City of Los Angeles Office of the Controller

AUDIT OF LAWAS MANAGEMENT CONTROLS OVER ITS HOME-GARAGED & POOL VEHICLES

June 21, 2013

Wendy Greuel
City Controller

TABLE OF CONTENTS

EXECUTIVE SUMMARY ........................................................................................................ 1 CONTROLLERS ACCOUNTABILITY PLAN.............................................................................. 8 BACKGROUND, OBJECTIVES, SCOPE AND METHODOLOGY ................................................. 12 AUDIT FINDINGS AND RECOMMENDATIONS ........................................................................ 14 SECTION I: HOME-GARAGED VEHICLES............................................................................. 14 SECTION II: VEHICLES ASSIGNED TO CENTRAL POOLS AND LAWA DIVISIONS .................... 21 SECTION III: CROSS-CUTTING ISSUES .............................................................................. 29 APPENDIX A .................................................................................................................... 32

AUDIT OF LAWAS MANAGEMENT CONTROLS OVER ITS HOME-GARAGED AND POOL VEHICLES

EXECUTIVE SUMMARY

The Controllers Office conducted an audit of the Los Angeles World Airports (LAWA) Management Controls over its Home-Garaged and Pool Vehicles. The primary objective of this audit was to assess LAWAs management controls over the assignment, usage, and monitoring of fleet vehicles assigned to Central Pools and LAWA Divisions, as well as those assigned to specific individuals with authorization for home-garaging. We also evaluated the Departments fleet management practices to identify opportunities to improvement. LAWA maintains a fleet of over 1,400 items including cars, trucks, motorcycles, and heavy equipment. This audit focused on light duty sedans, trucks, vans, and motorcycles that are maintained by LAWA, as categorized below: No. of Vehicles1 84 81 651 213 1,029

Home-Garaged Vehicles Central Pool Vehicles Vehicles Assigned to Divisions Vehicles Assigned to Airport Police Total

We focused our review on LAWAs passenger vehicles (e.g., light duty sedans, trucks and vans) that are being used to perform critical functions and support services in the areas of administration, airport operations, grounds and facility maintenance, engineering and construction, and security and law enforcement. This performance audit was performed in accordance with Generally Accepted Government Auditing Standards and included the current control structure and processes used to manage LAWAs vehicle fleet, and sample transactions and activities from July 1, 2010 to October 31, 2012. Audit fieldwork was conducted between October 2012 and January 2013. SUMMARY OF AUDIT RESULTS Over the last two years LAWA has purchased light-duty vehicles totaling more than $2 million. Additional costs are incurred for maintenance and fuel for the vehicle fleet.
Includes all items classified as C or P based on records provided by LAWAs Facilities Management Group as of October 18, 2012 sorted by assigned classification as noted in the fleet system. LAWA indicated these include 46 items that are not considered on-road vehicles.
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However, despite these significant expenditures, our audit found that LAWA lacks the necessary management controls to ensure the appropriate and optimal use of its vehicles. The Departments Facilities Management Group includes a Fleet Maintenance Section, and while this section uses a robust software application to help manage LAWAs vehicle fleet, the groups primary focus is on maintenance and repair activities and they have no oversight responsibility regarding the assignment or usage of LAWA vehicles. LAWA management has recognized the need for more centralized control over the vehicle fleet, and is pursuing hiring a Fleet Manager to fulfill this function. Overall, our audit found that there is inadequate centralized accountability or control over the vehicles that are assigned to staff with authority for home-garaging and those allocated to LAWA Divisions and other pools. We noted that the inventory information produced by the fleet system was inaccurate, and LAWA has no utilization standard or process to evaluate the need for or best use of its existing vehicles. Divisional pool vehicles are routinely assigned to individuals, limiting their effective use by other staff, and some employees who use their personal vehicle due to a shortage of available pool cars have been paid excessive mileage reimbursements. In addition, there is inadequate control over the vehicle replacement process. LAWA should take immediate action to improve controls over its vehicle fleet, as well as maximize the usage of those assets and reduce overall costs. The key findings of the audit include the following: HOME-GARAGED VEHICLES o LAWA lacks centralized accountability and control over assigned take-home vehicles. Information is inadequately maintained in LAWAs centralized listing, and not all employees who had custody of a LAWA take-home vehicle were properly authorized. Though it maintains a master listing of all LAWA vehicles, the Facilities Management Group, through its Fleet Maintenance Section, has little control or oversight regarding the assignment or location of vehicles; its attention has been focused primarily on vehicle maintenance. In addition, Airport Police Administration manages the assignment and location of vehicles designated as belonging to the police fleet. According to the Assistant Chief of Airport Police, patrol officers drive take-home motorcycles, officers at the rank of captain and above are assigned take-home cars, and others including K9 officers, task force members or officers in acting capacities may also have home-garaged vehicles. However, our review of the existing list of take-home authorities and interviews with several police units, demonstrated inconsistencies between what was listed, who was approved, and who actually had a take-home vehicle.

By not having centralized control over the assignment of home-garaged vehicles, LAWA lacks assurance that all take-home cars are fully accounted for, and are actually being used for their intended purposes. o LAWA does not have a process to ensure employees are formally approved for the home-garaged vehicle program and that they meet the Departments established criteria. No documentation supporting or justifying the home-garaged vehicle assignments for our audit sample could be provided, either by LAWA Administration or the Divisions that requested/initiated the specific assignment. However, during our review the Chief Operating Officer issued a memo noting the current approved list of employees with home-garaging privileges (excluding Airport Police, who must be approved by the Chief). Management indicated that home-garaged vehicles are provided to designated executive positions as a condition of employment. For other staff, if they are regularly subject to emergency calls at LAWA facilities, the authority for a homegaraged vehicle must be initiated and justified by the employees respective Division Head/Deputy Executive Director, and is subject to final approval by the COO. Based on our evaluation of home-garaged vehicle assignments using the Departments established criteria, we noted some exceptions. For example, a City Attorney was assigned a take-home vehicle as a condition of employment; however, that individual is not actually a LAWA employee. Also, while some individuals have been called in after office hours, it has not been on a regular basis since they have front-line supervisors positioned on-duty 24/7 and LAWA has an Airport Response Coordination Center that is adequately represented by staff from all key Divisions. While it is LAWAs discretion to determine which positions are provided a homegaraged vehicle, such decisions should be supported by a consistent policy that justifies the assignment. LAWA should develop more clear and consistent criteria for the home-garaged vehicle program that best meets the business needs in the most economical manner. o Providing and maintaining home-garaged vehicles is more costly than other alternatives. Other than those assigned to Airport Police, LAWA provides 31 employees with take-home vehicles, including 14 executives and 17 senior managers subject to regular emergency call. An additional eight vehicles are reserved by fleet services as loaners for executives when their assigned vehicle requires maintenance. Management has indicated there is a shortage of vehicles available to Division pools, but there has been no formal assessment of vehicle utilization or current assignments to Division pools or individuals with home garaging authority to determine an appropriate allocation. 3

