http://www.azcentral.com/news/articles/0430citycontracts0430.html

Phoenix audits find loose spending Transit contracts' oversight criticized

Monica Alonzo-Dunsmoor The Arizona Republic Apr. 30, 2006 12:00 AM

Internal Phoenix audits blame a pattern of lax oversight of city contracts, employee training and written guidelines by the Public Transit Department for almost $7 million in questionable expenses and potential lost revenue over the past four years.

Among the recurring findings:

A 2003 audit found that Transit officials paid a light-rail consultant $3.8 million more than contracted. Another audit two years later revealed that the department paid several contractors $2 million more than what was agreed upon because no one was tallying project expenses and comparing them to the agreed contract price.

From 2002 to 2004, about $145,000 in rent went uncollected for the Compass Bank Building in downtown Phoenix, which is owned by the Transit Department.

In 2004, auditors reported missing invoices for at least $167,000 paid to light-rail contractors, leaving no record of what the city received for that money.

City officials say these issues were likely the result of misfiled paperwork or incorrect formulas used to calculate expenses and have since been fixed.

But a January 2006 Public Transit audit notes there is an "ineffective and incomplete contract-monitoring system, and no written guidelines provided to contract monitors."

Acting City Auditor Randy Spenla said the amount of money in question represents a small percentage of the city's $1.1 billion annual operating budget. In the past nine months, he said, the city has spent about $400 million on some 3,000 contracts.

Public Transit alone has spent about $909 million in the past four years on capital expenses, contractual services and operating expenses.

Written procedures

The Transit Department, which is responsible for financial oversight of the Valley's $1 billion light-rail project and city buses, was told in 2004, "it is important that written procedures be finalized and conveyed to staff as soon as possible.

"This is a repeat finding from prior audit work."

A 2006 audit found that Transit officials signed contracts without shopping for the best price or getting the required City Council approval.

City officials say that in some cases, the extra money was needed to complete projects, but according to the audits, some contractors were initiating the additional work and city workers weren't "verifying that the work was needed or completed."

In 2005 and again in 2006, auditors found that when fuel was delivered to the city, tank gauges in the delivery trucks were not checked to make sure the city was getting the amount of fuel for which it paid.

Debbie Cotton, director of Public Transit, said that isn't happening anymore and that most issues boil down to a lag in paperwork.

"But we recognize we have a responsibility to do better in (administrative) areas," Cotton said, adding that her department is not responsible for the day-to-day planning and construction of light rail.

A majority of light-rail funding comes from federal transportation grants, and Public Transit is charged with making sure that money is spent correctly by Valley Metro Rail, the agency planning and constructing the project.

On two separate occasions, auditors found that federal transportation grant money was spent on city overhead costs. In 2004, auditors found that $80,000 in federal transportation funds had been used to cover such costs, a violation. Later that same year, auditors found the same had happened with an additional $35,000.

"The problem is not unique to the Public Transit Department," Cotton wrote in response to the 2004 audit. "Unless a citywide solution is found, this issue will continue to surface and could cost the city millions in future grant funding."

The next year, auditors found that Transit officials didn't realize that a contract had expired with Clean Energy, a fuel vendor, and the city ended up paying full market rate for bus fuel instead of a lower negotiated rate. The extra cost was about $472,000. A follow-up audit one year later revealed that same contract wasn't being monitored.

City officials say that it's unclear how much, if any, of the fuel costs could have been saved with a new contract.

But Cotton said she is addressing the problems through mandatory employee training and holding managers accountable for contract monitoring in performance reviews.

Phoenix, like many U.S. cities, audits its own departments to identify problems and recommend ways employees can do their jobs better and save the city money.

City Manager Frank Fairbanks said Phoenix could opt not to audit itself, avoiding public scrutiny. But instead, "we'll take the risk of finding what isn't right and making it right."

This is the second time in six months that issues regarding lax oversight within the city have become public.

In November 2005, The Republic revealed that some city employees were taking advantage of lax oversight of travel expenses. Collectively, employees were spending more than $2 million a year for trips that included white-water rafting on the Nile River and lunches at exotic locales such as the Guggenheim Museum in Spain.

More recently, The Republic reviewed about 70 internal-audit reports from 2003 to 2006 of the Public Transit, Public Works, Water Services, Parks and Recreation and Street Transportation departments. While there were some reminders in the reports about employee training and the need for written guidelines, they were not as extensive as those in the Transit Department.

