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AGENCY REVIEW

GENERAL SERVICES DIVISIONDEPARTMENT OF ADMINISTRATION

September 2015PE 15-8-575

AUDIT OVERVIEW

The General Services Division Is Finding It Difficult to Properly Maintain State Facilities Because the Department of Administration Purchases Properties With Little Concern of the Financial Implications

WEST VIRGINIA LEGISLATIVE AUDITOR

PERFORMANCE EVALUATION & RESEARCH DIVISION

JOINT COMMITTEE ON GOVERNMENT OPERATIONS

JOINT COMMITTEE ON GOVERNMENT ORGANIZATION

SenateCraigBlair,ChairChrisWalters,Vice-ChairGregBosoRyanFernsEdGaunchKentLeonhardtMarkR.MaynardJeffMullinsDouglasE.FacemireRonaldF.MillerCoreyPalumboHerbSnyderBobWilliamsJackYost

HouseofDelegatesGaryG.Howell,ChairLynneArvon,Vice-ChairJimMorgan,MinorityChairSairaBlairAnnaBorder-SheppardScottCadleLarryFairclothDannyHamrickJordanR.HillMichaelIhleKaylaKessingerPatMcGeehanMichelG.MoffattJoshuaNelson

RandyE.SmithChrisStansburyMarkZatezaloMikeCaputoJeffEldridgeMichaelT.FerroWilliamG.HartmanJustinMarcumRupertPhillips,Jr.PeggyDonaldsonSmithIsaacSponaugle

Building1,RoomW-314StateCapitolComplexCharleston,WestVirginia25305(304)347-4890



SenateCraigBlair,ChairChrisWalters,Vice-ChairEdGaunchCoreyPalumboHerbSnyder

HouseofDelegatesGaryG.Howell,ChairLynneArvon,Vice-ChairMichelG.MoffattJimMorganIsaccSponaugle

Agency/CitizenMembersTerryLivelyW.JosephMcCoyKennethQueenVacancyVacancy

AaronAllredLegislativeAuditor

JohnSylviaDirector

JillMooneyResearchManager

DanielKannerResearchAnalyst

KeithBrownReferencer

Performance Evaluation & Research Division | pg. �

Agency Review September 2015

CONTENTSExecutiveSummary....................................................................................................................................................................... 5

Issue1:TheGeneralServicesDivisionIsFindingItDifficulttoProperlyMaintainStateFacilitiesBecausetheDepartmentofAdministrationPurchasesPropertiesWithLittleConcernoftheFinancialImplications.................................................................................................................................... 7

ListofTables

Table1:DOABuildingsWithExtendedVacancies........................................................................................................... 8Table2:DOABuildingsinExistenceintheYear2000andTheir2014Status......................................................13Table3:DOABuildingsAcquiredSincetheYear2000.................................................................................................15Table4:GSDFundsforPropertyAcquisitionandMaintenance..............................................................................17Table5:GSDFundsRevenuesMinusExpendituresFY2000-2014........................................................................18Table6:End-of-YearFundBalanceCapitolDomeandCapitolImprovementsFund(2257)FY2000-2014...........................................................................................................................................................19Table7:StateBuildingCommissionFund(2241)FY2000-2014...........................................................................22Table8:OperatingExpensesShiftedFromFund2241toFund2257FY2007-2014......................................23Table9:LateFees/PenaltiesonUtilityBillsforDOAOfficeBuildings....................................................................24Table10:TotalRevenueLessTotalExpendituresfortheYearsSpecified...............................................................31Table11:DOABuildingPurchasedandTheirApproximateConstructionDate...................................................32

ListofFigures

Figure1:FirstFloorofBuilding3............................................................................................................................................. 9Figure2:Floor6ofBuilding4.................................................................................................................................................10Figure3:Floor4ofBuilding6.................................................................................................................................................11Figure4:Floor10inBuilding5...............................................................................................................................................11Figure5:EnergySavingProjectonFloor11ofBuilding5............................................................................................14Figure6:AreasofLeaksontopfloorofBuilding86.......................................................................................................31

ListofAppendices

AppendixA:TransmittalLetter................................................................................................................................................37AppendixB:Objectives,ScopeandMethodology.........................................................................................................39AppendixC:AgencyResponse...............................................................................................................................................41

pg. � | West Virginia Legislative Auditor

General Services Division



EXECUTIVESUMMARY

The LegislativeAuditor conducted anAgency Review of the Department ofAdministration(DOA)pursuanttoW.Va.Code§4-10-8(b)(2).Aspartofthisreview,aperformanceauditwasconductedontheGeneralServicesDivisionwithintheDOA.TheGeneralServicesDivisionisresponsibleforthecare,custodyandoperationofbuildingsownedbytheDOA.TheobjectiveofthisauditistodeterminethecausesoftheDOAhavingrealpropertiesthatareorhavebeeninadequatelymaintained,unoccupied,oruninhabitableforextendedperiodsoftime.Thehighlightsofthisreviewarediscussedbelow.

Frequently Used Acronyms in This Report

DOA:DepartmentofAdministrationGSD:GeneralServicesDivisionBRIM:BoardofRiskandInsuranceManagementDNR:DivisionofNaturalResourcesHVAC:Heating,Ventilating,andAirConditioning

Report Highlights:

Issue 1: The General Services Division Is Finding It Difficult to Properly Maintain State Facilities Because the Department of Administration Purchases Properties With Little Concern of the Financial Implications.

DespitefinancialreportsfromitsFinanceDivisiononinsufficientfunds,theDOAcontinuedtopurchaseorconstructnewbuildings.

TheDOA’sstockofrealpropertyisoverextendedandbeyondtheagency’sfinancialresourcestoproperlymaintainoroperateit.Moreover,thissituationhasexistedforseveralyears.

OthercausesfortheinsufficiencyoffundsisthattheDOAchargesaninadequateamountinrent,relativelyoldbuildingsareoftenpurchasedthatincursignificantexpensestorepairorrenovate,andtheagencyhasnoclearobjectiveinplanningitsrealpropertyformation.

TheLegislatureshouldconsiderimposingamoratoriumontheDepartmentofAdministrationfrompurchasingrealpropertyabovethepriceof$1millionuntiltheDepartmentcandemonstrateithasstrengtheneditsfinancialresources.

PERD’s Response to Agency’s Written Response

PERD received a written response to the report from the Department of AdministrationonSeptember2nd,2015. TheDepartmentofAdministration is inagreementwithallof the report’srecommendations. In his response, Secretary Pizatella does not dispute any of the information ormethodsutilizedbyPERDinthepreparationofthereport.TheSecretaryrecognizestheneedfortheDOAtoimprovetheefficiencyandeffectivenesswithwhichtheGeneralServicesDivisionoperates.



Theagencyagrees that it shouldperforma cost-benefit analysisprior to futurepurchasesof realproperty.TheDOAalsoagreesthatclarificationsfromtheLegislaturearenecessaryconcerningtheproperuseof theCapitolDomeandCapitol ImprovementsFund (2257). Furthermore,SecretaryPizatella recognizes theneed topayoperatingcosts fromFund2241 insteadofFund2257. TheagencyindicatedthatrentsarebeingraisedthatwillallowmoreoperatingcoststobepaidoutofFund2241,buttherearechallengestoachievingthisrecommendation.Mostnotably,theagencyincursoperatingcostsforBuilding1thatcannotbepaidwithrentrevenuebecauselittleiscollectedinrentfromBuilding1pursuanttostatute.

Recommendations

1. TheLegislatureshouldconsiderrequiringtheDepartmentofAdministrationtoperformanddocumentacost-benefitanalysispriortoanypurchaseofrealpropertyinexcessofaspecifiedthresholdpurchaseprice.

2. TheLegislatureshouldconsiderplacingamoratoriumontheDepartmentofAdministrationfrom purchasing real property above the price of $1 million until the Department candemonstrateithasstrengtheneditsfinancialresources.

3. If theLegislaturechoosesnot toplaceamoratoriumontheDepartmentofAdministrationfrompurchasingrealproperty,theDepartmentshouldavoidsignificantadditionstoitsstockofrealpropertyuntilithassubstantiallyimproveditfinancialresources.

4. TheLegislativeAuditorrecommendsthattheLegislatureclarifyitsintentoftheCapitolDomeandCapitolImprovementsFund(Fund2257),establishedinW.Va.Code(§5A-4-2(c)),foritsuseincapitalimprovementsandrepairsofstate-ownedbuildings.Also,aspecificdefinitionforcapitalimprovementsshouldbeprovidedinstatuteasitrelatestoFund2257.

5. The Department ofAdministration should take steps to improve its process of monitoringrentrevenuesandexpenditureswiththeintentionofraisingrentappropriatelytocoverrisingcosts.

6. TheDepartmentofAdministrationshouldpayallappropriateoperatingcostsofDOAfacilitiesfromFund2241.

7. TheDepartmentofAdministrationshouldcomplywithstatute topayallappropriatebondpaymentssolelyfromFund2241pursuanttoW.Va.5-6-8(a).

8. The Legislature should consider requiring the Department of Administration to have astructuralengineeringinspectionperformedonbuildingspriortothepurchasethatevaluatesthe structural integrity of the building, the roof, the basement, HVAC systems, plumbing,electricalwiring,andothermajorareasofthebuilding.Theresultsoftheinspectionshouldbefactorstoconsiderinthecost-benefitanalysisspecifiedinrecommendation1.



ISSUE1

The Legislative Auditor has deter-mined that the DOA’s inventory of real property is overextended, and as a result the State Building Commis-sion Fund has been for several years insufficient to properly operate and maintain DOA facilities.

The General Services Division Is Finding It Difficult to Properly Maintain State Facilities Because the Department of Administration Purchases Properties With Little Concern of the Financial Implications.

