SAVANNAH-CHATHAM COUNTY BOARD OF EDUCATION Internal Audit Department 208 Bull Street, Room 310 Savannah, GA 31401

Transcription

1 SAVANNAH-CHATHAM COUNTY BOARD OF EDUCATION Internal Audit Department 208 Bull Street, Room 310 Savannah, GA To: Through: From: Board of Education Dr. Thomas B. Lockamy, Jr., Superintendent Vanessa Miller-Kaigler, Executive Director of Facilities Management Rebecca McClain, Chief Financial Officer Kelly Crosby, Senior Director, Internal Audit Date: February 27, 2014 Subject: M&O Contract Audit Trane U.S. Inc PACT Agreement We have completed our Audit of the Trane U.S. Inc PACT Agreement. Our audit report is presented in the sections listed below: I. AUDIT OBJECTIVES II. SCOPE III. BACKGROUND IV. AUDIT FINDINGS Management s response to our report is attached in its entirety. In addition, the specific action that management has agreed to take in response to each recommendation is included in the Management Action Plan, along with who is responsible for the action and when it will be completed. I. OBJECTIVES Our audit was designed to meet specific objectives. Within those objectives, we focused on areas where we identified opportunities for improvement. The objectives of our audit were as follows: Verify compliance with SCCPSS Policies and Administrative Regulations. Validate SCCPSS compliance with all customer responsibilities in the PACT Agreement between SCCPSS and Trane U.S. Inc, dated June 21, Validate Trane compliance with all contract responsibilities in the PACT Agreement between SCCPSS and Trane U.S. Inc, dated June 21,

2 Verify Total Energy Savings calculated by Trane to ensure that guaranteed savings goals were met. II. SCOPE Internal Audit conducted an audit of the contract between the Savannah/Chatham County Public School System (SCCPSS) and Trane U.S. Inc. This is part of Internal Audit s continuing focus on the District s larger contracts. The focuses of this audit were the deliverables and savings guaranteed by the contract. In order to accomplish our objectives, we conducted the following steps during the course of our review: Held discussions with District management and staff within the Facilities Construction and Maintenance and Operations Departments; Reviewed the PACT Agreement (contract) between SCCPSS and Trane U.S. Inc, dated June 21, This includes additional exhibits that provide more detail and clarity of the contract requirements; Reviewed utility bills and District expenditures to validate the cost savings provided by Trane U.S. Inc.; and Reviewed the District purchasing procedures for the request for proposal process. We conducted our fieldwork during the period of August 2013 and January We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. III. BACKGROUND On June 21, 2010, SCCPSS entered into a contract with Trane U.S. Inc. (Trane) for energy management consulting services, equipment and installation fees at a total cost of $10,693,640. This contract was paid using both ESPLOST I ($3,429,344) and General funds ($7,264,296). The initial phase of the contract consisted of an Energy Audit; Trane reviewed the energy usage of selected schools, based on the energy invoices paid by the District in FY 2009 (the year prior to signing the contract). This established the baseline of SCCPSS energy costs. The Energy Audit also reviewed equipment used in schools for age and efficiency. This process identified schools with the potential for energy savings, using updated equipment and automated temperature controls. Trane s Energy Audit made recommendations for reducing energy consumption and costs District-wide. These recommendations were put in place during the next phase of the contract, called the Installation Period (May 2011 July 2012). During this phase, schools were outfitted with new lighting fixtures (24 schools and maintenance area), water economizing pedal valves (42 schools), hardware and software upgrades to air 2

