State Performance Audit finds Shoreline follows best practices

From the Office of the City Manager

June 2010 - Shoreline selected to be audited

In June 2010 the City was notified that it was one of eight jurisdictions (Thurston County, Bellingham, Everett, Puyallup, Richland, SeaTac, Shoreline, Spokane) chosen by the State Auditor’s Office (SAO) to be part of the Local Government Change Orders performance audit. Change orders occur when there is a contract amendment for additional work as a result of changing conditions not anticipated in the original contract.

The stated audit objective was to determine if the City had established and followed best practices to control the pricing of labor, materials and markups on change orders. The Auditor’s Office reviewed a single City contract– the $5.3 million contract with HDR Engineering for architectural and engineering design services for the section of the Aurora Corridor Improvement Project between N 165th and N 192nd Streets.

On January 10 the SAO issued its final report which found that Shoreline followed all applicable leading practices. Such practices include providing mechanisms within the original contract requiring detailed change order proposals and to pre-establish the basis for pricing change orders. In addition, City staff also followed best practices in managing and reviewing change orders for accurate contract pricing.

Below is an excerpt from the report:

Overall, Shoreline followed almost all the leading practices we (SAO) identified to help control the price of change orders. The contract and all amendments specified the overhead, profit and labor rates the City would pay for each firm member who worked on the contract. It was one of the two cities we (SAO) examined with a contract that limited the rates charged on change orders. Because the contract was expected to last more than one year, it included a yearly escalation rate of 5 percent for labor costs. We examined Aand;E contracts at two cities, and only Shoreline’s contract identified and limited profit and overhead changes. The City paid profit markups that were less than the typical 15 percent rate.

The audit also compared the prices and rates paid by the City against typical industry rates and found that the City paid rates within industry standards.

Every year since 2000 the City has received a clean audit for its financial statements from the State Auditor’s Office. The City’s strong financial stewardship has resulted in an AA+ bond rating and Standard & Poor’s (SandP) highest financial management rating of “strong.”

Shoreline staff is very committed to implementing best practices and takes seriously the responsibility to manage tax payer dollars effectively and efficiently. To see a copy of the full report, go here.