00:00:00:02 - 00:00:48:00 Chairman Vaughn Good afternoon. It is 12p.m. and I call to order the December 16th, 2025 meeting of the Texas Transportation Commission Audit Subcommittee. Note For the record, that public notice of this meeting containing all items on the agenda was filed with the Secretary of State at 3:53 p.m. on December 8th, 2025, which is at least seven days prior to the meeting in accordance with Government Code 551.044. At this time, I'd like to ask that before we begin today's meeting, you place all cellphones and other communication devices on silent or off mode. All speakers should say their name and title before speaking. Thank you and with that, I will now turn the meeting over to Chief Audit and Compliance Officer Parsons Townsend. 00:00:49:00 - 00:00:55:12 Chief Townsend Thank you Chairman Vaughn. At this time I ask for everyone's full attention to the screen as we show the Greer Building safety video describing emergency exits and other emergency procedures. 00:00:55:12 - 00:02:19:05 Video Narrator Attention Please. The following is a safety briefing to help ensure your personal safety while at the Texas Department of Transportation Greer Building. In case of a medical emergency, please call 911. The automated external defibrillator unit is located here on level 1 in the main lobby at the security booth. First aid kits are marked and located on each floor. Fire extinguishers are market and located on each floor. In the event of an evacuation proceed to the nearest exit. Once outside proceed to the west parking lot of the Greer building located at the corner of congress avenue and 11th street. In case of tornado or inclement weather, stay inside, move away from exterior walls and windows. The designated shelters are stairwells, basement, interior hallways, and centrally located restrooms. In case of active shooter or bomb threat, follow instructions from the public address system and onsite security personnel for more details. Thank you for your time, have a safe and productive meeting. 00:02:19:06 - 00:02:23:05 Chief Townsend All right. With the safety briefing completed I'll turn the meeting back over to you Chairman Vaughn. 00:02:23:06 - 00:02:32:01 Chairman Vaughn Thank you. Now we will open with comments from my fellow commissioner. Commissioner Alvis, do you have any words of wisdom or reflection for us? 02:32:02 - 02:36:04 Commissioner Alvis Merry Christmas to all of you. 00:02:36:05 - 00:02:52:59 Chairman Vaughn Thank you very much. I have no further comments. Now we will consider the approval of the minutes for the September 24th, 2025 Quarterly Audit Subcommittee meeting. Draft minutes have been provided. Do I have a motion to approve the minutes as presented? 00:02:53:00 - 00:02:53:20 Commissioner Alvis I move to approve. 00:02:53:21 - 00:02:54:00 I second. All in favor, say aye. 00:02:54:30 - 00:02:55:00 Chairman Vaughn and Commissioner Alvis Aye. Aye. 00:02:55:400 - 00:03:00:00 Chairman Vaughn Motion Carries. I will now turn it back over to Chief Townsend. 00:03:01:07 - 00:03:09:05 Chief Townsend All right at this time we'll move to agenda item three, the independent auditor's report. Joel Perez from CLA will be presenting this item. 00:03:22:07 - 00:13:05:00 Joel Perez Thank you Parsons. Chairman. Good afternoon. My name is Joel Perez. I'm a Principal with Clifton Larson Allens, CPA firm here in town. We are here to deliver the results of the audit for the fiscal year ending August 31st, 2025. We've taken the liberty of just kind of taking you guys through you guy's PowerPoint presentation, which should take us through the overall results of the audit and then there's some required communication. Hopefully this should just take a few minutes. I do want to certainly appreciate that this is our first year at the audit working for TxDOT so we certainly appreciate the opportunity to be here and, the overall cooperation from management to kind of culminate the completion of the audit. On the next, on this slide, is the agenda. I'll tell you a little bit more about the engagement team that supported me throughout the course of the engagement. We will also, highlight the overview about the audit, including the audit results and, take you through what the audit process is like. You know, basically, it's a risk based approach that we execute throughout the course of the engagement. The audit standards require that certain communication be addressed at this meeting with those charged with governance of this committee so we will take you through that as well. Highlight the results of any adjustments, and new developments and just kind of close with other communication. So as I go through my presentation, please, if there's anything you would like for us to expand on or clarify, let us know and we will be more than happy to address that. The next slide is the engagement team that supported me throughout the engagement. Myself as the engagement leader with overall responsibility for the engagement. I was supported by Kane Wells, here to my left. He