We conducted an analysis of the costs incurred by LAWA for a sample of take-home vehicles, and found it would have been more cost effective to provide a car allowance to those employees. Applying the results of the analysis to all non-sworn employees currently approved for home-garaging results in potential annual savings ranging from $13,000 - $65,000 annually. It may also be appropriate to reduce the number of home-garaging authorities based on the Departments criteria. LAWA has an opportunity to reduce the costs of the program and make more cars available for Divisions pool use. o The Departments home-garaging policy does not require permittees to provide evidence of personal insurance to cover liability that may arise from driving a City vehicle outside of its intended use. LAWAs current practices do not require staff with take-home vehicles to provide evidence of personal insurance that could cover their assigned City vehicle, though the CAO requires this of Council-controlled City Departments. The requirement to obtain and provide evidence of personal car insurance is intended to ensure coverage against liability that arises from driving a City vehicle outside of its intended use for business or under circumstances where the driver could be deemed grossly negligent. LAWAs Vehicle Policy and commercial insurance provide coverage only for permitted persons driving a City vehicle during the course and scope of his/her duties. By not ensuring that employees who are assigned take home vehicles maintain appropriate personal insurance, LAWA is exposed to greater potential liability. o LAWAs home-garaging vehicle policy should include specificity regarding the use of the vehicles, and be formally approved by LAWAs Board. LAWAs general vehicle policy provides that City cars are strictly for business use and cannot be used for personal purposes; however, the policy should more clearly indicate expectations for home-garaged vehicles. In addition, the specifics of LAWAs home-garaging program, including its purpose and benefits to the organization, as well as who is eligible and how assignments are determined, may be unknown to LAWAs Board. Providing a comprehensive vehicle policy that includes specificity on the homegaraged vehicle program, as approved by LAWA Board, would help ensure that actions by staff and management are consistent with expectations and that the program provides maximum benefit to the organization.

Vehicles Assigned to Central Pools and LAWA Divisions

o LAWA does not maintain accurate and complete information of Divisional pool vehicles.

We attempted to verify the information on LAWAs vehicle inventory listing generated from their fleet system by requesting LAWA Divisions to conduct a physical count of the vehicles assigned to them and provide other pertinent information. We found multiple discrepancies; concluding that the centralized listing was not accurate or reliable regarding the location assignment or existence of LAWAs pool vehicles. The Fleet Maintenance Section indicated that not all information related to vehicle inventory was generated by their automated system, which is primarily used to track maintenance work for the fleet, rather than inventory. However, a reliable inventory system that captures and reports accurate information is essential for effective fleet management and control over moveable assets. o Divisional pool vehicles are not utilized to maximize effectiveness, and the mileage reimbursement program must be better controlled. We analyzed vehicles assigned to LAWA Divisions consisting of light duty sedans, trucks and vans and found that a number of these vehicles are not being used to maximize its usage and reduce overall costs. In many Divisions, vehicles are assigned to specific individuals for their use rather than shared between staff working different shifts or as pool vehicles. These cars may remain idle after the end of a shift, while some staff who are not assigned a LAWA vehicle drive their personal vehicle and claim mileage reimbursement. Over our audit period, LAWA paid $325,000 in mileage to inspection staff. We noted that some inspection staff claimed between 30 to 70 reimbursable miles a day (equating to $300 to $700 per month) which appeared high given that staff drive no more than 15 miles a day related to their work assignments. We found that a large portion of the reimbursed miles related to inspectors commuting miles, because they were permitted to change their headquarters location to the LAWA facility nearest their home based on the existing practices used by the Bureau of Contract Administration of the Department of Public Works2. An employees headquarters should be determined by where s/he is assigned to work, consistent with the Los Angeles Administrative Code (Article 1, Section 4.224). We also found three employees received mileage reimbursements totaling over $27,000 during the time they were assigned a Divisional pool car that should have been used for their inspection activities. o LAWA does not have adequate controls over the vehicle replacement process, or of the disposal of replaced vehicles. The Department prioritizes replacing their aging and inoperable vehicles and discourages buying additional cars. Between 2010 and 2012, LAWA purchased
The Controllers Audit of Citywide Mileage Reimbursements issued December 18, 2012 noted this finding at selected Council-controlled Departments, and recommended corrective action.
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approximately 47 replacement vehicles costing over $2 million and added only two. No additional justification is necessary for a vehicle replacement; which is generally determined based on the vehicles age, mileage, and condition. Our audit noted purchases that should have been reported as additional and not replacement cars, and lax controls over the replacement and disposal process, for example: Vehicles identified for replacement and recommended for salvage were used more than once to justify the purchase of a new vehicle; Vehicles that were considered replaced by new vehicles were not salvaged, and were still being used in the Departments operations; and The Fleet Management system did not identify whether some new vehicles were purchased as replacement or additional vehicles.

o LAWA must strengthen procedures to ensure employees with suspended drivers licenses are prevented from driving vehicles on City business. All employees who drive any vehicle on City business must possess a current and valid drivers license. LAWA is enrolled in the DMV Employer Pull Notice (EPN) Program, which notifies the employer via email when a driver record is updated; LAWA can also request the current license status of any employee. However, the Department has not effectively utilized the EPN program, exposing LAWA to significant risk and potential liability. From a sample of twenty, we identified two employees who drove vehicles on City business while their drivers license had been suspended. One drove a Divisional pool vehicle and the other drove his personal vehicle for City business and received mileage reimbursement. While LAWAs Personnel section had been notified of both instances, one employee had already corrected the suspension within a few days, which was prior to Personnel becoming aware of the issue; while in the other instance, Personnel communicated to Division management within two weeks; but it was not effectively or timely acted upon by the Division.

Cross-Cutting Issues
o LAWA does not assess the vehicle needs of Central pools and LAWA Divisions or its home-garaged program. The Facilities Management Division and other LAWA Divisions confirmed that there has been no utilization analysis done for either the home-garaged or pool/divisional vehicles, to measure the usage and efficiency of vehicles assigned. LAWA has not analyzed and therefore cannot ensure that an appropriate number of vehicles are assigned among the Divisions, and to the home-garaged program.

o LAWAs vehicle replacement practices do not adequately address current needs, reducing opportunities to purchase less expensive and fuel-efficient cars whenever feasible. According to the Fleet Group, vehicle replacements are generally the same type or model as the previous vehicle without consideration of a Divisions current needs. Based on our review of vehicles purchased at prices up to $51,000, the majority were trucks assigned to the ADG-Inspection Division. The ADG-Inspection Division has a total of 20 pool vehicles; and most of them are trucks, including sports utility trucks, with some small sedans. ADG vehicles are assigned to specific staff for use in their inspection activities, and half of the inspection staff drive their private vehicles and receive mileage reimbursement. As a variety of vehicle types could be adequate for a Divisions use, LAWA should consider the most cost-effective options that will best meet operational needs when buying and assigning replacement vehicles.

REVIEW OF REPORT A draft of this report was provided to LAWA management on April 8, 2013. We held an exit conference with LAWA representatives on April 23, 2013 to discuss the contents of the audit report. LAWA management indicated general agreement with the reports findings and recommendations, and offered some clarifying information. We considered the comments and additional documentation provided by LAWA as we finalized this report. We would like to thank the LAWA management and staff for their full cooperation and assistance during the review.

CONTROLLERS ACCOUNTABILITY PLAN

Recommendations

Page

Mayor/Council Action Reqd

Department Action Reqd

Section I. Home-Garaged Vehicles

1. Implement effective centralized control over the administration of home-garaged vehicles to ensure full accountability and accurate reporting.

15

LAWA

2. Require periodic verification of all homegaraged vehicle assignments to the central listing, to ensure appropriate control and accurate reporting.

15

LAWA

3. Develop clear and consistent criteria for assigning home-garaged vehicles to ensure that each assignment can be adequately justified by the Citys business needs in the most economical manner.

