Chairman Alvis It is 1:05 p.m., and I call to order the May 20th, 2026 meeting of the Texas Transportation Commission Audit subcommittee in Austin, Texas. Note for the record that the public notice for this meeting, containing all items on the agenda, was filed with the Secretary of State at 3:54 p.m. on Tuesday, May 12th, 2026, which is at least seven days prior to the meeting in accordance with Government Code 551.044. At this time, I would like to ask that before we begin today's meeting, place all cell phones and other communication devices in the silent or off mode. All speakers should say their name and title before speaking. Thank you, and I will now turn the meeting over to our Chief Audit and Compliance Officer, Parsons Townsend. Chief Townsend Thank you Chairman Alvis. Before we begin, I would like to congratulate you on becoming our new chairman. I know we all appreciate your leadership and look forward to working with you as we address stewardship and accountability here at TxDOT. So thank you for your for your service and for Commissioner Gordon for his first time being on the subcommittee. We welcome you here and look forward to your leadership as well and working with you. 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. Greer Building Safety 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. Chief Townsend I now turn the meeting back over to you, Chairman Alvis. Chairman Alvis Thank you Parson. Now we will open with comments from my fellow commissioner. Commissioner Gordon, welcome to your first meeting. Thank you for your service. And do you have any comments you'd like to offer at this time? Commissioner Gordon No. Well, Michael. My only comments are very short. I just appreciate being a part of this committee. Appreciate all the work you guys are doing. So important for TxDOT and I'm happy to help the way I can. Chairman Alvis Thanks Commissioner Gordon. We'll now consider the approval of the minutes from March 24th, 2026 Audit Subcommittee meeting. The draft minutes have been provided. May I have a motion to approve the minutes for the March 24th, 2026, orderly meeting of the Audit Subcommittee. Commissioner Gordon Motion. Chairman Alvis Second. All in favor, say aye. Chairman Alvis and Commissioner Gordon Aye Aye. Chairman Gordon Motion carries. I will now turn the meeting over to Chief Townsend. Chief Townsend All right. Thank you, Chairman Alvis. Item three is the internal audit division update. Division Director Craig Otto will present this item. Director Otto Good afternoon everyone. Start off with item 3.a. management action plan follow up status. And I want to just to kind of take a step back on this in regards to just explaining a little bit about the management action plan process. There are four priority levels, as you'll see on the slide. Priority one red through priority four which is the green. And the risk levels will be higher at priority one and two versus the three and four. And typically what we'll do in these forums is, is try to bring more of the higher level risk priorities to the attention of the audit subcommittee as needed. And what this illustrates is back in our last, or I should say, in December 2025, when it was last time we presented the management action plan follow-ups. You can see how they progressed into the May of 2026. We've seen slight increases, of course, and anytime we issue more reports and as time goes on and if our completion dates aren't met, the management action plans will come past due. And so there's many things that we do to engage the business partners. Management action plans are created by the business. We will provide recommendations. We want to be there to assist in that, but we also want to make sure that the business has subject matter experts, you know, present what they feel is the best plan in timing to get the risk mitigated. And as you can see here on priority ones and twos, we will go back through and retest those. Once the completion date has passed we've obtained information from them. We'll send an audit team, a small team, to go back out and just reassess that what they said was going to be done and by the time frame was completed. And then that will be our conclusion to determine either close it or not. For the priorities three and four we went to what's the self-certification process. It just it helps the business in terms of feeling like there's another audit going on. It gives them the authority to work within themselves. And then the district engineer or district division director will self certify that they've closed, that. We are in a new era here with an internal audit where we're actually not only doing the follow ups, but we're actually looking at the sustainability for even a self certified. So we're going to be going back out into the field and just making sure that the businesses are continuing to follow through, or to work with them to find more efficient and effective means of getting things done. We do performance auditing. It's not just compliance. It's, you know, we do look to make sure that statutes are being followed, but we also want to engage ourselves a little bit in understanding this. Is this the most effective or efficient means of how we do things? So that's always, I think, looked upon by the businesses favorably. Of course, we make sure that we we make sure we stand the right distance from that because we're not necessarily subject matter experts, but we do see things about control perspective differently than others. So that's sort of just a summary, high level summary of how the management action process follows. We'll go through a couple of the the red and oranges here in the next couple of slides. Any questions on