How To Audit The Bus Operations Of The Transportation Branch Of The L.A. School District

Transcription

1 OFFICE OF THE INSPECTOR GENERAL REPORT OF AUDIT SCHOOL BUS OPERATIONS OA July 13, 2000

2 July 13, 2000 Mr. Alan Tomiyama Business Manager Business Services Division Los Angeles Unified School District 355 S. Grand Avenue, Suite 1100 Los Angeles, CA Dear Mr. Tomiyama: This is our report on the audit of the School District s Bus Operations. These are the report s key sections: The Executive Summary is an overview of what we audited and what we found. The Introduction specifies the scope of the audit and steps taken during the audit. The Finding and Recommendations section describes in detail the condition we found, our recommendations and your comments. Annex A contains your verbatim comments on specific recommendations. Annex B lists others receiving copies of the report. Annex C lists the members of the audit team. I appreciate the courtesies and cooperation extended to us during the audit. Sincerely, Don Mullinax Inspector General

3 EXECUTIVE SUMMARY Introduction. This report contains the results of our audit of the bus operations of the Transportation Branch of the Los Angeles Unified School District ( LAUSD ). Objectives. The audit objectives were to determine whether (1) contract bus requirements were adequately documented, (2) sufficient procedures were in place to control contract costs, and (3) buses were maintained in a safe operating condition. Results in Brief. Overall we found the Branch was well managed and policies and procedures had been established in most areas allowing operations to be conducted cohesively. However, we noted that the Branch did not (1) establish regional cost measures to evaluate the financial performance of its regional offices, (2) prepare budgets at the regional office or section level, (3) have adequate segregation of duties and supervision within the salvage process function and the inventory parts count process, and (4) have an adequate process for gathering ridership surveys and did not ensure that supporting documents were reviewed for accuracy. Summary of Recommendations. We recommended that the Branch (1) develop regional cost measures and quarterly internal reports of these measures for management, (2) develop budgets at the regional office and internal Branch level along with quarterly reports showing the variances from budget, (3) develop a more detailed salvaged vehicle policy that provides for improved segregation of duties and supervision of this function, (4) require written authorization to be generated whenever a vehicle is designated to be removed from a garage area to be sold as salvage, (5) develop a more detailed parts inventory count procedure that provides for improved segregation of duties and supervision of this function, and (6) incorporate more automation into the ridership survey process and include more procedures for checking the accuracy of the data supporting the ridership surveys. School District Comments. The School District agreed and stated that it had taken or would take corrective actions on the recommendations. i

4 TABLE OF CONTENTS Executive Summary...i Introduction Background... 1 Objectives... 1 Scope... 1 Methodology... 1 Finding and Recommendations Bus Operations... 2 Annexes A - Verbatim Comments by School District... 9 B - Report Distribution C - Audit Team... 16

5 INTRODUCTION Background. The Transportation Branch employs approximately 1,500 individuals engaged in student transportation, automotive maintenance and central support for drivers, school administrators, parents and the public. The Branch provides home-to-school/school-to-school busing services for approximately 65,000 students every school day on over 2,200 routes. In addition, approximately 86,000 other types of bus trips are provided each year, such as class field trips, parent buses, late activity buses, and athletic team buses. Over 39.5 million miles are driven annually in support of the District s student transportation program. The Transportation Branch has a good safety record. Objectives. The audit objectives were to determine whether (1) contract bus requirements were adequately documented, (2) sufficient procedures were in place to control contract costs, and (3) buses were maintained in a safe operating condition. Scope. We performed the audit from May 1999 through April 2000 at the Transportation Branch Headquarters and at selected garage locations. We performed the audit work in accordance with generally accepted government auditing standards and included tests of management controls that we considered necessary under the circumstances. The audit covered transactions representing operations current at the time of the audit. Methodology. To accomplish the audit objectives, we: Documented the functions of the Transportation Branch and its regional offices. Reviewed the method used to develop bus routes and to assign buses and drivers. Reviewed the procedures related to the transportation contract bidding process. Analyzed the budgeting and capacity planning process. Reviewed contract management and payment procedures. Tested contractors compliance with applicable contract terms. Determined if the buses were maintained in a safe operating condition. Determined how District and contract buses were assigned to regions and routes. In the course of this review, we also interviewed Branch management, operations, planning and financial personnel. 1

6 FINDING AND RECOMMENDATIONS FINDING: BUS OPERATIONS For the Business Manager, Business Services Division SUMMARY The Los Angeles Unified School District ( LAUSD ) could further strengthen the effectiveness and efficiency of its bus operations. Specifically, LAUSD s Transportation Branch did not: Establish regional cost measures to evaluate the financial performance of its regional offices. Prepare budgets at the regional office or section level. Have adequate segregation of duties and supervision within the safety and maintenance area. Have an adequate process for gathering ridership surveys and did not ensure that supporting documents were reviewed for accuracy. These conditions occurred because (i) establishment of cost measures on a regional office basis was not deemed as essential since the regional offices were not treated as independent cost centers and since other types of measures were being used to measure the performance of the Branch as a whole, (ii) the annual budget was prepared based on the various programs that funded the Transportation Branch s operations, (iii) clear policies and procedures were not developed for the safety and maintenance area, and (iv) the ridership survey process was manually intensive and discrepancies were not explained. As a result of the above conditions: The Branch could not readily determine the financial performance of its regional offices on an individual basis. The cost efficiency of the regional offices and the Branch sections could not be adequately monitored. 2

