audit of fuel inventory controls - boarddocs · reconciled amounts. nine adjustments in fuel...

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PRELIMINARY AND TENTATIVE

FOR DISCUSSION PURPOSES ONLY

Audit of

Fuel Inventory Controls

TBD

Report #2016-08

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Robert M. Avossa, Ed.D.

Superintendent of Schools

School Board Members Audit Committee Members

Chuck Shaw, Chair Noah Silver, CPA, Chair

Frank A. Barbieri, Jr., Esq., Vice Chair David H. Talley, Vice Chair

Marcia Andrews N. Ronald Bennett, CPA

Karen M. Brill Michael Dixon, CPA/PFS

Debra L. Robinson, M.D. LaTanzia Jackson

Erica Whitfield Richard Roberts, CPA

Bill Thrasher, CGFO

Audit Committee Representatives

Frank A. Barbieri, Jr., Esq., Vice Chair, School Board

Robert M. Avossa, Ed.D., Superintendent of Schools

Mike Burke, Chief Financial Officer

JulieAnn Rico, Esq., General Counsel

Maureen Werner, Principal Representative

Kathryn Gundlach, CTA President

MISSION STATEMENT

The School Board of Palm Beach County is committed to providing a world

class education with excellence and equity to empower each student to reach his

or her highest potential with the most effective staff to foster the knowledge,

skills, and ethics required for responsible citizenship and productive careers.

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Audit of


Table of Contents

Page

EXECUTIVE SUMMARY i

PURPOSE AND AUTHORITY 1

SCOPE AND METHODOLOGY 1

BACKGROUND 2

CONCLUSIONS

1. Controls for Fuel Deliveries Needed Improvement 4

2. Problem With Fuel Dispensing System 6

Unrestricted Access to Fuel Dispensing Software 6

System Controls Not Activated 7

Fuel-Can Card Dispensing Not Controlled or Monitored 8

3. 234,100 Gallons of Fuel Dispensed During Off-Hours, Weekends, and Holidays 9

in July 2013 through February 2016

4. Monthly Fuel Usage and Billing Statements Not Provided to User-Departments 9

5. Overpayment to Vendor for Hurricane Fuel Reserve 10

6. No Independent Confirmation of Prices for $458,078 in Sample Billings 11

7. Fuel Reconciliations Needed Improvement 11

APPENDIX

Management’s Response 15

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Audit of


EXECUTIVE SUMMARY

Pursuant to the Office of Inspector General’s (OIG) 2015-16 Work Plan, we have audited the Fuel

Inventory Controls at the Transportation Services Department (Transportation). The primary objectives

of this audit were to (1) assess the adequacy of controls and extent of staff’s compliance in handling fuel

inventory, and (2) determine the extent of fuel vendor’s compliance with the contract. This audit

produced the following major conclusions.

1. Controls for Fuel Deliveries Needed Improvement

We observed the fuel delivery process at the District’s eight fuel sites, and noted several control

weaknesses: (a) the fuel truck drivers had access to and printed reports from the District’s Veeder-

Root fuel inventory management system, (b) the fuel delivery process was not monitored by

Transportation staff, and (c) while the fuel delivery was in process, the affected areas were not

closed and some District’s vehicles were being refueled. (Please see page 4.)

Management’s Response: Management concurs and will implement new procedures to address the

issues. (Please see page 15.)

2. Problem With Fuel Dispensing System

The review of the Phoenix Fuel Management System (Phoenix System) noted the following control

weaknesses: (a) all users used the System Administrator’s ID, that has full restricted access

authority, to access the system, (b) most of the Phoenix System’s built-in controls were not activated

for monitoring fuel dispensing activities based on vehicle’s specifications, such as fuel tank size and

fuel economy information, and (c) fuel-can card dispensing activities were not controlled or

monitored. (Please see page 6.)

Management’s Response: Management concurs. The appropriate access control and fuel

dispensing control features will be activated. A process for fuel-can distribution will be developed

by November 1, 2016. (Please see page 15.)

3. 234,100 Gallons of Fuel Dispensed during Off-Hours, Weekends, and Holidays in July 2013

through February 2016

During July 2013 through February 2016, a total of 234,100 gallons of fuel, with estimated cost of

$513,567, were dispensed during off-hours (8:00 p.m. to 5:00 a.m., Monday through Friday),

weekends, and holidays. (Please see page 8.)

