DenverInternationalAirport
FleetManagementProgram
Follow‐upReport
June2014
Office of the Auditor Audit Services Division City and County of Denver Dennis J. Gallagher Auditor The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the proper and efficient use of City resources and providing other audit services and information to City Council, the Mayor and the public to improve all aspects of Denver’s government. He also chairs the City’s Audit Committee. The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee assists the Auditor in his oversight responsibilities of the integrity of the City’s finances and operations, including the integrity of the City’s financial statements. The Audit Committee is structured in a manner that ensures the independent oversight of City operations, thereby enhancing citizen confidence and avoiding any appearance of a conflict of interest. Audit Committee Dennis Gallagher, Chair Robert Bishop Maurice Goodgaine Jeffrey Hart Leslie Mitchell Timothy O’Brien, Vice‐Chair Rudolfo Payan Audit Staff John Carlson, Deputy Director, JD, MBA, CIA, CRMA, CGAP Sonia Montano, Internal Audit Supervisor, CGAP, CRMA Tim Waddingham, Senior Internal Auditor, MS You can obtain copies of this report by contacting us at: Office of the Auditor 201 West Colfax Avenue, Department 705  Denver CO, 80202 (720) 913‐5000  Fax (720) 913‐5247 Or download and view an electronic copy by visiting our website at: www.denvergov.org/auditor
______ _____________ City and County of Denver
201 West Colfax Avenue, Department 705  Denver, Colorado 80202  720-913-5000 
FAX 720-913-5247  www.denvergov.org/auditor
Dennis J. Gallagher
Auditor
June 9, 2014 Ms. Kim Day, Manager Department of Aviation City and County of Denver Re: Audit Follow‐Up Report Dear Ms. Day: In keeping with professional auditing standards and the Audit Services Division’s policy, as authorized by D.R.M.C. § 20‐276, our Division has a responsibility to monitor and follow‐up on audit recommendations to ensure audit findings are being addressed and to aid us in planning future audits. This report is to inform you that we have completed our follow‐up effort for the Denver International Airport (DIA) Fleet Management Program audit issued December 20, 2012. Our review determined that the Fleet Maintenance (Fleet Maintenance) Section has adequately implemented some of the recommendations made in the audit report. Despite Fleet Maintenance’s efforts, auditors determined that the risk associated with the audit team’s initial findings has not been fully mitigated. As a result, we may revisit these risk areas in future audits to ensure appropriate corrective action is taken. For your reference, this report includes a Highlights page that provides background and summary information on the original audit and the completed follow‐up effort. Following the Highlights page is a detailed implementation status update for each recommendation. This concludes audit follow‐up work related to this audit. I would like to express our sincere appreciation to you and to the Department of Aviation personnel who assisted us throughout the audit and follow‐up process. If you have any questions, please feel free to contact me at 720‐913‐5027 or Sonia Montano, Internal Audit Supervisor, at 720‐913‐5157. Sincerely, Kip Memmott, MA, CGAP, CRMA Director of Audit Services KRM/tdw cc: Honorable Michael Hancock, Mayor Honorable Members of City Council Members of Audit Committee To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services
that provide objective and useful information to improve decision making by management and the people.
We will monitor and report on recommendations and progress towards their implementation.
Ms. Cary Kennedy, Deputy Mayor, Chief Financial Officer Ms. Janice Sinden, Chief of Staff Mr. David P. Edinger, Chief Performance Officer Ms. Beth Machann, Controller Mr. Scott Martinez, City Attorney Ms. Janna Young, City Council Executive Staff Director Mr. L. Michael Henry, Staff Director, Board of Ethics Mr. David LaPorte, Deputy Manager of Aviation for Facilities Management Mr. Jeff Booton, Director of Fleet Maintenance, Aviation Mr. Patrick Heck, Chief Financial Officer, Aviation To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services
that provide objective and useful information to improve decision making by management and the people.
We will monitor and report on recommendations and progress towards their implementation.
City and County of Denver – Office of the Auditor Audit Services Division REPORT HIGHLIGHTS Denver International Airport’s Fleet Management Program Follow‐up Report: June 2014 The Department of Aviation has not fully implemented all of the recommendations made in the December 2012 audit report.