the surface in regards to what I just went through. Chairman Alvis Great. Director Otto So let's go take a look on slide six. We'll look at the priority one. This is the highest priority. And this is one in regards to being past due. It's been on our slides for a few times now. We are seeing progress. We've seen 20 districts actually provide substantiation around utilities. What had happened here is that when we had gone out and we were being discovered that we were being billed, and a lot of the districts weren't necessarily sure that what are we being built for? So we had to go basically to develop an inventory of all of our meters. And these could be in right-of-ways or could be in buildings, etc. And so one of the districts have done that have made substantial progress. We are we with an internal audit, are now going through that work to try to ascertain that, you know, what should have been accomplished has been there are five districts that are still working through that. We will take a look at those when that information is provided. But one thing that we try to do with an internal audit is if we see 20 districts have completed this, we're going to bring that risk level down. There's no need to keep it at a high level. We want to make sure that you guys are singing at the level that we, from an independent, objective point of view, would see that. So as we get through those 20s, very well likely to come down either to warrant or potentially even yellow, depending upon what we see. Commissioner Gordon Are they telling you when they're ready for you to come in and retest, or are you kind of giving them deadlines for that? Director Otto There is a there is an original completion date. Commissioner Gordon, and then ultimately a new target date will be established. We'll work with them on. We don't want to necessarily be too pushy on it, but we do want to be respectful of that very soon after, within a few days of that deadline, we're we're inquiring about what has been submitted to us. And then I would say within probably it could be a few weeks to a couple of months, at most. We'll get into the field on those red and oranges and actually start working with them face to face. Chairman Alvis Thank you. Director Otto We go to the next page. These are the priority twos. There's a couple on here from district operations and also one from aviation. Again, these have been on here since the last presentation. But just to give you a little bit of an update. In relation to the construction engineering and inspection, the CEI, this was one where there was a lot of questions around when these consultants or these engineer inspectors come out into the field, how do we know they're actually there? And oftentimes it's very hard to ascertain that. And one of the things that we're piloting in the Lufkin district right now is sort of the geofencing. We do that with our fleet vehicles. So you can kind of based on an app or a GPS signal, you can determine the individual is there, and this is just one good step in the right direction of making sure they're at least in the proximity. But then also it's working with the area engineers and project managers to make sure that the coursework of what those engineers or inspectors are supposed to be doing on our behalf is being done. Oftentimes, we'll look through documentation, daily work reports, things of that nature to to try to understand. Did they do what they say we're going to go to do or what we're being billed for. So this is a good a good step in the right direction. We're hoping that the pilot process goes well, and then we can basically start moving that on to other districts to help determine and pinpoint that those individuals were really needed to be during that time. Regards to fleet prevention of maintenance audit this again, primarily the priority level on this one. Anytime we talk safety, it typically is going to be something that is going to rise. And we just want to make sure that all the standard operating procedures are documented and written as to how these pre-trip pre-trip inspection inspections are supposed to occur. There's also a review process by supervisors making sure that if anyone detects something that that's being looked at and making sure that it gets resolved or reported. So again, 11 and 12 districts currently are being tested right now. We don't have those results finalized. We can provide an update on that as we as we move forward. The last one on here is grant management aviation audit. This again was again related to documentation and making sure that there's certain activities. If it's by America or material testing that that information is being recorded and documented. And one of the solutions to this was to try to go to more of an automated process that unfortunately, the procurement of that had gone on for a few months, and then it ended up being vacated. And they're looking to go back into some of the manual processes. I know that last I've heard that there is a kind of a renewal for procurement of an automated tool, but what we're trying to understand is in the meantime, how are we making sure that we're we're mitigating that risk. And so manual processes are still being implemented. We've been working with aviation to make sure that, you know, they understand that improvement is good, but we need to make sure that sustainable and that at that point we level down for all the businesses in those capacities, not only close to not only lower those, but also to close these ones and for all other any questions and relates to any of the management action plans that I've just discussed? Commissioner Gordon No questions. Director Otto So we'll continue on to two audits. I