Management’s Response: Management concurs. Transportation will put procedures in place by

November 1, to review fueling records to ensure legitimacy of off-hour fueling. Management will

explore the possibility of installing cameras as part of our security and monitoring as part of our

accountability system. (Please see page 16.)

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4. Monthly Fuel Usage and Billing Statements Not Provided to User-Departments

Transportation uses the Phoenix System to calculate the fuel usage for user-departments and bill the

departments monthly. However, fuel usage information was not provided to the user-departments

for review, monitoring, and approval. Our review of sample fueling transactions found that 1,822

gallons ($5,194) in fuel processed through the use of three fuel cards were charged to the wrong

departments during July 2013 through April 2015. Errors occurred because (a) the fuel card

information for two vehicles was not updated after the vehicles had been transferred to another

departments, and (2) two fuel cards with the same card number were assigned to two different

vehicles. (Please see page 10.)

Management’s Response: Management concurs. Monthly Reports will be provided to the Chief

Operations Officer, Accounting and directors of all User-Departments starting December 2016.

Process will be developed to ensure transfer of vehicles and fuel card charges are kept in sync.

(Please see page 16.)

5. Overpayment to Vendor for Hurricane Fuel Reserve

On July 13, 2013, the School District purchased 75,000 gallons of diesel fuel ($257,400, invoice

#982169A) for reserve in the event of fuel shortage due to hurricanes. The vendor delivered the fuel

to the District, through multiple deliveries, after the 2013 hurricane season. However, the last

delivery of 616 gallons in diesel fuel on December 18, 2013, was subsequently invoiced by the

vendor as a regular purchase at $2,048.20 (invoice #1055396). (Please see page 11.)

Management’s Response: Management concurs. Transportation is investigating the duplicate

billing of the $2,048.20. If a credit has not already been received, the department will work with the

vendor to resolve. The process of invoice verification and payment will be reviewed and adjusted, if

needed, to ensure overpayment does not occur again. (Please see page 16.)

6. No Independent Confirmation of Prices for $458,078 in Sample Billings

We examined the sufficiency of documentation for 138 random sample invoices, totaling

$2,194,509, for the period July 2013 through February 2016. However, 18 (totaling $458,078.30) of

the 138 sample invoices did not have the OPIS Reports for price verification, as required by the

District’s fuel purchase contracts. As a result, there was no assurance that the invoiced prices were

correct. (Please see page 11.)

Management’s Response: Management Concurs. Transportation currently has a procedure in

place to verify fuel prices billed on invoices against the applicable fuel price index. Procedures will

be reviewed to ensure documentation of price verification is documented. (Please see page 16.)

7. Fuel Reconciliations Needed Improvement

Transportation reconciled the fuel inventory monthly. However, after the reconciliation process was

completed, there was no further actions taken by Transportation when differences were noted in

reconciled amounts. Nine adjustments in fuel inventory were made for all storage tanks from July

2012 to June 2016. A total adjustment of $1,469,867 was made to true-up the general ledger

balance for the Fuel Inventory Account (#115012), which resulted in reducing the asset balance by

$1,469,867. (Please see page 12.)

Management’s Response: Management concurs. Transportation will revise the monthly fuel

reconciliation report. The revised report will begin starting December 2016. The Transportation

Operations General Manager will be responsible for reviewing the report and investigating

discrepancies to resolution. (Please see page.)

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M E M O R A N D U M

TO: Honorable Chair and Members of the School Board

Robert M. Avossa, Ed.D., Superintendent of Schools

Chair and Members of the Audit Committee

FROM: Lung Chiu, CPA, Inspector General

DATE: TBD

SUBJECT: Audit of Fuel Inventory Controls

PURPOSE AND AUTHORITY

Pursuant to the Office of Inspector General’s (OIG) 2015-16 Work Plan, we have audited the

Fuel Inventory Controls at the Transportation Services Department (Transportation). The

primary objectives of this audit were to (1) assess the adequacy of controls and extent of staff’s

compliance in handling fuel inventory, and (2) determine the extent of fuel vendor’s compliance

with the contract.

SCOPE AND METHODOLOGY

This audit was performed in accordance with Government Auditing Standards promulgated by

the Comptroller of the United States. 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.

This audit covered the period July 2013 through February 2016, and included:

Interviewing staff.

Reviewing District’s Fuel Contracts #13C-815A and #14C-822A.

Reviewing sample invoices.

Observing fuel deliveries.