18

LAWA

4. Ensure all home-garaged authorizations, including the recommendations for assignments and executive management approval, are maintained in a central location.

18

LAWA

5. Implement a process to periodically review home-garaged vehicle permittees to ensure that each permittee continues to have a justified business need to take a LAWA vehicle home.

18

LAWA

6. Establish a process to eliminate or reallocate vehicles that do not meet the criteria for assigning a home-garaged vehicle.

18

LAWA

7. Pursue options to lower the costs associated with the home-garaged vehicle program, such as reducing the number of take-home vehicles and making them available to Divisional pools; for selected executives, consider providing a car allowance in lieu of a home-garaged vehicle.

19

LAWA

8. Revise the home-garaged vehicle program considering the potential liability to LAWA arising from driving a City vehicle outside of its intended use for City business, or under circumstances where a driver could be deemed grossly negligent. This would include requiring employees with authority for home-garaging to procure and provide verification of personal vehicle insurance, or knowingly assume the risk.

20

LAWA

9. Develop a comprehensive vehicle-use policy, approved by the LAWAs Board, for the Departments home-garaged program that includes specific standards on the use and assignment of take-home vehicles.

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LAWA

Section II. Vehicles assigned to Central Pools and LAWA Divisions

10. Ensure fleet management system provides reliable, complete, and accurate vehicle information for effective inventory control.

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LAWA

11. Assess the needs and actual use of the fleet vehicles that are currently assigned to Divisions; and consider reallocation to maximize usage and effectiveness. Also, ensure Divisional pool vehicles are utilized to the fullest before approving staff to use their personal vehicles and receive mileage reimbursements.

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LAWA

12. Establish appropriate controls to ensure employees are assigned headquarters location based on their work assignment rather than their home address.

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LAWA

13. Implement adequate controls to ensure employees do not receive mileage reimbursement if they are also assigned a pool vehicle. Supervisors must adequately review mileage reports to identify potential abuse.

25

LAWA

14. Establish sufficient controls to prohibit using the same vehicle to justify the purchase of more than one replacement vehicle.

27

LAWA

15. Ensure that replacement vehicles targeted for salvage are surrendered to the fleet group for proper disposal.

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LAWA

16. Ensure all vehicle purchases are properly identified as either Additional or Replacement vehicle in the fleet system for proper tracking and reporting.

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LAWA

17. Implement sufficient procedures to ensure employees with a suspended license are prevented from driving on City business, using either a City car or their personal vehicle and receiving mileage reimbursement.

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LAWA

Section III. Cross-Cutting Issues

18. Assess the vehicle needs of LAWA divisions and home-garaged vehicle permittees by performing a utilization analysis. This will ensure LAWA divisions and the homegaraged vehicle program are allocated the appropriate number of vehicles.

29

LAWA

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19. Establish specific criteria (e.g., expected business miles, minimum mileage, or days of use) that can be used in measuring the efficiency of vehicle usage.

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LAWA

20. Have a process in place to ensure vehicles that do not meet the expected criteria are eliminated or re-allocated to other Divisions where more vehicles are needed.

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LAWA

21. Where material reductions in service levels are observed, attempt fleet reduction to reduce costs.

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LAWA

22. Consider current needs of divisions when purchasing replacement vehicles, and procure less expensive, more efficient models whenever feasible.

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LAWA

23. Adopt a maximum price and fuel efficiency guidelines for all vehicle purchases (i.e., replacements and additions) and require that any exceptions from those guidelines be justified in writing.

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LAWA

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BACKGROUND, OBJECTIVES, SCOPE, AND METHODOLOGY

BACKGROUND
An entitys vehicle fleet supports its services by enabling the movement of employees from one place to another in a cost-effective and reliable manner. Many governments are seeking ways to increase efficiency and provide improved service by ensuring appropriate fleet size and utilization. This audit specifically focused on LAWAs light vehicle fleet (i.e., cars and light trucks) and three related processes: Assignment, Monitoring/Use, and Replacement/Disposal of fleet vehicles. Fleet management is a function of LAWAs Facilities Management Group. While its processes for procurement and disposal are guided by the Citys general purchasing and salvage/disposal criteria, the replacement and assignment processes are guided by LAWAs internal policy. LAWA developed a vehicle policy to provide staff with direction on vehicle procurement, management of vehicles assigned to Divisions and central pools, and protocols for vehicle use. Although policies regarding vehicles assigned to the Airport Police Division are separately defined in the Airport Police Divisions Administrative Manual, the guidelines are similar to those in LAWAs overall vehicle policy. Per LAWAs vehicle policy, home-garaged vehicles are approved by the Chief Operating Officer (COO) and are normally assigned to the Executive Director, the COO, Deputy-Executive Directors, and to designated employees who are regularly subject to emergency call. Vehicles assigned to Central Pools and LAWA Divisions are strictly for City businessuse by LAWA employees during their workday and cannot be driven for personal use. Also, those vehicles must be returned to the pool at the end of the day, unless senior management has authorized occasional garaging away from the airport. Occasional garaging is authorized when it is determined by management as essential, would provide for economy and efficiency, and would serve the Citys best interest. Occasional garaging requires approval from a Deputy Executive Director. The business-use only policy, which prohibits the use of City vehicles for private/personal use is defined in Section 63.106 of the Los Angeles Municipal Code. LAWA currently has more than 1,400 vehicles in their fleet. This figure includes 945 pool vehicles intended for shared use through Central or Divisional Pools, and an additional 84 authorized as take-home vehicles for approved personnel.

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OBJECTIVES, SCOPE AND METHODOLOGY

The primary objective of this audit was to evaluate the management controls over the assignment, use and monitoring of LAWAs vehicles, including those assigned to Central or Divisional pools and to specific employees who are authorized for homegaraging. Our audit scope covered activities related to the assignment, use, and replacement/disposal of LAWAs fleet vehicles, including cars, motorcycles and light trucks (we excluded heavy trucks/equipment) over the period July 2010 through October 31, 2012. We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Audit fieldwork was conducted between October 2012 and January 2013. In conducting our audit, we interviewed management and staff involved in LAWAs fleet vehicle operations. We also reviewed the applicable City policies and departmental procedures related to assignment, usage and monitoring of LAWA vehicles, including those in the home-garaged program. We reviewed the Departments inventory listing generated by their fleet management system, vehicle assignment schedules as provided by LAWA Divisions, inventory counts conducted by the Divisions as requested by the auditors, samples of vehicle logs, reports submitted to the Controllers Office for fringe benefit reporting, reports showing costs of maintaining individual take-home vehicles, reports showing vehicles recommended for replacement, salvage vehicle reports, mileage reimbursement reports, and DMV reports related to Employer Pull Notice program. We also obtained information from DWP and Harbor regarding their home-garaging policies and transportation allowances, if any. The remainder of this report details our findings, comments, and recommendations.

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AUDIT FINDINGS AND RECOMMENDATIONS

SECTION I: HOME-GARAGED VEHICLES

Home-garaged vehicles must be approved by LAWAs COO and are normally assigned to the Executive Director, the COO, Deputy Executive Directors, and designated employees who are regularly subject to emergency call. The recommendation for assignment of a take-home vehicle to an employee who is not normally assigned a car based on his/her position should be initiated by their respective Deputy Executive Director, subject to approval by the COO. As of our review, there were 843 home-garaged vehicles, assigned as follows: LAWA Executives - 14 LAWA Senior Managers - 17 Airport Police - 53

The Department does not currently provide an option for employees to receive a transportation allowance in lieu of a take-home vehicle. Based on our interviews and review of reports and other documentation related to LAWAs home-garaged vehicles, we found the following issues.

