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REPORT OF INTERNAL AUDIT

PRESENTED TO

THE CITY COUNCIL

CITY OF BOISE, IDAHO

AUDIT/TASK: #08-08, Fixed Assets / Mutual Aid Agreements & Contracts

AUDIT CLIENT: Boise Fire Department

AUDIT DATE: August 1, 2008 REPORT DATE: August 14, 2009

AUDITOR: Jim McMahon CPA, CIA

APPROVAL: Steven Rehn CIA, CFSA

INTRODUCTION / EXECUTIVE SUMMARY In accordance with Boise Municipal Code Title 1, Chapter 9; the Office of Internal Audit undertook an examination of selected activities within the Boise Fire Department (BFD). Those activities included a review of the accounting for, and tracking of fixed assets; and a comprehensive review of Departmental contracts and / or mutual aid agreements executed between the Boise Fire Department and outside emergency response organizations in the vicinity. Also included was a review of agreements with third-parties that were contracting for emergency response service from the Department. Additionally, the reviews were accompanied by an associated analysis related to the mutual and automatic aid agreements. Overall, Task #08-08 was pursued in order to ascertain whether fixed assets were being properly accounted for and safeguarded; and whether the contracts the Department has entered into with other municipalities and / or third-parties were being properly administered.

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Given the unique nature of the two aspects of Fire operations that were subject to examination, this report presents Internal Audit’s findings and recommendation in two distinct and separate sections. The first covers the work performed relative to the Department’s asset tracking systems. And the second provides information relative to the contracts and agreements Fire currently has in place both with other emergency response agencies, and with people and organizations that are basically contracting with BFD for fire protection services. During the conduct of the review, Audit identified one over-riding and high-level need that currently exists, and that should be addressed by management. The Department’s focus rightly continues to be first and foremost that of an emergency-responder to not only fires, but also to a wide array of other emergency situations. However, there appears to be a need to strengthen the business process that backs up and supports front-line operations. Internal Audit believes that management should assess the skill sets of current staff, the objective being the identification of one or more staff members capable of redeployment to the analysis of business processes. Assigning staff with these skill sets into Fire administration would enhance management’s ability to analyze current operations, and to identify opportunities for improvement in both efficiency and effectiveness across the organization. Audit believes the findings and observations contained within this report demonstrate the need for management to strongly consider any options available to it in this area, and to assign these types of human resources to administrative / analytical duties if at all possible.

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SCOPE AND METHODOLOGIES Internal Audit established the scope of the review to include general operations, and compliance activities in the focal areas that occurred during the 34-month period beginning October 1, 2005, and ending July 31, 2008. Where it was deemed to be necessary in order to gain an insight into current operations, more recent records were incorporated into the scope of the review. The objectives of the audit were established as follows:

• Verify that an adequate system of internal controls, procedures, and monitoring protocols are in place and functioning with respect to the accounting for and safekeeping of fixed assets within the Boise Fire Department.

• Review a sample of Fire Department fixed assets, determining whether the assets are physically present and properly identified at various stations and areas therein. Perform a visual inspection of selected fixed assets at the various stations and areas within the Boise Fire Department; ensuring that the selected items appear on the appropriate fixed asset register.

• Review each of the Department’s contractual and/or inter-agency agreements that are incident-response related. Assess BFD’s and other contracting party’s compliance in relation to the memorialized agreements. Perform a high-level analysis for each mutual aid agreement.

Internal Audit utilized methodologies consisting of observations, interviews, detail testing, and analysis in order to achieve its identified objectives. All activities were planned and conducted in a fashion that was deemed to be adequate to support the Audit Findings, and the general comments contained within this report.

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FIXED ASSETS

EVALUATION AND COMMENTS

Internal Audit noted that assets in excess of the City’s capitalization threshold were correctly accounted for by Fire; having been entered into the City’s fixed asset system. It should be noted that the capitalization threshold - $5,000 - is that acquisition price above which property is entered to the balance sheet as an asset, tracked, and depreciated over a pre-determined lifespan. Unlike other departments across the City, the Fire Department implemented a policy a number of years ago that called for utilizing the City’s fixed asset system to track purchases of equipment and assets that also fell below the mandatory threshold. This policy appears to have been implemented in an effort to establish an acceptable level of accountability over all assets that were at risk of loss or pilferage. While conducting the review, Intenal Audit noted a high level of error in the accounting for, and tracking of, equipment and assets that fall below the mandatory capitalization threshold. More efficient and effective methods of controlling these smaller assets appear to be available to the Department. Whatever system Fire chooses to implement, it should include both a comprehensive periodic verification of assets currently in possession; and on-going monitoring of the rate at which these smaller assets are replaced in order to protect against loss or pilferage. Overall, Internal Audit views the current administration and tracking of Fire Department’s fixed assets as “Low Satisfactory.” Issues were encountered frequently enough to lose the appearance of “isolated;” and management oversight was not always effective to ensure the quality of operations in this area. Conditions in this area appeared to meet the definition of “Low Satisfactory” as specified in Internal Audit’s Policies and Procedures, as adopted and approved by the City Council. Additional management attention appears to be required. It should be noted that the errors encountered by Internal Audit likely did not result in a material misstatement of total fixed asset balances for the Department; neither is it likely that operating expenditures were under- or over-stated, or were otherwise inaccurately represented. Rather, the deficiencies appeared to be related to the Department’s attempt to use the fixed asset system to track assets below the City’s required threshold for recognition. By doing so, Fire experienced a detrimental impact to both administrative efficiency and effectiveness based on the amount of staff resources and effort that was directed toward maintaining this type of asset tracking system. The system has likely yielded a less-than-satisfactory level of performance given the amount of effort that was expended in attempting to maintain it.