3 control systems (25 schools), and replacement of outdated air conditioning units (21 schools, 947 units). The contract includes both guaranteed and non-guaranteed (or stipulated) savings to the District. The guaranteed savings over 10 years are based on anticipated annual savings at six identified schools (Haven Elementary, Hesse K-8, Myers Middle School, Jenkins High School, Savannah High School, and Savannah Arts Academy). These savings are based on recommendations made by Trane to ensure the maximum cost savings. The stipulated savings are those savings that were agreed upon at the onset of the project based on retrofitting existing kitchen sinks with water economizing pedal valves, updating lighting fixtures, and changes to the gas rates. The projected total savings over 10 years are $14,453,304. IV. AUDIT FINDINGS Savings Trane presented The First Year Performance Results for the Performance Agreement for Comfort to District staff on October 29, This report showed the following savings for the period of May 2011 through July 2013: Electrical Energy Natural Gas Total Year 1 Actual Savings 10,070,076 kwh 268,812 Therms Year 1 Guaranteed Savings 11,701,080 kwh 250,405 Therms Savings in Excess of Guarantee (1,631,004 kwh) 18,407 Therms Installation Period Savings 5,729,804 kwh 192,011 Therms Total Savings in Excess of Guarantee through July ,098,800 kwh 210,418 Therms To determine these savings, Trane developed a baseline year of utility usage/cost for the District. They used the year prior to the contract (FY 2009) for the baseline. The next fifteen months were identified by Trane as the installation period. The installation period ran from May 2011 July By reviewing the utility bills during this period, they determined the District saved $814,117 in electrical and gas utilities. Water utilities were not included in this calculation. While Trane did not meet the guaranteed kilowatt hour savings (see table above), the dollar amount saved exceeded the estimated (calculated) savings, as shown below. Total Year 1 Actual Savings (Cost Avoidance) $1,284,737 Year 1 Calculated Value of Energy Savings in Contract 1,260,769 Savings in Excess of Calculated Value $ 23,968 Calculated Savings during Installation Period 814,117 Total Estimated Savings $ 838,085 The contract allows for the Installation Period Savings to serve as a reserve for any shortfalls during the 10 year time period. Unapplied savings from the Installation Period carry over into the following year(s). Industry standard methodologies were used to determine energy consumption and utility bills were used to determine energy costs. 3

4 Calculation methods can be located in the exhibits of the PACT Agreement. The report presented to SCCPSS on October 29, 2013 included possible explanations for the deviation between the actual and guaranteed savings. The recurring issues were the scheduled hours of operations and chiller operations. The Trane contract used the following operational parameters: Elementary Schools: Weekdays 7:00 AM 4:00 PM (Class schedule), 7:00 AM 5:00 PM (Office Schedule). No weekend or summer occupancy. Middle Schools: 6:00 AM 4:00 PM (Class schedule), 6:00 AM 5:00 PM (Office Schedule). No weekend or summer occupancy. High Schools: 5:00 AM 6:00 PM (Class schedule), 5:00 AM 6:00 PM (Office Schedule). No weekend or summer occupancy. Summer periods for the classroom were July August and for the office July. Equipment failures were also a problem at two schools. Savannah High School had issues with their condenser tubes, resulting in the chiller running harder and longer to pre-cool the building. Savannah Arts Academy had a chiller issue that resulted in the unit running 24 hours a day. Those issues were addressed, and the chillers are now functioning appropriately. These adjustments should provide additional future energy savings. Trane reserves the right to adjust the Utility Baseline used to calculate energy savings. Any costs incurred to adjust the Utility Baseline will be at the District s expense. The baseline may be changed using standard and sound engineering principles based on the following conditions: Changes to the building utilization the total number of building occupants, Changes to building occupancy hours the total number of hours the building is occupied or changes to the use of equipment, Changes in weather conditions yearly average highs and lows, and/or Changes to the building structures additional portables or new structures. For Year 1, no baseline adjustment was made. In Year 2, Trane will make a baseline adjustment based on the operations schedules and the chiller plant. Trane will work with the District to optimize schedules and other operational strategies prior to making baseline adjustments. Management is currently reviewing the recommended changes. No formal decision has been made to adjust the utility baseline. Conclusion: Trane U.S. Inc. and SCCPSS have adhered to the requirements in the June 21, 2010 PACT Agreement. The guaranteed savings in the first year were met using the Installation Period savings. The main cause of the reduced savings was the difference between the baseline operational schedules and each school s actual operations. The District should review the baseline adjustments proposed by Trane and continue to track the guaranteed savings each year. Management s Response: 4

5 Management agrees with the findings as outlined in the referenced document. In addition to the original program savings, the District also received a rebate of $192,000 for utilizing energy efficient products. Facilities Management staff will implement an annual energy management awareness program geared towards all school sites and departments, with our first campaign presented before the end of this fiscal year. We will actively monitor usage and identify opportunities for improvement. District staff will work collaboratively to determine if adjusting the utility baseline is in the best interest of the district. In addition, staff will consult with Trane prior to making a final decision relative to the proposed adjustments. 5

6 Signature Page for Audit of M&O Contract Audit Trane U.S. Inc PACT Agreement Dr. Thomas B. Lockamy, Jr. Superintendent Rebecca McClain Chief Financial Officer Vanessa Miller-Kaigler Executive Director of Facilities Management Kelly Crosby Senior Director, Internal Audit Leah Underwood Senior Internal Auditor 6