Finding 1:

LAWA lacks centralized accountability and control over assigned take-home vehicles. Information is inadequately maintained in LAWAs centralized listing, and not all employees who had custody of a LAWA take-home vehicle were properly authorized.

In order to adequately manage the home-garaging program, LAWA should have an accurate and up-to-date record of the specific vehicles that are assigned to each employee. An accurate centralized listing would also help ensure all employees are appropriately authorized for the program. However, we found that the Department does not have an accurate listing or centralized control over take-home vehicles, as the administrative oversight of these vehicles is split between LAWA and the Airport Police.
As of the date of this report, LAWA reports there are 85 home-garaged vehicles, with 54 of these allocated to Airport Police, though three of those were unassigned.
3

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According to LAWAs Facilities Management Group (FMG), although it is the overall administrator of LAWAs fleet, it has very little control over Airport Police vehicles which comprise approximately 26% of LAWAs reported vehicle fleet. The Airport Police Administration is responsible for managing their vehicles, except for maintenance and servicing, which is done centrally. In addition, the majority (63%) of LAWAs homegaraged vehicles are assigned through Airport Police; however, we noted inconsistent and inaccurate information regarding who was approved for, or actually had custody of, a home-garaged vehicle. According to the Assistant Chief of Airport Police, patrol officers drive take-home motorcycles, officers at the rank of captain and above are assigned take-home cars, and others including K9 officers, task force members or officers in acting capacities may also have home-garaged vehicles. However, our review of the existing list of take-home authorities and interviews with several police units, demonstrated inconsistencies between what was listed, who was approved, and who actually had a take-home vehicle. After bringing this matter to the attention of the Assistant Chief of Airport Police, he noted that there had been significant turnover within the Units, and some officers who had previously been granted home-garaging privileges no longer had them, and staff who reported vehicle assignments to the auditors may not have been aware of these changes and lists had not been appropriately updated. He confirmed that other police officers should be added to official listing of home-garaged vehicle assignments, as they were approved and had custody of the vehicles, but were not reflected on the centralized LAWA report. FMG, being the overall administrator of LAWAs fleet, should have full accountability and control over the entire fleet, including those assigned to the Airport Police and all home vehicle assignments, to ensure all LAWA vehicles are fully accounted for. By not having centralized control over the assignment of home-garaged vehicles, LAWA lacks assurance that all take-home cars assigned to LAWA Divisions and Airport Police are fully accounted for, and that they are actually being used for their intended purposes.

Recommendations: LAWA management should: 1. Implement effective centralized control over the administration of homegaraged vehicles to ensure full accountability and accurate reporting. 2. Require periodic verification of all home-garaged vehicle assignments to the central listing, to ensure appropriate control and accurate reporting.

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Finding 2:

LAWA does not have a process to ensure employees are formally approved for the home-garaged vehicle program and that they meet the Departments established criteria.

LAWAs vehicle policy provides that home-garaged vehicles are normally assigned to the Executive Director, the COO, Deputy Executive Directors, and designated employees regularly subject to emergency call. According to FMG, the assignment of take-home vehicles to Executive level staff (Executive Director, COO and Deputy Executive Directors) is a condition of employment, while for all other staff, the assignment of a take-home vehicle must be determined and initiated by the Divisions Deputy Executive Director/Head, subject to final approval by the COO. Documentation of the justification and approved authorization should be maintained centrally to ensure appropriate authorization and reporting and for improved inventory control. We noted that LAWA does not document the justification for the assignment of takehome vehicles to staff. Nor was there documented approval by the Departments Chief Operating Officer (COO). For all six staff we sampled, LAWA had no formal documentation supporting or justifying the vehicle assignments. Facilities Management Group (FMG) does not maintain home-garaged vehicle authorizations centrally, but suggested that they may have been kept by the COOs Office or the LAWA Divisions that had requested/initiated the specific assignments of take-home vehicles. We requested the COOs Office and some LAWA Divisions to provide documentation for a sample of home-garaged vehicle authorizations; however, neither was able to provide the justification/authorization for our sample. During our review, the COO issued a memo noting the current approved list of LAWA employees with home-garaging privileges (excluding Airport Police). The memo includes both the executives and designated employees regularly subject to emergency call in to LAX, Ontario and/or Van Nuys Airports. The memo was to serve as the Departments documented approval for its take-home vehicle assignments to non-sworn personnel. We also evaluated the staff positions assigned take-home vehicles based on the Departments established criteria, namely, positions who are assigned a take-home vehicle as a condition of employment, and positions who are assigned a take-home vehicle because they are regularly subject to emergency calls. These include: As a Condition of Employment (14 Executives): Chief Executive Officer Chief Operating Officer City Attorney Deputy Executive Directors Regularly Subject to Emergency Calls (17 Senior Managers; 53 Airport Police): Airport Manager Director of Operations Chief of Operations 16

Chief Airports Engineer Director of Construction and Maintenance Assistant Director of Construction and Maintenance Services Chief Construction Inspector Airport Maintenance Supervisor Chief of Airport Police (unmarked vehicle) Assistant Chief of Police (unmarked vehicle) Captain (unmarked vehicle) Lieutenant (unmarked vehicle) Sergeant (unmarked vehicle) Motor unit Police Officers (motorcycles)

Based on our evaluation of the above positions, some do not appear to meet LAWAs criteria for assigning home-garaged vehicles. For example, the City Attorney is not a LAWA employee, and as a City employee, his vehicle assignment is not a condition of employment. We also interviewed some positions in the Maintenance Services Division assigned take-home vehicles to determine the extent to which they had been called in to the Airports after their normal working hours for an emergency call. They each stated that they had been called in after office hours, but not on a regular basis since they have front-line supervisors positioned on-duty 24/7 at the airports that can cover for them. They also noted that LAWA has an Airport Response Coordination Center that is adequately represented by staff from each key Division of LAWA (e.g., Airport Operations, Maintenance Services and Airport Police) which enables an immediate response to urgent matters occurring at the Airports at all times. LAWA does not require logs for take-home vehicles, nor do individuals track the number of emergency callouts they had made in the past. While it is LAWAs discretion to determine which positions are provided a home-garaged vehicle, such decisions should be supported by a consistent policy that justifies how the assignment best meets the business needs of LAWA in the most economical manner. Therefore, an assignment made as a condition of employment and approved by management is considered an additional fringe benefit; however, for other employees, LAWA has defined the criteria as those who are regularly subject to emergency call, implying that the assignment is justified because they must regularly report in. Without basis to affirm that these positions do, in fact, regularly report in for emergency calls, using this criteria can be questionable. LAWA should develop more clear and consistent criteria for the home-garaged vehicle program that best meets the business needs in the most economical manner. Lastly, LAWA does not have a process that requires an annual review of home-garaged vehicle authorizations to ensure that permittees continue to have a need for a take-home vehicle for business use. This process should be in place to ensure there are no unnecessary vehicle assignments. Recommendations: LAWA management should: 17

3. Develop clear and consistent criteria for assigning home-garaged vehicles to ensure that each assignment can be adequately justified by the Citys business needs in the most economical manner. 4. Ensure all home-garaged authorizations, including the recommendations for assignments and executive management approval, are maintained in a central location. 5. Implement a process to periodically review home-garaged vehicle assignments to ensure that each permittee continues to have a justified business need to take a LAWA vehicle home. 6. Establish a process to eliminate or re-allocate vehicles that do not meet the criteria for assigning a home-garaged vehicle.