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FINDINGS AND RECOMMENDATIONS

Internal Audit’s detailed background information and audit findings are included with management’s responses below.

1. FINDING: Fixed Asset Tracking

Background for Audit Findings: The City’s policy relative to fixed assets requires that items > $5,000, and with an expected life of at least 3 years be capitalized. Furthermore, these assets are required to be tracked through the City’s fixed asset system, and depreciated according to established procedures. As stated previously, Boise Fire Department has adopted a policy of tracking all durable assets that are acquired – regardless of cost – the objective being to better safeguard the assets. The Department enters all items of a durable nature into the City’s fixed asset system, records transfers and disposals, and attempts to confirm existence via a year-end verification process. However, the current system does not appear to be providing the degree of assurance that the Department desired or anticipated in this area.

In order to test the accuracy of Fire’s asset tracking mechanisms, Audit employed protocols commonly referred to as “upstream / downstream” testing. This involved tracing assets that are present at selected locations “upstream” to the asset registers, and identifying discrepancies between the assets and the corresponding records. Conversely, the “downstream” testing involved tracing a sample of assets appearing on asset listings back “downstream” to the actual assets themselves, and identifying discrepancies between records and the existence of the actual assets. Finally, Audit tested a number of the requested record-keeping changes resulting from the most recent yearly asset inventory to ascertain whether those changes were incorporated into the fixed asset system. The results of that testing are as follows:

Upstream / downstream test results from Fire Maintenance, Station 7, Station 12, and HazMat – a sample of 283 assets – revealed the following:

• Twenty-two (22) instances were noted where assets had apparently been transferred or decommissioned, with no update occurring to the fixed assets records for these locations – 7.77% of the overall sample.

• Seventeen (17) instances were noted where assets were not present, and could not be otherwise accounted for – representing 6.01% of the overall sample.

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• Seventy-six (76) instances were noted where assets were physically present at the various locations, but the asset listings had not been updated to record that fact. (Though this represented 26.8% of the sample, Audit believes a number of these

assets were properly excluded since title was held by either Homeland Security,

or by the Idaho Military Division. Refer to the Finding related to HazMat Fixed

Assets at page 11. Resolution of this issue is currently underway.)

Downstream test results from a second sample – a combination random / judgmental sample of 71 assets ranging in value (original cost) from $0 to $446,442 – revealed the following: • Eight (8) instances were noted where assets had apparently been transferred or

decommissioned, with no update occurring to the fixed assets records – 11.27% of the sampled assets tested.

The most recently completed annual asset verifications (January-March 2008) identified a number of needed updates to the fixed asset tracking system. Audit judgmentally selected 45 updates, and attempted to verify whether the directed changes had occurred within the fixed asset system: • 27 needed changes had been input correctly into the system. • 18 needed changes had not been input into the system – representing 40% of the

items tested.

Audit Findings Related to Fixed Asset Tracking

Based on Internal Audit’s observations, and on anecdotal evidence gathered during field work, it appears that a number of causal factors may be contributing to the conditions noted: • The policy of tracking all durable goods does not appear to have been adequately

communicated to the field. Discussions with various members of the Department revealed interpretations that ranged from including all assets in the tracking system, to tracking only those items costing $500 or more.

• Firefighters commonly engage in swapping out non-functioning items for items

that are operational – an example being “Toughbook” computers that are deployed on the various vehicles. Unless Inventory Identification Forms are completed, the location of specific assets that have been swapped out, or moved, is rendered inaccurate on the fixed asset lists.

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• The task of completing Inventory Identification Forms has been distributed

amongst members of the command force, and may not consistently receive the level of attention needed to maintain the integrity of the asset listings at a level that is consistent with the policy established by Fire.

Overall, the impact on the City’s financial statements appears to be minimal since a large majority of the errors appear to involve assets that either did not qualify for capitalization due to cost, or that likely had already been fully depreciated. However, these errors do defeat the Department’s ability to effectively track, control, and safeguard their assets via this medium. Through a combination of the factors noted above, the integrity and effectiveness of the asset records has been measurably impaired. Perhaps the most significant impact being realized by Fire is the expenditure of administrative time and effort to maintain a system that fails to provide the desired results – namely, a satisfactory level of control over the items.

RECOMMENDATION:

Restoring the integrity and accuracy of the current system would, in all likelihood, require a significant investment in staff time and effort. Given that, Internal Audit recommends that management review the existing policy and give strong consideration to revising it according to current Department needs and capabilities. Steps the Department may wish to consider include the following: • Consider raising the Department’s tracking threshold in the fixed assets system to

the level commensurate with current city policy ($5,000) and remove fixed assets below this level from the system. Doing so will significantly lessen the number of Inventory Identification Forms required to be completed, will decrease system tracking and input needs, and will minimize the time and effort expended during the annual asset verification process.

