Some of the most significant findings from the city of Killeen’s management audit report presented at a City Council workshop Tuesday were in the city’s capital outlay policies, which the report found were in significant disarray.

City officials and audit firm McConnell & Jones defined capital outlay as “non-recurring expenditures for improvements that exceed $50,000 and have useful lives exceeding one year.”

These expenses include infrastructure and facility construction and improvement, and asset purchases.

The audit specifically targeted the city’s capital outlay expenditures from fiscal year 2006-16 and looked for reasons behind the city’s bump in capital outlay spending in certain years, any significant cost overruns in capital improvement contracts and the funding mechanism behind those projects.

While the auditors — as they did in every other aspect of the investigation — said there was no apparent fraud or mismanagement in the handling of capital outlay funds, a series of shortsighted expenditures and weak financial controls created a situation in which the council repeatedly voted for large increases in capital improvement without a clear vision of the future.

“We noted that capital project information is fragmented and disorganized,” the report said. “There are no summary databases, schedules, or reports that combine all relevant details about capital projects in one place. The inability of the City to readily provide line item project budgets weakens internal controls over capital outlays and reduces accountability for these funds.”


Hampering the investigation was a specific instance in which the firm could not gather certain financial documents that could have shed light on a 311 percent increase in capital outlay expenses from fiscal year 2005-06 due to formatting issues in one of the documents and another that the city could not provide.

In the city’s management response, however, the city said the documents the firm requested were audit work papers that they were not required by state record retention laws to maintain. When the city reached out to the audit firm that possessed the documents, one was in an unreadable format and the other was not attainable.

In another area of concern, the auditors found that city department heads had in the past overseen and managed vertical construction projects, including the construction of two fire stations in fiscal year 2010 and the Killeen police headquarters on Featherline Road.

The firm recommended the city create a “vertical construction” team for capital improvement projects to take those projects out from under department head management. Auditors sample 12 major capital improvement projects and found no significant change order abuse of cost overruns in those projects.

In the recommendations section of the report, the firm recommended the city institute a comprehensive capital improvements plan that would have a two-fold benefit: Provide a long-range view of the city’s planned capital outlay expenditures and untangle capital expenses from operating expenditures in the general fund.

City Manager Ron Olson has touted a similar program and city fund since his arrival in Killeen in February. Olson said the plan would fold the city’s various master plans — which have a five-year horizon — into a plan that could look as far as 20 years into the future.

“When we look a capital improvement plan, it’s going to be comprehensive and deal with water, sewer, drainage, roads, facilities,” Olson said Friday. “It’s one place you can go and see everything.”


Olson said the city currently works with a series of master plans that are all nearing the end of their shelf lives. He said once the city’s annual budget is expected to be approved Sept. 19, he would work provide the council with policy language to create the capital improvement fund and begin establishing a calendar for outlay expenditures.

“The master plan is created for a five-year look and pretty much all of our plans are at the tail end of that length now,” Olson said. “For sure, we’ve got to get the plans updated but we need to have an ability to look beyond that five year window, which we don’t have now.”

Go to to read the firm’s final report, see for more articles on how municipal government impacts you, and check out for continuing coverage of the investigative audit's results. | 254-501-7567

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.