Finding 3: Providing and maintaining home-garaged vehicles is more costly than other alternatives. Excluding those assigned to Airport Police, LAWA provides 31 take-home vehicles to employees. These vehicles are primarily used for employees to drive from home to LAWA during their regular work schedule or in case of a LAWA related emergency callout. To be effective, the home-garaged vehicle program should meet the business needs of LAWA in the most cost-effective manner. However, the Department has not performed an analysis of its home-garaged vehicle costs compared to other alternatives, such as paying a car allowance/stipend. We compared the actual costs that were incurred for maintenance and fuel and estimated the annual costs for depreciation and liability for five sampled take-home vehicles. In four cases, LAWA costs were higher (ranging from 7% to 35%) than paying employees a standard monthly car allowance. By applying the results of this analysis to all 31 non-sworn employees who currently have home-garaging authority, the potential savings ranges from $13,000 - $65,000 annually. There are currently 14 vehicles assigned to executives for take-home use, and an additional eight loaner cars reserved to serve as replacements when any of those assigned vehicles is undergoing maintenance. Additional home-garaged vehicles that are assigned on the basis of regular emergency call out may not be justified, based on Finding #2. LAWA managers have indicated that there is a shortage of vehicles available in Divisional pools, yet there has been no formal assessment of vehicle utilization or current assignments. We also noted that one individual with a take-home vehicle is also assigned a Divisional pool vehicle for his exclusive use during the workday. By reducing the number of take-home vehicles, LAWA could make more cars available for Divisions pool use. In addition, to continue providing a benefit to selected staff as a 18

condition of their employment, payment of a car allowance appears to be a more cost effective option. The car allowance amount used in our analysis was based on that currently paid by Harbor Department. It should be noted that LADWP no longer provides its executives with either a City car or an allowance. Recommendation: LAWA management should: 7. Pursue options to lower the costs associated with the home-garaged vehicle program, such as reducing the number of take-home vehicles and making them available to Divisional pools; for selected executives, consider providing a car allowance in lieu of a home-garaged vehicle.

Finding 4: The Departments home-garaging policy does not require permittees to provide evidence of personal car insurance to cover liability that may arise from driving a City vehicle outside of its intended use for City business. LAWAs current practices do not require employees who are authorized for homegaraging to obtain and provide evidence of personal insurance covering the City vehicle, though the CAO requires this practice for other City Departments. Although LAWA is not under the jurisdiction of the CAO, this requirement is intended to ensure coverage against liability that arises from driving a City vehicle outside of its intended use for City business, or under circumstances where a driver could be deemed grossly negligent. LAWAs vehicle policy clearly states As long as a LAWA employee is operating a vehicle in the course and scope of his/her duties, he/she is covered for liability under LAWAs insurance policy. The business auto coverage section of the specimen policy provided states that anyone else while using with your permission a covered auto. . . is insured. LAWAs insurance provider also indicated that any person who meets the requirements of the policy driving the vehicle with the permission of the Named Insured is covered. However, because the coverage is contingent upon an employees vehicle use with your permission, LAWA appears to be at risk when/if a liability occurs due to personal use or gross negligence. By not requiring LAWA employees assigned take-home vehicles to maintain appropriate personal car insurance, the Department is exposed to greater potential liability that would not be covered by their existing commercial insurance. Recommendation: LAWA management should: 19

8. Revise the home-garaged vehicle program considering the potential liability to LAWA arising from driving a City vehicle outside of its intended use for City business, or under circumstances where a driver could be deemed grossly negligent. This would include requiring employees with authority for home-garaging to provide verification of personal vehicle insurance, or knowingly assume the risk.

Finding 5: LAWAs home-garaging vehicle policy should include specificity regarding the use of the vehicles, and be formally approved by LAWAs Board. Formal policies provide clarity for an organizations staff regarding the practices they are expected to follow, in order to ensure they align with the expectations of management and governing authorities. The LAWA vehicle policy is broad, and while it mentions home-garaged vehicles which must be approved by the Chief Operating Officer, the terms of use for take-home vehicles are not specifically defined. We also found that some functions noted in the authorities and responsibilities were not adequately performed, such as a Fleet Manager reviewing and reassigning vehicles as deemed appropriate. While the broad policy provides that City cars are strictly for business use only and cannot be used for personal purposes, this requirement should be reiterated for the home-garaged vehicles. Also, the Department was not able to provide evidence that their policy on take-home vehicles had been approved by LAWAs Board. The particulars of LAWAs home-garaging program, including its purpose and benefits to the organization, as well as who is eligible and how assignments are determined, may be unknown to LAWAs Board. Providing clarity through a comprehensive vehicle policy that includes specificity on the home-garaged vehicle program, as approved by LAWA Board, would help ensure that both staff and management actions are consistent with expectations, and that the program provides maximum benefit to the organization. Recommendation: LAWA management should: 9. Develop a comprehensive vehicle-use policy, approved by the LAWAs Board, for the Departments home-garaged program that includes specific standards on the use and assignment of take-home vehicles.

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SECTION II: VEHICLES ASSIGNED TO CENTRAL POOLS AND LAWA DIVISIONS

For purposes of facilitating the movement of employees at and around LAX, fleet vehicles are assigned to central pool locations (Administration West, Administration East, Skyview tower and Fleet Maintenance). In addition, most LAWA Divisions are assigned their own pool vehicles for their employees to use in carrying out their day-to-day responsibilities. For example, Airport Operations, Ground and Facility Maintenance, Engineering and Construction, and Airport Police and Security each have their own Divisional pool vehicles to transport employees from one place to another within the airport, or from one airport location to another (e.g., from LAX to Van Nuys Airport). As of our audit fieldwork, a total of 945 pool vehicles were assigned to Central pool locations (81) and Divisions (864). The breakdown of the assignment is as follows: Central Pools: Administration West Administration East Skyview Fleet Maintenance- Loaner Total LAWA Central Pool Vehicles *(eight loaner vehicles are reserved for Executives) 17 11 21 32* 81

Divisional Pools: ADG- Construction Inspection Division Administration Airport Development Group Airport Operations- LAX Airport Operations- Ontario Airport Operations- Van Nuys Airport & Facilities Planning Division Commercial Development Group Community Relations Division Engineering & Facilities Mgt. Division Environmental Management Division Fire Department- assigned to LAX Government Affairs Human Resources Information Mgt. & Technology Group Landside Operations Division Maintenance Services Division- LAX 21 22 4 28 71 152 5 2 3 2 80 2 2 2 4 27 8 200

Maintenance Services Division- Ontario Maintenance Services Division- Van Nuys Media Relations Procurement Services Rideshare Risk Management Warehousing & Record Retention Total Division Pool Vehicles Excluding Police Airport Police & Security-LAX Airport Police & Security-Ontario Airport Police & Security-Van Nuys Total Airport Police Pool Vehicles Total LAWA Divisional Pool Vehicles