• Consider expanding the current “manifest” system utilized for the emergency

vehicles to include a separate schedule listing basic furniture, fixtures, and equipment contained at the Department’s various locations. Currently all assets deployed to engines, trucks, etc… are inventoried at least weekly, and after every deployment. Battalion Chiefs review this activity, and in so doing, are frequently monitoring assets that are also included on the asset tracking system. This appears to be an effective control mechanism that could be used in-lieu of the current system to monitor assets for existence, location, etc...

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MANAGEMENT RESPONSES: The Boise Fire Department is a highly trained, well equipped organization and is second to none in handling a wide variety of emergency situations. Fire concurs with the need to strengthen the business processes that back up and support our front-line operations. A new Administrative Manager for Fire will start on June 15th. One of the first orders of business will be to evaluate the findings of the Audit and to implement a new process to track Fire’s fixed and mobile assets; and review Fires Contracts and agreements. Fire’s new Administrative Manager brings skills to assist Staff with process improvement, fiscal analysis, and capital planning.

Response to Audit Findings: Currently the Fire Department tracks assests below the mandatory threshold. While good intentioned, adopting this policy created a system with too many items to track and the error level is not acceptable. Fire will raise the Department’s tracking threshold in the fixed assets system to the level commensurate with current City’s policy ($5,000) and remove fixed assets below this level from the system.

Implementation Timeline: Completed Response to Audit Finding: Fire will impliment a reporting mechanism to monitor the ≤$5,000 assest that will be removed from the inventory tracking system.

Currently, station Captains are responsible for a weekly inventory of equipment on each piece of apparatus and a monthly inventory of books, and other supplies. Fire will expand this program to encompass those items that are included in the recommendations for a manifest system, above. This report will be given to the Battalion Chiefs and they will monitor all equipment and contents. Fire has a procedure, in place, applicable to this process. Boise Fire will train/educate personnel on the updated inventory tracking procedure/ policy and enforce consistency and accuracy of the forms. Implementation Timeline: Process already in place. Will expand by September 1st, 2009.

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2. FINDING: Significant store of parts and supplies at Fire Maintenance not

presently recorded on the balance sheet of General Fund.

While performing fixed assets verifications at Fire Maintenance, Internal Audit noted a related deficiency that deserves immediate management attention. Fire Maintenance currently maintains a fairly significant store of parts and supplies needed to fulfill their service-related activities. The inventory items range from low value items such as nuts, bolts, oils and automotive chemicals to what appear to be fairly high value parts needed for the engines / apparatus – some requiring individual investments of hundreds of dollars or more. Maintenance staff estimated the value to the inventory to lie within a range of “…between $20,000 and $120,000…” This store of parts and supplies has not been counted, valued, or booked to the General Fund Balance Sheet. As such, the value of these parts has been handled as current period operating expenditure, and has not been recognized as an existing city resource. This accounting treatment is not consistent with what the City requires of other service groups that maintain similar stores. The current procedure may unnecessarily inflate operating expenditure, while it understates resources available for on-going operations. The present convention also fails to provide an adequate control environment over these resources.

RECOMMENDATION: Internal Audit recommends that management review the parts inventory, and consider pursuing the following initiatives: • Implement a tracking mechanism, such as an automated repair order system, that

is capable of maintaining inventory-related records for purposes of inventory control. Side benefits may also accrue – it could provide management with enhanced ability to track the deployment of labor resources, inventory shrinkage, and service histories for various vehicles.

• Count, establish a reasonable value, and load the current inventory and the

associated value to the tracking system.

• Ensure the inventory value is booked to the general ledger.

• Maintain the inventory system going forward, perform periodic physical counts in order to adjust the values carried on the balance sheet, and arrive at a more accurate representation of M&O expense.

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MANAGEMENT RESPONSES

Response to Audit Finding; Establish and maintain a tracking system going forward: Boise Fire is currently researching and evaluating various inventory tracking programs utilized by City departments (see Fires recommendation to Council below). Boise Fire will also review the new system being installed by the City of Meridian as it is an upgrade to the system currently used by Public Works. Fire will perform a cost/benefit analysis to determine the most appropriate level of tracking. A system currently in use by Boise Fire will be utilized as an interim inventory system. Implementation Timeline: Complete an inventory of all new and unused parts and establish a value by July 31, 2009. Implement by August 15, an interim tracking method until an appropriate software application can be acquired. Implement computerized tracking by August 31, 2009. Maintain the tracking of parts and supplies from that time forward. Response to Audit Finding; Establish a reasonable value: The effort to identify cost tracking predates the audit. Fire just hired an intern with a Masters in Business to research and affix costs to items currently in the inventory. Additionally this Intern will complete a cost analysis to determine a shop rate structure similar to that used by Fleet Management. Implementation Timeline: Complete value determination by August 31, 2009. Response to Audit Finding; Book the value to the General Ledger: Boise Fire will complete the inventory and determine a value. This will be delivered to the Boise Fire Administrative Manager and she will assure it is booked to the General Ledger. A procedure for periodic physical counts will be implemented, and balance sheet adjustments will be implemented by October 1, 2009. Implementation Timeline: Complete an inventory of all new and unused parts and establish a value by July 31, 2009. Implement change adjustment procedure by October 1, 2009. Recommendation from Fire to Council: Each individual department has a different inventory tracking system. A team led by DFA and IT with representatives from each department should research and recommend a City-wide inventory asset tracking system. This system should be electronic with a bar-code system (Hansen bar-code style is one example). Each department would then purchase a license and the proper amount of scanners.