Issue Summary

TheDepartmentofAdministration(DOA)hasseveralbuildingsthat have either become uninhabitable due to severe deterioration orhavegoneseveralconsecutiveyearsinneedofmajorimprovements.Inits2014presentation to theJointStandingCommitteeonGovernmentOrganization,theDOAindicatedthat“Duetobudgetcutsanddecrease[s]in excess lottery funding, the General Services Division is finding itdifficult toproperlymaintainstate facilities.” Althoughexcess lotteryrevenueshavedeclined, the Legislative Auditor finds that the main reason the DOA cannot adequately maintain its properties is that it has purchased buildings with little regard for the financial implications of the acquisitions. Despite the drop in lottery revenues and severalbuildingsindisrepair,theDOAcontinuedtoacquirenewpropertieswhichonlycompoundedtheproblem.Someofthenewlyacquiredpropertiesarerelativelyoldandinneedofrepairsorsignificantrenovationsatthetimeofpurchase.The Legislative Auditor has determined that the DOA’s inventory of real property is overextended,and as a result the State Building Commission Fund has been for several years insufficient to properly operate and maintain DOA facilities. The LegislativeAuditor also finds that in response to the insufficiency of the StateBuildingCommissionFund,theDOAispayingoperatingexpensesfromtheCapitolDomeandCapitolImprovementsFundthattheLegislaturemayhaveintendedforrepairsandimprovements.Thelossofthesefundsfor repairs and improvements has further exacerbated the problem ofinadequatelymaintainedproperties.PrimaryrecommendationsarethattheLegislaturerequiretheDOAtoperformacost-benefitanalysispriortothepurchaseofrealproperty,imposeatemporarymoratoriumontheDOAinpurchasingrealpropertyinexcessof$1million,andclarifythelegislativeintentoftheCapitolDomeandCapitolImprovementsFund.

Several DOA Properties Have Gone Consecutive Years in Need of Major Capital Improvements

TheobjectiveofthisperformanceauditistodeterminethecausesfortheDOAhavingofficebuildingsthathavegoneseveralconsecutiveyearsinadequatelymaintained,unoccupied,uninhabitableandinneedofextensiveimprovements.Althoughthisreporthighlightsthedeficienciesof several DOA properties, it should be noted that the DOA spends

The objective of this performance au-dit is to determine the causes for the DOA having office buildings that have gone several consecutive years inad-equately maintained, unoccupied, un-inhabitable and in need of extensive improvements.



Over the 2000 to 2014 time period, the DOA had buildings that were unin-habitable for several years, while other buildings, such as Buildings 4, 5 and 6 on the State Capitol Complex, have areas that are uninhabitable and have been in poor condition for years.

millionsofdollarstowardsmaintenanceeachyear,andseveralbuildingsareingoodcondition.Furthermore,theLegislativeAuditorunderstandsthatbuildingswilleventuallyrequiremaintenanceandthatmaintenancesometimesmaybedeferred.However,thisreviewiswarrantedbytheobservation thata significantamountofdeferredmaintenanceoveranextendedlengthoftimehasoccurredinseverallargeDOAbuildingsthatsuggestasystemicproblemexists. Inaddition, thescopeofthisauditwasextended to theyear2000 inorder to capturea completehistoricprogressionof theproblemaswell as thepervasivenessof theDOA’spractices.

Pursuant to W. Va. Code §5-6-4 and §5A-4, the Departmentof Administration is responsible for the care and custody of Capitolbuildings,andhasauthoritytoacquire,maintain,constructandoperaterealproperty.Overthe2000to2014timeperiod,theDOAhadbuildingsthatwereuninhabitableforseveralyears,whileotherbuildings,suchasBuildings4,5and6ontheStateCapitolComplex,haveareasthatareuninhabitableandhavebeeninpoorconditionforyears.InaMay2006PERDreport,itwasreportedthattheGSDhadnotproperlymaintainedtheCapitolComplexparkinggarage(Building13)anditwasexperiencingaccelerateddeteriorationdespitethefacilitybeingonlyaroundsixyearsold.Moreover,otherDOApropertiesaredysfunctionalfortheirpresentuseorneedmajorrepairsandcapitalimprovements.

Table1belowshows fourDOAbuildings thatwerevacant forextendedperiodsoftime.Thesebuildingsarerelativelylargeinsquarefootage. The office buildings in Fairmont and Clarksburg have beenrazedandnewbuildingshaverecentlybeenconstructedtoreplacethem.

Table 1DOA Buildings With Extended Vacancies

Name of Building Years of Vacancy

Square Footage

Building3-FormerDMVBuilding 2011–Present 162,075Building21-FormerFairmontOfficeBuilding 2009–2012 120,000Building24-FormerClarksburgOfficeBuilding 2004–2011 80,000Building28-FormerStateMedicalExaminer’sOffice 2005–2011 28,090Sources:TheDepartmentofAdministration,GeneralServicesDivision,anddatafromtheBoardofRiskandInsuranceManagement.

Abriefdescriptionof thevacantbuildingsmentionedaboveandotherfacilitiesaregivenbelow.



Plans to renovate Building 3 have been in place as early as 2000.

Building 3 - The DMV Building

The DMV building was vacated in November 2010 due to avariety of issues that made the building functionally obsolete. ThisbuildingisintheworstconditionoftheCapitolComplexbuildings,andit remains uninhabitable to date.Figure1attherightshowsthefirstfloor of Building 3. Plans torenovate Building 3 have been inplaceasearlyas2000.Thebuildinghadasbestosabatementcompletedinfiscalyear(FY)2013.ThefirstattempttorenovateBuilding3wasinFY2011.However,bidsfortheproject came in at $35 million,whichexceededthemaximumbudgetof$30million.ThesecondattempttookplaceinMay2015andacontractwasawardedintheamountof$34million,whichisat themaximumbudgetfor thedesign. RenovationsbeganinJuneofthisyearandcouldbecompletedbyDecember2016.

Building 21 - The Former Fairmont Office Building

TheformerFairmontofficebuildingwaslocatedat109AdamsStreet. The DOA entered into a 10-year lease-purchase agreement in1986withtheMarionCountyBuildingCommission,whichhadissuedrevenuebondsinDecember1985fortheamountof$3.3million(principalandinterest).TheDOAmadefinalpaymentforthefive-storypropertyin February 1997. The building became uninhabitable in early 2009aftertheState’sBoardofRiskandInsuranceManagementrequestedastructuralinspectionthatrevealedseveredeteriorationinvariousareasofthebasementandthepotentialforacatastrophicfailureduetoaseverelycorrodedmaingas line. TheFairmontbuilding remainedvacantuntilitwasrazedinthespringof2012.Thelocationoftheformerbuildingiscurrentlyavacant lot. TheDOAreplaced the formerbuildingwithanewfive-storystateofficebuildinglocatedafewblocksawayat416AdamsStreet. Theconstructionof thenewbuildingwassubstantiallycompleted in February 2015, with tenants moving in the followingmonth.Theestimatedfinalcompletionconstructioncostisover$17.6million.Approximately180employeesworkinthebuildingforseveral

Building 24 - The Former Clarksburg Office Building

TheDOAenteredintoalease-purchasecontractwiththeHarrisonCounty Building Commission for the old Clarksburg office buildinglocatedat151MainStreetinAugust1988.Thetotalpurchasepricewas

Figure1-FirstFloorofBuilding3Figure1-FirstFloorofBuilding3

stateagencies.

The former Fairmont office building became uninhabitable in early 2009 after the State’s Board of Risk and Insurance Management requested a structural inspection that revealed se-vere deterioration in various areas of the basement and the potential for a catastrophic failure due to a severely corroded main gas line.

pg. 10 | West Virginia Legislative Auditor


The Clarksburg building was vacated in December 2003, six months before the final payment, because of severe water damage from a leaking roof and piping failures according to the GSD.

anestimated$5.7million.TheDOAmadefinalpaymentforthebuildinginJune2004.TheClarksburgbuildingwasvacatedinDecember2003,sixmonthsbeforethefinalpayment,becauseofseverewaterdamagefromaleakingroofandpipingfailuresaccordingtotheGSD.Thebuildingremainedvacantforoversevenyears throughthefallof2011whenitwasrazed.Constructionofanewfive-storyofficebuildingbeganinJuly2014approximatelyonthesamesiteastheformerbuilding.TheexpectedcompletiondateisMarch2016andtheestimatedtotalconstructioncostisover$24.9million.

Building 28 - The Former State Medical Examiner’s Building

Building28,theformerStateMedicalExaminer’sOfficelocatedat701JeffersonRoadinSouthCharlestonadjacent totheStatePoliceHeadquarters,becamevacantwhentheMedicalExaminer’sOfficemovedoutofthebuildingin2005.Accordingtoa2007inspectionreport,oneroomonthesecondfloorwasclosedduetomold,andmoldwaspresentinseveralareasofthebuilding.Thebuildingremainedvacantfrom2005to2013andwasusedforstoragebytheStatePolice.TheGSDperformedasbestos abatement in the building in November 2011 and September2013.Inmid-2013theStatePoliceawardedacontracttorenovatethebuildingfor$4.4million.TherenovationshavebeencompletedandthebuildingisintheprocessofbeingtransferredtotheStatePolice.

Building 4 on the State Capitol Complex

According to the GSD,Building4 is in thesecondworstconditionontheCapitolComplex.The building has asbestosthroughoutthestructure,theHVACsystemisfunctionallyobsolete,andtherestroomsdonotcomplywithAmerican Disability Act (ADA)standards. Floor 3 of Building 4is completely unoccupied and isbeingusedforstorage,andone-thirdoffloorsixisuninhabitable,pertheFireMarshal(seeFigure2).Thebuildingisabout80percentoccupiedbystaffofWorkforceWestVirginia.TheGSDindicatedthattherearenostructuralissueswithBuilding4.AdesignplanisexpectedforthebuildingintheearlypartofFY2016,andiffundingisavailable,renovationswillbegininFY2017.ThecurrenttenantswouldberelocatedtoBuilding3.Therenovationsareexpectedtotake16to18monthsatacostof$20-$22million.Followingtherenovation,WorkforceWestVirginiaemployeeswouldremaininBuilding3andnewtenantswouldmoveintoBuilding

Figure2-Floor6ofBuilding4Figure2-Floor6ofBuilding4

According to the GSD, Building 4 is in the second worst condition on the Capitol Complex.

Performance Evaluation & Research Division | pg. 11


There are many functional issues throughtout Buildings 5 and 6 such as electrical infrastructure, the HVAC system is in poor condition, and the restrooms are not ADA compliant.

4inFY2018or2019.

