are turning with increasing frequency to public/private partnerships and innovative financing to address demands for highway improvements.
Traditional revenue sources can no longer keep pace. European countries have endured similar challenges for years, and one of the most common solutions is to use private investments in public systems. The question that a group of transportation auditors addressed during a two-week tour last year was how to provide oversight that ensures the greatest benefit to public agencies while allowing a reasonable return for private businesses.
Carri Rosti, manager of ITD’s Office of Internal Review, was part of a team that visited five countries to learn about successful audit practices of public/private partnerships. She joined representatives from transportation departments in Texas, Alabama and Michigan, the Federal Highway Administration and transportation consultants on a two-week tour in May 2006.
In many cases, private companies build, operate and/or maintain a public highway in exchange for revenue or other business concessions such as the sale of products and services. Typical of the European model, and one that is growing rapidly in the U.S., are toll highways and bridges.
Although Idaho has no toll highways, the audit/stewardship principles can be applied to other emerging public/private partnerships, such as operation of safety rest areas, financing of interchange construction, and administration of the GARVEE program.
Under the federal Interstate Oasis program, ITD recently committed funds to expansion of a private truck stop that will provide free services 24-hour-a-day to motorists on Interstate 15 at McCammon. The Legislature, under a new program, also recently authorized the use of private funds through a new STAR program (State Tax Anticipation Revenue) to construct a Post Falls interchange for limited sales tax concessions as a reimbursement.
ITD also joined with Connecting Idaho Partners (CIP) to manage and oversee highway construction projects that use innovative Grant Anticipation Revenue Vehicle bond financing.
Lessons learned during the five-nation Scan tour could be effectively applied to Idaho’s new partnerships, Rosti suggested.
The purpose of the Scan tour was “to review and document best practices of audit stewardship and oversight for possible application in the U.S.” The Scan tour included stops in London, Paris, Dublin, Lisbon and Madrid.
Audit stewardship focused on:
Elements of audit oversight included:
“Auditors need a variety of skill sets,” Rosti explained. “These skills involve value engineering, business modeling, capital budgeting (present value and internal rate of return applications), traditional financial problem-solving methodology and performance auditing.”
Transportation departments should implement the use of a process auditor position for each public-private partnership, according to a report on the Scan tour issued in March. Process auditors assure that all necessary legal, accounting, business plan and policy issues are addressed throughout the project life cycle, from development of the partnership through the final bid acceptance, implementation and operation.
Performance and compliance audit plans should be developed from the public/private partnership and transportation department’s project business plan. The report also recommends that concession counts, revenues and expenses be developed and that revenue determinations should be clearly stated in the request for proposal and contract.
Rosti said she will use information gleaned from the Scan tour when selecting new employees, training new and existing employees and in new approaches to project life cycle auditing and value-for-money auditing of ITD projects.
The tour was sponsored by the Federal Highway Administration, the American Association of State Highway and Transportation Officials (AASHTO) and the Transportation Research Board’s National Cooperative Highway Research Program.
Rosti participated in the tour as an officer of the AASHTSO audit subcommittee. She has been a member of the subcommittee for about 20 years and has served as an officer the past three years.
She said only a few other ITD executives have participated in Scan tours in the past, usually engineers or planners. “It was very rare – this may be the first time – that auditors have been part of a Scan tour. This was very unique.”
Results of the tour are available in a jointly produced report, “Audit Stewardship and Oversight of Large and Innovatively Funded Projects in Europe,” published in March. Copies are available from FHWA. Refer to publication no. FHWA-PL-07-001