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3. FINDING: HazMat Fixed Assets

While conducting an audit over the Fire Department’s fixed assets related to HazMat operations, Internal Audit noted that a number of assets were deployed in this specialized operations area that were not accounted for on the fixed asset tracking system. Additional inquiries revealed that a number of these assets had been sourced through Bureau of Homeland Security grants, as well as other programs that are administered by the State of Idaho. Department staff indicated that title to these resources did not vest with the Fire Department for periods of two years or more, depending on when the Homeland Security grant year closed out. Also, a separate group of the assets would never be fully transferred to the City – title would reside with the State of Idaho permanently where those assets were acquired with State Military Division funds. Some of these assets would breach the City’s $5,000 capitalization threshold. As part of the inter-agency contract portion of the review (see page 14), Internal Audit contacted the State of Idaho’s Military Division, and its subsidiary, the Bureau of Homeland Security. Those entities provided Audit with comprehensive lists of resources that had been acquired under both State Military Division funding conduits (the State retained ownership of the assets), and under grants administered by the Bureau of Homeland Security (ownership passed to Fire after grant close-out). Additional verification activities utilizing those lists revealed the following:

• A number of smaller assets Fire received via State Military Division funding appear to have been booked to the fixed asset tracking system – perhaps in error since the State retained title to those items.

• Several assets that Fire might properly have taken title to based on their date of acquisition under Homeland Security grants had not been booked to the fixed asset tracking system.

The Military Division personnel who were contacted indicated a fundamental policy change was imminent. Ownership of all assets provided to Fire through either of the funding mechanisms mentioned above was scheduled for transfer to Fire by the end of CY’08. Going forward, title will vest with Fire as soon as assets are acquired under either of these grant programs.

RECOMMENDATION Given the fundamental nature of the changes envisioned by the Military Division, Internal Audit recommends that the Fire Department: (1) Identify all existing assets acquired from Military; (2) Establish current values for those items; (3) Work with

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the City’s Controller to capitalize and/or track the assets going forward; and, (4) Implement procedures to ensure that assets acquired through these funding mechanisms in the future are immediately capitalized and/or tracked as owned assets. Doing so will ensure appropriate recognition and tracking of these vital assets.

MANAGEMENT RESPONSE: Fire Department staff met and reviewed the internal audit findings for “State/Federal Grant Assets findings. We agree in many of the audit findings areas. Fire has reviewed the recommendations from Internal Audit and will be making changes and assignments. Response to Audit Finding: Boise Fire currently has a spreadsheet of all assets acquired from the State Military Division. Fire will continue to maintain a current list of assets. Each specialty team completed an inventory to include valuation, origin, location and replacement schedule for all assigned equipment, where possible. Acquisition timeline and cost for some items remain unknown and investigation is underway to determine origin, value and ownership path for those items. Implementation Timeline: Sept. 30, 2009 Response to Audit Finding: Boise Fire will establish values for the assets acquired from the State Military Division; updating the asset spreadsheet. Fire is in the process of establishing and/or updating asset values where values are missing or are in question. DFA has provided an Insurance and Property Control Report of equipment with assigned values of $5,000 or greater. Fire has obtained that list and will compare with Fire’s findings. Where reconciliation is not realized, a value will be assigned utilizing best practices. Implementation Timeline: Sept. 30. 2009 Response to Audit Finding: Boise Fire will capitalize all fixed assets to be consistent with the City’s Inventory Policy of capitalizing assets of $5,000 and above. Identifying and assigning value should result with reconciliation between Fire and DFA’s asset tracking lists. Implementation Timeline: October 31, 2009 for reconciliation results.

Response to Audit Finding: Grant-acquired equipment ownership transfer is determined through grant guideline schedules. Experience shows that asset ownership transfer timetable guidelines are flexible based on Idaho State Bureau of Homeland

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Security Policies that may not reflect pre-determined HSGP transfer schedules. Fire will ensure that a capitalization tracking process will occur upon confirmation of asset ownership transfer. Implementation Timeline: Upon notification from BHS.