THE SCHOOL DISTRICT OF LUNG CHIU, CIG, CPA SCHOOL BOARD PALM BEACH COUNTY, FLORIDA INSPECTOR GENERAL CHUCK SHAW, CHAIR

FRANK A. BARBIERI, JR, ESQ., VICE CHAIR OFFICE OF INSPECTOR GENERAL MARCIA ANDREWS 3318 FOREST HILL BLVD., C-306 KAREN M. BRILL WEST PALM BEACH, FL 33406 DEBRA L. ROBINSON, M.D. ERICA WHITFIELD (561) 434-7335 FAX: (561) 434-8652 www.palmbeachschools.org ROBERT M. AVOSSA, Ed.D., SUPERINTENDENT

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Draft audit findings were sent to management for review and comments. Management response

is included in the Appendix. We appreciate the courtesy and cooperation extended to us by

District staff during the audit. The final draft report was presented to the Audit Committee at its

TBD meeting.

BACKGROUND

District’s Fuel Contracts. During the audit period of July 2013 through February 2016, the

District had two contracts for purchase of fuel:

(1) Contract #13C-815A: for April 1, 2013, to March 31, 2014.

(2) Contract #14C-822A: for July 1, 2014, to March 31, 2017.

Fourteen Fuel Storage Tanks at Eight Fueling Sites. Fuel is purchased to operate 957 school

buses, 940 cars and trucks, emergency generators, and various other fuel powered equipment.

The District has 20 fuel storage tanks (six for unleaded gasoline with a total capacity of 57,000

gallons; and 14 for diesel fuel, with a total capacity 170,800 gallons) at eight locations as follow:

Fuel Tank Locations

Diesel Fuel Unleaded Gasoline

Fuel Storage Site Number of

Fuel Tanks

Capacity

(Gallons)

Number of

Fuel Tanks

Capacity

(Gallons)

Total Capacity

(Gallons)

1.Central 3 60,000 1 20,000 80,000

2.East 2 30,000 1 15,000 45,000

3.North 1 20,000 1 10,000 30,000

4.South 2 20,000 - - 20,000

5.West 2 20,000 1 10,000 30,000

6.Royal Palm 4 20,800 - - 20,800

7.South ITV - - 1 1,000 1,000

8.Crestwood (Note) - - 1 1,000 1,000

Total 14 170,800 6 57,000 227,800

Source: Transportation Services

Note: Crestwood site was closed since April 1, 2015

The District also has an additional 31 locations with diesel fuel tanks, with sizes ranging from

100 to 1,500 gallons each, totaling 8,855 gallons in capacity, at various schools and other sites

for emergency generator use.

$18 Million in Fuel Purchased During 2014 Through 2016. Transportation is responsible for

ordering, receiving, storing, and dispensing fuel. The following exhibit shows fuel purchased

during Fiscal Years 2014 through 2016:

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Fuel Purchased

During Fiscal Years 2014 through 2016 Unleaded Gasoline Diesel Fuel

Fiscal Year Gallons Cost Gallons Cost Total

2014 461,023 $1,453,467 2,428,993 $8,343,087 $9,796,554

2015 460,641 $1,048,304 1,984,943 $5,470,654 $6,518,958

2016 (Note) 288,480 $520,227 837,906 $1,513,696 $2,033,923

Total 1,210,144 $3,021,998 5,251,842 $15,327,437 $18,349,435

Source: Transportation Services

Note: For the period July 1, 2015 through February 29, 2016

Phoenix Fuel Management System. The District uses the Phoenix Fuel Management System

(Phoenix System) to manage the dispensing of fuel. Each District vehicle is assigned a fuel card

for refuel at any fueling station. The system generates transaction data on fuel dispensing,

including the date, time, location, quantity, and fuel type. The District utilizes the fuel

dispensing information for billing the fuel cost to the user-departments. During July 2013,

through February 2016, information for an estimated $20 million in fuel processed and dispensed

was captured by the Phoenix System.

Fuel Dispensing Transactions

During July 2013, through February 2016

Fuel Type # of Transactions Gallons Average Cost

Diesel 136,124 6,273,368.6 $17,385,472.89

Unleaded Gasoline 74,134 1,220,534.1 3,022,198.07

Total 210,258 7,493,903 $20,407,670.96 Source: Phoenix System

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CONCLUSIONS

The audit produced the following major conclusions:

1. Controls for Fuel Deliveries Needed Improvement

All School District’s fuel tanks were installed with the Veeder-Root TLS-450 System to (1)

detect and monitor fuel storage tank leakage, if any, and (2) monitor fuel inventory.