Buildings 5 & 6 on the State Capitol Complex

Therearemanyfunctional issues throughoutBuildings5and6suchaselectricalinfrastructure,the HVAC system is in poorcondition,andtherestroomsarenotADAcompliant(seeFigure3). Also, a sprinkler system isneeded throughout eachbuilding. A12-yearagreementwiththeFireMarshalhasbeenin place since 2005 to havesprinklersinplaceby2017.AtthetimeofPERD’stourofthesebuildings(April2015)only5ofthe25floorshadfiresprinklersinstalled.TheGSDrealizedin2014thathavingsprinklersoneachfloorofthebuildingswouldnotbecompletedby2017.Therefore,theFireMarshalagreedtoallowtheGSDtohavesprinklersystemsonallfloorsineachbuildingthatmeettheWestVirginiadefinitionofhigh-risers(above75feet)by2017.

DespitetheconditionsinBuildings5and6,theyarecompletelyoccupied. Inaddition, floor10 inBuilding5 (seeFigure4)and flooreightinBuilding6havebeencompletelyrenovated.

Inadditiontotheabove-mentionedstructures,theDOAhasotherfacilitiesthatareinpoorconditionandfunctionallyobsolete.ThePublicEmployeeDayCare(Building16)isinpoorconditionandunsuitableforitspresentuseasadaycarecenter,yetitisstillbeingusedassuch.TheGSDMasterPlancallsforthisbuildingtobedemolishedandreplacedwith a new constructionnearby. TheState’sSurplusProperty facility (Building27), located in Dunbar, is apoorly functioning site andwill need significant workto make it functional for itscurrent use. Building 33,locatedat311JeffersonStreetneartheCapitolComplex,isbeing used as a mail roomandcarpenter shop. It is infairtopoorconditionandisfunctionallyobsolete.GSD’s

Figure3-Floor4ofBuilding6Figure3-Floor4ofBuilding6

Figure4-Floor10inBuilding5

In addition to the above-mentioned structures, the DOA has other fa-cilities that are in poor condition and functionally obsolete.



MasterPlancallsforBuilding33toberazed.

Eighteen (18) GSD Properties Have Been Acquired Since the Year 2000

Table2listsDOApropertiesthatwereunderthecareoftheGSDintheyear2000.Mostofthesepropertiesarestillinuseandmostarelocated in thecityofCharleston. According to theGSD, therangeofconditionsofthesepropertiesasof2014isgoodtopoorandfunctionallyobsolete.However,mostofthesepropertiesareingoodtofaircondition,andtheoldparkinggarage(Building2)wasdemolishedin2004,andtheFairmontandClarksburgbuildingshavebeendemolishedasmentionedpreviously.

Performance Evaluation & Research Division | pg. 1�


Table 2DOA Buildings in Existence in the Year 2000

and Their 2014 Status

Building Number Property Name/Occupants Location 2014 GSD Status

1 CapitolBuilding Charleston Generallygoodcondition.

2ParkingGarage#2–CaliforniaAve

Charleston Demolishedin2004.

3 FormerDMVBuilding Charleston Uninhabitableforyears.

4 WorkforceWV Charleston Functionallyobsolete/20%uninhabitable.

5 DOH/CPRB/DOT Charleston Goodtopoorcondition/fullyoccupied.

6 Commerce/DHHR Charleston Goodtopoorcondition/fullyoccupied.

7 Conference/Training Charleston Generallygoodcondition.8 Governor’sMansion Charleston Generallygoodtofaircondition.

10 HolyGroveMansion Charleston Restorationworkneeded/unoccupied.

11 ChillerPlant Charleston Generallygoodcondition.

13 CapitolComplexParkingGarage Charleston Generallygoodcondition.

15 Purchasing-FinanceDivisions/DOA Charleston Generallyfaircondition.

16 PublicEmployeeDayCare Charleston Pooranddysfunctional/inuse.

17 DivisionofFinance/DOA Charleston Generallygoodtofaircondition.20 Warehouse Charleston Generallyfaircondition.

21 OldFairmontStateOfficeBuilding Fairmont Uninhabitableforyears.Demolishedin2012.

22 StateTaxDepartment Charleston Generallyfairtogoodcondition.

23 BeckleyOfficeComplex Beckley Generallyfaircondition,dysfunctionalforofficeuse.

24 OldClarksburgComplex Clarksburg Uninhabitableforyears.Demolishedin2011.

25 DHHR/Corrections/Tax/Rehab Parkersburg Dysfunctionalforofficeandcustomerservice

27

StateSurplusProperty

Dunbar Poorlyfunctioningwithantiquatedinfrastructure.Significantworkneeded.

SurplusProperty–Warehouse#1SurplusProperty–Warehouse#2SurplusProperty–Warehouse#3

28 OldStateMedicalExaminer’sOffice SouthCharleston

Unoccupiedforyears.BeingtransferredtoStatePolice.

29 AirportHanger Charleston Administrativefunctionsremoved.Workneeded.

Sources: The Department of Administration, General Services Division, and data from the Board of Risk and InsuranceManagement.

pg. 1� | West Virginia Legislative Auditor


To date, the DOA has a total of 37 properties. This total includes prop-erties that have structures, but it does not include parking lots that have been purchased primarily near the State Capitol Building.

Since2000,theDOAhasacquired18additionalproperties.Table3liststhesepropertiesandtheyearinwhichtheywereacquired.Eight(8)of these18propertieswereacquired through state or localbond issues. The three mostrecent purchases, Logan, NewClarksburg and New Fairmontbuildings,arenewconstructionsusingcash.However,theDOAindicated to PERD that it mayissue bonds for the Clarksburgand Fairmont buildings. TheEnergySavingProject listedinTable 3 involved the purchaseof a central high-pressure steamplantthatismoreefficientthanthepreviousheatingsystemaccordingtotheGSD.Theequipmentislocatedonthe11thfloorofBuilding5(seeFigure5).TheheatingsystemprovidesheatingandcoolingformostoftheCapitolComplex(Buildings1,3,4,5,and7).ThesystemdoesnotserveBuilding6,butitcanbelinkedtoitonceBuilding6’shotwatersystemexceedsitslifespan.TheEnergySavingProjectalsoinvolvednewpipes andpumps through eachbuildingon theCapitolComplex.Building 98 comprises a lot that is used to store grounds-keepingequipmentandofficespaceforgrounds-keepingstaff.Todate,theDOAhas a total of 37 properties. This total includes properties that havestructures,butitdoesnotincludeparkinglotsthathavebeenpurchasedprimarilyneartheStateCapitolBuilding.

Figure5-EnergySavingProjectonFloor11

ofBuilding5

Figure5-EnergySavingProjectonFloor11

ofBuilding5



Table 3DOA Buildings Acquired Since the Year 2000

Bldg No. Building Acquired Location Method of

Acquisition Amount*

14 SupremeCourtOffice 2001 Charleston Cash $312,000

18 GSDEngineering 2008 Charleston Cash $179,695

32 HuntingtonOfficeBuilding 2003 Huntington StateBonds $18,000,000

33 HowardProperty–ParkingLots 2002 Charleston LocalBonds $1,510,355

34 Weirton 2004 Weirton StateBonds $10,300,000

36 DHHR–OneDavisSquare 2004 Charleston StateBonds $5,200,000

37 DEP–PEIA 2003 KanawhaCity StateBonds $53,700,00055 Logan 2013 Logan Cash $15,200,000

74 DNR 2008 SouthCharleston Cash $3,310,260

84 DivisionofCorrections 2008 Charleston Cash $1,937,72586 Greenbrooke 2008 Charleston StateBonds $18,700,00087 FormerHolidayInn 2010 Parkersburg Cash $2,200,000

88 7PlayersClub,Charleston** 2011 Charleston Cash $2,000,347

97 DHHR–Williamson 2006 Williamson LocalBonds $6,000,000

98 321MichiganAve/Grounds 2011 Charleston Cash n/a

n/a EnergySavingProject 2006 Charleston StateBonds $15,400,000

n/a NewFairmontOfficeBuilding 2015 Fairmont Cash $17,600,000

n/a NewClarksburgBuilding 2016 Clarksburg Cash $25,000,000

Sources:GeneralServicesDivision,LocalandStateBondAgreementsreceivedfromtheRealEstateDivisionwithintheDepartmentofAdministration.*Includesprincipalandinterestonstateandlocalbondissues.**Building88waspurchasedusingastateagency’sfund,butthebuildingwasdeededtotheDOA.



The primary revenue sources are of-fice rent charged by the DOA, video lottery transfers, parking fees, court settlements on asbestos litigation, and a general fund appropriation.

The Large Lottery Revenue Gains in 2008 and 2009 Have Been Largely Spent on Acquisitions and Construction of Office Buildings.

The DOA has several funds for acquiring and maintainingproperties. Table 4 lists the names of these funds, a brief descriptionofthefund’spurposes,andtheirprimaryrevenuesources.Theprimaryrevenue sources are office rent charged by the DOA, video lotterytransfers, parking fees, court settlements on asbestos litigation, and ageneral fund appropriation. The state appropriation received in Fund0230coverstheGSD’spayrollandofficeexpenses. Fund2241(StateBuildingCommission)receivesthelargestsourceofGSDrevenuefromrent charged to state agencies. Video lottery revenues are the secondlargestsourceofGSDfunds.Lotteryrevenuesaretransferredintofourseparate GSD funds (Funds 2255, 2257, 2461 and 2462), each with adistinctstatutorypurpose.Fund2255wascreatedbyW.Va.Code§5A-4-5(e)toreceivelotteryfundsfortheconstructionandmaintenanceoftheparkinggaragelocatedontheCapitolComplex(Building13).Fund2257wasestablishedbyCode(§5A-4-2(c))toprovideformaintenance,repairsandimprovementsoftheCapitoldomeandstate-ownedbuildings.Fund2461wascreatedby§5A-4-5etoreceivelotteryfundstoconstructandmaintainanotherparkinggarageonoradjacenttotheCapitolComplex.Fund2462was createdby§5-4-6 to receive lottery revenues tomakerenovationsandimprovementsoftheStateCapitolbuildingandtheCapitolComplex inorder to“reversedeterioration toexisting facilities.” TheAsbestosLitigationRecovery(2250)wascreatedby§5-6-5atoreceivelitigationrecoveriespertainingtoasbestos,andinvestmentearningsonrecoveryfundsheldinaspecialrevenueaccount. Fund2250mustbeused exclusively to pay expenses associated with asbestos abatementinstatebuildings. Courtsettlementrecoverieshavenotbeenreceivedsince2004.Consequently,overthelast10years,asbestosabatementhasreducedtheinvestmentbalanceto$2,851,053asoftheendofFY2014,andinvestmentearningsreceivedinFund2250hasbeendeclining.TheGovernor’sMansionFund(2463),createdby(§5A-4-2(d)),hasreceivedonlyafewthousanddollarssinceFY2006,andhasabalanceoflessthan$3,000.