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CONTRACTS / MUTUAL AID AGREEMENTS

EVALUATION AND COMMENTS At the request of executive management and Council, Internal Audit undertook a review of a number of Fire Department agreements (contracts) referred to generically as either “inter-agency contracts,” or “mutual aid agreements.” The agreements provided to Audit by Fire’s administrative and command staff covered a broad range of activities and relationships related to the following basic areas: (1) Mutual and Automatic Aid responses; (2) Agreements where Fire provides fire protection / other services for a fee; and, (3) Facilities, space and cost sharing. They also applied to activities occurring both within the local area, and outside of the Department’s defined jurisdictional boundaries. In conjunction with the agreements, Audit also obtained and analyzed a significant amount of detailed, incident-related data that provided additional insights into the efficacy of the relationships. The relationships Internal Audit reviewed are summarized and presented in tabular form within “Exhibit A,” attached to this report at page 24. In all, a total of twenty-eight (28) contracts and / or inter-agency agreements were included in this portion of the audit. As indicated within the attached Exhibit, the current status of the agreements Audit reviewed can be categorized as follows:

• Currency: Twenty-one (21) of the agreements appeared to be in-force as of the date of review. Two (2) of the agreements had lapsed – one fairly recently, and one a number of years ago. Three (3) were no longer active due to their primary purpose having been fulfilled. Finally, two (2) of the agreements did not appear to have ever been ratified.

• Financial Impact: Two (2) of the agreements represent significant expenditures / costs to the City since Fire is paying for the provision of services. Another three (3) of the agreements involve substantial in-flows of revenue to the Department since Fire is providing services in these instances. Eight (8) of the arrangements involve smaller streams of revenue and / or reimbursement for costs incurred.

• Response History: Detailed incident response data provided by Fire for a 24-month period between 10/1/06 and 9/18/08 indicated the agreements correlate positively to actual response experience over the period reviewed (See “Exhibit A” for “Service Provided…” and “Service Received…”).

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• Other Impacts: Based on Internal Audit’s analysis of response data, it also appears that a small number of Department responses outside of defined jurisdictional boundaries were not covered by any formal arrangements. These responses involved rural locations in Ada County, on area state highways, and in the I-84 corridor. Refer to page 21, “Other Area of Concern,” for additional details.

The primary criteria upon which each of the agreements was evaluated involved the contractual compliance terms, conditions, and deliverables specific to the agreements. While conducting the review, Internal Audit noted the existence of deficiencies in the administration of, and contractual compliance tracking related to certain agreements. Based on the review undertaken, Internal Audit believes the current control environment surrounding contract administration is most accurately characterized as “Low

Satisfactory.” Reportable issues were noted and additional management attention is required in this area. These issues were encountered frequently enough to lose the appearance of “isolated.” Management oversight in this area was not always effective to ensure the quality of operations related to contract monitoring and compliance. A detailed presentation of the audit findings, recommendations, and management responses appears immediately below.

FINDINGS AND RECOMMENDATIONS

Internal Audit’s detailed background information and audit findings appear below, along with management’s responses. 1. FINDING: Contract Administration

While conducting testing over Boise Fire Department’s contracts related to mutual aid and incident response, Internal Audit noted the following deficiencies. These issues suggested the presence of a weakened control environment surrounding the monitoring and tracking of contractual rights and responsibilities.

• Whitney Fire Protection District Contract: Two issues were noted with respect to this contract. Whitney Fire Protection District currently pays the Boise Fire Department to staff and operate its two stations under an agreement that has been in existence for some time. 1) The supporting financial information or “build-up” for the base-level contractually agreed upon reimbursement to the City (currently $1,656,687 per year) under the agreement appears to have been based off a

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historical cost amount derived seven (7) years ago. Since that date, this amount has simply been indexed for cost increases. Audit Finding (1): The current contractual amount could not be directly compared for reasonableness to the current labor and facility costs for the two Whitney stations. The Whitney contract specifically states that it is the responsibility of the City to appropriately identify any and all equipment and apparatus purchased by the Whitney Fire Protection District, in order to differentiate it from the property of the City. All equipment purchased by the District shall be marked for identification purposes. Audit selected a sample of thirty-five (35) Whitney assets to test. These assets were selected from the master Whitney inventory listings incorporated into the contract between the parties. Internal Audit found a higher than expected error rate in appropriately tagging Whitney assets. The results of the testing were as follows: Twenty-one (21) assets were appropriately identified as belonging to Whitney. Five (5) assets were not appropriately identified as belonging to Whitney. Three (3) assets were not physically present. Six (6) assets within the sample could not be tested – they were either part a homogonous pool of assets, had been traded-in, or had been relocated to another location within the department. Audit Finding (2): Not all Whitney assets are being appropriately tagged as required by the contract. Internal Audit also noted that the current Whitney equipment/apparatus inventory listings do not adequately identify Whitney assets with corresponding serial and/or asset numbers to allow for efficient identification.

• North Ada County Fire and Rescue Contract: A contractual stipulation requiring the City to notify North Ada County Fire and Rescue (NACFR) of the City’s intention to renew the existing contract was missed. Section 8.7 of the 2008 contract required Boise Fire Department to submit a notification by 7/30/08 of intention to renew or extend the contract at the current terms and conditions. Absent that notification, the 2009 payment is set to increase 25% ($125,000) over the 2008 base-level amount of $100,000. Audit Finding: Unless renegotiation with NACFR occurs, this obligation will increase by 25% for FY’09.

