County Controller Chelsa Wagner today announced that her office has finalized its analysis of County-owned vehicles and released her findings and recommendations. The audit revealed misuse and fraud, lack of oversight and major gaps in data. The Controller’s report will be forwarded to the County Administration for review and the opportunity to respond.

“This is an area that is ripe for abuse, and that is unmistakable across everything our audit examined – vehicle use, gas cards and County fuel tanks,” Wagner said. “Each year the County spends approximately $4 million in vehicle costs and maintenance, yet major gaps in data exist. Because record keeping and checks and balances are so poor, what we were able to identify were the most extreme cases of fraud and misuse.”

While the Controller’s audit identified, conclusively, unmistakable misuse and fraud, the most extreme cases include: the arrest of an employee of First Vehicle Services, the maintenance provider for County vehicles, who stole approximately $13,000 by using a County employee’s fuel card; and recovery of $42,737 from County Executive Rich Fitzgerald and return of his County-owned vehicle after the audit uncovered his vehicle was being used for political and other non-County purposes, and that his mileage logs were inaccurate and missing more than 19,000 miles.

The Controller’s Office also found that the County failed to seek reimbursement from the state for its exempt status for gas taxes as a governmental unit for 2013 and the first nine months of 2014, and for that period alone is owed approximately $75,000. As documentation was not clear, the Controller’s Office is further recommending that the County Manager’s Office work with the Controller’s Office in order to seek reimbursement going back to 2010.

Wagner is advocating for three major policy changes to address the problems:

1. The County should immediately adopt and adhere to a stringent log policy to ensure that vehicles are properly tracked and accounted for. Every County vehicle should have an accurate and up-to-date log, with every trip recorded. Managers should review logs on a monthly basis, at a minimum.
    
2. Any person using a take-home vehicle should reimburse the County for any personal use, including commuting, by having any personal mileage deducted from their take-home pay. Currently, the County policy permits only commuting miles, but pays the entire cost of the employee’s commute, with the employee taking a modest tax deduction for the benefit. 
    
3. The County should consider upgrading to an automated fuel tracking system to substantiate fuel usage at its tank stations.

 Wagner indicated that her office will benchmark the County’s progress in addressing these problems in six months, and that her office will also be conducting a full audit in the future of the County’s maintenance contract with First Vehicle Services.

An internal draft of the audit report, which includes these findings and recommendations, will be forwarded to the Administration by the end of this week. The final release of the audit will be upon receipt of its responses, expected within two to three weeks.

The Controller’s complete list of findings and recommendations is below.

1. Vehicle List is Incomplete and Inaccurate

The County must maintain an accurate, up-to-date list of all County-owned and leased vehicles. The County did not have an accurate and comprehensive list of all County vehicles, nor vehicle and driver information. The lack of accurate inventory of the County fleet, and related data, prevents proper management and accountability of the fleet, including the ability to assess where cost savings may be found by modifications to the fleet, such as potential changes to compressed natural gas (CNG) or other alternatives. 

Recommendation:

• Evaluate the current County Fleet Vehicle lists to ensure that all County vehicles are accounted for and all relevant attributes associated with each vehicle are correct.
• Develop a strategy for improving the overall effectiveness, efficiency, timeliness and internal controls for managing and maintaining the County fleet.
• Update the Fleet Handbook to incorporate specific processes and procedures for staff members to follow to manage and maintain the County’s vehicle inventory.
• Monitor and evaluate the performance of staff assigned to manage the County’s vehicle inventory to ensure policies and procedures are being followed by performing periodic reviews for compliance.
• Verify with each County Department, on an annual basis, the accuracy of the information, including the assigned driver, when applicable, for all County-owned and leased vehicles. 
• Implement procedures to ensure that Public Works receives information on personnel changes that affect take home vehicles, or any vehicles.
• Additionally, all vehicle title and lease documents should be remitted to the Controller’s Office, so that the Controller may verify and maintain the correct fleet information for purposes of accounting for County assets.   

 
2. Internal Control Weaknesses Involving County Fuel Cards

Fuel cards are to be used to fuel County-owned vehicles and equipment. The County’s Fleet Handbook provides basic instructions for using County fuel cards. When fueling the vehicle, the card user must enter their employee number and the vehicle mileage at the pump. A Monthly Fuel Card Log Sheet is to be submitted for each vehicle, including receipts that identify the vehicle.  The Controller’s audit found incorrect odometer recordings, missing fuel log sheets and receipts, unreasonable transactions and terminated employees who were still on the fuel card user list.
 
Recommendation:

• Develop controls to deter and detect fraud and other misuse of County fuel cards. Update the Fleet Handbook to include specific policies and procedures related to these controls. 
• Perform periodic reviews of the staff assigned to monitor fuel card usage to ensure policies and procedures are being adhered to.
• Investigate the 12 outstanding issues identified in the Finding to determine if there is any evidence of fraudulent activity.  If additional theft is discovered, seek legal action to recover these funds.
• Require all departments to submit Monthly Fuel Card Log sheets and receipts to Public Works.  These documents should be reviewed for reasonableness and accuracy.   
• Create a fuel card inventory in conjunction with Wright Express, the County’s fuel card vendor, and conduct random checks to ensure each card is properly accounted for.
• Work with Human Resources to ensure that Public Works is notified when an employee is terminated so that Public Works can secure the fuel card and remove the terminated employee from the Fuel Card User List. 