like to provide a little bit of an oversight on. The first one is item 3.b.1, this is construction maintenance contractor evaluations. It overall was a priority two, which is an orange. And what this one focused on is looking at interim in the final evaluation process for both construction and maintenance projects. And some of the mitigations, as you'll see as we go through some of the evidence points are going to be focusing on, again, making sure that we reinforce completion and making sure the monitoring of these evaluations is being done. There's also always room for additional training, you know, TxDOT that has maintained really good numbers in regards to keeping personnel up, but people can move jobs, and we want to make sure that the training is adequate enough to make sure that they can ramp up quickly in terms of what the responsibilities may be. On page nine, we walk through a couple of the details. So as it relates to completion and timeliness, you can see here 37% of the interim, 40% of the final evaluations were not completed on time. There are certain parameters in regards to the number of days, typically after these anniversary dates for interim or the final evaluation closeout is to commence. We're actually seeing in some cases, the evaluation is being done as much as 200 days early, which, you know, most people think it's always later, but we've seen some done a little bit early and also some being done later. And the monitoring activities is probably one of the key areas that we're looking to try to get improvement on. It's sometimes you just lose track of time and it's been one year and all of a sudden you have an interim evaluation that's ready to be done. Unfortunately, there's not the most robust triggering mechanism out there to alert folks to to start doing these. And sometimes they're then discovered later. And that's where we want to make sure that whatever the business can do to, to to detect that this timing is coming up to make sure these not only get done on time, but they're also being completed as the second bullet point. There were 70 interim, 70% of interim and 9% of final evaluations that we could not locate in state government. Of course, we've got to make sure that we keep a good audit trail and paper trail. So whenever we offer up, if something cannot be immediately located, we will still report it as a finding. But we always give the business an opportunity to go and look for these things as well. So, you know, again, timeliness and location and making sure that these are being secured is very, very important specifically as it relates to these evaluations. Secondly, on scoring and corrective actions, as you score the evaluation, there's a scoring 1, 1. 5, 2, 2.5, and 3. So there's those five areas. The justification we take a look at it. Does it make sense. If you score below a two there's a project recovery plan that needs to be brought forward by the contractor making sure, hey what are you going to do to help improve your scoring? Because we don't want the project to be in jeopardy. Because of our evaluation being so low, we want to make sure that we see improvement from the contractor. So in a lot of these cases, you know, the justification, the scoring, we want to make sure aligns so that there's a consistency and that nobody feels that they're being treated differently or unfairly as it relates to one district versus the other. As it relates to item 3.b.1 and the construction maintenance contractor evaluations either. Do you have any questions? Commissioner Gordon I have a couple on that. So you have 70% of the of these evaluations you couldn't even locate. On they in writing or electronic or, that's pretty abysmal. Director Otto Yeah. Yeah. There there need to be done. It's again we don't want things electronically. It's around the securitization of them making sure they don't get out. But basically the interims were such a high percentage is there's oftentimes bypassed. But the finals again much lower percentage. Those are being typically completed. Commissioner Gordon Okay. Executive Director Williams Yeah I would say when this commission adopted the rules around this. There were I should say this is Marc Williams, executive director, capture that on the record. There was a lot of concern by the contracting community around. Doing this electronically, open records request, competitors for one open record, getting open records, request for their competitors and getting that information out there. And so the commission's rules that were adopted prescribed that we had to do it in writing and that we couldn't make records of them. And so that that process, you know, it was adopted for a reason. But that process also lends to some of the challenges here. What happened to the one piece of paper that somebody filed, you know, and did that evaluation on? Well, I don't know. We weren't allowed to make copies of it. So, you know, that is part of what kind of presents the challenges. So if I, you know, if there were no parameters under which we had to operate, I would say, let's just do this all electronically. We can set it up like we're doing the access management. We can track it all, but there are administrative code regulations that we have to follow that kind of contribute to some of the challenges that the districts have, and being able to be more efficient in this area. Still, there's there's there's absolutely room for improvement and some things that we can do to improve just the tracking of it. But there is some, some history as to why, you know, we are following a paper process when it would seem to be an electronic process would be so much easier. Commissioner Gordon Yeah. And I just look