7 District assets may not have been totally safeguarded and errors in record keeping could have been perpetuated and undetected. The likelihood for inaccuracies in the reported ridership data was increased and accountability from the personnel who prepared the surveys was reduced. Our recommendations to correct these conditions begin on page 7. BACKGROUND This section provides background information related to the Branch s budgeting and ridership survey process. Budgeting The students of the District are the primary users of the Transportation Branch s services. The students were offered these services if they: (1) lived more than two miles from the school they were attending, or (2) lived outside the attendance boundary for a given school. The transported students were categorized by the various programs that provided the funding for the transportation services. The two main programs were the Integration Program and the Special Education Program. The Office of Student Integration Services oversaw numerous subsidiary programs, including Magnet, Permit With Transportation, Other Transported Students, Capacity Adjustment and Satellite Zone. The Branch s budgeting process for the fiscal year ending June 30, 2000 was based mainly on the prior year budget and input from the various program coordinators. The coordinators indicated their program s projected transportation needs for the incoming fiscal year and the budget was then prepared on a program basis. Ridership Survey Process The Branch s Central Planner was responsible for collecting ridership surveys from the five regional offices on a monthly basis and then preparing a monthly Survey Summary Report summarizing the survey data received. The source of information for the surveys was primarily the Daily Bus Reports prepared everyday by all bus drivers, District and contract. The Daily Bus Report served as a time reporting instrument for the drivers as well as a daily log showing the trips completed by them. The information in the surveys was used by the Branch: (1) as a planning tool for management to monitor how effectively the Branch s equipment was being utilized, (2) to assess the accuracy of forecasts related to routing, and (3) to prepare ridership statistics that were submitted to Branch Management and to the School District s Business Manager. 3

8 DISCUSSION This section discusses these four areas: Cost measures. Budgets. Safety and maintenance. Bus routing and ridership. Cost Measures The Branch did not maintain or review cost measurement data to evaluate the individual financial performance of its five regional offices. The regional offices were the operating units the Branch used to deliver its services to the District. An effective and complete performance measurement system would generally include maintaining and reviewing cost measurement information to assess the individual financial performance of important operating units. The Branch did not use cost measurement data to evaluate the financial performance of the regional offices because historically it has not treated the regions as independent cost centers. Instead, the main performance measures were those applied to the Branch as a whole. As a result, the Branch could not completely monitor the financial performance of its individual regional offices or determine if the costs associated with a regional office were reasonable or efficient. We discuss the actions needed to adopt cost measurements into the performance measurement system of the Branch in Recommendation 1. Budgets The Transportation Branch budget was prepared on a program basis only and did not provide any breakdown of the resources projected to be used by the regional offices or internal Branch sections. An example of an internal Branch section would be the Branch s accounting department. A budgeting and planning process that is complete would include strategic goals, a plan to achieve those goals, and establishing a budgeting system that allows the progress of operating units to be monitored and for course adjustments to be made. The incorporation of these measures into an entity s planning cycle would improve its ability to meet objectives. The reason the Branch did not prepare budgets at the regional office or internal Branch section level was because it was easier to prepare the annual budget on a program basis. 4

9 The result of this is that the Branch was not able to monitor the financial performance of the regional offices or the internal sections from a budgetary perspective. We discuss the actions needed to incorporate budgetary tools for the regional offices and internal Branch sections in Recommendation 2. Safety and Maintenance Our review of safety and maintenance disclosed a need for improvements in the following areas: Salvage process functions. Salvage process documentation. Parts inventory counting procedures. Salvage Process Functions There was inadequate segregation of duties related to the salvage process. Specifically, the same individual at fleet operations was performing several functions related to the bus salvage process. These functions included contacting a third party vendor to retrieve the vehicle, processing the vehicle title transfer, the vehicle bill of sale, processing any invoices from the third party vendor and forwarding payment received for the vehicle to the District s General Accounting Office. This condition occurred because Branch management was not aware that having one individual perform all of the above functions was incompatible with a strong internal control environment intended to protect errors and to safeguard District assets. As a result, errors or improprieties may have occurred for salvage related transactions and may have gone undetected by management. We address the actions needed to improve the segregation of duties related to the salvage process in Recommendation 3. Salvage Process Documentation The Branch did not maintain any documentation showing management s approval for a vehicle to be identified and sold as salvage. This condition occurred because once the Branch Director designated a vehicle as a salvaged vehicle to be sold, the notification and final approval was verbally communicated to the Garage Supervisors. As a result, no documentary evidence existed to support that proper authorization was obtained prior to identifying and selling a vehicle as salvage and this could have permitted vehicles to be removed from the garage without proper approval. 5