Idaho Military Division / HazMat Regional Response Team: Under the terms of the agreement, the Military Division will reimburse Fire for the costs associated with regional responses to hazardous materials incidents. Audit

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selected five (5) reimbursement payments and attempted to trace those back to incident reports and invoicing documents. Four (4) invoices were verified as to the inclusion of allowable charges. One (1) record was not locatable. Audit also selected four (4) incident reports that appeared to be related to regional hazardous materials responses that would qualify for reimbursement of costs from Military. Reimbursement requests must be submitted within 60 days of the incident closure date to qualify for payment. Audit requested copies of the invoices / reimbursement requests in order to verify thorough and timely submission. Audit Finding: Fire Department staff was not able to provide evidence to Audit that reimbursement for costs incurred relative to these four (4) responses had been pursued. Incident responses are each unique relative to the deployment of equipment, supplies, and personnel. However, based solely on the average amount of reimbursement received for HazMat responses that occurred over the previous two years, Audit estimates the amount of cost recovery forgone relative to these four incidents could amount to as much as $10,215. (Note: A high-level review of the total number of HazMat responses during the

period vs. the number of cost recoveries pursued suggested recoveries were

generally pursued – though not in all instances, as evidenced by the four that

were identified by Audit.)

• Veterans Affairs Medical Center (Fire Protection Agreement): The agreement for provision of fire protection services between BFD and the Veterans Affairs Medical Center in east Boise called for annual flow testing of all hydrants on the VA grounds. Audit Finding: The hydrants are not being tested annually as required. Data indicate the most recent tests occurred during 2006.

• De-minimus Findings: Internal Audit notes several additional, smaller issues relative to contract administration:

(1) Under the ITD / I-84 agreement, Fire is reimbursed for the costs associated

with responding to vehicle fires on I-84 between mileposts 59 and 72. Of two qualifying events that occurred over the past two years, cost recovery was only pursued for one – Audit believes the forgone cost recovery could equal $400.00 or more based on apparatus deployed, and on duration of the incident.

(2) Under the Marshall agreement, the protected party is required to submit support for the annual payment to Fire. The support for the payment was not present when the file was reviewed.

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(3) Under the Ada County / Station #2 Use and Maintenance agreement the counterparties to the agreement agreed to share equally in the costs of maintenance and operations; and to meet annually in order to review the terms of the agreement. Fire was unable to provide documentation that demonstrated compliance with either of these aspects of the agreement.

(4) Internal Audit noted an instance (Ada County Fire Chiefs Association) where multiple contracts currently in effect may cover the same operational responsibilities. Also, a number of the original parties to the Fire Chiefs’ agreement no longer appear to exist as separate entities.

RECOMMENDATION:

Internal Audit recommends that management review the current contract administration controls, and consider pursuing the following initiatives:

• Analyze and profile contracts and agreements in order to determine the quantity and timing of resource commitments needed to fulfill rights and obligations contained in existing agreements, as well as any future agreements that may be ratified.

• Implement a tracking mechanism, such as utilizing contract administration software that is capable of maintaining contract-related records and functionalities that promote and enable contract compliance.

• Review and reinforce the administrative controls and procedures currently in place in order to ensure that the Department takes advantage of all opportunities to bill other agencies and seek recovery of costs where allowable.

• Remove outdated, expired, or unexecuted contracts from the active contract file. Pursue updated or modified agreements where it is desirable to do so.

MANAGEMENT RESPONSE: Fire Department staff met and has reviewed the internal audit findings for “Contract Compliance” findings. We agree in many of the areas of the audit findings. Fire has reviewed the recommendations from Internal Audit and will be making changes and assignments:

Response to Audit Finding: Boise Fire has appointed a Contract Committee to review all contracts. This committee will research and evaluate contract management software used by other City departments. Until software review has been completed, Fire uses Groupwise to alert Command Staff 60 days prior to an agreement expiring; and also to track key interim action dates.

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Implementation Timeline: Complete Response to Audit Finding: Boise Fire is currently reviewing all contracts and will be establishing controls to ensure billing of other agencies and that cost recovery occurs. Implementation Timeline: October 1, 2009 Response to Audit Finding: The previous administration did not have Staff assigned to Contract management. Fire reorganized service units and the Administrative Manager is now responsible for all contracts. Boise Fire will be reviewing all contracts and will be updating and executing new contracts where desirable; and also removing contracts that are no longer active. Implementation Timeline: September 30, 2010. Response to Audit Findings: Billing/Tracking/Responding. The Boise Fire Department’s number one goal in FY09/10 is to perform a self assessment and become a Nationally Accredited Fire Department.

Standards of Cover is a rational and systematic way of looking at the basic service we provide as an emergency service agency. The purpose of a Standards of Cover is to provide a system which will assist with: 1. Assessing community fire and non fire risks 2. Defining baseline and benchmark emergency response performance standards 3. Planning future station locations 4. Determining apparatus and staffing patterns 5. Evaluating workload and ideal unit utilization 6. Measuring service delivery performance 7. Supporting strategic planning and policy development relative to resource procurement and allocation

Creating Standards of Cover consists of decisions made regarding the placement of our resources (number, type and location) in relation to the potential demand placed on them by the type of risk and historical need in the City of Boise.

Standards of Cover will be developed for each risk that is contained in the City of Boise. This process uses a systems approach for deployment and we will be able to match the City of Boise's needs with the appropriate level of service to operate in a safe, efficient and effective manner. With this information, as Fire Chief, I

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will be able to assist the Mayor, Council and other Department Heads in adopting appropriate and affordable service levels.