will help me go through some of the presentation. Roy Cobb was also a director that was also very much involved in the in the details of the engagement. Avery was my senior, and, not included in this slide also, but a very key part of the engagement was Rodrigo Flores, here with us this this afternoon. And then, we also brought in a IT team that supported us in understanding the typical environment as it relates to the IT infrastructure of TxDOT in relation to the financial reporting process. His name is Jim Kreiser and he had a team below him that supported him and myself throughout the engagement. The next slide, this is, really this slide kind of captures it all, you know, the overall results of the audit. We had several deliverables. The, obviously the ACFR for TxDOT which the, what we referred to as the government wide entity financial statements, but we also had several deliverables specific to a couple of the funds. The Texas Mobility Fund has its own separately issued financial statement. The Central Texas Turnpike system, as well as the great, the Grand Parkway Transportation Corporation. All of these used separately issued financial statements. And then there was an agreed upon procedures engagement that we also issued as part of the audit. This were the deliverables, what I call the deliverables. The results are highlighted by underneath each, each one of the deliverables, it's a unmodified opinion. It's the technical term, that that's the accounting standards technical term. But think of it as a, as a clean opinion. That's the highest level of assurance that as your independent audit firm that we can issue and on a set of financial statements. Those are good results in like what I believe management expected, that you've also received in the past. So, to the right of this slide is the, reference to no internal control findings. In addition to the financial audit, we issued a report in accordance with government audit and standards, very commonly referred to as the Yellow Book. That report is relating to scope of, that report is relating to compliance with laws, contracts, and regulations as well as the control environment, behind those contracts, laws and regulations. Any time the scope of the engagement includes this is the stuff about it. We designed the audit procedures to evaluate any compliance or control matters related to this. We're happy to report that were no deficiencies that were considered significant deficiencies or material weakness. Those types of control deficiencies, the audit standard require that we communicate those in writing to those terms with governance, but since there were none, we have not reported or including a report related to that. Next slide is the audit process I mentioned earlier. It's a risk based approach. So we conducted the audit, at the very beginning, started back in, July, August, with some preliminary planning engagement procedures. We also spent some time understanding the internal control environment and the system of checks and balances that ultimately govern the preparation of your financial statements. We gathered that through increased reading, memorandums of understanding that you prepared to document your processes, evaluated policies within your accounting function and gathered various types of evidence. We also conducted some specific testing, procedures and analysis over the data in the financial statement numbers. Ultimately concluding and developing and understanding the results of the audit and developing conclusions in into the reasonableness of the financial statement amounts, which leads us to the reporting stages, that reporting stages of that unmodified opinion that I just referred to in the results, but there is, these are the various key phases of the audit and the nature of what each one of them consists of. So. The next slide, so I mentioned earlier, required communication. This is standard, communication to those charged with governance that is dictated by the audit standards. The first one is relating to accounting policies. Those are highlighted in the very beginning of your note disclosures under note one. Pretty standard, no disclosures. If you go through the act there's pretty standard no disclosures included in there, but it is worth mentioning during the fiscal year ending, August 31st, 2025, TxDOT did adopt a couple of new pronouncements. The first one in here highlighted is, GASB statement number 101 relating to the accounting and reporting for compensated absences, as well as GASB statement number 102 certain risk disclosures. Those pronouncements are described in the notes through your financial statement and I'm happy to report the disclosures were in line with what the pronouncement requirements dictated that on. The next slide is the accounting estimates, the financial statement, recorded amounts are not all actual numbers, you know, and that's why this reference here is important. It includes various estimates. The responsibility under auditing standards is for us to evaluate