Transportation utilizes the Current Inventory Reports generated by the Veeder-Root System

before and after each fuel delivery to verify the quantity delivered and invoiced by the

vendor. Based on our interviews with Transportation staff, Exhibit 1 provides an overview

of the fuel ordering and delivery process, and control weaknesses.

Exhibit 1

Fuel Ordering and Delivery Process

Fuel Ordering

Fuel Delivery

Control Breakdowns

(Auditor’s Onsite Observations)

Source: Based on auditor’s onsite observations and interviews with Transportation staff.

Foreperson at Fuel Site emails

Transportation’s Accounting Clerk

of fuel needs

Accounting Clerk emails vendor requesting fuel delivery as

requested by foreperson

Accounting Clerk emails Budget

Technician notification of

scheduled delivery

Vendor sends fuel truck to site as

requested

Before fuel is delivered into the storage tank, foreperson prints the

inventory report from the Veeder-

Root System

The driver delivers fuel into the

storage tank and leaves a bill of

lading/delivery ticket with foreperson

After fuel delivery is complete, foreperson prints the inventory

report from the Veeder-Root System

Vendor emails Budget Technician

invoice for delivery

Foreperson sends before and after

Veeder-Root readings and delivery

documents to Budget Technician

Budget Technician

verifies accuracy of invoice /

compares with contract terms

At three sites, the fuel truck driver

printed the inventory report from

the Veeder-Root Panel.

(See Conclusion #1.)

At three sites, the fuel truck driver

printed the inventory report from

Veeder-Root Panel. (See Conclusion #1.)

18 (for $458,078) of the 138

sample invoices had no records for

independent confirmation of

billing prices.

(See Conclusion #6.)

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Results of Observation. During the audit, we observed a total of eight sample fuel deliveries

at the District’s eight fuel sites and noted that:

The fuel truck drivers had access to the District’s Veeder-Root System in three

locations to: (a) print the Current Inventory Reports before and after the fuel delivery

into the storage tanks, and (b) print the Last Delivery Report after the completion of

the fuel delivery. Specifically, the Veeder-Root’s reports at three sites (Central,

North, and South) were printed by the fuel truck drivers, instead of District staff.

The fuel truck driver presented the Current Inventory Reports, Last Delivery Report,

and fuel delivery tickets to a Transportation staff for signature to confirm the delivery

of fuel.

Each fuel delivery process takes approximately 30 minutes for transport-truck

delivery, and 15 minutes for tank-wagon delivery.

Our onsite observations revealed the following control weaknesses for fuel deliveries:

The entire fuel delivery process was not monitored by Transportation staff.

The affected fuel dispensing areas were not closed during the delivery; District

vehicles were refueled near-by while the fuel delivery was in process. As a result, the

quantity measurement of the fuel delivered into the tank would not be accurate.

Recommendation

To protect the best interests of the School District and ensure the integrity of the Veeder-

Root System,

Fuel delivery truck drivers should not be allowed access to the Veeder-Root System

Panel and print the reports. The access should be limited only to authorized District

employees.

The Veeder-Root System’s Current Inventory Reports should be printed by a District

employee, instead of the truck driver.

To ensure the accuracy of the Last Fuel Delivery Report and prevent any health and

safety hazards, fuel dispensing should not take place during fuel delivery. This report

should be used to confirm the actual quantities of fuel recorded on the vendor’s fuel

delivery ticket and invoice.

Management’s Response: Management concurs. Transportation will implement new

protocols which (1) limit fuel management systems access to designated District personnel

only and (2) close fuel dispensing areas while fuel is being delivered. As soon as all

personnel are trained, transportation will activate the necessary controls and limit access to

appropriate users. (Please see page 15.)

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2. Problem With Fuel Dispensing System

The District uses the Phoenix System to manage the dispensing of fuel. Our review of the

fuel dispensing system identified the following control weaknesses:

(a) Unrestricted Access to Fuel Dispensing Software. The Phoenix System provides system

access control features for creating user IDs with different access rights (to Manage, Edit,

and View Access) to the system. However, we noted that all users were using the System

Administrator’s ID to access the system. The System Administrator’s ID, however, has

full unrestricted access to the system, including addition, modification, and deletion of

fueling records. Consequently, the integrity and reliability of transaction data (such as

fuel-card number, activity dates, time, location, quantity, and fuel types, etc.) could be

compromised due to the lack of accountability and control for unauthorized access.