2 20 2 2 3 5 3 651 201 3 9 213 864

Finding 6: LAWA does not maintain accurate and complete information on Divisional pool vehicles. During our audit, we were provided a vehicle inventory list that was generated from LAWAs fleet maintenance system, FASTER. We attempted to verify the information on the inventory list by requesting LAWA Divisions to conduct a physical count of the vehicles assigned to them. We also requested they provide other pertinent information such as a description of their processes in assigning the vehicles, copies of vehicle logs (if any), vehicle description, vehicle mileage, etc. We found discrepancies between the information shown in the inventory list and that provided to us by the LAWA Divisions. Also, the listing of Divisional vehicle coordinators provided by LAWA Fleet Management was inaccurate. For example, the Airport Development Group Division (ADG) provided auditors with the result of their count, showing 47 vehicles assigned. This is different from the 52 vehicles noted as assigned to ADG per LAWA inventory list. According to ADGs vehicle coordinator, it is possible that the cars were with another Division. We subsequently verified that these cars were under the control of the Engineering & Facilities Division, but the transfer had not been noted on the fleet inventory. In another example, the physical count results submitted by Maintenance DivisionCustodial was higher by two cars as compared to LAWAs inventory list. We also noted some missing information on the LAWAs inventory list. For example, several assigned vehicles to the Ontario Airport did not have vehicle descriptions and license identification numbers. Odometer readings for a number of vehicles were also not included in the report. LAWA Divisions do not regularly conduct an inventory count to ensure the vehicles assigned to them are fully accounted for. Moreover, they do not inform or update 22

LAWAs Fleet Division of any changes (e.g., organizational changes like splitting up a former Division into three) that may affect the vehicles assigned to them. LAWAs Facilities Management Group (FMG) explained that it is possible that not all information related to the vehicle inventory was generated by their system. The primary use of the Fleet Asset Management System (FASTER) is to track and monitor the work performed and parts used for maintenance and repair of LAWA vehicles at LAX, Ontario and Van Nuys airports; not activities related to vehicle additions, transfers and disposals. They added that the system currently in use has limitations in capturing and generating needed vehicle inventory information. LAWA plans to upgrade its system to enable staff to properly record, track and report fleet vehicle information. Having a reliable inventory system that can capture and report accurate information is essential for effective fleet management and control over moveable assets. Recommendation: LAWA management should: 10. Ensure the fleet management system provides reliable, complete and accurate vehicle information for effective inventory control.

Finding 7:

Divisional pool vehicles may not be utilized to maximize effectiveness, and the mileage reimbursement program must be better controlled.

We analyzed vehicles assigned to LAWA Divisions consisting of light duty sedans, trucks and vans and found that a number of these are not being used to the fullest in order to maximize usage and reduce overall costs. For example, in many Divisions vehicles are assigned to specific individuals rather than shared between Division staff working different shifts or as shared pool vehicles. Usage logs are not maintained for most Divisional pool vehicles. ADG-Inspection is assigned a total of 20 Divisional pool vehicles. The Division has over 100 staff consisting of approximately 40 regular LAWA employees, 60+ consultants, and employees of the Citys Department of Public Works -Bureau of Contract Administration (BCA). The work schedule consists of three shifts. The 20 Divisional cars are assigned to specific employees to use for inspection activities during the workday. They are not allowed to take the cars home; and the vehicles must be left parked in the office lot after the assigned employees shift. LAWA Inspection staff who are not assigned a specific LAWA vehicle use their personal vehicles for inspection activities and claim mileage. Our review noted that LAWA Inspectors received approximately $325,000 in mileage reimbursements over our audit scope; some current inspection staff claimed mileage reimbursements of $300 to $700 per month. 23

This amount appears high given that staff are charged with inspecting construction work at LAX, and the ADG-Inspection Head estimated that they drive no more than 15 miles per day related to their work assignments. We analyzed the average number of miles claimed by inspection staff on a daily basis and questioned why some staff were paid an average of 30 to 70 miles per workday. The ADG-Inspection Head explained that a large portion of the reimbursed miles are actually related to staffs commuting miles. Inspection staff were permitted to change their headquarters location to whatever LAWA facility was nearest to their home, based on the existing practice used by the Bureau of Contract Administration of the Department of Public Works. As mentioned, there are BCA staff assigned in this LAWA Division and they too submit claims for reimbursement for mileage through BCA, for doing inspections at LAX. However, by allowing LAWA staff to change their headquarters location, LAWA is unnecessarily paying employees for commuting miles. For example, if a LAWA inspector lives in Van Nuys but works every day at LAX, and the employee is allowed to designate his headquarters as the LAWA location nearest his home, it would be LAWAs Van Nuys Airport. In this case, the inspector would be reimbursed for the 21 miles between Van Nuys Airport and LAX (essentially commuting each way) as well as the actual miles driven for his inspection activities while at LAX. This would effectively increase his daily claim from 15 to almost 60 miles per day. This issue was previously reported in the Controllers Audit of Citywide Mileage Reimbursements issued on December 18, 2012. We noted several City Departments (including the Department of Public Works) lacked controls to ensure that their employees assigned headquarters were appropriate and that employees were accurately reporting their home to headquarters miles. The Los Angeles Administrative Code Section 4.224 provides that If any officer or employee who is eligible for payment for travel under the provisions of this article continues to report directly from his home to a temporary assignment for more than 30 days, such assignment shall be deemed thereafter to be permanent and no further payment for travel shall be allowed to him while he was working on such assignment. Also, the Internal Revenue Services Publication 463 indicates that the miles driven by employees between home and regular work location are considered to be commuting miles. An employees headquarters should be determined by where he/she is assigned to work, which is consistent with the Los Angeles Administrative Code, and staff should only be reimbursed for their business miles and not for commuting. Subsequent to our fieldwork, LAWAs Personnel issued a directive to management of the Inspection Division to ensure all staff comply with City requirements and that LAWA has an accurate home-to-headquarters designation on file for mileage reimbursement purposes. Employees who are assigned a Divisional pool vehicle to perform their duties at LAWA should not also be receiving mileage reimbursement for using their personal vehicle for the same purpose. However, this appears to have occurred. 24

We selected a Division where pool vehicles are assigned to specific staff, and requested the Division to provide the actual dates of staffs vehicle assignments. We then reviewed mileage payments over the last fiscal year to determine whether any of the employees identified as having been assigned a pool vehicle also received mileage payments. We noted three staff received mileage reimbursements totaling over $27,000 during the time they were assigned pool cars. LAWA supervisors should review mileage reports to ensure employees who are assigned a Divisional pool car are not also receiving mileage reimbursements during the same time. LAWA should maximize the use of every vehicle. While many LAWA vehicles have low annual mileage, the frequency of trips and/or documented continuous use of each vehicle would be a better measure of full utilization. However, many Divisions assign the vehicles to individuals rather than making them available as a shared pool car, and the Divisions we reviewed did not maintain logs that would document actual use. Through assessing the actual vehicle usage and needs of Divisions, LAWA could reallocate fleet vehicles to maximize their utilization and/or reduce the amount mileage reimbursements paid. Recommendations: LAWA management should: 11. Assess the needs and actual use of the fleet vehicles that are currently assigned to Divisions; and consider reallocation to maximize usage and effectiveness. Also, ensure Divisional pool vehicles are utilized to the fullest before approving staff to use their personal vehicles and receive mileage reimbursements. 12. Establish appropriate controls to ensure employees are assigned headquarters location based on their work assignment rather than their home address. 13. Implement adequate controls to ensure employees do not receive mileage reimbursement if they are also assigned a pool vehicle. Supervisors must adequately review mileage reports to identify potential abuse.