 
3. Lack of Oversight Involving County Fuel Tanks

The Public Works Department is responsible for fuel tanks at 13 locations throughout Allegheny County. The audit found that Public Works has insufficient monitoring procedures and does not have controls in place for management and oversight of fuel tank logs and disbursement of fuel.

Recommendation:

• Upgrade technology to include a fuel tracking system to substantiate fuel usage throughout the County.
• Direct site personnel to measure and document the fuel in each tank before and immediately after a fuel delivery in order to verify the quantity of fuel received.
• Revise the fuel logs used at each tank to include the following for each transaction: Date, Employee Name, Gallons Removed, Equipment Description/Vehicle Number, Fuel Reading (if applicable), Fuel Remaining in Tank, Site Supervisor’s Signature.
• Direct site personnel to record the tank fill date, gallons purchased and gallons in tank (based on measurement) on the log following each fuel purchase. 
• Direct site personnel to reconcile the fuel log after each purchase to ensure that the gallons measured in the tank agree with the running fuel tank balance on the fuel log. 
• Review the fuel log and reconciliation for each location on a reasonable basis and investigate any suspicious activity. Ensure that the tank quantity is never negative or exceeds the maximum capacity of the tank. 
• Perform unannounced site visits to ensure that the gallons measured in the tank agree with the balance on the fuel logs. 
• Implement policies and procedures to ensure that fuel usage is properly monitored and safeguarded. 
• Install cameras, which have the capability to record, at all fuel tank locations to ensure safeguarding of assets. 

 
4. Fraud and Misuse

• David Ruffing, an employee of First Vehicle Services, the maintenance provider for County vehicles, was charged with theft for his fraudulent use of a County gas card. The Controller’s Office has communicated to County Police and County Administration the results of the audit, which indicate Ruffing stole more than $7,600, as initially reported by the County Manager’s Office. The Controller has requested that the County Manager and County Police meet with the Controller’s Office in order to obtain the true and correct amount owed back to the County, which is believed to be approximately $13,000 and covers a time period more expansive than initially reported.
   
• County Executive Rich Fitzgerald submitted $42,737 and returned his County-owned vehicle upon the audit’s finding of political and other non-County use, including submission of inaccurate mileage logs and omission of more than 19,000 miles of use.

Recommendation:

• Obtain details of the fuel card transactions before January 1, 2012 and determine if there are any additional inappropriate transactions. 
• Seek legal action to recover any fraudulent funds associated with the misuse of County owned fuel cards.
• Implement internal controls to ensure safeguarding of County fuel cards. 
• The County Manager’s office should meet with and work with the Controller’s Office to ensure the amounts collected in instances of fraud and abuse are correct and do not minimize the amount owed back to the County.
• The County should memorialize procedures for employees found to be in violation of County vehicle policies, so that the method of calculating the amount owed to the County and procedures for further analysis and/or investigation are consistent.

 
5. Employee Payroll/IRS Issues

Recommendation:

• Revise the DCS payroll policy to coincide with the IRS Publication 15-B.  A requirement to submit detailed mileage logs to Public Works should be included. 
• Ensure that all applicable employees submit the required documentation to Public Works and the Controller’s Office Payroll Division on a timely basis. 

 
6. Policies and Procedures Need to be Updated

Recommendation:

• Update the Fleet Handbook and include:
  • Current IRS regulations regarding taxation of personal-use vehicles.
  • A process for employees and management to follow to procure a take-home vehicle.
  • Procedures to ensure all necessary forms are completed, approved and sent to Public Works.
  • Procedures to periodically evaluate the number of vehicles (take home vehicles and pool vehicles) assigned to each department in the County.
  • Procedures requiring that County Departments notify Public Works when they lease vehicles.
• Review the Fleet Handbook on an annual basis and make any necessary revisions, including any changes in IRS regulations.

 
 
7. Allegheny County did not Receive State Gas Tax Credits for all Fuel Card Transactions Allowable Under our Exemption Status

The County is owed $74,485.22 for 2013 and the first nine months of 2014, and additional money in reimbursement for the state, as allowed by law, dating back to 2010.  The County will not be able to recoup money inaccurately submitted prior to 2010.

Recommendation:

• Research and submit proper paperwork to the State of Pennsylvania to make a claim for State gas taxes paid during 2013 and 2014 (nine months) in the amount of $30,157.55 and 44,327.67, respectively, to which the County is entitled under our tax exempt status.  Public Works should also calculate the fourth quarter 2014 (Oct-Dec) tax credit and apply for the tax credit in the new year (2015).
• Recoup State gas taxes paid during prior years and exempted under our exemption status, going back through 2010, as allowable under law.  Public works should request fuel card transaction data for the periods in question, calculate a State tax credit for non-participating merchants and then submit the proper paperwork to the State to request a refund.