Fleet audit finds holes in city’s purchasing process

By Joel Wittnebel/The Oshawa Express

The latest in a series of audits at the City of Oshawa has revealed some troubling holes in the city’s fleet purchasing and management practices that may not only be costing the city money, but also having staff ignoring reports and looking for council approval on items they may not necessarily need.

The report looks into the city’s Fleet Services department, a branch managing over 300 city vehicles worth approximately $23.8 million. Currently, the city contracts NAPA for most of the fleet’s spare parts inventory.

However, the report, recently delivered to councillors by KPMG, the city’s hired external auditor, found the city is, overall, lacking the proper infrastructure for running a cost-effective system.

“We note that the information systems and data resources currently supporting Fleet Services are not well developed or utilized to support decision making,” the audit reads.

“Fleet Services management often does not have the information required to make informed decisions to achieve the best outcomes for the city from a cost and efficiency perspective.”

Specifically, the audit found that the city rarely analyzes assets on a regular basis and that when certain assets are analyzed, only a three-year mileage and repair estimate is noted, which does not give a full idea of the replacement costs required to give a better idea of when certain vehicles need replacement or the type of replacement needed.

The report highlights a batch of Chevrolet half-ton trucks purchased by the city, following which a series of suspension upgrades were required in order to use them for their intended purpose.

“This whole thing seems a little bit weird for me to be reading this,” said Councillor John Neal. “Reading this, it looks like KPMG has uncovered that some of these vehicles are being beefed up after they’re purchased.”

In responding to the report’s recommendations, city staff note regular inspections are a challenge due to a lack of resources, but are aiming to improve the system.

Further, the report found that even when proper analyses are done, staff may ignore the findings  and go to council for approval of the item anyway without leaving behind a paper trail.

“The replacement analysis is not formally recorded and retained,” the KPMG audit found. “In addition, fleet customer departments may reject the outcome of the analysis and go to city council to obtain approval of vehicle or equipment purchases, resulting in inefficiencies from a cost and operations perspective.”

The audit also found limited separation and stages of approval for final purchases in the fleet department. Currently, only four individuals have the ability to order parts for the city – however, between June and October of last year, KPMG noted 232 instances of parts being ordered, but could find no evidence of them being validated.

These “process design gaps” were something KPMG stated could allow opportunity for “misappropriation of assets.”

The lack of information also does not lend itself well to future planning, something that has come back to haunt the city in the past when the cost of fleet replacements have not been covered by the dollars put away in reserves for that very purpose. Unless something changes, KPMG says this will only continue.

“Without a process for verification of asset cost values, there is a greater possibility going forward that capital fleet reserve contributions are inaccurate,” the report states.

A review of the city’s reserve contributions is currently underway and is expected back in the late spring or early fall.

The contract with NAPA was also under the microscope by councillors at the committee level as the audit pointed out the part supplier is currently not meeting its contractural obligations.

The contract sets out a part availability target of 80 per cent. The report noted that at the time, it was sitting around 68 per cent. However, city staff note those numbers have improved since that time, increasing to the 80-per-cent mark in January before dropping to 78 per cent in February.

The numbers drew the concern of Councillor Amy McQuaid-England.

“The understanding that I had of it was, it was going to be easier for us to maintain and order parts,” she said of the switch over to NAPA.

It was also unclear whether other aspects of the contract with NAPA are being met as KPMG notes that these aren’t routinely tracked.

KPMG makes several recommendations in the report, many of which are calling on the city to dedicate more resources and support to fleet analysis, something the city says it is agreeable to.

Moving forward, councillors are looking for further information on the state of the NAPA partnership, requesting staff to come back with updates on how well the company has performed throughout 2017, how many times the part supplier has missed its contractually obligated 80-per-cent threshold, and how many of the city’s vehicles cannot have parts ordered through NAPA.