Background Highlights from Original Audit DIA’s Fleet Maintenance section is responsible for performing repair and preventative maintenance and monitoring and tracking fleet utilization. DIA’s fleet includes equipment, attachment pieces, and as of December 2012, 1,246 vehicles. A variety of sections at DIA are involved in the operations related to the fleet management program, including DIA Risk Management, DIA Maintenance Control, DIA Finance and Administration, and Department of Airport Infrastructure Management (AIM). AIM is responsible for Facility Maintenance, Fleet Maintenance, Field Maintenance, Technical Maintenance, Maintenance Services, and Life Safety. DIA uses two information systems for daily fleet management activities: Fuel Force and Maximo. Fuel Force is responsible for tracking fuel consumption at DIA and Maximo tracks work orders, purchase requisitions, & preventative maintenance schedules. Fleet Management Does Not Have Sufficient Managerial Involvement in and Control over Fleet Assets in Six Specific Areas: First, DIA needs to reassess its take‐home vehicle program. Second, oversight and internal controls governing fuel access at DIA are inadequate. Third, Fleet Maintenance does not have a formal Fleet Utilization Program. Fourth, fixed assets managed by Fleet Maintenance are not consistently recorded or monitored. Fifth, preventive maintenance for newer vehicles in the fleet are not consistently tracked and monitored. Sixth, damage to fleet vehicles is not reported to Fleet Maintenance in a timely manner. These issues can result in unnecessary costs, an increased risk of misuse of assets, and an unsafe environment if the fleet is not properly maintained. Purpose The purpose of the audit was to assess the status of the recommendations outlined in the DIA Fleet Management Program audit in December 2012 and determine if they have been fully implemented by DIA Fleet Maintenance personnel. Budget Opportunities and Risks Related to Operating and Capital Costs Are Not Optimally Managed: We identified several budget and supplemental funding opportunities that are not being diligently pursued by Fleet Maintenance management, which could help to offset increasing operating expenses. First, Fleet Maintenance is not requesting additional funding for preventive maintenance costs despite a growing fleet. Second, Fleet Maintenance is not fully documenting or taking advantage of possible supplemental funding available through grants. Third, DIA has missed opportunities to reduce expenses by not recouping the cost of fuel consumption at DIA by other City agencies and third parties. With these three opportunities in mind, Fleet Maintenance should better capture and communicate the costs associated with maintaining a growing fleet, develop and document processes undertaken to pursue grant funding, and monitor outside agencies and third‐party vendors in relation to fuel use and invoice them for consumption. ●
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Findings at Follow‐up The audit resulted in 17 recommendations, and our follow‐up review found that Aviation did not fully implement all of the audit recommendations. ●
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For a complete copy of this report, visit www.denvergov.org/auditor. Audit Contact Person: Sonia Montano |720.913.5157 | Sonia.montano@denvergov.org
Recommendations: Status of Implementation Recommendation Auditee Action Status Finding 1: Denver International Airport (DIA) Management Should Take Action to Strengthen Oversight and Internal Controls for the DIA Fleet Management Program 1.1 1.2 1.3 1.4 Take‐Home Vehicles ‐ The Manager of Aviation should conduct a review to ensure that DIA is in compliance with Fiscal Accountability Rule 10.6 as it pertains to take‐home vehicle users residing within the maximum twenty‐five mile radius. The Manager of Aviation should review the current list of authorized take‐home vehicle users to determine if use is based on a public purpose. Fuel Use Access ‐ Maintenance Control should implement policies and procedures to manage the proper activation and deactivation of fuel user accounts. In addition, a standard authorization form for activation should be developed for activating users and all such forms should be retained as records. Fuel Variance Thresholds ‐ Fleet Maintenance should establish criteria to set variance thresholds for fuel exception resets and if necessary adjust the thresholds accordingly. Exception Reporting ‐ Fleet Maintenance should establish criteria for review of fuel exceptions. Fleet Maintenance should also maintain a log of users reviewed to determine if irregular usage is more prevalent amongst certain individuals or departments. DIA implemented Policy 2025 (Assigned & Take Home Vehicles) and reduced the number of take‐home vehicles from 53 to 25 (53%). The 25 remaining take‐home vehicles belong to DFD and DPD ‐ no employees of the Department of Aviation have a take‐home vehicle. Fleet Management has implemented a policy (MOI 40‐08) for managing the annual recertification of the Take Home vehicle program. Agree/ Implemented
The Maintenance Control Center has been delegated the responsibility for managing and updating user accounts. A user authorization form has been developed and is in use. In addition, the user account database has been analyzed and corrected. Inactive and duplicate account users have been deleted. We will stay at current levels and re‐
evaluate thresholds six months after new Ground Fuel Management Program is in‐place utilizing monthly reports (reset, exception, etc.) and determine if changes are necessary. We analyzed 2012 DIA GAS/DIESEL transactions/ID multiple transactions per user to define a baseline for an "Irregular Usage Report" (Exception Report). We also developed a "Stale Vehicle Report" to identify vehicles that have not received fuel over a specified period of time. Both of these reports will reside in FuelForce as “canned” reports. Both have been developed by MultiForce. Agree/ Implemented