Finding 8: LAWA does not have adequate controls over the vehicle replacement process, or of the disposal of replaced vehicles. Periodically and during the budget period LAWA management, in coordination with the Facilities Management Group (FMG), determines the number of cars to be purchased for the coming fiscal year. Rather than buying an additional car the Department prioritizes replacing their aging and inoperable vehicles in order to maintain a stable fleet. Between 2010 and 2012, 25

LAWA purchased approximately 47 replacement vehicles and added only two cars. When requesting an additional vehicle FMG requires the initiating Division to submit a written justification; however, when a vehicle is simply being replaced, no additional justification is required. Rather, FMG follows the following criteria (or a combination) for vehicle replacement: The Divisions operational needs; Age of vehicle (vehicles over 10 years old are evaluated for possible replacement); Mileage of vehicle (vehicles with over 100,000 miles are evaluated for possible replacement); Condition of vehicle (vehicles in traffic accidents or requiring major repair); and, Vehicle rating from LAWAs fleet management system Based on our review, we noted that vehicles are not always replaced and disposed according to the Departments established criteria. We also found purchases that should have been reported as additional and not replacement cars, and some purchases that were coded as neither. The following are specific weaknesses related to the Departments replacement and disposal processes: Vehicles identified for replacement and recommended for salvage were used more than once to justify the purchase of new vehicles LAWA used the same vehicle number to justify purchasing more than one vehicle as its replacement. We found that LAWA purchased vehicle C-2922 as replacement for C-2872; however, C-2872 was also used to justify the purchase of C-2932. Also, when we reviewed LAWAs most recent report of vehicles being recommended for replacement (as generated by FASTERs 15-point replacement program), we noted seven had already been used as justification for previous purchases. Specifically, these vehicles had already been submitted to management prior to 2012 for replacement and had already been replaced; yet the same vehicles were again being recommended for replacement, and were approved in FY2012-13 budget. These included: C-2395 which was already used in 2005 to purchase C-5100 C-3446 which was already used in 2006 to purchase C-3710 C-2221 which was already used in 2008 to purchase C-5220 C-2294 which was already used in 2004 to purchase C-5025 C-2170 which was already used in 2005 to purchase C-5124 C-2440 which was already used in 2011 to purchase C-2475 C-2454 which was already used in 2011 to purchase C-2476 26

Because LAWA has restricted buying additional cars and prioritizes buying cars as replacements, it appears that staff had been reporting some purchases as replacements to avoid scrutiny. Vehicles that were considered replaced by new vehicles were not salvaged, and were still being used in the Departments operations We noted a number of vehicles that had already been replaced by purchasing new vehicles were actually still in use by Divisions, rather than surrendered for salvaging. In addition, due to lax controls over these assets, it could be questioned if these cars were still safe since FASTER had recommended them for salvage. Shortly after we brought this matter to LAWAs attention, the Fleet Maintenance Group indicated that some of these vehicles were surrendered by the Divisions, and they were processing them for salvage. The Fleet Management System does not identify whether some new vehicles were purchased as replacement or additional vehicles Lastly, we noted that there are purchases in the system identified neither as replacement nor additional vehicles. Therefore, there is no way to verify if the same vehicle was used to justify the purchase of more than one replacement vehicle. Recommendations: LAWA management should: 14. Establish sufficient controls to prohibit using the same vehicle to justify the purchase of more than one replacement vehicle. 15. Ensure that replacement vehicles targeted for salvage are surrendered to the fleet group for proper disposal. 16. Ensure all vehicle purchases are properly identified as either Additional or Replacement vehicle in the fleet system for proper tracking and reporting.

Finding 9:

LAWA must strengthen procedures to ensure employees with suspended drivers licenses are prevented from driving vehicles on City business.

All employees who are required or authorized to drive a vehicle on City business must possess a current and valid drivers license. The California DMV has a program called Employer Pull Notice (EPN) that was established to provide employers and regulatory agencies with a means of promoting driver safety through their ongoing review of driver records. The EPN Program automatically generates a notice when there is any update 27

on the employees DMV record. DMV notifies the employer via e-mail that DMV has updated the driver record, and the employer can request DMV to provide their employees license status whenever needed. According to management, all LAWA employees are enrolled in the DMVs EPN Program, and LAWA Personnel receives status reports from DMV on a regular basis. Upon notification of a change in license status, LAWA Personnel is to inform the respective Divisions management to take appropriate action. We requested LAWA Personnel to provide current DMV status reports for twenty selected employees. From that sample, we identified two employees (10%) who drove vehicles on City business while their license was suspended. One drove his personal vehicle on City business and received mileage reimbursement for one day while his license was suspended, while the other drove a Divisional pool vehicle as part of his regular duties repeatedly while his license was suspended with special restrictions. Our audit found that Personnel had received a DMV notice for both employees. One employee corrected the suspension within three business days of the notice, which was before Personnel was able to contact the Division; however, after learning of the violation, Personnel should have communicated this matter to the Division manager for appropriate action, such as admonishment or discipline for driving on City business with a suspended license. For the other instance, Personnel communicated the issue to Division management with a response required; however due to poor internal communication and inadequate follow-up, timely action was not taken and the employee continued to drive a City vehicle. The Department does not sufficiently act on notices received through the EPN program to ensure employees with a suspended driver license are prevented from driving on City business. This practice exposes LAWA to significant risk and liability. This issue was also noted in the Controllers recent report Audit of Citywide Mileage Reimbursements. Recommendation: LAWA management should: 17. Implement sufficient procedures to ensure employees with a suspended license are prevented from driving on City business, using either a City car or their personal vehicle and receiving mileage reimbursement.

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SECTION III: CROSS-CUTTING ISSUES

We found some issues that are common to vehicles assigned to individual employees and to Central pool locations and LAWA Divisions. These include the following: Finding 10: LAWA does not assess the vehicle needs of Central pools and LAWA Divisions, or its home-garaged vehicle program. The Facilities Management Division and other LAWA Divisions confirmed that there has been no utilization analysis done for either the home-garaged and pool/divisional vehicles to measure the usage and efficiency of vehicles assigned. LAWA has not analyzed and therefore cannot ensure that an appropriate number of vehicles are assigned among the Divisions, or to the home-garaged program. Utilization analysis includes developing and establishing criteria (e.g., minimum mileage, trips, or days of use) that can be used to measure the vehicles efficiency. It could also include tracking actual business miles incurred and comparing results with previously established criteria. For example, if the miles (or other measure) do not meet the criteria, LAWA may consider eliminating or re-allocating the cars to maximize usage. Such an analysis would help LAWA balance the distribution of existing vehicles among the Divisions, and/or reduce the number of fleet vehicles to lower its overall costs. For example, we observed that there may be excess vehicles reserved for Executives in the Fleet Maintenance section. Out of 32 loaner cars maintained, eight cars are reserved for Executives to serve as replacement loaners if/when their assigned homegaraged vehicle is undergoing maintenance. According to Fleet Maintenance, they do not allow other staff or Divisions to use the loaner cars that are reserved for Executives. This is an area where results of a utilization analysis can be useful; helping management determine if some cars can be eliminated from this section, and re-allocated to other Divisions where there is a greater need. Recommendations: LAWA management should: 18. Assess the vehicle needs of LAWA Divisions and home-garaged vehicle permittees by performing a utilization analysis. This will ensure LAWA Divisions and the home-garaged vehicle program are allocated the appropriate number of vehicles. 19. Establish specific criteria (e.g., expected business miles, minimum mileage, or days of use) that can be used in measuring the efficiency of vehicle usage. 29