Table 4GSD Funds for Property Acquisition & Maintenance

Fund No. Fund Name Purpose Primary Revenue

Sources

0230 DivisionofGeneralServices GSDpayroll&officeexpenses. Gen.Fundappropriation

2240 ParkingLotsOperating Maintainparkinglots. Parkingfees,fines

2241 StateBuildingCommissionConstruct,purchase,maintainandoperatestateproperties.

Buildingrent

2250 AsbestosLitigation Asbestosabatementinstatebuildings.

Courtsettlements,investmentearnings

2255 ParkingGarage MaintainCapitolComplexParkingGarage. VideoLottery

2257 CapitolDomeandCapitolImprovements

MaintenanceandimprovementstoCapitoldomeandstate-ownedbuildings.

VideoLottery

2461 2004CapitolComplexParkingGarage

ConstructandmaintainparkinggarageonoradjacenttoCapitolComplex.

VideoLottery

2462 CapitolRenovationandImprovement

RenovationsandimprovementsoftheStateCapitolbuildingandtheCapitolComplex.

VideoLottery

2463 Governor’sMansion EnhancetheGovernor’sMansion.

Excessinaugural

contributions,investmentearning

Sources: West Virginia Code, the Finance Division within the Department ofAdministration, and the State Treasurer’sOffice.



Lottery revenues increased by $50 million in FY 2008 and by another $17 million in FY 2009.

As Table 5 below shows, the GSD has overspent revenuesreceivedineachofthelastfivefiscalyearsbyrelativelylargeamounts.This increased spending was prompted by a substantial increase invideolotteryrevenuesinfiscalyears2008and2009.Lotteryrevenuesincreasedby$50millioninFY2008andbyanother$17millioninFY2009,withrespecttothe2007revenuefigure.TheincreasesaffectedonlytheCapitolDomeandCapitolImprovementsFund(2257).Furthermore,virtually all of the additional spending that occurred also cameout ofFund2257.

Table 5GSD Funds*

Revenues Minus ExpendituresFY 2000 – 2014

FiscalYear

TotalExpenditures

TotalRevenue

RevenuesMinusExpenditures

2000 $12,911,115 $10,808,874 -$2,102,241

2001 13,211,239 12,281,660 -929,579

2002 12,966,496 13,966,519 1,000,0232003 12,659,524 13,434,300 774,7762004 14,682,900 20,233,425 5,550,5252005 20,169,176 24,760,324 4,591,1482006 22,407,223 25,823,148 3,415,9252007 21,777,837 26,023,965 4,246,1282008 32,347,899 76,505,512 44,157,6132009 42,519,013 44,547,142 2,028,1292010 48,138,219 24,808,555 -23,329,6642011 38,676,067 28,378,441 -10,297,6262012 40,721,412 33,492,614 -7,228,7982013 39,793,296 24,366,152 -15,427,1442014 41,597,635 24,672,239 -16,925,396

Source:PERDcompilationsusingdatafromtheStateAuditor’sOffice.*DoesnotincludeGSDstateappropriationsreceivedinFund0230.



Despite the drop in lottery revenues, the GSD continued to incur expenses substantially above revenues in each year from FY 2010 through 2014.

Table6documents therevenueandexpendituresofFund2257from 2000 to 2014. The table shows the two bulges of video lotteryrevenuesof$50millioninFY2008andaround$17millioninFY2009,comparedtoFY2007.TheGSDbegantoincreaseexpendituresinFY2009;however,beginninginFY2010,lotteryrevenuesreturnedtotheirpre-2008levels.Despitethedropinlotteryrevenues,theGSDcontinuedto incur expenses substantially above revenues in each year from FY2010 through2014. Asa result,Fund2257’send-of-yearbalancehasdwindledfromahighof$76millioninFY2009to$15.8millioninFY2014.

Table 6End-of-Year Fund Balance

Capitol Dome and Capitol Improvements Fund (2257)FY 2000 – 2014

FiscalYear

TotalExpenditures

TotalRevenue

End-of-YearFundBalance

2000 $387,546 $1,060,639 $721,4542001 269,623 1,811,221 2,263,0532002 652,800 2,531,758 4,142,0122003 640,886 2,981,220 6,482,3472004 1,669,864 4,226,068 9,038,5512005 2,985,632 6,195,095 12,248,0142006 3,776,900 6,576,769 15,047,8842007 5,616,001 6,799,727 16,198,9962008 6,860,303 57,665,705 67,004,3982009 14,569,030 23,958,701 76,394,0692010 24,654,839 4,883,446 56,622,6752011 16,272,706 7,371,903* 47,721,8732012 21,371,939 13,193,495* 39,543,4292013 15,875,300 4,069,279 27,737,4082014 15,459,351 3,511,228 15,789,284

Source:PERDcompilationsusingdatafromtheStateAuditor’sOffice.*Includesgrantfundingof$2.5millioninFY2011,andareimbursementfundtransferof$8.1millioninFY2012.



The Legislative Auditor contends that it may not be the intent of the Legisla-ture to use Fund 2257 to pay for oper-ating expenses of DOA buildings.

TheexpenditureincreasesbeginninginFY2009fromFund2257werefortwobasicpurposes:

1. tobuyandconstructofficebuildings,and2. topayasignificantamountofoperatingexpensesofbuildings

thattheStateBuildingCommissionFundcouldnotpay.

TheDOAusedtheadditionallotteryrevenuetopurchaseorconstructthefollowingbuildings:

• Building74(DNR),purchasedfor$3.3million(FY2009);• Building 84 (Division of Correction), purchased for $1.9

million(FY2009);• Building87(FormerHolidayInn),purchasedfor$2.2million

(FY2010);• Building88(7PlayersClub),purchasedusinganotherstate

agency’sfundingbutthebuildingisinDOA’snameandunderitscare.

• Building55(Logan),constructedfor$15.2million(FY2011-2013);

• New Fairmont Building constructed for $17.6 million (FY2012-2015);and

• NewClarksburgBuildingunderconstructionfor$25million(FY2012-2016).

The State Building Commission Fund Has Been Insufficient to Properly Maintain and Operate State Facilities for Several Years

Theacquisitionsandconstructionprojectsusedupmostof thelotteryincreasesof2008and2009.However,theDOAalsousedsomeofthelotteryincreasestopayasignificantamountofoperatingexpensesfor numerous office buildings that would normally be paid with rentrevenuedeposited intoFund2241 (StateBuildingCommissionFund).Fund2241wasestablishedinW.Va.Code§5-6-5toreceiverentchargedby theDOAtomaintainandoperateofficebuildings. FromFY2009toFY2014,theDOAchargedFund2257anaverageof$2.6millionayearinoperatingexpenses.The Legislative Auditor contends that it may not be the intent of the Legislature to use Fund 2257 to pay for operating expenses of DOA buildings.Asstatedpreviously,Fund2257was created to provide for maintenance, repairs and improvements oftheCapitoldomeandstate-ownedbuildings.Thiswillbediscussedin

Performance Evaluation & Research Division | pg. 21


For many years Fund 2241 has had barely enough finances to maintain and operate DOA buildings.

greaterdetailinanothersectionofthisreport.

TheneedtoshiftsomeoftheoperatingexpensesfromFund2241toFund2257canbeseeninTable7.FormanyyearsFund2241hashadbarelyenoughfinancestomaintainandoperateDOAbuildings.AsTable7shows,Fund2241’srevenueshavebeenclosetoexpendituresoverthelast 15years. As a result, this fund’s end-of-yearbalanceshavebeenunder$1millioninmostyears.Havingcashbalancesunder$1millionforthenumberoffacilitiesinDOA’scaredoesnotallowitsufficientfundstoplan formajormaintenanceprojects,whichexplains the significantamountofdeferredmaintenancethathasextendedoverlongperiodsoftime.Althoughthefundhadabalanceofover$3.3millioninFY2014,thisoccurredprimarilybecausetheDOAshiftedasignificantamountofoperatingexpensestoFund2257aswillbeseen.

Furthermore, since Fund 2241 has not had significant cashavailable to purchase buildings, the DOA used its authority to issuerevenuebonds topurchase several largebuildings. However, amajorconsequence of acquiring facilities through bonds is that the agency’sdebt servicepaymentshave takenona largerpercentageof the fund’stotalexpenditures.Overthelastfewyears,debtservicepaymentshavetotaled over $5 million and have been 35 to 40 percent of the fund’sexpenditures. Debt service as a percentage of expenditures increasedsignificantlybeginninginFY2009. ThiswasduetotheDOAissuingbondsinFY2010topurchasetheGreenbrookebuildinginCharleston,whichaddedover$672,000ayearindebtservicepayments.Inaddition,afewbondissues,includingGreenbrooke,hadpaymentschedulesthatescalatedannualprincipalandinterestpayments.Greenbrooke’sannualpayment schedule escalated over time from $672,644 in FY 2010 to$752,586inFY2014.TheHuntingtonbondpaymentincreasedgraduallyfrom$696,355 in 2009 to$793,000 in2014. TheWeirtonbondandthe Energy Saving bond also had increases totaling over $30,000 and$63,000respectivelyforthesametimeperiod.

However, a major consequence of ac-quiring facilities through bonds is that the agency’s debt service payments have taken on a larger percentage of the fund’s total expenditures.



The average annual amount of oper-ating expenses shifted to Fund 2257 was $2.6 million from FY 2009 to FY 2014. Had these expenses been paid out of Fund 2241, the fund would have a deficit of over $12 million in FY 2014.