that the data behind these estimates, the approach to those estimates, and determine whether the data, the calculations of those estimates is reasonable in relation to the account balances that you're reporting. Some of the estimates that I'd like to highlight here are related to the estimation process behind the accounts payable in the construction process for year end, the groups, there was a major estimates, significant estimate that we identified and we're happy to report, you know, no issues to report with, behind those and those account estimates. The next slide is the significant risk. You recall, you know we communicated a list of the scope of our work letter that we dated July 14th of 2025, we communicated certain preliminary risk that we had identified in that stage of the audit. The audit standards require that we identified a final list of those risk, you know, via this communication. Those are highlighted in here, management overriding controls was one, the other one is the revenue recognition related to your business type activities. That's your total revenue from operations, including the transaction with the outsourcing of the back up office relating to your total activities, you know, over to HCTRA. That's another significant risk that we identified. And then the last one is the evaluation of the completeness of the construction progress and accounts payable year end accrual estimates that are included in your financial statements. So those were the last set of significant risk that we concluded on. I'm going to ask Kane to take us through the next few slides and then I'll come back and close the presentation. 00:13:06:03 - 00:18:17:00 Kane Wells Thank you Joel. For everyone here, again, my name is Ken Wells, I'm a Director at CLA and I'm happy to take you through a few more of the slides here. So on this slide, we have the required communication of the financial statement disclosures. And again, kind of in our risk based approach, as we were looking at the financial statements for TxDOT identified kind of a key footnote disclosure around that pension and other post-employment benefit plans. Those are certainly sensitive and of importance to users of the financial statements so we spent some time with that, looked at the actual reports and, tested some of the inputs there in relation to these footnotes. And I'm happy to conclude there that they were in accordance with the standards tied up to the financial statements as a whole. Next slide. Significant unusual transactions with a few items here that we identified during our audit and spent time with. One was kind of in relation to the significant risks that Joel talked about earlier of the total revenue and the change between TxDOT and HCTRA. We spent some time really kind of going through that change and looking closely at the total revenue in that kind of that first two year period there. So that was a significant transaction. Also, the change within reporting entity. So on the, within the TxDOT ACFR in the previous year, the Texas Mobility Fund was reported as a single fund. In this year, kind of given the current year change in operations, there was a change within the reporting entity to break that up into a debt service fund and a capital projects fund. Kind of a technical accounting change there that just reflects that fund into two different columns this year looking at you ACFR. Next slide is another transaction that we looked at pretty closely was the buyout of the 288 development agreement. In October of 24 this transaction included a loan between the state Highway Fund and Texas Transportation Finance Corporation (TTFC). Looked at that transaction and kind of the underlying accounting, number in relation to that transaction. And, happy to report yet again, everything was in accordance with GAP and proper reporting in the financial statements. This slide is a little bit of a summary of some of the other required government governance communications. On the left side here there's a handful of items that essentially they're all none. There were no difficulties in performing the audit, no disagreements with management that we had, manager had no other consultation with outside independent accountants on matters that we were aware of. And no significant issues discussed with management prior to the engagement. On the right side here, a few notes, management representation letter. So throughout the audit there's certain source documents that we rely on and representations that we get from management. Those are all summarized in a representation letter and are included in the governance communication that I presented to you guys. Two other items here that required supplemental information and the supplementary information we applied procedures to those that are less than a kind of a full audit. And, accordingly, they are presented in your ACFR but we don't provide full assurance on those. Those are in relation to the ACFR. And the last item is that we provided a separate communication letter of some