20. Have a process in place to ensure vehicles that do not meet the expected criteria are eliminated or re-allocated to other Divisions where more vehicles are needed. 21. Where material reductions in service levels are observed, attempt fleet reduction to reduce costs

Finding 11: LAWAs vehicle replacement practices do not adequately address current needs; reducing opportunities to purchase less expensive and fuel-efficient cars whenever feasible. According to Fleet Maintenance staff, in most cases the replacement vehicle purchased is the same type (make/model of car or truck) as the old one being replaced. For example, LAWAs Information Technology Division stated that they were not consulted when their vehicles were replaced by LAWAs Fleet Group to determine their current needs. They needed a box-truck type but found out they were getting the same type of truck (with bed) as the replaced vehicle. As previously mentioned, replacing a vehicle does not require a new justification from the receiving Division. However, the Divisions current operational needs should be considered for purchasing decisions related to replacement vehicles, along with an analysis if a less expensive, more fuel-efficient option would be feasible. We reviewed a sample of vehicles with a purchase price of up to $51,000, noting that a majority of these were trucks assigned to the ADG-Inspection Division. Of the 20 pool vehicles assigned to the ADG-Inspection Division, most are trucks including some sports utility vehicles. All are assigned to specific employees for their use in inspection activities during the workday; and many of the Divisions inspection staff drive their private vehicles for inspection activities and receive mileage reimbursement. Within the Inspection Division, a variety of vehicle types is used to perform their work. The Division pool includes small sedans fueled by CNG, pickup trucks, and SUVs, while several Inspectors utilize their personal vehicles of various makes/models. As a variety of vehicle types could be adequate for this Divisions use, LAWA should consider the most cost effective options that will best meet operational needs when buying future replacement vehicles. Recommendations: LAWA management should: 22. Consider current needs of Divisions when purchasing replacement vehicles, and procure less expensive, more efficient models whenever feasible.

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AUDIT OF LAWAS MANAGEMENT CONTROLS OVER ITS HOME-GARAGED AND POOL VEHICLES APPENDIX A Ranking of Recommendations
Description of Finding Ranking Code Recommendations

Section I: Home-Garaged Vehicles

LAWA management should: 1 LAWA lacks centralized accountability and control over assigned take-home vehicles. Information is inadequately maintained in LAWAs centralized listing, and not all employees who had custody of a LAWA take-home vehicle were properly authorized. U 1. Implement effective centralized control over the administration of homegaraged vehicles to ensure full accountability and accurate reporting. 2. Require periodic verification of all home-garaged vehicle assignments to the central listing, to ensure appropriate control and accurate reporting.

LAWA does not have a process to ensure employees are formally approved for the homegaraged vehicle program and that they meet the Departments established criteria.

3. Develop clear and consistent criteria for assigning home-garaged vehicles to ensure that each assignment can be adequately justified by the Citys business needs in the most economical manner. 4. Ensure all home-garaged authorizations, including the recommendations for assignments and executive management approval, are maintained in a central location. 5. Implement a process to periodically review homegaraged vehicle assignments to ensure that each permittee continues to have a justified business need to take a LAWA vehicle home. 6. Establish a process to

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eliminate or re-allocate vehicles that do not meet the criteria for assigning a home-garaged vehicle.

. Providing and maintaining home-garaged vehicles is more costly than other alternatives.

7. Pursue options to lower the costs associated with the home-garaged vehicle program, such as reducing the number of take-home vehicles and making them available to Divisional pools; for selected executives, consider providing a car allowance in lieu of a homegaraged vehicle.

The Departments home-garaging policy does not require permittees to obtain additional personal car insurance to cover liability that may arise from driving a City vehicle outside of its intended use for City business.

8. Revise the home-garaged vehicle program considering the potential liability to LAWA arising from driving a City vehicle outside of its intended use for City business, or under circumstances where a driver could be deemed grossly negligent. This would include requiring employees with authority for home-garaging to provide verification of personal vehicle insurance, or knowingly assume the risk.

LAWAs home-garaging vehicle policy should include specificity regarding the use of the vehicles, and be formally approved by LAWAs Board.

9. Develop a comprehensive vehicle-use policy, approved by the LAWAs Board, for the Departments home-garaged program that includes specific standards on the use and assignment of take-home vehicles.

Section II: Vehicles Assigned to Central Pools and LAWA Divisions

LAWA does not maintain accurate and complete information on Divisional pool vehicles.

10. Ensure the fleet management system provides reliable, complete and accurate vehicle

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information for inventory control.

effective

Divisional pool vehicles may not be utilized to maximize effectiveness, and the mileage reimbursement program must be better controlled.

11. Assess the needs and actual use of the fleet vehicles that are currently assigned to Divisions; and consider reallocation to maximize usage and effectiveness. Also, ensure pool vehicles are utilized to the fullest before approving staff to use their personal vehicles and receive mileage reimbursements. 12. Establish appropriate controls to ensure employees are assigned headquarters location based on their work assignment rather than their home address. 13. Implement adequate controls to ensure employees do not receive mileage reimbursement if they are also assigned a pool vehicle. Supervisors must adequately review mileage reports to identify potential abuse.

LAWA does not have adequate controls over the vehicle replacement process, or of the disposal of replaced vehicles.

14. Establish sufficient controls to prohibit using the same vehicle to justify the purchase of more than one replacement vehicle. 15. Ensure that replacement vehicles targeted for replacement are surrendered to the fleet group for proper disposal. 16. Ensure all vehicle purchases are properly identified as either Additional or Replacement vehicle in the fleet system for proper tracking and reporting.

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LAWA must strengthen procedures to ensure employees with suspended drivers licenses are prevented from driving vehicles on City business.

17. Implement sufficient procedures to ensure employees with a suspended license are prevented from driving on City business, using either a City car or their personal vehicle, and receiving mileage reimbursement.

Section III: Cross-Cutting Issues

10

LAWA does not assess the vehicle needs of Central pools and LAWA Divisions, or its homegaraged vehicle program.

18. Assess the vehicle needs of LAWA Divisions and homegaraged vehicle permittees by performing a utilization analysis. This will ensure LAWA Divisions and the home-garaged vehicle program are allocated the appropriate number of vehicles. 19. Establish specific criteria (e.g., expected business miles, minimum mileage, or days of use) that can be used in measuring the efficiency of vehicle usage. 20. Have a process in place to ensure vehicles that do not meet the expected criteria are eliminated or reallocated to other Divisions where more vehicles are needed. 21. Where material reductions in service levels are observed, attempt fleet reduction to reduce costs.

11

LAWAs vehicle replacement practices do not adequately address current needs; reducing opportunities to purchase less expensive and fuel-efficient cars whenever feasible.

22. Consider current needs of Divisions when purchasing replacement vehicles, and procure less expensive, more efficient models whenever feasible. 23. Adopt a maximum price and fuel efficiency guidelines for all vehicle purchases (i.e.,

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replacements and additions) and require that any exceptions from those guidelines be justified in writing.

Description of Recommendation Ranking Codes U- Urgent-The recommendation pertains to a serious or materially significant audit finding or control weakness. Due to the seriousness or significance of the matter, immediate management attention and appropriate corrective action is warranted. N- Necessary- The recommendation pertains to a moderately significant or potentially serious audit finding or control weakness. Reasonably prompt corrective action should be taken by management to address the matter. The recommendation should be implemented within six months. D- Desirable- The recommendation pertains to an audit finding or control weakness of relatively minor significance or concern. The timing of any corrective action is left to managements discretion. N/A- Not Applicable

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