Table 7State Building Commission Fund (2241)

FY 2000 – 2014

FiscalYear

TotalExpenditures

TotalRevenue

End-of-YearFundBalance

DebtService

DebtServiceasPct.ofExpenditures

2000 $8,439,681 $7,927,462 $659,240 $1,379,462 16.3%

2001 8,877,775 8,673,409 454,874 1,332,799 15.02002 8,642,812 8,687,786 499,848 1,427,452 16.52003 8,652,993 8,779,179 626,035 1,415,648 16.42004 10,015,085 9,814,479 425,429 1,947,551 19.42005 10,403,788 10,750,806 772,488 1,699,943 16.32006 11,423,017 11,283,307 632,778 1,668,120 14.62007 10,673,372 10,939,065 898,471 1,754,185 16.42008 11,214,531 11,101,026 784,967 2,033,416 18.12009 12,993,371 13,559,310 1,350,906 3,491,760 26.92010 14,060,536 13,613,774 904,145 5,035,225 35.82011 14,696,548 14,837,408 1,045,006 5,245,315 35.72012 13,629,292 13,561,335 977,050 5,102,144 37.42013 13,420,769 14,663,116 2,219,396 5,400,493 40.22014 14,828,456 15,963,258 3,354,239 5,040,890 34.0

Source:PERDanalysisusingdatafromtheStateAuditor’sOffice.

Table8 shows themainoperating expenses thatwerepaidoutofFund2257 insteadofFund2241. Expenses for custodial services,utilities,security,insuranceandfurniturewereforahostofDOAofficebuildings across the state. Other operating expenses not included inTable8areforwindowcleaning,snowremoval/deicing,watertreatment,grounds-keeping/landscaping,movingexpenses,andothermiscellaneousexpenses. AsTable8shows,theshiftoftheseexpensestoFund2257beganprimarilyinFY2009. Theaverageannualamountofoperatingexpenses shifted toFund2257was$2.6million fromFY2009 toFY2014.Had these expenses been paid out of Fund 2241, the fund would have a deficit of over $12 million in FY 2014. While it is obvioustheDOAwastakingadvantageoftheextralotteryrevenuestopayfortheseexpenses,theshiftofexpenseswasalsooutofnecessitybecauseit isapparentthe rent charged by the DOA has been insufficient to maintain and operate its office buildings.



Table 8Operating Expenses Shifted From Fund 2241 to Fund 2257

FY 2007 – 2014

FiscalYear Utilities* Custodial

ServicesSecurity

PersonnelBRIM

InsuranceFurniture

Expenditures Total

2007 $4,465 -- $4,949 -- $10,459 $19,8732008 -- -- -- -- 53,470 53,470

2009 3,949 $1,406,835 -- -- 207,672 1,618,457

2010 254,127 767,192 142,417 -- 2,386,126 3,549,8642011 667,630 1,640,778 151,145 -- 106,741 2,566,2952012 126,158 2,526,745 127,198 $23,421 14,942 2,818,465

2013 730,686 1,935,082 4,349 22,045 -- 2,692,164

2014 22,856** 2,320,540 10,465 -- 73,162 2,427,025

Total $1,809,871 $10,597,172 $440,523 $45,446 $2,852,572 $15,745,613

Source:PERDcompilationsusingdatafromtheStateAuditor’sOffice.*Utilitiesincludegas,electric,water/sewage,fireservice,andsanitation/disposal.**InFY2014,theDOAtransferred$687,796inutilityexpensesfromFund2257toFund2241.

TheinsufficiencyofFund2241isrevealedinotherindicators.Forexample,inJuly2012,theDOApaidover$498,000inbondpaymentsfromFund2257.ThisamountwastransferredbacktoFund2257fromFund2241inDecember2012.ThebondsassociatedwiththesepaymentswerefortheEnergySavingProject,theDEPbuildinginKanawhaCity,theOneDavisSquarebuilding,theGreenbrookebuilding,andthebuildingslocated in Huntington, Weirton, and Williamson. Also, in November2011,abondpaymentof$169,651fortheDEPbuildingwaspaidfromFund2257.ThesignificanceofpayingthesebondpaymentsfromFund2257isthatitviolatesthestatutoryrequirementinW.Va.5-6-8(a)whichstates:

TheCommission isherebyempowered to raise thecostofaproject,asdefinedinthisarticle,bytheissuanceofstatebuildingrevenuebondsofthestate,theprincipalandinterestonwhichshallbepayablesolely from the special revenue fund provided in section five [§5-6-5]of thisarticleforthepayment.[emphasisadded]

The special revenue fund created in §5-6-5 is Fund 2241, theStateBuildingCommissionFund.Therefore,theprincipalandinterest



Although the expenses of the July 2012 bond payments were transferred back to Fund 2241 five months later, the issue is that at the time the pay-ments were due, Fund 2241 had insuf-ficient funds to make the payments.

ofrevenuebondsissuedbyDOA’sauthority,whichitreceivedwhentheStateBuildingCommissionwasterminatedin2000(§5-6-4(19)),shouldbepaidoutofFund2241.ThebondfortheWilliamsonbuildingistheonly one that was not issued by the DOA. Although the expenses oftheJuly2012bondpaymentsweretransferredbacktoFund2241fivemonthslater,the issue is that at the time the payments were due, Fund 2241 had insufficient funds to make the payments. TheLegislaturehasmade it imperative thatmoneys inFund2241“shallbe impressedwith and subject to the lien or liens on the moneys in favor of thebondholders”(§5-6-4(19)).Inotherwords,nootherexpensesofthefundhave higher priority than the bond payments. The inability to make these bond payments from Fund 2241 and using another fund is a serious matter. ItshouldbenotedthatthereisnorecordthatthebondpaymentmadeinNovember2011fromFund2257hasbeenreimbursedfromFund2241.

Inaddition,theDOAhasbeenfacedwiththeinabilitytopayinfullalargenumberofutilitybillsoutofFund2241andthoseshiftedtoFund2257.Asaresult,asignificantamountoflatefeesandpenaltieshavebeenincurred.Table9showstheamountoflatefeesandpenaltiespaidbytheDOAonutilitybills.AsubstantialincreaseinlatefeesoccurredinFY2011through2013.PERDcouldnotrevieweverylatefeetransaction.Whilesomelatefeeswerelikelytheresultoflatepayments,manyhighlatefeeswerelikelybecausetheDOAcouldnotpaytheutilitybillsinfullandtheoutstandingbalancesincurredlatefeesandpenalties.AlthoughtheseamountsarerelativelysmallincomparisontothemillionspaidoutofFund2241,they are another indicator of a fund that has been and continues to be under financial stress.

Table 9Late Fees/Penalties on Utility Bills for DOA Office Buildings

FY2010 FY2011 FY2012 FY2013 FY2014

LateFees/Penalties $6,771 $55,822 $51,405 $56,968 $20,860

Source:PERDcompilationsusingdatafromtheStateAuditor’sOffice.

The Operating Expenses and Other Expenditures Being Paid From Fund 2257 May Not Be the Legislature’s Intent

PERDevaluatedeachGSDfundtodetermineifexpenditureswereconsistentwiththeirintendedpurposes. Theprimaryfindingsconcernthe State Building Commission Fund (2241), and the Capitol DomeandCapitol ImprovementsFund(2257). IthasbeenpreviouslystatedthattheLegislativeAuditorquestionstheuseofFund2257forpayingvariousoperatingexpensessuchasutilities,custodialservices,security,



The Legislative Auditor questions the use of Fund 2257 for paying various operating expenses such as utilities, custodial services, security, and furni-ture for DOA buildings.

andfurnitureforDOAbuildings.However,thereareotherexpendituresfromFund2257 thatmaybe inconsistentwith the legislative intentofthefund.Inadditiontooperatingexpenses,theDOAhasalsousedFund2257topayforthefollowingtypesofexpenditures:

• constructioncostsofstand-alonebuildings,• purchasesofstand-alonelandandbuildings,• improvementstoleasedbuildings(leaseholdimprovements),

and• scheduledleaseorbondpaymentsonlandandbuildings.

According to W. Va. Code §5A-4-2(c), moneys in the CapitolDomeandCapitolImprovementsFund

“shall be expended for maintenance and repairs of thecapitoldomeandothercapitalimprovementsandrepairstostate-ownedbuildings.”

The statutory phrase “and other capital improvements and repairsto state-owned buildings” could be understood to mean that capitalimprovementsandrepairsareconfinedtoexistingstate-ownedbuildings.Purchasingrealpropertiesorconstructingfacilitiesthatareadjacenttoexisting state-owned properties could be interpreted as improving theexistingproperties.However,purchasingorconstructingbuildingsthatstandalonedoesnotimproveexistingstate-ownedproperty.TheDOAhasrecentlyconstructedthreebuildings.ThenewClarksburgbuildingis essentially on the same land as the former building. Therefore, itcouldbeconsideredimprovingexistingstate-ownedproperty.However,theLoganandnewFairmontbuildingsarestand-aloneproperties,andtherefore,didnotimproveexistingstate-ownedproperties.

TheDOAalsousedFund2257topurchaseBuilding74(DNR),Building84(DivisionofCorrection),andBuilding87(FormerHolidayInninParkersburg),eachofwhicharestand-aloneproperties.Furthermore,Fund2257hasbeenusedtomakeimprovementstopropertiesthatarebeingleasedtotheStateortheStateislease-purchasing.Asleasedproperties,theyarenotstate-owned.Forexample,inFY2010Fund2257wasusedtopay$457,779inleaseholdimprovementstotheKanawhaCityMallwhere theDivisionofMotorVehicles is located. Fund2257wasalsoused topay$63,500 to installductwork inBuilding97(Williamson).Thisbuildingisalease-purchaseownedbythecityofWilliamson.

Fund2257isalsobeingusedtopayaround$75,000peryearindebtserviceonalease-purchaseagreementwiththeCharlestonBuildingCommissionforthreelotsonJeffersonStreetneartheCapitolComplexthatincludesBuilding33andtwoparkinglots.Debtservicepaymentsaregenerallypaidforbytherentgeneratedbytheproject.Thesepayments



donotimproveorrepairtheproperty,thus,theyareoperatingexpenses.