internal control matters to management. Again, those are items that we deem less than a significant deficiency or material weakness. And next slide we have audit adjustments and, happy to report here that we have no uncorrected or corrected adjustments. Rather atypical for an engagement like this, first year engagement is certainly a testament to the quality of your team. Your accounting staff were phenomenal to work with here, and happy to report that we had no adjustments through our audit. Slide here, just some notes on upcoming GASB's that will be applicable for the next year that management is still evaluating. The first one GASB 103, has an element of some enhanced disclosures in the MBNA coming next year and then GASB 104 relates to kind of some enhancements around capital asset disclosures. 00:18:18:13 - 00:21:13:00 Joel Perez Thank you Kane. Before I open it up for questions, I do want to take an opportunity, was going to highlight a couple of things. On required communication Kane highlighted what was conducted in the audit. No disagreement with management and other stuff. I do want to take an opportunity, just give credit where credit's due, the audit is as you know, it's a big engagement but, conflicts, saw some of the unusual transactions of significant amounts. I do want to thank management for their cooperation throughout the engagement. I do want to highlight for this committee the talent that you have in your finance team, you know, from sitting in your shoes gives me some comfort just because we had a lot of discussions back and forth throughout the entire engagement, some of them were easier than others, but at the end of the day, us coming in new, and needing to understand the financial reporting structure, the basis behind why you landed on those account numbers. It was important to us to understand, you know, how those were arrived and how they were supported by the different in various accounting standards. Happy to report that every time we approached management they had a very good answer, you know, that that made us very comfortable each and every discussion we had. Kane also highlighted there were no adjustments, or even what we call trivial path adjustments. For reference, we do audits all year long. Typically we budget 1 to 3 adjustments, you know, per engagement. We had none to report here especially had been our first year audit, coming in with that fresh set of eyes, you know. That's also something that I wanted to make sure the important slide. Sitting in your shoes just kind of gives you some comfort that the information you're getting throughout the course of the year is completely accurate, and reliable when making decisions on that. So, I want to make sure I make those highlights. So. And then, the GASB pronouncement that are coming up. The finance team also does a nice job identifying that. I don't know if this is the term internally but I identify them as they identified a champion. Somebody that is going to own that new pronouncement, understand the requirements, and kind of roll it out and determine the financial standards before they get adopted. I think that's a very healthy practice to have in any accounting function because these pronouncements, some of them are easier than others, but some can be complex. This one, GASB 103, which in some of the presentation in your financial statements, once it gets adopted. So for sure your team has it all under control, but I do want to make those highlights, you know, for your reference, you know, that we thought were important. So, that concludes our presentation. I'd like to open it up for any questions or concerns. 00:21:14:00 - 00:21:28:05 Commissioner Alvis Just one. How difficult was it to follow the HCTRA back office shared expense? And how did you audit that? On site in Harris County or just here? 00:21:29:00 Joel Perez It was just here. The approach was just here. The focus of that transaction and significance of that transaction was on how the accounting of that, it was how the accounting of the of the total revenue, specifically speaking, impacted to your financial statements. The expense side of that was not to a significant amount on your financial statements so we didn't spend a lot of time on how that expense kind of gets rolled in. Our focus was on the accounting behind the total traffic that's passing through those, how those get culminated and turned over into rates. You know how HCTRA was collecting them and ultimately how all that was coming into TxDOT's financial statements. Your controls call for you to also reconcile some of those activities. We spent a lot of time evaluating those reconciliations. How those tied into the information you were providing to HCTRA and how those tied into the information you were receiving back from HCTRA is the approach that we took on that transaction. 