Recommendation

To properly safeguard District asset and ensure proper accountability and integrity of the

fuel usage database, Transportation should activate the Phoenix System access control

features to (1) assign unique user ID and password for each user on an as-need basis, and

(2) restrict the access rights accordingly for each user based on responsibility and job

title.

(b) System Controls Not Activated. A valid fuel card is required by the Phoenix System for

dispensing fuel at all District’s fuel stations. The Phoenix System has built-in controls

for tracking fuel use. However, none of the following system controls was activated:

Reasonability of Miles Traveled: Fueling request can be denied by the system if the

mileage traveled (difference between the current odometer entry and the previous

entry) is not within the programmed reasonable range.

Product Restriction: The system can limit the type of fuel (unleaded gasoline or

diesel) that can be used by the fuel-card assigned to a specific vehicle.

Daily Allocation: The system can limit the daily quantity or value of fuel that can be

requested by a specific card.

Monthly Allocation: The system can limit the monthly quantity or value of fuel

requested by a specific card.

Bad Odometer Tracking: The system will flag the transaction if the odometer entry

does not meet the mile-per-gallon range pre-set for the vehicle’s fuel card.

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Recommendation

To ensure that fuel cards are used only for the assigned District’s vehicles for District

business, Transportation should:

1) Activate the appropriate control features available in the Phoenix System,

2) Periodically review and investigate those unusual transactions reported by the

Phoenix System,

3) Investigate the causes of such unusual transactions, and

4) Report the investigation results to the senior management for proper disposition.

(c) Fuel-Can Card Dispensing Not Controlled or Monitored. As of February 29, 2016,

Transportation issued 40 fuel-can cards to Maintenance and Plant Operations Department

for fueling the portable fuel cans, with sizes ranging from five to 10 gallons. This fuel is

for maintenance equipment and District vehicles should they run out of fuel. During July

1, 2014, and February 29, 2016, a total of 14,654 gallons (7,699.6 gallons in diesel fuel,

and 6,954.4 gallons in unleaded gasoline, and with a total cost of $34,750.78) was

dispensed through these 40 fuel-can cards. Please see the following exhibit:

Fuel Dispensed To Fuel-Cans

During July 2014 and February 2016

Fuel Type # of Transactions # of Gallons Cost *

Diesel 979 7,699.6 $18,878.43

Unleaded 528 6,954.4 $15,872.35

Total 1,507 14,654.0 $34,750.78 * Based on average purchase cost.

Source: Phoenix System

An analysis of the fuel-can card activities for dispensing 10 gallons or more per fueling

found that 35 cards had a total of 496 dispensing in quantities ranging from 10.1 to 76.8

gallons, with a total value of $20,757.42; and six of the 496 dispensing occurred on

weekends. However, there are no procedures and controls for:

Unauthorized use of fuel, and abnormal use of fuel-can cards.

Quantity of fuel-cans or gallons to be refilled.

Frequencies of refueling per card for certain time-period.

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Fuel-Can Card Transactions > 10 Gallons/Fueling

During July 2014 and February 2016

Fuel Type # of Transactions # of Gallons Cost *

Diesel 191 2,842.9 $7,674.09

Unleaded 305 5,775.7 $13,083.33

Total 496 8,618.6 $20,757.42 * Based on average purchase cost.


Recommendation

To ensure that fuel is dispensed for authorized use only, Transportation should:

Determine what equipment should be fueled with fuel-can cards.

Determine the reasonable fuel consumption for such equipment.

Develop procedures to monitor the use and dispensing of fuel for the cards.

Management’s Response: Management concurs. Phoenix Software System access control

features will be activated to assign unique user IDs and passwords and restrict access rights

according to role assignment. The additional system controls recommended will be activated

and monthly reports and analysis will be implemented by December 1, 2016. A process for

fuel can distribution will be developed by November 1, 2016. (Please see page 15.)

3. 234,100 Gallons of Fuel Dispensed during Off-Hours, Weekends, and Holidays

in July 2013 through February 2016

During July 2013 through February 2016, there were 122,632 fuel-card transactions that

dispensed 4,190,843 gallons of fuel, at a total estimated cost of $9,627,874. According to

Transportation, all District’s fuel sites are closed and fuel pumps are pad-locked from

8:00pm to 5:00am during Monday through Friday, and all day on the weekends and holidays.

The only persons who have the keys to access the fuel pumps during off-hours are the site

supervisors and school police. The review of the 122,632 fuel-card transactions found that

234,100 gallons of fuel, with a total estimated cost of $513,567, were dispensed during off-

hours in July 2013 through February 2016.