at it when it's 70% or 73 down here, that there's something wrong with the process itself, and you've kind of identifying that it's got to be these little paper forms and everybody's concerned about them. Okay. Director Otto And just for clarification on this 73% that, you know, the contractors are the ones that are responsible for getting that to the districts. But again, it's probably us monitoring that and letting them know, hey, we don't have this. You know, we need to get this. So yeah, there are challenges that Marc laid out very well. Chairman Alvis Marc, our education on inspections, final inspections and finishing strong on these contractors. That's continuing nonstop, correct? yes? Executive Director Williams Yes. Chairman Alvis You know, you see that in the field sometimes they they don't finish as strong as if it was the [uninlligible word] campus. Right. You know, kind of like to see projects finish that. They turn it over to us and it looks good. Executive Director Williams Right. And I think the teams come up with some good recommendations with the districts on, you know, maybe looking at how frequently we do interims and, and then and just having some I mean, the final evaluation really needs to be that, that needs to be completed on time and definitely needs to be secured. Chairman Alvis Are we doing that before the final payout? Executive Director Williams Uh, I don't I don't think that that's necessarily the case based upon the results. Chairman Alvis That would be nice to have in that. Correct? Yes. Okay. Executive Director Williams Okay. Director Otto We'll continue on 3.b.2 the state safety oversight program. This this was a yellow priority three. But the reason why I wanted to bring this audit forward is, is sort of demonstrates how internal audit will work with the business. And in this case it was the rail division. They will be audited every three years I believe through to. And what we try to do is come in before that and provide them an audit and give them results for things to kind of mature and fix. And it doesn't necessarily mean the FTA won't necessarily utilize our work, but at least helps, you know, rail in this in this case, you know, get prepared for this and continuously look at opportunities and ways to improve. So we'll go through some of the results as it relates to this. We will work on the oversight itself. Details. There's there's six RTAs or rail transit authorities anywhere from Houston to Galveston, El Paso, a couple in Dallas and also north of Dallas and McKinney. And one of the areas that we detected was as an event or accident occurs in, you know, safety is such an instrumental part of this entire oversight. We noticed that contributing factors were not always identified as it related to the incident. So those are pretty much important from the standpoint of how do we learn and understand causes. So one of the things that, you know, we've asked and the business is looking to do is to help increase, again, monitoring and understanding of making sure that those fields are filled up properly in the incident reports. Also, there's a workload assessment that has to be done with this program. You know, in regards to are we property properly have enough capacity and manpower to fulfill the responsibilities? Also looking at the costs associated with that. And we detected the review areas in terms of adding that documentation to that assessment. Oftentimes you're not going to get feedback from and maybe federal partners or others. But what we were able to do is go in and kind of basically from a compliance check in terms of what areas needed to be covered. And we saw a couple areas of opportunities. So rails taking that and going to be developing those as we move forward. Also training as we mentioned previously as well, there's all of the training and program standards were being filed. Again, what we call operational design or the standard operating procedures is things do need to be documented and then they need to be performed. And so sometimes we in a good sense, we're doing what we're supposed to be doing, but the documentation may not be there. And so in a couple of cases here, we need to make sure our standards are all properly documented. And also the training that we determine is appropriate for these leaders within this area is getting done. And as it relates to the training, these were actually self-identified areas of opportunity. So again, they complied with what they needed to. But there were a couple other areas that they just need to attend to. And again, we have full assurance from our recommendations as well as the management action plans that that will be fulfilled. So again, a good story that we're able to go and help the businesses a little bit ahead of time before our federal partners come in. But again, that's primarily the reason for bringing this going forward there. Any questions. Chief Townsend Thank you, Craig. Great. Item four is the compliance division update division director Cheryl Durkop will present this item. Director Durkop. Good afternoon. Today I will use a summary of investigations for the third quarter as well as an action plan follow up for findings issued by external auditors. This summary of investigations does include both fraud, waste and abuse investigations, which are conducted by the Compliance Division, as well as EEO investigations that are completed by our EEO section. Overall, for the quarter, we received 173 allegations. We initiated 27 investigations and substantiated 11 of the 20 investigations we closed, resulting in a substantiation rate of 55%, which is an increase from last quarter's 43% substantiation rate. There were several cases that we