00:22:34:10 - 00:22:51:13 Commissioner Alvis Well, your hard work and diligent work is welcome and appreciate the report. And, results sure make it a lot easier on us up here. So thank you very much. 00:22:53:14 - 00:22:54:04 Kane Wells Thank you for having us. 00:22:54:04 - 00:22:56:01 Commissioner Alvis Mr. Perez, Mr. Wells. Appreciate it. 00:22:56:03 - 00:22:57:07 Chief Townsend Thank ya'll. Thank you Kane. 00:22:57:25 - 00:22:58:01 Joel Perez Thank you, Parsons 00:22:58:09 - 00:23:02:02 Chief Townsend Alright. Chairman, moving on to agenda item four. The Internal Audit Division update with Craig Otto, Division Director, will run through items A and B. 00:23:04:00 - 00:26:00:02 Director Otto Thank you Parsons. Good afternoon. First I want to start off, happy as of this meeting, we finally have 23 past due maps, again broken up by priority level. For priority one you can see that we have one past due map and then priority two, we have 10, it's a good level to be at. It's very consistent with where we were back in May when we went through maps last time. Again, there's always going to be some upticks and down ticks based on closure, as well as, new maps that are at some, some how slip past the completion date. But again, we're pretty stable and we're happy with that level. We continue to work quarterly to test all maps, including those that are past due, coming due, to see progress, as well as, to potentially downgrade the level of priority if work is being done in the business. We think it's important to continue to demonstrate that work is being done, but also the risk level may be dropping so we are always conscientious of that. There's only three new maps that we're seeing down below and, you know, again, progress to retest those has already commenced. Past due maps are being worked as I mentioned and continue to be assessed as our testing continues. This item here will continue to ebb and flow, For the three for district operations, which is our priority one, good thing to report on this one is a lot of work has been done since May. We're approximately at about 90% of the known meters have now been found and that's a considerable amount of progress. So once we go back into these districts, we'll take a look at what work was done, how that information was accumulated and then, I can probably see this one coming at least down gradable to orange or yellow, potentially even closed by the next time we meet. So, a lot of work to be done there in regards to us verifying, but good progress by the business. As we move into Priority two, there were three new ones. The construction engineering and inspection one, as well as rail project and grant management. The CEI one is an interesting one. Sort of meets a little bit with the audits that I'll be talking about, but what we're trying to determine is how do we make sure that we know the hours that these inspectors are on job sites. And it's not an easy, solvable means because these projects are so huge, but there is actually, a group that's working on something, they're hopefully to try to test it by the end of this month as we get into January. So we're excited to see what the businesses come up with that, and again, hoping to bring that down or close it completely by the next time we mean. Rail division, you know, kick the tires there a little bit as well. One of the things making sure is that we're getting to all of our crossings, making sure that we're working with Federal Rail Administration. And the main thing here was the creation of SOPs. Understanding what the design of the process needs to be so that the districts can then assume that responsibility and make sure proper work is getting done. As you see often in the news, rail crossings can be a challenge and dangerous and the rail division has done a lot to improve themselves in terms of standing so we're happy there. But again, still some work to do. And then the traffic safety division, they did have a new, section director introduced. They had asked for a little bit more time to help make sure that the oversight monitoring of their grants is adequate. So again, that'll be something that we'll probably see here in the next quarter or two. We'll come back and take a look at those. Any questions as it relates to the MAP follow up status, primarily as it's related to the past dues. 00:26:30:01 - 00:27:00:00 Chairman Vaughn and Commissioner Alvis None. 00:27:01:02 - 00:32:11:01 Director Otto Continue to item 4b1. This is a designed to look projects payment audit. We looked at three districts and that's three design projects in this districts of San Antonio, Austin and Dallas. Focus here was primarily on money spent, specifically with materials on hand. Again, oftentimes that money is paid early. Material is then brought in and staged. Could be like retaining walls, concrete decks, etc.. We also looked at other work activities that typically involve inspections or inspectors on site, curious to determine if there's anything from the materials perspective they see wrong or potentially anything with the project itself. There were two findings, as you can see. And we looked to make sure primarily that support was in hand or we knew of the support before we