720-913-5000 auditor@denvergov.org

DENVER – Denver International Airport has made significant progress after two assessments conducted last year, but airport leaders still have work to do to ensure sound financial management for one of its largest sources of revenue, according to two follow-up reports released today by Denver Auditor Timothy M. O’Brien, CPA.

“Airport management is working harder to improve revenue and contract management,” Auditor O’Brien said. “However, most of our recommendations for parking revenue are still not implemented, and I want to see the risks we identified fully mitigated.”

Our office conduced an audit of the airport’s parking revenue in February 2018, and we commissioned an examination of the airport’s contract with PetroPro Engineering Inc. for management of oil and gas wells on airport land in March 2018.

Airport Parking Revenue:

The parking revenue audit found weak oversight of airport parking operations, including lax oversight of employee parking, off-airport parking, and general transportation operations — which has meant missed opportunities for revenue collection. SP Plus Corp. holds a contract to manage parking operations at the airport.

In 2016, the airport generated more than $187 million in parking revenue — more than $170 million from public parking, about $11 million from ground transportation, and more than $6 million from employee parking. Parking is the second-largest source of revenue for the airport. Management of a significant revenue stream requires sound controls to safeguard the revenue.

Out of 26 recommendations, the airport fully implemented only 12. Four were partially implemented.

The airport did institute a new system to monitor ride-hailing services, such as Uber and Lyft, and it did confirm the companies are paying appropriate fees. The new electronic geotagging system has shown a 3% to 5% discrepancy between the trips these ride-hailing companies make to the airport and the number of trips tracked in the Gatekeeper system.

Some of the unimplemented recommendations and partially implemented recommendations are dependent upon the upcoming implementation of a new property and revenue management system. The airport plans to switch to an airport industry-specific software system called PROPworks for financial tracking and calculations.

Airport management did collect 32 unremitted payments for off-airport parking but did not collect interest on the payments because the current financial system can’t calculate the fees. Interest will continue to be uncollected for late payments until PROPworks is implemented — which means lost revenue for the city.

The airport has also not implemented a new employee parking system as recommended. The airport says it’s waiting for City Council to approve the contract for the system.

Other issues identified in the audit included contractor reimbursements, staffing requirements, budget submittals, employee leave accruals, record keeping and documentation, and quarterly incentive awards.

“Airport managers are working hard to get this large source of revenue under control,” Auditor O’Brien said. “But there’s still more work to do, and we will be keeping a close eye on ongoing risks at the airport.”

Well rig at Denver International Airport​Airport Oil and Gas Wells:

During our follow-up work for the airport oil and gas examination, we were pleased to find all recommendations implemented.

In the examination, auditors found some wells had lost money and that PetroPro, the company managing the wells for the airport, had no incentive to cap unprofitable wells. After the assessment, airport officials worked with the University of Wyoming to conduct a feasibility study of the airport’s oil and gas program.

PetroPro has now stopped all production from the wells, and the airport is not producing any oil and gas.

Airport officials used the feasibility study to assess which wells were not worth reconnecting if operations resume. PetroPro also conducted an analysis of the wells and updated the status of inefficient wells. The company conducted an annual cash-flow report for each well, detailing expected gross and net production through 2033 should the airport decide to reconnect any wells.

The PetroPro oil and gas management contract expires in 2021, and any future contract would include clearer well status definitions, potential additions to resolve the incentive conflict noted in the original report, and enhanced data management and reporting expectations.

“I applaud the airport for taking a measured approach to how it manages these oil and gas wells going forward,” Auditor O’Brien said. “It is important to make sure we are using resources effectively to avoid waste and lost revenue.”

Read the Follow-Up Report – Airport Parking Revenue
Read the Audit – Airport Parking Revenue
Read the Follow-Up Report – PetroPro Engineering Inc. Contract
Read the Report – PetroPro Engineering Inc. Contract

 

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