PERD requested a legal opinion from the Legislative ServicesDivisionwithintheOfficeoftheLegislativeAuditor.Thequestionraisedin therequestwas if theDOAisusingFund2257 incompliancewithWestVirginiaCode.Thelegalopinionindicatesthat,withtheexceptionofpurchasingfurniture,theDOA’sexpendituresforoperatingexpenses,acquisitionsandconstructionofrealpropertiesfromFund2257“fulfillsthepurposesofthelegislation.”TheopinionindicatesthatBlack’sLawDictionarydefinescapitalimprovementasan“outlayoffundstoacquireorimproveafixedassets.”Furthermore,theopinionindicatesthatW.Va.Code§5A-4-2(a)(1)and(2)providethatthedirectoroftheGSDhasresponsibilityforthecare,controlandcustodyofCapitolbuildingsandfurnishlight,heatandventilation.Giventheseresponsibilities,thelegalopinionassertsthatitfollowsthatthelegislationisallowingforcertainoperatingcoststobepaidoutofFund2257.

AlthoughthelegalopinionindicatesthattheDOAisinlinewiththestatutorylanguageofitsenablingstatute,thecurrentuseofFund2257maynotbetheLegislature’sintent.WhiletheGeneralServicesDivisionis responsible for janitorial services, light, heat andventilation for theCapitolbuildings, §5A-4-2 says that these services are tobeprovided“. . . regardless of the budget or budgets, departmental or otherwise,fromwhichthejanitorialservicesarepaid”[emphasisadded].Inotherwords,itisstronglyimpliedthattheseservicesarepaidfromstateagencybudgets,not lottery revenues. TheLegislatureprovidesagencieswithappropriationsforrent,whicharedepositedintoFund2241oncepaid.Building rent is normally charged for the purpose of maintaining andoperatingofficebuildings.Therefore,itstandstoreasonthatFund2241istoprovidethevariousoperatingservices.Furthermore,theseoperatingexpenseswerebeingprovidedsolelythroughFund2241longbeforethecreationofFund2257in1999.

Defining the term “capital improvements” is important indetermining if purchasing or constructing stand-alone buildings usingFund2257was theLegislature’s intention. Capital improvements aredefinedinW.Va.Code§11-15-2(b)(3)(C)(vi)fortheconsumersalestax.Thedefinitionstatesthatcapitalimprovementsareimprovements“thatareaffixedtoorattachedtoandbecomeapartofabuildingorstructureorrealproperty.”Bythisdefinition,capitalimprovementswouldonlyinvolveimprovementstoexistingproperty.Therefore,purchasinglandorbuildingsthatarestand-alonewouldnotconstitutecapitalimprovements.The Legislature should consider providing a formal definition for capital improvements as it relates to the use of Fund 2257.

PERDrequestedthattheDOAgiveitsstatutoryinterpretationthat

The Legislature provides agencies with appropriations for rent, which are deposited into Fund 2241 once paid. Building rent is normally charged for the purpose of maintaining and oper-ating office buildings. Therefore, it stands to reason that Fund 2241 is to provide the various operating services, not lottery revenues.



justifies itsuseof theCapitolDomeandCapitol ImprovementsFund.TheDOA’sresponsestatesthat:

Historically,ithasbeentheStateLegislature’spracticetoappropriatefundsintoFund2257...tobeusedfortheacquisitionofland,buildingsandtheconstructionofnewstand-alonebuildings.ThisFundhasalsobeenusedtopaycustodialandutilitybills,purchaseofficefurniture,makeleaseholdimprovements,andmakedebtservicepaymentsbecauseFund2241...didnotcontainadequatebalancestopayfortheseexpenditures.TheDepartmenthasalreadyincreased certain lease rental rates and will continue toevaluatetheserates,whenappropriate,toensurethattheratesgoingforwardadequatelycovertheoperationalcostslistedabovefromFund2241.SinceOctober1,2014,theDepartmenthasalreadyshiftedsomecustodialandutilityexpensesfromFund2257toFund2241.

ItisnotclearthattheLegislaturehashadanhistoricalpractice,asstatedbytheDOA,ofappropriatingfundsintoFund2257toacquireland,officebuildingsandtheconstructionofnewstand-aloneofficebuildings.From2000to2009,mostofthestructuresthattheDOAacquiredwerebybondissuesthatarepaidwithrentrevenuefromFund2241.IthasonlybeensinceFY2009thatFund2257wasusedtoacquirebuildings,andtheconstructionofnewbuildingsusingFund2257startedrecentlyaround2012.Nevertheless, the Legislative Auditor considers the steps taken by the DOA to raise rent appropriately and shift the operating costs mentioned in this report back to Fund 2241 as appropriate responses to this situation.

TheDOAalsostatedthat:

Expenditures for these various purposes were madepursuanttoWestVirginiaCode§5A-4-2(c),whichstatesthatfundsshallbeusedfor“othercapitalimprovementsandrepairstostate-ownedbuildings.”...Thereisnootherfundforusetobuildandrepair“state-ownedbuildings”not located on the State Capitol Complex. “Capitalimprovements”isatermofart,broadlydefinedbyvarioussources,includingtheInternalRevenueService,toincludemajorimprovementstoproperty.

TheLegislativeAuditordoesnotquestionthatFund2257is tobeusedtorepairandimprovestate-ownedbuildingsnotlocatedontheStateCapitolComplex.Furthermore,theagency’sstatementthatthereisnoother fund foruse tobuild state-ownedbuildingsnot locatedontheCapitolComplexisclearlyincorrectbecausetheDOAhasusedits

According to the DOA, Fund 2257 has also been used to pay custodial and utility bills, purchase office fur-niture, make leasehold improvements, and make debt service payments be-cause Fund 2241 . . . did not contain adequate balances to pay for these ex-penditures.



authority tobuild severalbuildings around the stateusingFund2241.TheissueisiftheLegislatureintendedtouseFund2257torepairandimprove only existing state-owned properties, which would excludeconstructingorpurchasingstand-alonebuildingsandmakingleaseholdimprovements.ItmaybethattheLegislatureintendedthatconstructingorpurchasingnewstructureswastobedonethroughFund2241,whichistheonlyDOAfundwithclearauthoritytobuildwithnorestrictionsonthegeographicallocationofthebuilding.The Legislative Auditor recommends that the Legislature clarify its intent of Fund 2257 in these areas.

The Insufficiency of GSD Funds Has Several Causes

TheDOAhas indicated that it is findingitdifficult toproperlymaintainstatefacilitiesduetobudgetcutsanddecreasesinlotteryfunds.WhilePERDacknowledgesthedropinvideolotteryrevenuessinceFY2010,thisisnotthecauseforthefinancialinsufficienciesofFunds2241and2257,twooftheDOA’sprincipalfundsformaintainingandoperatingDOAproperties.PERDliststhefollowingreasonsforDOA’sfinancialinabilitytomaintainitsproperties:

• TheDOApurchasesbuildingswithlittleregardforthefinancialimplications.

• The planning of DOA properties is uncoordinated andincomplete.

• Therentchargedinmanyinstancesisinadequatetomaintainandoperatethebuildings.

• TheDOApurchasesbuildingsthatarerelativelyoldandinneedofrepairsandrenovationsatthetimeofpurchase.

• The DOA does not have structural engineering inspectionsperformedonrelativelyoldbuildingspriortopurchase.

Thesefivecausesarediscussedingreaterdetailbelow.

The DOA Purchases Buildings Without Concern for the Financial Implications

PERDfindsthattheFinanceDivision,withintheDOA,hasamplemanagementinformationreflectingthedeclineofvideolotteryrevenuessinceFY2008,thedwindlingbalancesofFund2257,andtheinadequaciesofrentrevenuestocoverbuildingoperatingandmaintenanceexpenses

Furthermore, the agency’s statement that there is no other fund for use to build state-owned buildings not locat-ed on the Capitol Complex is clearly incorrect because the DOA has used its authority to build several buildings around the state using Fund 2241.

The issue is if the Legislature intend-ed to use Fund 2257 to repair and improve only existing state-owned properties, which would exclude con-structing or purchasing stand-alone buildings and making leasehold im-provements.



inFund2241. Therefore, PERD concludes that despite the DOA’s awareness of funding deficiencies, the acquisition of properties at least since FY 2008 have been made with little concern for their financial impact. These acquisitions diverted funds from being usedto address the significant amount of deferred maintenance in severalbuildings,particularlyBuildings3-6ontheCapitolComplex.Moreover,someoftheseadditionalpurchaseshaveaddedtothefinancialburdenintermsofexpendituresexceedingrentrevenue(seeTable10below).

PERD requested from the DOA a description of the decision-making process it uses in acquiring real property. The DepartmentSecretaryindicatedthatpurchasesofpropertyaresuggestedbyeitherthedirectorsoftheRealEstateDivisionortheGeneralServicesDivision.Thedecisiontomakethetransactionisbasedonseveralfactorsincluding,butnotlimitedto,short-termandlong-termbudgetandfiscalimplications,the ability to maintain the real property, and the contemplated use oftheproperty. TheDOAindicatedthatnowrittendocumentationexistsfor thisprocess,but that it isconsidering implementingone. It is the Legislative Auditor’s recommendation that the Legislature require the DOA to document all relevant factors that are essential in making a financially responsible purchase of real property.TheLegislatureshould consider specifying some of the factors in Code, as well asimposingtherequirementontransactionsofcertainamounts.TheRealEstateDivisionhasonoccasionbeenrequestedtoperformcost-benefitanalysesonafewselectproposedpropertytransactions.Therefore,theDOAhastheexpertisetoperformtheanalysis.

The Planning of DOA Properties Is Uncoordinated and Incomplete

TheGSDperiodicallypreparesMasterPlans,CapitalImprovementPlans, and FacilityAssessments. In previous years these plans wereprovidedonafive-yearschedule.Thelastfive-yearFacilityMasterPlanwasissuedin2007.Therehasnotbeenafive-yearplanissuedsincetheconclusionofthe2007five-yearplan.PERDfindsthatGSD’scapitalimprovementplanshavebeenincomplete,unfulfilled,andcontradictory.Forexample,intheagency’s2000-2005CapitalImprovementPlan,theplanforBuilding2(ParkingGarage)wastorestoreitatanestimatedcostof$700,000. However,Building2wasdemolished in2004.TheplanalsointendedtototallyrestoreBuilding3atanestimatedcostof$20.4millionbutitwasunfulfilled.The2007planintendedtorestoreBuilding3between2007and2009atanestimatedcostof$30million.Thisalsowasnotaccomplished.Theserenovationsarerecentlybeingaddressedsome15yearslater.