do a draw request or make payment. I think it's critical to make sure there's an audit trail and support ability with any payments that we were making. Overall, this rating was a priority three and again, you know, we scratched the surface on this. I think, you know, both of you understand both, design build projects are massive and one of the things that I've been working with Parsons and talking about is seeing how we can do more continuous auditing in the payment aspect of this type of program. Potentially even using some AI tools that can kind of help expedite and get through more volume of these payments and we do pay a lot of money for construction and maintenance types of properties. We think it's probably good for us to kind of stay in this type of audit. As we go down and we talk a little bit about the findings ,the first finding of the points I'll take you through. The first one in regards that 81% materials on hand. This really boiled down to is the audit team going in and looking at the invoice package and trying to understand that is the draw request matching sort of one for one in regards to the supportability. Challenging to say the least and we also know in talking with general engineering contractors, which is used in two of the districts, it can be a challenge and it's very time consuming. So one of the things we wanted to make sure is that, you know, we've got a good general understanding of what their process is, but also making sure, again, similar to what I said before is do we have documentation to support, you know, those activities. So again, it was not easy for us to go through sometimes unsuccessful and thus you saw that we had about 81% of MOH items. In one particular district where it was a challenge to see, again. Working with the GEC's and working with the districts we see that there's going to be a pathway, hopefully, to allow that visibility to be tied out a little bit better so people could come through and do that in a more efficient manner in terms of tie up. Likewise, in another district on the 33 of the 63 supplier invoices this is the situation. Again, we're making sure that any materials that need to be tested externally, that that report and that information is provided back to the districts prior to that payment. In talking with the district engineer in this situation, we feel that there's a somewhat adequate explanation for having approved vendors that do this work should account for something, right. But what we try to press upon is making sure we get that supporting documentation provided to the district so everybody can read through it and see that there is concurrence with that work. The last two bullet points, just in summary, those are work activities. Again, what we wanted to make sure is looking at those work activities, specifically with inspections. Can we see that inspections were taking place? Can we see if there was any potential problems and thus resolution before we make payment? That is critical, again. Inspections, again, are very broad in coverage and scope. Making sure that we can see those inspection reports and also if there's any issues that those get resolved before we make payment. It's not to say that the district could not get those reports, just they were not there prior to that payment. So once we looked at the timing of the payment, we knew that the district did not have those in hand, so. The last one, finding two, dashboards, we have a lot of dashboards across the agency. This one is really in relation to looking at our ERP system, as well as, the dashboard sub-ledger. And what we were determined based on a timing issue is the information that was provided showed a difference of $3 million. Again, we have no concern that there's anything other than just timing issues that will probably be noted, but there's also going to be a better reconciliation process to make sure that numbers are looked at because if there's a difference, that should probably be explained upon. So any questions as relates to the design build project payment audit? 00:32:11:02 - 00:32:12:03 Chairman Vaughn Any questions. 00:32:12:05 - 00:32:13:03 Commissioner Alvis None here. 00:32:13:04 - 00:35:39:09 Director Otto Thank you for the pause. I always like to get a little drink in between. All right let's continue to 4b2 timeliness and proficiency of procurement. This audit, what the impacts of this audit we're looking at the customer satisfaction of requisitions across the agency and the procurement division. Making sure there's a transparency of all purchases that occur. The overall rating was a priority three and there were three findings. Focus a little bit on finding number one and really what this was centered around was making sure communications are being driven by the buyer with the requisitioner, as well as the vendor during any type of PO issuance. There was some. Oftentimes what we were able to see is, again, evidence that existed at the point in time of our audit and just understanding where there may be potential delays