Date: October 10, 2014 To: Keith Chapman, Interim Director, Department of Public Works From: H. Patrick Campbell, Chief Auditor Tele: 860.757.9951
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City of Hartford Department of Public Works Equipment Services Division Accounts and Operations Audit Report 1505 I. Executive Summary
In accordance with our audit plan for the fiscal year ending June 30, 2015, we completed an examination in September 2014 of the City of Hartford Department of Public Works Equipment Services Division Accounts and Operations. The purpose of the examination was to evaluate and test internal accounting and operating controls, the accuracy and propriety of transactions processed, the degree of compliance with established operating policy and procedures, and to recommend improvements where required. The results of our examination were reviewed with K. Chapman, Interim Director, Department of Public Works; M. Fontaine, Assistant Superintendent, Department of Public Works; and, other responsible members of operating management. The summary, which follows, includes exceptions disclosed and recommended operating improvements. Management has also noted actions taken or planned including time periods to resolve each finding and/or recommendation in this report. We thank Department of Public Works management and staff for their cooperation and courtesies extended to us during our audit. Background The Equipment Services Division (ESD) is responsible for providing maintenance and repair to all of the City of Hartford
’s (City’s)
 passenger, heavy equipment, and ancillary equipment fleet not including those managed separately by the Fire Department and Hartford Public Schools. With a staff of 14 employees, ESD is responsible for approximately 810 vehicles and other pieces of equipment with combined acquisition costs of more than $29.2 million. ESD uses the MUNIS Financial Management System (MUNIS) to manage the fleet, its maintenance requirements and  parts inventories. ESD is also responsible for the City fueling operations which are managed through the FuelMaster System, a commercial software package. K. Chapman was appointed to the position of Interim Director in September 2013. M. Fontaine was hired as the Heavy Equipment Supervisor in March 2012 and promoted to the position of Assistant Superintendent in January 2013. For the fiscal year ending June
30, 2014, ESD’s expenses totaled approximately $4.1 million.
 General In general, we found that policies, procedures and controls relating to the parts inventory, fueling operations and work order and auction processes were not documented and needed improvement. We also noted that improvements were required over security and access to the MUNIS Inventory
 
 
City of Hartford Department of Public Works Equipment Services Division Accounts and Operations Audit
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module and FuelMaster systems and related policies and procedures. We would also like to note that DPW management took action to address a number of the recommendations in our prior report, however, improvements are still required in various areas as noted in the details of this report. Scope The scope of our audit included various tests of operations, activity and transactions performed primarily during fiscal year ending June 30, 2014. The following audit procedures were performed:
 
Reviews and evaluations of policies, procedures and related internal operating and accounting controls;
 
Examinations of parts inventory;
 
Reviews and tests of the process for auctioning surplus vehicles and equipment;
 
Reviews and tests of work orders and related process; and,
 
Reviews and tests of FuelMaster transactions.
II. Detail Findings
Parts Inventory Parts for vehicle and equipment repairs are either purchased to be used for specific immediate repair requirements or to be maintained on hand in stockrooms for future repair needs. ESD uses the Inventory module of MUNIS to account for and control part inventories. At the time of our review, the inventory included over 13,230 parts under 3,809 separate part numbers with a total cost of approximately $357,000. Various tests of 20 parts with a cost of more than $48,500 and reviews of related operations disclosed the following: 1.
 
Policies and procedures relating to the management and oversight of parts purchased for repair work and those maintained in inventory were not documented. We recommend that DPW management document policies and procedures relating to purchased parts and related inventory. This should include, but not be limited to, purchasing levels and limits, control over parts from purchase to use, accounting for the parts in MUNIS and performing periodic physical counts of the inventory on-hand. 2.
 
The cost of one part was incorrectly recorded in MUNIS as $5,180 instead of $5.18. In addition, although the part was used, it was not accounted for as relieved from the Inventory module. As a result, the inventory was overstated by $5,180. ESD management informed us that this was the result of an oversight. We recommend that DPW management take action to ensure that all parts are accounted for properly in the future. 3.
 
Thirteen of the parts with an extended cost of $27,694 were either obsolete or overstocked because they had not been used in 12 to 60 months. As a result of our analysis and discussions with ESD management, we jointly estimated that as much as $100,000, or about 30%, of the
 
 
City of Hartford Department of Public Works Equipment Services Division Accounts and Operations Audit
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$357,000 parts inventory was either obsolete or overstocked. We recommend that DPW management take action to identify obsolete and excess inventory and determine the feasibility of either returning the items for refund or credit or selling them outright. 4.
 
All parts did not have unit costs recorded in the MUNIS Inventory module. We noted that 72 part numbers with a total of 261 parts on-hand did not have a unit cost recorded in the Inventory module. Using an average part cost of $26, we estimated that aggregate cost of these parts could total as much as $6,900. This understates the inventory and asset values for financial reporting purposes. We recommend that DPW management take action to record the unit costs in the Inventory for the 72 part numbers noted above and ensure that unit costs are recorded in the inventory for all parts in the future. 5.
 
A physical inventory of parts is performed by ESD periodically. The last physical inventory of parts was performed in September 2013 by a third party vendor. The City paid the vendor $4,950 to perform the physical inventory. While having a third party perform the inventory  provides for a more independent review, we recommend that DPW management determine the feasibility and practicality of performing the  physical inventory of parts with DPW employees to avoid having to pay for these services. DPW management informed us that they had  planned to perform the next physical inventory of parts with City employees and that this would include identifying and addressing as appropriate the disposition of excess and obsolete parts. 6.
 
Physical access to the stockroom and parts inventory was not adequately restricted. We noted that there is nothing to prevent anyone from entering the stockroom and gaining access to parts. While the desk of the Parts Clerk is located adjacent to the stockroom, there is nothing to  prevent someone from entering the stockroom unobserved when this individual is away from the desk for any reason. As a result, there are opportunities for parts to either be misappropriated or used and not accounted for without being detected. We recommend that DPW management more adequately restrict access to the stockroom and parts inventory.
Management Response
: Due Date: December 31, 2014 Responsible Person: Keith Chapman, Interim Director, Department of Public Works We will take action to follow-up on and address the findings and recommendations as noted above. Work Orders Various tests of work orders initiated during the fiscal year ended June 30, 2014 and reviews of related operations disclosed the following: 1.
 
We identified a number of work orders with large dollar costs. The top ten work orders we indentified had a total aggregate cost of about $86,895 and ranged in amounts from $5,616 to $12,505. The model years of these vehicles ranged from 2000 to 2012. We also noted that that there were 12 vehicles with aggregate annual work order costs exceeding $10,000. The aggregate costs of the work orders for these 12 vehicles
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