Inthe2007MasterPlan,theGSDdiscussedtheneedsofmanyfacilities, but nomentionwasmadeof the agency’splan forBuilding24(ClarksburgOfficeBuilding),whichhadbeenvacantforfouryears

These acquisitions diverted funds from being used to address the significant amount of deferred maintenance in several buildings, particularly Build-ings 3-6 on the Capitol Complex.

pg. �0 | West Virginia Legislative Auditor


atthetimetheplanwasissued,andnomentionwasmadeofBuilding28 (Old State Medical Examiner’s Office), which became vacant in2005.Furthermore,inSeptember2006theGSDspent$86,826foraroofreplacementonBuilding24atatimewhenithadbeenvacantforovertwoyears,remainedvacantthrough2011andsubsequentlydemolished.Theplan mentioned Building 21 (Fairmont Office Building) and proposedahostof renovationswithanestimatedcostof$1million. However,Building21becamevacanttwoyearslaterandwouldbedemolishedinFY2012.

Sincethe2007plan,theGSDissuedaFacilitiesMasterPlanin2013. However, thisplanaddressesonly thebuildingson theCapitolComplex.PERDfindsthatappropriatefacilityplanningwouldhavetoincorporateall facilities. Severalnewfacilitieshavebeenaddedsince2007,butatthepresenttimethereisnoplanthatspeakstotheentirestockofDOAproperties.Furthermore, the decisions to acquire additional properties during this time period were illogical given the financial constraints and the amount of deferred maintenance.Forexample,inFY2011,theDOApurchasedthe7PlayersClubproperty.TheDOAdidnotincurcostsforthepurchasebecausetheMinersSafetyandHealthagencyusedmoneyfromtheMinersHealthSafetyandTrainingFund.However,thebuildingwasdeededtotheDOA,whichmakesitDOA’sresponsibility to maintain and operate it. As of the end of FY 2014,expenditureshaveexceededrentrevenuedueinpartbecauseoftheinitialbuildingimprovementsofnearly$90,000(seeTable10below).Given the state of DOA funds, the decision of adding more property to its inventory has been questionable. This underscores a concern that the DOA does not have a definitive objective in what it is trying to accomplish in its real property formation.

The Rent Charged Is Often Inadequate

A primary cause for the insufficiency of Fund 2241 is theinadequate amount of rent charged by the DOA. Table 10 illustratesthe difference between total revenues and expenditures for buildingswithdebtservicepayments,andbuildingsrecentlypurchasedwith theadditionallotteryrevenues.The agency does not adequately monitor the rent charged in relation to building expenses, especially buildings that were purchased through revenue bonds. When bond paymentschedules escalate, as they have over the last several years, the DOAhas not raised rent appropriately. In addition, the recently purchasedbuildingsallhadmajorrenovationssoonafterthepurchase,particularlyBuilding84.OnlyBuilding74madeupthedifferenceinrentrevenuebytheendofFY2014.

Since the 2007 plan, the GSD issued a Facilities Master Plan in 2013. However, this plan addresses only the buildings on the Capitol Complex and it is only for the current year. Several new facilities have been added since 2007, but at the present time there is no plan that speaks to the entire stock of DOA properties.

Performance Evaluation & Research Division | pg. �1


Table 10Total Revenue Less Total Expenditures

for the Years Specified

Building TimePeriod RevenuelessExpenditure

Bonds Issued:Huntington–Building32 2009-2014 -$1,282,511Weirton–Building34 2009-2014 -51,093OneDavisSq.–Building36 2009-2014 -763,057DEPKanawhaCity–Building37 2009-2014 153,832Greenbrooke–Building86 2010-2014 -530,612Williamson–Building97 2009-2014 -312,367Cash Purchases:DNR–Building74 2010-2014 370,255Corrections–Building84 2010-2014 -451,533

7PlayersClub–Building88 2012-2014 -26,995

Net Total -$2,894,081Source:PERDcompilationbasedondatafromtheStateAuditor’sOffice.

Some Buildings Purchased Are Relatively Old and Require Significant Repairs and Renovations

SeveralDOApropertiespurchasedarerelativelyoldandinneedofrepairsorrenovationsat thetimeofpurchase (see Table 11). Renovationcosts tomake thefacilitiessuitableforoffice spaceandmake themcompliantwith federal and state law can beconsiderable,anditmaybeyearsbeforethose costs are recouped in rentpayments. The Greenbrooke building(Building 86), located in Charleston,wasconstructedinthe1920s.TheDOAissuedrevenuebondsforthebuildingin2009withaprincipalandinterestamountofcloseto$19million.Thebondshavea24-yearterm(2010to2034).TheGSDstatesthebuilding’sconditionasgoodtofair.However,PERDvisitedthebuildingandwasshownvariousplacesonthetopfloorwheretheroofleaks(seeFigure6).Inoneplacetheleakwassobadthatalargecontainer was placed underneath it. The building will also need newcarpetonthethirdfloor.Inaddition,theDOAhasincurredover$115,000

Figure6-AreasofleaksontopfloorofBuilding86Figure6-AreasofleaksontopfloorofBuilding86



The Greenbrooke building will also need new carpet on the third floor. In addition, the DOA has incurred over $115,000 in FY 2011 for repairs and replacements to the building’s heat pumps and HVAC system.

inFY2011forrepairsandreplacementstothebuilding’sheatpumpsandHVACsystem.AsTable10previouslyshows,expendituresforBuilding86 have exceeded revenues by over $530,000 from FY 2010 to FY2014.

Table 11DOA Buildings Purchased

and Their Approximate Construction DateBuilding ApproximateYearBuilt

PublicEmployeesDayCar–Building16 1937OldFairmontBuilding--Building21 1927BeckleyOfficeComplex--Building23 1930OldClarksburgBuilding--Building24 1968DHHRParkersburg--Building25 1940sSurplusProperty–Building27 1954OneDavisSq.–Building36 1958DNR--Building74 1978Corrections–Building84 1979Greenbrooke–Building86 1920sSources:TheGeneralServicesDivisionandtheBoardofRiskandInsuranceManagement.

Within a year after the DOA purchased Building 84, locatedat 1409 Greenbrier Street in Charleston, costs of over $520,000 wereincurredtorenovaterestrooms,installcarpetandvinyltile,installnewwindows,andrepairtheHVACsystem.Thisbuildingalsoneedsanewroofbutfundingisnotavailable. InFY2010,Building36, locatedatOneDavisSquare inCharleston, incurredover$350,000 for roof andHVAC repairs. The entire HVAC system in Building 36 needs to bereplacedbutfundingisnotavailable.Theestimatedcostoftheprojectis$3.6million.

TheDOAhaspurchasedbuildingsthatwerenotonlyrelativelyoldbutwerenot conducive for office space. Building24, the formerClarksburg office building, was converted from a hotel into an officefacility. A 1998 PERD report indicated that 2,424 square feet of thebuildingcouldnotbeleasedbecausetheareawastoocostlytorenovate.Thisbuildingeventuallydevelopedsevere interiorwaterdamage fromaleakingroofandpipingfailures.Thebuildingwasevacuatedin2003whiletheStatestillhadsevenmonthsofbondpaymentsremaining.TheDOAquestionedthewisdomoftheClarksburgpurchaseinthefollowingstatement:

Within a year after the DOA pur-chased Building 84, located at 1409 Greenbrier Street in Charleston, costs of over $520,000 were incurred to renovate restrooms, install carpet and vinyl tile, install new windows, and re-pair the HVAC system. This building also needs a new roof but funding is not available.

In FY 2010, Building 36, located at One Davis Square in Charleston, in-curred over $350,000 for roof and HVAC repairs. The entire HVAC system in Building 36 needs to be re-placed but funding is not available. The estimated cost of the project is $3.6 million.

Performance Evaluation & Research Division | pg. ��


The DOA has purchased buildings that were not only relatively old but were not conducive for office space. The 1998 PERD report also indicated that 15,900 square feet of Building 21, the former Fairmont office building, was deemed “not suitable for use.”

Inhindsight,thedecisiontoconvertthisoldhotelintoanofficebuildingwasaquestionableone,atbest.Evenatitshighestuse,thebuildingwasonlyat50%occupancy.

The1998PERDreportalsoindicatedthat15,900squarefeetofBuilding21, the formerFairmontofficebuilding,wasdeemed“notsuitable foruse.”

Older Properties Acquired Without Structural Engineering Inspections

PERD requested engineering inspection reports for severalrelativelyoldpropertiespurchasedbytheDOA.TheDOAwasunabletoprovidesuchdocumentsforanyofthebuildings.Someofthebuildingsinquestionwerepurchasedquitesometimeago,soaninspectionmayhavebeenconductedpriortopurchasebutnorecordexists.However,noinspectionreportswereavailableformorerecentpurchasessuchastheGreenbrookebuildingwhichwasbuiltinthe1920s.Thereisnoevidenceindicating the DOA requires structural engineering inspections ofbuildingspriortopurchase.ItisinterestingtonotethatseveralexampleswereprovidedbytheRealEstateDivisionofenvironmentalinspectionsofpropertiespriortopurchases,butnotastructuralengineeringreview.