is one of the biggest, I think, pain points for many folks that do requisitions is understanding where is my product, where is my good, etc.. And as you can see, it was a fairly high percentage on this. And again, this was just a sample, but it demonstrates again how we want to make sure that there's more of a customer satisfactory culture in terms of communication, both understanding from the vendor, as well as back to the requisitioner. Also then, the other two bullet points and finding umber one talk about solicitation requirements. Those are required of us to make sure that, you know, the purchaser meets those requirements, as well as vendor verification. We are not seeing that there's any alarm in relation to those two points. Again, documentation should be retained to support those verifications of both of those regulations. So those are things again that retention should be able to solve. Second finding was in vendor performance reports. This was the unique, finding in the fact that 97% of the PO's that we sampled were below a $25,000 threshold. It's encouraged if anything is procured under $25,000 to fill out sort of a vendor performance evaluation. Anything above $25,000 does require one and as you can see, it's a tool that's not being utilized and we want to just again to express to procurement that this is probably a good avenue to really push more marketing on. To get the word out, fill out these evaluations. We're only going to be stronger if our vendors understand what's required of them and making sure that they get proper feedback. And then lastly, in relation to finding number three due dates, oftentimes what we see are requisitioners filling out due dates, either omitting it or filling it up with a date that's just not, you know, going to be able to hit. So what happens with the buyers is, again, they're going to probably work more with FIFO, first in, first out, method. But if you're putting in I need everything tomorrow every time you send a requisition your never going to meet that. And so it really pairs the priority for those purchasers to go after what they need to in a, you know, in a more realistic manner. We feel that management action plan will address all actions and correct these to make sure again, customer satisfaction is there and vendor performance is being evaluated and proper due dates are entered. Are there any questions as it relates to timeliness and proficiency of procurement 00:35:34:10 - 00:35:37:11 Chairman Vaughn Any questions? 00:35:38:00 - 00:35:40:28 Commissioner Alvis No questions. 00:35:41:11 - 00:35:46:11 Chief Townsend Thank you, Craig. Alright, moving on to item five Compliance Division update, Cheryl Durkop, Division Director will run through items A, B and C 00:35:49:00 - 00:37:30:00 Director Durkop Good afternoon Chairman Vaugh, Commissioner Alvis. The compliance division is presenting a summary of investigations for the first quarter of fiscal year 2026. The results of two external audits of PTN sub recipients and an action plan follow up of findings that were issued by external audit. The summary of investigations includes fraud, waste and abuse as well as EEO investigations. Overall, for the quarter, we received 173 allegations. We initiated 32 investigations in the first quarter, and we substantiated 27 of 39 investigations that we closed. This resulted in a substantiation rate of 69%. During the first quarter, we saw an increase in substantiated cases of misuse of state resources, including four cases of vehicle misuse, a pcard being used to pay personal bills, and an employee laptop that was used to conduct business for an elected position. Significant this quarter, we substantiated a investigation concerning the theft of over $10,000 in state property in the Austin district headquarters by unknown persons and during an unknown specified period of time. Police report was filed with the Austin Police Department in September. Also significant this quarter, we substantiated an investigation of a fleet office coordinators use of their assigned Pcard to pay their personal bills, both cell phone bills and energy bills. Totaling about just over $1,700 during a six month period. This employees no longer employed by TxDOT. 00:37:36:05 - 00:37:42:08 Chairman Vaughn Usually you don't have to state the obvious. 00:37:42:09 - 00:37:42:58 Joel Perez Unless you're in front of the audit committee. 00:37:43:10 - 00:37:50:13 Director Durkop Fair. I was asked the question last week. That is fair. Are any questions about the summary of investigations for the quarter? 