found significant this quarter, including an investigation regarding a conflict of interest or text. That employee is living and guiding hunts on a game ranch owned by an active text vendor. The vendor is a supplier of cleaning products that are used by the district. However, the employee is not involved in purchasing of those products. The employee and the owners have been friends for several years, and it hadn't occurred to them that this was a potential conflict or that it should have been disclosed. Employee did receive a 12 month probation and has found and has since moved from the property. We don't have any continuing concerns with this situation. Also significant. This quarter, we substantiated two investigations that included falsification of documentation. The first involved in employee who was on jury duty. He falsified his jury duty notice, claimed three days of jury duty. In fact, he only had one day. The second case involved in employee falsifying medical provider information, which was provided to the supervisor as an excuse for missing work. Are there any questions about the substantiated investigations from the quarters? Chairman Alvis No questions Director Durkop So this slide that you're seeing shows the results of investigations that were closed during the period, organized by allegation category. Workplace harassment was our most common allegation that was investigated this quarter. Employee excuse me, followed by employee misconduct. Overall, the total of allegations did decrease this quarter from last quarter. Q3 did show an increase in substantiated investigations related specifically to employee misconduct, and this quarter that included a combination of misuse of state equipment as well as other activities, including employees performing work for supervisors outside of Texas, as well as falsification of documentation. We did see a significant decrease in third party investigations this quarter. We only had one one unsubstantiated case this quarter versus eight cases last quarter. Can I answer any questions about our allegation categories? Chairman Alvis No questions. Director Durkop So this slide is showing allegations by category. Over the past 12 months misuse of state resources has decreased. We only have one substantiated case this quarter. And while allegations of workplace harassment do continue to be reported, we are seeing that fewer cases are being substantiated. And the downward trend that we've been seeing over the past year is continuing. The action plan follow up does include findings that have been issued from audits conducted by the Compliance Division's external audit section. External audit is currently tracking six audits with a total of 50 recommendations. 33 of those recommendations are identified as being fully implemented. Since this information was last presented to the subcommittee in Q1, the Lubbock MPO, Laredo MPO and Killeen-Temple MPO have closed out all of their findings. I'm going to take just a minute to walk through the entities that have open findings. The City of Denton. The maps for the City of Denton were issued in March of this year. The implementation of these will be reviewed during our next mapping. The audit of Southeast Texas Regional Planning Commission. Southeast Texas did return the allowable costs that were identified during the audit and is completing documentation of new processes. The audit of Golden Crescent Regional Planning Commission regional, excuse me, Golden Crescent also returned the identified allowable costs, and they are also working on documenting new procedures. Hidalgo County, their open finding their one remaining open finding is in relation to the value engineering change proposal that was utilized during construction of the 365 tollway project. CRA has finalized their methodology for determining Nonparticipating versus participating costs, and they it has been approved by FHWA. We are currently waiting for HDR to implement the new approved methodology and to revise the request for reimbursement and resubmit those to the district. Permian Basin MPO. They are struggling a little bit to complete their findings. They're a very small MPO with only three staff members, and this is one of the MPOs that has a the City of Odessa is their fiscal agent. And so the the relationship there is in progress. So they depend a lot on the city of Odessa, and they're still working on how that relationship is maintained and what it should look like. They do have several open findings that we are still assisting them on closing. The Houston Galveston area MPO. They have they are still not paying vendors within their 30 day 30 days due to cash flow issues. So they have requested that text consider paying them in advance instead of a permanent method. And the Houston district is currently working with the Cob to find a solution to their issue. So are there are there any questions I can answer concerning the open findings that we have. Chairman Alvis No questions, thank you. Commissioner Gordon No questions, thank you. Chief Townsend Thank Chairman Alvis. With all the agenda items completed, I now turn the meeting back over to you, sir. Chairman Alvis We will not need an executive session today with all agenda items concluded. Are there any other comments? Commissioner Gordon I have no comments. Chairman Alvis We plan to conduct the next Transportation Commission Audit Subcommittee on August 25th of 2026, or made no other further comments. May I have a motion to adjourn? Commissioner Gordon Motion. Chairman Alvis Second. All in favor, say aye. Commissioner Gordon Aye. Commissioner Alvis Motion carried. Please note for the record, it is 1:37 and this meeting stands adjourned.