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Fueling During Off-Hours, Weekends, and Holidays

July 2013 through February 2016

8:00pm to 5:00am

Monday through Friday Weekends & Holidays Total

Department

Tran-

sactions

Qty

(Gal)

Avg

(Gal) Cost

Tran-

sactions

Qty

(Gal)

Avg

(Gal) Cost

Tran-

sactions

Qty

(Gal)

Avg

(Gal) Cost

Transportation

Services 3,965 189,798.9 47.9 $416,128 760 32,635.1 42.9 $69,863 4,725 222,434.0 47.1 $485,991

School Police 141 1,771.0 12.6 4,085 365 4,198.5 11.5 10,958 506 5,969.5 11.8 15,043

Facility Services

M & PO 40 1,449.4 36.2 3,157 101 1,636.7 16.2 3,485 141 3,086.1 21.9 6,642

Boynton Beach

High 10 738.1 73.8 1,599 1 70.0 70.0 146 11 808.1 73.5 1,745

Atlantic High 15 444.4 29.6 924 - - - - 15 444.4 29.6 924

School Food

Service 2 41.4 20.7 $83 9 151.6 16.8 $398 11 193.0 17.5 $481

Maintenance –

Grounds - - - - 12 160.3 13.4 406 12 160.3 13.4 406

Palm Springs

Middle 3 161.6 53.9 336 - - - - 3 161.6 53.9 336

Building

Department - - - - 10 104.7 10.5 328 10 104.7 10.5 328

Boca Raton

High 2 80.7 40.4 168 1 73.1 73.1 152 3 153.8 51.3 320

Property

Redistribution 3 142.2 47.4 296 - - - - 3 142.2 47.4 296

M & PO-

Portables - - - - 3 83.0 27.7 240 3 83.0 27.7 240

ITV 5 55.5 11.1 135 2 19.9 10.0 36 7 75.4 10.8 171

Transportation –

Central Facility - - - - 4 71.9 18.0 147 4 71.9 18.0 147

Santaluces High 1 67.0 67.0 139 - - - - 1 67.0 67.0 139

Warehouse –

Australian - - - - 1 54.1 54.1 113 1 54.1 54.1 113

Information

Technology 1 20.3 20.3 64 - - - - 1 20.3 20.3 64

Village

Academy

Elementary - - - - 1 20.4 20.4 64 1 20.4 20.4 64

School Police-

Youth Court 1 17.1 17.1 54 - - - - 1 17.1 17.1 54

Maintenance –

Central Services - - - - 1 12.1 12.1 25 1 12.1 12.1 25

Area 4

Superintendent - - - - 1 11.0 11.0 20 1 11.0 11.0 20

Building Code

Services 1 10.0 10.0 18 - - - - 1 10.0 10.0 18

Total 4,190 194,797.6 46.5 $427,186 1,272 39,302.4 30.9 $86,381 5,462 234,100.0 42.9 $513,567


Recommendation

To ensure that fuel dispensed during off-hours is only for authorized usage, Transportation

should

Install surveillance camera at the selected fueling sites to monitor access to the fuel

pumps during off-hours.

Require staff to complete a fueling logs for off-hours fueling.

Periodically review the Phoenix’s fueling records to ensure the legitimacy of off-hour

fueling activities.

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Management’s Response: Management concurs. Transportation will put procedures in

place by November 1, to review fueling records to ensure legitimacy of off-hour fueling. We

will explore the possibility of installing cameras as part of our security and monitoring as

part of our accountability system. (Please see page 16.)

4. Monthly Fuel Usage and Billing Statements Not Provided to User-Departments

Transportation uses the Phoenix Software system to calculate the fuel usage for user-

departments and charge the fuel cost to each department monthly. However, fuel usage

information was not provided to the user-departments for review, monitoring, and approval.

Our review of sample fueling transactions found that 1,822 gallons ($5,194) in fuel processed

through three fuel cards were charged to the wrong departments during July 2013 through

April 2015,

(a) Two vehicles (#368 and #961) were transferred to another user-department, but the

related fuel card records (#4599 and #0414) were not updated.

(b) Two fuel cards assigned with the same card number (#7143) were issued to two

different vehicles: one to OIG, and the other one to School Police.

Incorrect Fuel Charges to Departments

Card # Vehicle #

Wrong

Department #

Correct

Department # # of Gallons Amount

4599 368 9004 9320 146.4 $435

0414 961 9095 9320 1,473.5 $4,219

7143 2138 9104 9004 202.4 $540

Total 1,822.3 $5,194 Sources: Phoenix System and PeopleSoft System.