Our goal will be to produce a set of deployment objectives that assure responder and citizen safety, enhance community service, ensure fiscally responsibility, and provide a method for measurement. Implementation Timeline: June 30, 2010.

Whitney Agreement

The previous administration did not fully cost the Whitney Fire Protection District contract. Fire has already begun the process of full cost accounting of the contract with Whitney Fire Protection District. Our new Administrative Manager will be working with DFA on this project so Fire will be prepared during the next negotiations.

Veterans Affairs Medical Center (Fire Protection Agreement)

Fire agrees with Audit’s findings. Engine 1 has been notified of the need to annually flow test hydrants on VA grounds. Flow tests began in ’08. Implementation Timeline: Complete NACFR Contract

The previous administration signed an Automatic aid contract with unreasonable penalties and cost. Current administration is in the process of negotiating a Contract for Service with NACFR. Fire is currently conducting a financial analysis to encompass all relevant costs. Once completed, DFA, Legal and HR will review the contract and pricing. Implementation Timeline: October 31, 2009

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OTHER AREA OF CONCERN

Analysis Related to Mutual and Automatic Aid Agreements

Separate and distinct from the audited areas, Internal Audit attempted to analyze the contracts for coverage, and to quantify the mutual and automatic aid relationships over approximately twenty-four months in terms of numbers of responses given and received. (Refer to “Exhibit A” at page 24 for a tabular presentation of the contracts and agreements currently in place.) In general, automatic aid agreements designate which fire department will provide first-response capabilities in designated areas – regardless of jurisdictional boundaries. Mutual aid agreements define roles and responsibilities for incident command and management when one agency requests emergency response resources from another – resource providers do so voluntarily based on availability of apparatus and personnel, and on coverage considerations in their home jurisdiction(s). With respect to coverage, Audit noted the Fire Department has traditionally maintained mutual aid agreements with surrounding community fire departments, fire protection districts, and state and federal agencies; all of which are engaged in fire suppression, and / or emergency response activities. More recently, automatic aid agreements have been put in place in order to achieve optimal response times in areas where jurisdictional boundaries have, of late, come into close proximity. Geographically, Fire’s inter-agency contracts and agreements allow for broad coverage of emergency response and cooperative suppression efforts. Based on an analysis of Fire’s incident response data, there do appear to be a limited number of areas where the Department is providing emergency response services (typically EMS-related calls, calls involving motor-vehicle accidents; and a limited number of water-related rescue responses) that are both outside the Department’s jurisdictional boundaries, and are not covered under any existing aid agreements that were reviewed. Those included the following:

• Six (6) responses on or near roads in unincorporated areas of Ada County;

• Fourteen (14) responses in the immediate vicinity of Lucky Peak Reservoir;

• Thirty-three (33) responses within state highway corridors, or on other state-owned properties; and,

• Sixty-five (65) responses within the I-84 corridor. Opportunities appear to exist for the Fire Department to negotiate additional coverage agreements with agencies holding jurisdiction, and to pursue cost recovery strategies for these types of incident responses. These measures would provide additional revenues in an era of relative scarcity of resources available to the City.

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MANAGEMENT RESPONSE:

Responding Outside the City

In an April 13, 2009 Attorney General Opinion (See Note below), Deputy Attorney General John C. Keenan stated that all areas where there are no existing fire officials, district, department, or volunteer organization, the local sheriff of the county is authorized to carry out the ordinances of the district in the prevention of fires and call upon outside local fire officials to assist. He goes on to say that if the sheriff calls upon a local fire protection district or fire department to respond to the call, the department may charge a reasonable fee for the service provided.

This is a new ruling and perspective. Boise Fire will begin working with the sheriff on an Automatic aid agreement that will define our response district and give Fire the legal rights to charge for the service it provides.

Audit Note: The document referred to above is a letter opinion produced by Deputy

Attorney General John C. Keenan dated April 13, 2009, and directed to Dane H.

Watkins, Jr., Prosecuting Attorney for Bonneville County, Idaho. The letter outlines,

among other things, options available to emergency response entities under Idaho State

Statute relative to recouping expenses that are incurred as a result of extra-jurisdictional

responses.

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CONCLUDING REMARKS Boise Fire Department recorded 32,457 emergency response incidents occurring in the community and the surrounding vicinity between October 1, 2006 and September 19, 2008. However, responding to fires – incidents the Department is generally associated with – made up a relatively small part of those activities. Records indicate the deployment of resources in response to incidents occurred as follows:

• 1.14% - Rescue and Extrication calls

• 3.82% - Hazardous Conditions of varying types

• 4.90% - Fire and Heat-related incidents

• 5.75% - Motor Vehicle-related incidents (no EMS involvement)

• 16.48% - False Alarms or calls Dispatched and Cancelled en route

• 61.41% - EMS-related calls

• 6.51% - All other calls Maintaining the capability, and the proficiency needed to respond to the wide variety of situations faced by Fire requires the effective and efficient marshalling and administration of available resources. Incremental improvements in administration and operations should better position the Department to continue meeting its primary goals and objectives as an emergency response entity. Internal Audit would like to express its appreciation to both the administrative, and the emergency response staff of the Boise Fire Department for their assistance during the course of this review.