00:37:50:13 - 00:38:00:09 Chairman Vaughn No questions from us. 00:38:00:10 - 00:39:54:08 Director Durkop Okay what we see here are the results of investigations that were closed during the quarter organized by allegation category. So misuse of state resources and third party violations were the most common allegations investigated this quarter. We substantiated six third party cases, including one lapse in insurance, sexual harassment of a TxDOT employee by a contractor, a conflict of interest, the use of a non-approved project manager, and falsification of laboratory equipment calibration results. Are there any questions about allegations for the quarter? Okay. Our next slide is showing substantiated allegations by category over the past 18 months. So in each bar here does reflect six months or two quarters worth of data and while workplace harassment is consistently our most common allegation, we have seen a decrease in substantiated cases in the last six months. But you can clearly see here that there has been a definite increase in cases of misuse of state resources and third party violations. Compliance is maintaining a presence at our DE huddle meetings to help communicate what we're seeing with vehicle misuse, specifically the different types of misuse that we're seeing. Are there any questions about the 18 month. Okay. External audit has recently completed two audits of PTN Subrecipients and Naima Hafeez, the external audit section director is with us here today to walk us through the results. 00:39:59:04 - 00:42:35:07 Section Director Hafeez Good afternoon. I am Naima Hafeez and I'm the external audit section director in the compliance division. External audit has recently completed two audits of PTN sub recipients. Sub recipients are Golden Crescent Regional Planning Commission and Southeast Texas Regional Planning Commission. Both of these sub recipients utilize FTA pass through funding to provide transit services in their area. And these grants are passed through TxDOT. Our audits review the monitoring controls that these sub recipients have in place over these subcontractors and also ensure if payments were made timely, for the subcontractors by the sub recipients during fiscal year 2024 and 2025. Next slide please. Our audit results showed that both of these sub recipients have implemented adequate controls to ensure these contracts comply with grant agreement and subcontract payments are made timely. But, we also identified opportunities to improve these processes. For Golden Crescent specifically, we identified unallowable costs resulting in question cost of approximately $1,900. We also identified and provided recommendations for Golden Crescent to develop and implement procedures for subcontractor monitoring activities. For South East Texas, we identified costs that were incurred outside of the TxDot project grant agreement. This cost is questioned cost totaling approximately $12,000. The recommendations also include that all federal provisions be included in subcontracts moving forward, and the subcontracts are executed timely, and that South East Texas develop monitoring procedures to monitor these subcontractors. We worked closely with the Public Transportation Division in doing these audits and PTN is currently working to make sure that the money comes back to TxDOT, which has been identified as collecting costs and improve internal staff training at TxDOT and provide additional guidance to the sub recipient moving forward. Are there any questions about these audits? 00:42:38:07 - 00:42:44:10 Chairman Vaughn and Commissioner Alvis Thank you. 00:42:44:11 - 00:43:45:11 Director Durkop That our last item is the action thought. Excuse me. Action plan follow up. These are findings that have been issued for audits conducted by External Audit within the compliance division. Currently external audit's tracking nine audits with a total of 82 recommendations. We have had some additional findings closed since the slide was created. So we are currently, we currently have 51 findings identified as fully implemented and 31 is incomplete. The Rio Grande Valley MPO has closed out all of its findings since we last presented this information, and the Laredo MPO has closed remainder of their findings as of last week. There are currently four MPOs that compliance and TPP are actively working with to help close the remaining findings. Are there any specific questions on these open findings that I can answer? 00:43:45:12 - 00:43:52:06 Chairman Vaughn Commissioner Alvis any questions? 00:43:53:00 Commissioner Alvis No questions. Thank you Cheryl. 00:43:54:07 - 00:43:57:15 Chief Townsend Thank you, Cheryl. Chairman Vaughn with all agenda items completed I'll turn the meeting back to you. 00:43:58:00 - 00:44:28:11 Chairman Vaughn All righty. We will not be meeting in executive session today. All the items on today's agenda are complete. We plan to conduct the next Texas Transportation Commission Audit Subcommittee meeting on March 24, 2026. There being no other comments. May I have a motion to adjourn? 00:44:29:00 - 00:44:30:01 Commissioner Alvis I move to adjourn. 00:44:30:30 - 00:44:31:55 Chairman Vaughn I second the motion. All in favor, say aye. 00:44:32:00 - 00:44:33:00 Chairman Vaughn and Commissioner Alvis Aye. Aye. 00:44:33:03 - 00:44:46:03 Chairman Vaughn Motion carries. Please note for the record. Hopefully it's not still 11:59. Please note for the record that the time is 12:44 p.m. and this meeting stands adjourned. Thank you.