Recommendation

To ensure the accuracy and integrity of information in fuel consumption by user-

departments, Transportation should provide monthly fuel utilization and billing to the user-

departments for review, confirmation, and approval. Moreover, Transportation should ensure

that fuel card information recorded in the Phoenix System be timely updated when the

vehicles are transferred to a new department.

Management’s Response: Management concurs. Monthly Reports will be provided to the

Chief Operations Officer, Accounting and directors of all User-Departments starting

December 2016. Processes will be developed to ensure transfer of vehicles and fuel card

charges are kept in sync. (Please see page 16.)

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5. Overpayment to Vendor for Hurricane Fuel Reserve

On July 13, 2013, the School District purchased 75,000 gallons of diesel fuel ($257,400,

invoice #982169A) for reserve in the event of fuel shortage due to hurricanes. The vendor

delivered a total of 74,384 gallons of diesel fuel to Transportation through ten deliveries

during November 18, and December 16, 2013 (after the 2013 hurricane season). The

remaining 616 gallons (75,000 – 74,384) was delivered to Transportation on December 18,

2013. However, the last delivery for the 616 gallons of diesel was subsequently invoiced by

the vendor as a regular purchase at $2,048.20 (invoice #1055396).

Recommendation

The $2,048.20 in diesel fuel payment was a duplicate billing that the District had already

paid. The District should recoup the $2,048.20 in overpayment from the vendor.

Management’s Response: Management concurs. Transportation is investigating the

duplicate billing of the $2,048.20. If a credit has not already been received, the department

will work with the vendor to resolve. The process of invoice verification and payment will be

reviewed and adjusted, if needed, to ensure overpayment does not occur again. (Please see

page 16.)

6. No Independent Confirmation of Prices for $458,078 in Sample Billings

During the audited period, the District had two fuel contracts (#13C-815A and #14C-822A).

According to the contract provisions, the fuel prices are based on the Daily Platts Prices

published in US Market Scan, and Daily OPIS Price published in the OPIS Contract

Benchmark File respectively for the date of delivery of the product. For Contract #13C-

815A, the vendor emailed the Daily Platts Prices to Transportation for verifying the invoice

prices. For Contract #14C-822A, Transportation has a subscription with OPIS in order to

independently verify the invoice prices.

We examined the sufficiency of documentation for 138 random sample invoices, totaling

$2,194,509, for the period July 2013 through February 2016. However, 18 of the 138 sample

invoices did not have the OPIS Reports for price verification. As a result, there was no

assurance that the invoiced prices were correct.

Invoices Without Documentation

For Independent Confirmation of Prices

Contract # Number of Invoices Invoice Amount

13C-815A 10 $282,519.06

14C-822A 8 $175,559.24

Total 18 $458,078.30

12

DRAFT



Recommendation

To ensure that billing prices are consistent with the Fuel Contract #14C-822A,

Transportation should verify the fuel prices from the OPIS Reports.

Management’s Response: Management concurs. Transportation currently has a procedure

in place to verify fuel prices billed on invoices against the applicable fuel price index.

Procedures will be reviewed to ensure documentation of price verification is documented.

(Please see page 16.)

7. Fuel Reconciliations Needed Improvement

The monthly fuel reconciliations performed by Transportation staff used actual physical

inventory on hand, added purchases from invoices, and subtracted fuel dispensed per the

Phoenix System to get an ending inventory amount [referenced to as (D) in Process #1] to

compare with the new actual physical inventory on hand [referenced to as (D’) in Process

#2]. This reconciliation process mixed perpetual inventory records with physical inventory

records, rather than comparing the perpetual inventory records with the physical inventory

records.

Reconciliation Processes

Process #1 (Perpetual Inventory) Process #2 (Actual Inventory)

(A)

(B)

– (C)

Actual Beginning Inventory

Purchases (from invoices)

Fuel Dispensed Per Phoenix

(A’)

(B’)

– (C’)

Actual Beginning (actual ending from last period)

Purchases (from invoices)

Actual Fuel Dispensed

(D) Ending Inventory (D’) Actual Ending Inventory (actual in storage tanks)

Analysis of Why D ≠ D’ in Process #1 and #2

Logically A must = A’, and B must = B’

If D ≠ D’ (perpetual inventory not equal to actual ending inventory) and need adjustment, and the

contributing factors are C and C’.