ThereareexamplesofDOAbuildingsthathadseriousissuesthatmayhavebeenforeseenwithastructuralengineeringinspection.Asstatedpreviously,theClarksburgbuildinghadsevereinteriorwaterdamage.TheFairmontbuildinghadsignificantproblemsidentifiedin2005and2009structural engineer reports conducted for BRIM. The 2009 report ledtothebuildingbeingclosedthatyearbecauseofstructuralweaknesses,waterinfiltrationinthebasement,rustedbeams,rustedelevatorrailsfromstandingwaterintheelevatorpit,andacorrodedgaslinethatcouldhaveresultedinacatastrophicevent.Althoughthe2005reportdidnotmentionthecorrodedgasline,itmentionedthestructuralissues,waterinfiltration,rustedbeamsandelevatorrailsthatwereidentifiedinthe2009report.The2005 report also specified that a fewof the issues createdunsafeconditionsthatneededtobeaddressedimmediately.Moreover,the2009report stated that “There had been problems with moisture intrusionsthrough the foundationwalls in thebasementoveranextendedperiodoftime.”Sincethe2005reportidentifiedsimilarconditions,thewaterinfiltrationwaslikelyanissuewellbefore2005.Thisraisesthequestionsofhowfarbackdidtheseissuesexist,andwouldtheyhavebeendetectedbyastructuralengineeringinspectionbeforethepurchase?

TheLegislativeAuditorrecommendsthattheLegislaturerequiretheDOA,priortothepurchaseofabuilding,haveacompleteengineeringinspectiondonetoevaluatethestructuralintegrity,aswellastheconditionof the roof,basement,HVACsystem,plumbing,electricalwiring,andotherimportantfeatures.Theresultsoftheinspectionshouldbefactorstoconsiderinthecost-benefitanalysispreviouslyrecommended.

There is no evidence indicating the DOA requires structural engineering inspections of buildings prior to purchase. There are examples of DOA buildings that had serious issues that may have been foreseen with a structural engineering inspection.

pg. �� | West Virginia Legislative Auditor


Any significant additions to the agen-cy’s inventory of real property should be avoided.

Conclusions

The Legislative Auditor concludes that the Department ofAdministrationhasanoverextendedstockofrealpropertythatitcannotproperlymaintainoroperate,and this situationhasexisted for severalyears. Furthermore, it is evident that in purchasing these propertiesthe DOA ignored financial analyses provided by its Finance Divisionthat clearly showed the insufficiencies of its funds. The situation isfurtheraggravatedbytheDOAcharginganinadequateamountinrent,and purchasing relativelyold buildings that incur significant expensestorepairandrenovatethemsoonafterthepurchase. Thishasresultedin some buildings incurring more expenses than rent generated. Anysignificantadditionstotheagency’sinventoryofrealpropertyshouldbeavoided.

Recommendations

1. The Legislature should consider requiring the Department ofAdministrationtoperformanddocumentacost-benefitanalysisprior to any purchase of real property in excess of a specifiedthresholdpurchaseprice.

2. The Legislature should consider placing a moratorium on theDepartment of Administration from purchasing real propertyabovethepriceof$1millionuntiltheDepartmentcandemonstrateithasstrengtheneditsfinancialresources.

3. If the Legislature chooses not to place a moratorium on theDepartment of Administration from purchasing real property,the Department should avoid significant additions to its stockof real property until it has substantially improved it financialresources.

4. TheLegislativeAuditorrecommendsthattheLegislatureclarifyits intentof theCapitolDomeandCapitol ImprovementsFund(Fund2257),establishedinW.Va.Code(§5A-4-2(c)),foritsusein capital improvements and repairs of state-owned buildings.Also, a specific definition for capital improvements should beprovidedinstatuteasitrelatestoFund2257.

5. TheDepartmentofAdministrationshouldtakestepstoimproveitsprocessofmonitoringrentrevenuesandexpenditureswiththeintentionofraisingrentappropriatelytocoverrisingcosts.

6. The Department of Administration should pay all appropriateoperatingcostsofDOAfacilitiesfromFund2241.



7. TheDepartmentofAdministration shouldcomplywith statute topayallappropriatebondpaymentssolelyfromFund2241pursuanttoW.Va.5-6-8(a).

8. The Legislature should consider requiring the Department ofAdministration to have a structural engineering inspectionperformed on buildings prior to the purchase that evaluates thestructuralintegrityofthebuilding,theroof,thebasement,HVACsystems,plumbing,electricalwiring,andothermajorareasofthebuilding.Theresultsoftheinspectionshouldbefactorstoconsiderinthecost-benefitanalysisspecifiedinrecommendation1.



Appendix ATransmittal Letter



The Performance Evaluation and Research Division (PERD) within the Office of the LegislativeAuditorconducted thisperformanceauditof theGeneralServicesDivisionaspartof theAgencyReviewoftheDepartmentofAdministration(DOA),asrequiredandauthorizedbytheWestVirginiaPerformanceReviewAct,Chapter4,Article10,of theWestVirginiaCode,asamended. Thepurposesof theGeneralServicesDivision(GSD),asestablishedinWestVirginiaCode§5A-4,aretohavecare,custodyandcontrolofthecapitolbuildingsandbuildingsunderthejurisdictionoftheDOA.

Objective

TheobjectiveofthisreviewistodeterminethecausesoftheDepartmentofAdministrationhavingrealpropertiesthatareorhavebeeninadequatelymaintained,unoccupied,uninhabitableorunderutilizedforanextendedperiodoftime.

Scope

Thescopeofthisreviewconsistsofallrealpropertiesthatarepresentlyownedorarebeinglease-purchasedby theDOAorwereownedby theDOAatany timeduring2000 to2014. Somebackgroundinformationforyearspriorto2000wasnecessarytolearntheageofsomebuildingsandwhentheywerepurchasedby theState. The scope includes an examinationof all revenues sources, expenditures, lease-purchase agreements and bond issues used to purchase, construct, operate, maintain, repair and improvethesepropertiesfrom2000to2014.TheGSDfundsthatwereanalyzedconsistedofFund0230(DivisionofGeneralServices),Fund2240(ParkingLotsOperating),Fund2241(StateBuildingCommission),Fund2250(AsbestosLitigationRecovery),Fund2255(ParkingGarage),Fund2257(CapitolDomeandCapitolImprovements),Fund2461(2004CapitolComplexParkingGarage),Fund2462(CapitolRenovationandImprovement)andFund2463(Governor’sMansion).Fund2249(DebtServiceRegionalJailAuthority)andFund2252(Education,Arts,Sciences,andTourism,DebtService)arenotinthescopeofthisauditbecausetheyarestrictly flow-throughaccounts for receivingfunds topaydebtserviceonbond issues. TheWestVirginiaStateAuditor’sFinancialInformationManagementSystem(FIMS)wastheprimarysourceofdataonGSDrevenuesandexpenditures.Inaddition,thescopeincludestheagency’sfinancialreportsonGSDfunds,longandshort-termplansforGSDproperties,andGSDassessmentreportsontheconditionsofeachproperty.

Methodology

PERDgatheredandanalyzedseveralsourcesofinformationandconductedauditprocedurestoassessthe sufficiency and appropriateness of the information used as audit evidence. A complete inventory ofGSD properties that existed during the 2000-2014 period was necessary as a starting point for the audit.PERDreceivedGSD’scurrentinventoryofproperties;however,thelistdidnotincludepropertiesthatwerepreviouslydemolishedor scheduled to bedemolishedor transferred to another state agency. In order tocomplete the listofDOAproperties,PERDreceived from theBoardofRiskand InsuranceManagement(BRIM)alistofDOApropertiesitinsuredineachyeardatingbackto2000.PERDalsoexaminedtheGSDMasterPlansbackto2000thatlistedvariousbuildings,andFIMSdatawerealsousedtoidentifybuildingsthatwerestillincurringexpensesorreceivingrevenueforyearsbackto2000.PERDwasabletousethese

Appendix BObjective, Scope and Methodology



sourcestodevelopaninventoryofDOArealpropertyfor2000-2014thatgavereasonableassuranceofbeingsufficientandappropriate.

Inordertoestablishthecurrentconditionsofexistingbuildings,PERDreliedonGSDconditionreportsfor eachbuilding. However,PERDalso toured several buildings, tookphotographs andconfirmedotherphysicalevidenceofbuildingsthroughwrittenconfirmationfromtheGSD.Inordertoconfirmthelengthoftimeexistingornon-existingbuildingswereuninhabitable,ortodocumenttheconditionofbuildingspriortotheirdemolitionorrenovation,PERDusedGSDinformationandcorroboratingevidencefromSchirmerreportsandengineeringinspectionsconductedforBRIMthatdescribedtheconditionsofbuildingsandlengthofvacanciespriortorenovationsordemolition.Financialdatawerealsousedinsomecasestoconfirmthelengthofvacanciesbyidentifyingwhenrentceasedtobepaidincertainbuildings.ThesesourcesofdataandtestsofevidenceprovidedreasonableassuranceoftheconditionsandlengthofvacanciesofGSDbuildingsinexistenceduringthe2000-2014period.

As a means to determine the causes for several GSD buildings being improperly maintained forextended periods of time, PERD conducted financial analyses to determine how the DOA used the largeinfluxof lottery revenuesof fiscalyears2008and2009during the time inwhichbuildingswere inneedofmajorimprovements,andhowdiditrespondtoexcesslotteryrevenuesreturningtonormallevelsinFY2010.Inaddition,PERDobtainedtheagency’sMasterPlansandcomparedthemtofinancialdecisionsinordertoassesstheagency’splanningprocess.PERDobtainedfinancialdataonrevenuesources,operatingexpenses,maintenanceandimprovementexpenses,purchases,leasepurchasesandconstructionofbuildings,andfundbalances.FinancialdataandinvoiceswereobtainedthroughtheStateAuditor’sFIMSsystemandwereusedtoconfirmfinancialreportsprovidedbyDOA’sFinanceDivision.Therewerenodiscrepanciesbetweentheagency’sfinancialreportsandFIMSdata.NoprocedureswereconductedonFIMSdatabecausetheLegislativeAuditorconsidersitanauthoritativesourceunderGAGASA6.05c.Therefore,FIMSdataonGSDfundswereconsideredsufficientandappropriate.

We conducted this performance audit in accordance with generally accepted government auditingstandards. Those standards require that we plan and perform the audit to obtain sufficient, appropriateevidencetoprovideareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.

Performance Evaluation & Research Division | pg. �1


Appendix CAgency Response



Building1,RoomW-314,StateCapitolComplex,Charleston,WestVirginia25305

telephone:1-304-347-4890|www.legis.state.wv.us/Joint/PERD/perd.cfm|fax:1-304-347-4939

agency review general services division · agency review general services division department of...

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