For example, a 2004 audit of Water Services noted that a project manager who canceled a software upgrade cost the city $320,000. The vendor sued the city over the lost contract and won. Auditors wrote that the manager hadn't been trained properly and was unaware of the repercussions for improperly canceling a contract. The next year, auditors found that the department had still not "provided project managers with contract-monitoring training."

Auditors also noted that the department did not have a contract-monitoring system.

Acting Water Services Director Danny Murphy, who has been heading the department for about 18 months, said that staff has since been through extensive training and that a new computer system monitors the department's contracts.

Contract monitoring City officials have differing opinions on why contracts have not been closely monitored over the years.

Fairbanks said steep budget cuts are to blame for fewer employees and less training for staff.

"We've desperately tried to make cuts in the budget without hurting the community," he said. "We've delivered more and more services with a shrinking number of employees. There are problems that need to be corrected."

But Cotton, in the Transit Department, said rapid growth is at the root of their problem.

In the past three years, the number of people boarding buses increased to 41.2 million from 38.3 million. The department also expanded bus services and hours, built a new park-and-ride center and upgraded others.

"With that kind of growth, you're going to have some things slip through the cracks," she said. "We've made great strides, but it's a constant process."

In the past few years, the city has also lost five of its top seven administrators to retirement or job offers from other cities. Temporary and special assistants are filling in overseeing various departments.

John Hall, a professor in the School of Public Affairs at Arizona State University, said audits are just one management tool.

"Any well-managed public organization has audits as part of its tool kits to provide information and feedback to managers," Hall said. "But the audits alone can't make an impact. It's the people who receive the information who make the impact."

What's important, he said, is "what happens to the audit results and how are managers trained to deal with the audit results."

Auditor Spenla said that it's up to the individual department to follow through on the auditor's recommendations, but auditors will return to review progress on more serious issues.

Fairbanks said he doesn't read all the audit results, but that that responsibility belongs to one of his administrative assistants.

"They hit here at the end of the process, and if there is anything significant, they call it to my attention," he said. "Any large problems, (the auditor) calls it to my attention before it's even done."

Fairbanks said he is considering assuming a more prominent role in reviewing audits. In the meantime, auditors are planning at least 17 more Public Transit audits in the next three years.

Reach the reporter at monica .alonzo-dunsmoor@arizonarepublic.com or (602) 444-2478.

Phoenix internal audits

City auditors report that lax oversight of contracts, employee training and written guidelines have led to at least $7 million in questionable spending and potential lost revenue in the past four years.

Department Audit IssueAuditor's remarksWater Services, June 2004

Court ruling against Phoenix for $320,715. "Our case study of the . . . lawsuit noted a need for project manager training. . . . " Public Transit, October 2003 and January 2006 Contractors are paid a total of $5.8 million above the agreed-upon contract limits. "Change orders, required by the (Federal Transportation Administration) were not processed for the additional payments."Public Transit, January 2004 $80,000 for city overhead costs improperly charged to federal grants."Recommendation: Transit ensure all future (Engineering and Architectural Services) charges to FTA grants only include federally allowable costs."Public Transit, May 2004 $35,071 for work-order charges improperly applied to federal grants."If unallowable costs are charged to the federal grant, there is a risk that the city could lose federal funding for the light-rail system."Public Transit, June 2004 Invoices were missing for an excess of $167,780 paid to contractors."Reconciliations of the invoices to the billing . . . are necessary to ensure expenditures are properly supported."Public Transit, March 2005$145,481 in rent not collected for the city-owned Compass Bank building in downtown Phoenix. "Copies of older lease agreements and payment histories were not available so we cannot explain the undercollection amount."Public Transit, March 2005 An excess of $472,000 paid for fuel for city buses."Contract is not adequately monitored to ensure payments are properly supported . . . We are unable to determine if Transit received all the fuel Clean Energy invoiced the city for. . . . "


Crazy Atheist Libertarian
Crazy Atheist
Government Crimes
Government News
Religious Crimes
Religious News
Useless News!
Legal Library
Libertarians Talk
War Talk
Arizona Secular Humanists
Putz Cooks the ASH Book's
Cool Photos & Gif's
More cool Gif & JPEG images
Az Atheists United
HASHISH - Arizona
Messy Yard Criminals
Papers Please, the American Police State
Tempe Town Toilet
Tempe Town Lake
"David Dorn"    -    Hate Monger
"David Dorn" Government Snitch?
Free Kevin Walsh
U.S. Secret Service
Secret Service Political Prisoner
News about the Secret Service
WLA
Western Libertarian Alliance
Phoenix Copwatch
Copwatch
Friends