MANAGEMENT PARTICIPANTS Dennis Doan, Boise City Fire Chief Bruce Rankin, Division Chief / Special Operations – Boise Fire Department Mitch Caldwell, Deputy Chief / Logistics – Boise Fire Department Kim Brown, Administrative Manager – Boise Fire Department

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“EXHIBIT A”

# Contracting Entity Service Status of Agreement Annual

Rev / ( Exp) Impact

# Service

Provided

Incidents

# Service

Received

Incidents

1 Ada County Dispatch Service Agreement

Current Expense

($248,740) n/a n/a

2 Ada County Sheriff's Office

Dive Agreement / Reimburse for Dive and Water Rescue-Related Responses to County Jurisdictions

Lapsed n/a n/a n/a

3 Idaho Air National Guard

Airport Emergency Response Procedures Agreement

Current n/a 24 31

4 Boise Front Watershed Operating Plan / Co-operative Agreement for Responses to Wildfires

Current n/a 54 57

5 Boise Police Department

Mutual Assistance Agreement - Arson Investigations

Current n/a n/a n/a

6 Corrections Corporation of America

Fire Protection of Prison Facility – Pleasant Valley Road

Never Ratified n/a n/a n/a

7 Central District Health Department

EMS Mutual Aid Supplies and Equipment / Grant Instrument

Purpose Fulfilled - No Longer in Force

n/a n/a n/a

8 Whitney Fire District Station 14 Building Construction Maintenance and Use Agreement

Current Sharing Specific M&O Expenses

n/a n/a

9 Garden City

Memorandum of Understanding Covering Re-alignment of Impact Areas and Locating a Fire Station


n/a n/a n/a

10 General Services Admin.

Fire Protection Services for Federal Building Premises – Fort Street

Lapsed * n/a n/a n/a

11 Various Irrigation Districts

Fire Protection for Facility at Lucky Peak Dam

Current $600 Annually + Reimbursement of Costs Incurred

0 n/a

12 ID Dept. of Lands Emergency Equipment and Personnel Cost Reimbursement Agreement

Current Reimbursement at IDOL Rates

1 1

13 ID Department of Transportation

Response to Vehicle Fires on I-84 – MP59 to MP72

Current Reimbursement at IDOL Rates

2 n/a

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# Contracting Entity Service Status of Agreement Annual

Rev / ( Exp) Impact

# Service

Provided

Incidents

# Service

Received

Incidents

14 ID Department of Transportation

Cooperative Agreement to Facilitate Cole / Overland Interchange Construction


n/a n/a n/a

15 Lower Snake River District BLM

Shared-Station Agreement (St.2) for Placement of BLM Fire Apparatus During Fire Season

Current n/a n/a n/a

16 Marshall Agreement

Agreement to Provide Fire Protection Services to Property Located Outside Jurisdictional Boundaries

Current

Annual Payment Equal to 24% of Property Tax Assessed

0 n/a

17 Micron

Plan Review and Permitting for Facilities Improvements - No Impact on Fire

Current n/a n/a n/a

18 Ada County EMS Services

Use and Maintenance Agreement / Locating Ada County EMS Apparatus and Personnel at BFD Station #2

Current Equal Sharing of M&O Expenses

n/a n/a

19 ID Military Division

Equipping SW ID Emergency Response Team / Reimbursement of Costs for HazMat Responses

Current

Repair - Replace Equipment / Reimbursement of Costs per Incident

387 n/a

20 US Army Corp of Engineers

Fire Protection and Emergency Response Service to Corps Offices / Buildings Located at Lucky Peak Dam

Current $1,000 Annually + Reimbursement of Costs Incurred

0 n/a

21 Veterans Affairs Medical Center

Fire Protection Services for VAMC Facilities and Grounds

Current Revenue $77,471

24 n/a

22 Ada County Fire Chiefs Association

Mutual Aid Agreement Current n/a 100 324

23 Meridian Rural Fire Protection District

Automatic Aid Agreement Current n/a 294 364

24 North Ada County Fire and Rescue

Automatic Aid Agreement Current Expense

($100,000) ** 567 1,395

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# Contracting Entity Service Status of Agreement

Annual

Rev / ( Exp)

Impact

# Service

Provided

Incidents

# Service

Received

Incidents

25 Eagle Fire Protection District

Cooperative Fire Protection Agreement Providing for Automatic Aid in Areas Adjoining the Respective Jurisdictional Areas

Current n/a 128 87

26 Whitney Fire Protection District

Fire Protection and Services Agreement / BFD Provides Fire Protection – Whitney Facilities are Shared and Utilized

Current Revenue

$1,653,600 1,141 n/a

27 Idaho Air National Guard

Mutual Aid Agreement Current n/a 7 5

28 Ada County I-84/Hwy 21 Agreement Never Ratified n/a n/a n/a

* New agreement currently being pursued. Expected annual revenues to Fire Department will likely approximate $66,000.00+. ** Refer to Findings and Recommendations for Inter-Agency Contract Compliance for related Audit Finding.

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