As a result, the adjustments are necessary because C ≠ C’, due to fuel dispensed per Phoenix ≠

actual fuel dispensed.

After the reconciliation process was completed, there was no further action taken by

Transportation Services staff when differences were determined in reconciled amounts. The

table below shows the variations in fuel quantities produced by monthly reconciliation

reports for the period of July 1, 2013, to February 29, 2016:

13

DRAFT



Fuel Quantity Variations from Reconciliation Reports

Site Fuel Type FY14 FY15 FY16(1) Total

Central Diesel (24,358.8) (2,434.0) (4,085.5) (30,878.3)

East Diesel (6,868.1) 7,624.4 2,687.6 3,443.9

North Diesel (4,485.5) (8,684.2) (2,124.6) (15,294.3)

Royal Palm Diesel (3,875.6) (10,232.1) (11,834.3) (25,942.0)

South Diesel (8,647.4) 5,989.9 (196.7) (2,854.2)

West Diesel (135.6) (610.6) 2,168.8 1,422.6

Total (48,371.0) (8,346.6) (13,384.7) (70,102.3)

Central Unleaded 9,213.2 2,198.4 1,105.3 12,516.9

Crestwood(2) Unleaded 479.7 204.2 0 683.9

East Unleaded 8,268.7 7,346.2 (5,033.1) 10,581.8

North Unleaded (1,705.9) (9,103.8) (15,897.8) (26,707.5)

South ITV Unleaded (4,285.4) (4,216.9) (5,258.4) (13,760.7)

West Unleaded 299.3 394.2 424.2 1,117.7

Total 12,269.6 (3,177.7) (24,659.8) (15,567.9) Source: Transportation Services

Notes: (1) For the period July 1, 2015 through February 29, 2016.

(2) Crestwood site closed February 2015

$1.5 Million in Negative Adjustments. Adjustments in fuel inventory were made for all

storage tanks from July 2012 to June 2016. Total adjustment included negative adjustment

of 432,087 gallons in diesel fuel ($1,119,766) and 135,592 gallons in unleaded gasoline

($350,101). A total adjustment of $1,469,867 was made to true-up the general ledger balance

for the Fuel Inventory Account (#115012), which resulted in reducing the asset balance by

$1,469,867.

Adjustments in Fuel Inventory

During July 2012 and June 2016

Gasoline Diesel Total

Date

Quantity

(Gallons) Cost

Quantity

(Gallons) Cost

Quantity

(Gallons) Cost

12/31/2012 (35,818.3) ($113,185.85) (81,731.4) ($286,877.25) (117,549.7) ($400,063.10)

2/28/2013 (12,509.8) ($52,465.22) (142,922.3) ($187,534.78) (155,432.1) ($240,000.00)

6/30/2013 (8,080.1) ($26,825.79) (30,183.6) ($99,605.91) (38,263.7) ($126,431.70)

1/31/2014 (34,321.1) ($106,395.43) (106,352.1) ($359,470.20) (140,673.2) ($465,865.63)

6/30/2014 (29,577.0) ($18,991.43) (28,302.1) ($79,499.95) (57,879.1) ($98,491.38)

1/31/2015 (12,254.0) ($26,101.06) (28,529.2) ($70,752.48) (40,783.2) ($96,853.54)

2/28/2015 (2,887.9) ($6,064.57) (13,363.1) ($32,472.40) (16,251.0) ($38,537.01)

3/1/2015 (2,431.7) ($5,471.27) (6,747.7) ($17,274.0) (9,179.3) ($22,745.26)

6/30/2015 2,288.0 $5,399.68 6,044.6 $13,721.32 8,332.6 $19,121.00

Total (135,591.9) ($350,100.96) (432,086.9) ($1,119,765.66) (567,678.8) ($1,469,866.62)

14

DRAFT



Recommendation

As stated in the above analysis, the explanations for the discrepancies could be:

Inaccurate fuel dispensing records maintained by the Phoenix System; or

Shrinkage of fuel (due to evaporation or unauthorized removal.)

Discrepancies in fuel inventories should be fully investigated to determine the causes.

Transportation staff should use the capabilities of the fuel inventory system to determine why

there is such a great discrepancy.

Management’s Response: Management concurs. Transportation will revise the monthly

fuel reconciliation report. The revised report will begin starting December 2016. The

Transportation Operations General Manager will be responsible for reviewing the report

and investigating discrepancies to resolution. (Please see page 17.)

– End of Report –

Appendix

Management’s Response

15

Appendix


16

Appendix


17

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