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Recommendations: Status of Implementation Recommendation Auditee Action Status 1.5 Segregation of Duties ‐ Maintenance Control should perform all processing and data entry functions related to Fuel Force. Agree/ Implemented 1.6 Access Levels ‐ Fleet Maintenance in conjunction with Maintenance Control should develop criteria to determine the appropriate access levels for Fuel Force administrators based on roles and responsibilities. Segregation of duties has been outlined in a Ground Fuel Management policy (MOI 50‐02). The Maintenance Control Center has been delegated user access responsibilities in FuelForce. Access levels have been outlined in a Ground Fuel Management policy (MOI 50‐02). The Maintenance Control Center has access in FuelForce for user account level access. The Fleet Maintenance Liaisons have vehicle account level access (currently being tested and refined in FuelForce system). The Fleet Operations Manager will retain oversight authority for this program with administrative level access. City and County of Denver
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Recommendations: Status of Implementation Recommendation 1.7 1.8 Auditee Action Status Due to the large amount of time and effort required to perform a full utilization analysis, combined with the lack of employee support positions (analysts, planners, etc.), this will need to be accomplished during the annual Vehicle Capital budgeting process. The recently implemented Vehicle/Equipment Justification Form provides specific data from the customers that enable analysis of smaller sections within the overall fleet at a more manageable level of effort. The Vehicle Replacement Program (MOI 40‐04) addresses the criteria (mileage, hours, maintenance costs, etc.) and the process used to determine when replacement vehicles should be purchased. These two processes combine to provide the oversight necessary to properly manage the fleet. The DRAFT Fleet Utilization Program provides for recourse with the DIA Fleet Utilization Committee on disapproved (by Fleet) new or replacement vehicles. Fleet Management documented the Vehicle Replacement Program ‐ The Director of Fleet Maintenance current process (MOI 40‐04). In addition, Fleet coordinated with the should develop a formal documented Vehicle Replacement Finance & Accounting to institute a Program Policy and procedures standardized Vehicle/Equipment that can serve as a reference when Justification Form to ensure all assets determining whether to purchase are properly approved before new or replacement vehicles. purchased through the Vehicle Capital Program. Disapprovals of requests are routed through the Fleet Utilization for final approval/disapproval. Fleet Utilization Program ‐ The Manager of Aviation should ensure that a Fleet Utilization Program as described in Executive Order 3 is established. The outcomes of the annual Fleet Utilization Program meeting should be used as the criteria for determining if and when new replacement vehicles should be purchased. Page 3
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Recommendations: Status of Implementation Recommendation Auditee Action Status 1.9 Recording Fleet Equipment Assets ‐ DIA's Division of Finance and Administration and Fleet Maintenance should coordinate to determine how fleet assets were purchased without being recorded and to prevent such omissions in the future. Agree/Not Implemented
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Fleet Inventory ‐ DIA's Division of Finance and Administration and Fleet Maintenance should coordinate a strategy to ensure that all capitalized and expensed fleet assets are regularly inventoried in accordance with Fiscal Accountability Rule 4.2. 1.11
Policies and Procedures ‐ The Director of Fleet Maintenance should develop policies and procedures that provide guidance on entering vehicle warranty information, preventative maintenance schedules, and work history in Maximo and determining when warranty work should be conducted internally. Fleet Management's Acceptance policy (MOI 40‐02) is updated to show that Fleet will update the Asset Management Section when a vehicle is added to our database so they can update their records. In addition, our DRAFT Purchasing policy requires us to have vendors itemize vehicle attachments in their quotes so we can load the purchase price in MAXIMO. When Fleet Management signs “OK to pay” on the invoice for a new vehicle, the invoice is routed back to Finance &Accounting (F&A) so they can update the asset database. The process to update F&A on other items that Fleet does not purchase but adds to the Maximo Database is documented in MOI 40‐02, para. 3.3.2. Fleet also has a documented process in MOI 40‐03 (Surplus Vehicles) to inform F&A when an asset is surplus and leaves DIA. A Vehicle Acceptance policy (MOI 40‐
02) addresses onboarding of new vehicles into DIA’s fleet. A Maximo Database Management policy (MOI 40‐07) is being developed to cover all processes for entering warranty and preventive maintenance into the Maximo database. A Warranty policy (MOI 40‐03) is currently being developed to address all warranty issues. City and County of Denver
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Agree/Not Implemented
Agree/Not Implemented Recommendations: Status of Implementation Recommendation Auditee Action Status 1.12
Preventative Maintenance Schedules ‐ The Director of Fleet Maintenance should review records in Maximo to ensure that all vehicles have preventative maintenance schedules and warranty information captured in the system. Agree/ Implemented 1.13
Vehicle Accident Policy ‐ The Director of Fleet Maintenance should continue to develop and implement the draft Motor Vehicle Accident Policy and Procedures document to ensure that accidents are reported and vehicles are repaired in a timely manner. 1.14
Expanding Fleet ‐ During the annual budgeting process Fleet Maintenance should complete a budget risk template detailing the specific costs associated with the expanding fleet. 1.15
Grant Opportunities ‐ Fleet Maintenance should develop and document the internal processes conducted and associated communication or collaboration with grant funding personnel when pursuing grant opportunities. The AIM Division has developed new metrics to monitor the progress of Preventive Maintenance Schedules throughout the year. Additionally, these metrics track labor hours, Corrective Maintenance and many other areas in the maintenance program and have been implemented across the entire Division. Fleet Management has implemented an Accident/Abuse policy (MOI 60‐
02) to identify these issues as vehicles are brought to Fleet. This program ensures fast and comprehensive reporting of accident information (photo's, cost estimate, accident report, etc.) to higher authorities for decision making or further investigation. Fleet Management is monitoring additions to the fleet during this budgeting season to analyze the additional maintenance costs of adding to the fleet. Fleet is also developing a calculator to translate vehicle complexity into manpower requirements. The ultimate goal is to develop an algorithm that produces maintenance costs and manpower requirements. Fleet Management has implemented a Grant Management policy (MOI 50‐
07) and a tracking form (Form 50‐1) has been created and is being updated as opportunities arise. Page 5
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Recommendations: Status of Implementation Recommendation Auditee Action Status 1.16
Billing for Services ‐ Fleet Maintenance should conduct an analysis of costs incurred related to services provided to other DIA divisions, outside agencies, and third‐party contractors. The results of the analysis should be presented to DIA Executive Management along with a request to internally bill for services provided to other parties. Agree/ Implemented 1.17
Fuel Use ‐ The Director of Fleet Maintenance should monitor outside agencies and third‐party vendors in relation to fuel use and invoice them for consumption. Fuel Force has been updated to properly track fuel costs to enable accurate billing. The Ground Fuel Management policy (MOI 50‐02) has outlined this process. Fleet Management will coordinate monthly billing procedures with the DIA division/section responsible for the outside agency/contractor. The managing DIA division/section is responsible for ensuring the receipt of funds per the terms of the contract. DIA will not invoice other DIA divisions/sections for fuel. DIA Business Management (BMS) now has full control of the CNG contract. As third party vendors require fuel, Fleet Maintenance will provide invoicing through the responsible DIA contract manager. City and County of Denver
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Agree/ Implemented
Conclusion The Denver International Airport’s (DIA) Fleet Maintenance Section (Fleet Maintenance) has implemented thirteen of the seventeen recommendations made in the DIA Fleet Management Program audit report issued in December 2012. Four recommendations were not implemented but Fleet Maintenance has taken steps to address them. Although not every recommendation has been implemented, Fleet Maintenance has realized savings and efficiency improvements as a result of the recommendations that have been implemented. Most notably, by re‐designating twenty‐eight take‐
home vehicles to assigned vehicles, Fleet Maintenance has saved approximately $38,000 annually on fuel as well as over 245,000 miles of wear and tear on city vehicles. Several other implemented recommendations have resulted in savings and improved DIA fleet operations. For example, the implementation of an accident/abuse policy now allows Fleet Maintenance to monitor and record vehicles and equipment that need repair from either an accident or abuse in a timely manner. Another recommendation that has had a positive impact on fleet operations is related to the Vehicle Replacement Program. For any new vehicle or piece of equipment, a standardized Vehicle/Equipment Justification Form must be filled out that specifies the need for the new vehicle or equipment. According to Fleet Maintenance personnel, this has reduced the number of new vehicle requests. Finally, other new policies and procedures have improved internal controls related to fuel use. A fuel user authorization form with supervisor approval is required to obtain fuel at DIA and provides a segregation of duties. Although Fleet Maintenance has implemented the majority of recommendations from the audit, a few others are in progress or not implemented. For example, one recommendation has been partially implemented, as the Vehicle Replacement Program and the Vehicle Equipment Justification form combine to provide the oversight necessary to properly manage the fleet. Additionally, the Airport Level Fleet Utilization Program is still being worked on and a warranty policy is currently being developed to address all warranty issues. Finally, there are two recommendations that were not fully implemented related to inventory of assets. Although Fleet Maintenance developed policies to report new vehicles to the DIA Finance and Administration’s (Finance) Asset Management section through the invoice process, the actual implementation has not been fully executed because Fleet Maintenance and Finance’s inventories still do not align. Despite the Fleet Maintenance’s efforts, auditors determined that the risk associated with the asset inventory for DIA has not been fully mitigated and the Auditor’s Division may revisit these risk areas in future audits. On behalf of the citizens of the City and County of Denver, we thank staff and leadership from DIA for their cooperation during our follow‐up effort and their dedicated public service.
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