10 We address the actions needed to improve the policies related to approval documentation for salvage vehicles in Recommendation 4. Parts Inventory Counting Procedures Personnel who periodically counted the Branch s parts inventory also performed any recounts necessary to investigate discrepancies. In addition, garage supervisory personnel did not have clear written guidelines describing how and when discrepancies should be reviewed. This condition occurred because Branch management was not aware that having the same individual perform the above inventory count functions was incompatible with a strong internal control environment intended to protect errors and to safeguard District assets. In addition, Branch management was not aware of the importance of having a written policy that describes how and when garage supervisory personnel should investigate discrepancies in parts inventory counts. As a result, errors or improprieties may have repeatedly occurred for parts inventory transactions and may have gone undetected by management. We address the actions needed to improve the policies related to parts inventory count procedures in Recommendation 5. Bus Routing and Ridership The process for gathering ridership surveys allowed errors to go undetected by Branch management. In addition, we noted instances where the Daily Bus Reports contained inaccuracies that were not explained or corrected by the personnel preparing the surveys. This condition occurred because the ridership survey data gathering process was still manually intensive and the appropriate level of personnel in the regional offices did not properly explain discrepancies in the documents supporting the surveys. As a result, the likelihood for inaccuracies in the reported ridership information was increased and the personnel preparing the surveys had reduced accountability since they were not explaining discrepancies contained in the documents supporting the surveys submitted to the Branch s Central Planner. We address the actions needed to improve the ridership survey compilation process in Recommendation 6. 6

11 RECOMMENDATIONS AND COMMENTS Recommendation 1: Direct the Transportation Branch to: Regional cost measures such as overtime cost, cost per driver, cost per student, etc, to evaluate regional performance. A Report to distribute to the Branch s Regional Transportation Managers that shows quarterly and year-to-date cost measures by region on a comparative basis. School District Comments: The School District agreed with the recommendation and will phase in regional cost measures and reports beginning with overtime expenditures and contract bus excess charges. The planned completion date is September 1, Recommendation 2: Direct the Transportation Branch to develop: Budgets at the regional office or internal Branch section level in lieu of or in addition to the program level based budget. A report that will show a comparison between actual and budgeted costs for each of the regional offices and internal Branch sections. The report should be prepared at least quarterly and the appropriate level of personnel should explain cost variances from plan. School District Comments: The School District agreed and stated that in addition to maintaining the existing program-based budget, regional budgets will be developed for key items such as supplies, alteration and improvement costs, equipment, and administrative payroll costs. Additional budget line items will be incorporated as appropriate. The planned completion date for the initial budget items is September 1, Recommendation 3: Develop a salvaged vehicle policy that: Requires parties who purchase salvaged vehicles from the District to send their payments directly to the Branch Fleet Services Manager who should review the supporting documents, such as the title transfer, bill of sale, and related invoices for completeness and accuracy before forwarding the payment received to the District s General Accounting Office. Directs the Fleet Services Manager to review, at least quarterly, a listing of all vehicles newly identified as salvaged and to investigate any discrepancies or unusual transactions. School District Comments: The School District agreed and stated that it had issued revised procedures in this area on April 10, Recommendation 4: Require that written authorization be produced and maintained with the bus file before any vehicle is removed from the garage for sale at an auction. 7

12 School District Comments: The School District agreed and stated that it had issued revised procedures in this area on April 18, Recommendation 5: Develop a written parts inventory count policy that requires: A second individual to perform parts inventory recounts when inventory count discrepancies are being investigated. Garage Supervisors to review and sign the parts inventory worksheets indicating that count discrepancies were adequately resolved. School District Comments: The School District agreed and stated that it issued revised guidance for cyclical parts inventory count procedures on May 25, Recommendation 6: Direct the Transportation Branch to: Automate the ridership survey process by forwarding an Excel template of the survey report to the regional offices for completion. Review the electronic surveys and ensure that a hard copy of these is returned to the regional offices for their review, approval and signature. Conduct a quarterly review of a sample of the Daily Bus Reports as well as of other daily bus records, such as the Tachograph Charts and Vehicle Condition Reports. Cross check the ridership data in the Central Planner s monthly Survey Summary Report to the data compiled by the respective Regional Planners. Ensure that the Daily Bus Reports along with the supporting documents are accurate and complete by having the Area Bus Supervisors explain any discrepancies or unclear remarks in the Daily Bus Report comment section as well as initial any changes made to the original Daily Bus Reports. School District Comments: The School District agreed and stated it would use its local area network and lotus notes software to automate the ridership survey process. The School District also indicated that it already had a program in place that requires the Regional Transportation Managers to conduct random audits of time reports and tachograph charts and that it would continue to support its internal efforts at checking the accuracy of these documents. In addition, all ridership data will be reviewed and approved by the Area Bus Supervisors and the Regional Planners will verify summary reports of this information. Finally, the District indicated that all Area Bus Supervisors have received additional training and instruction on the completion of the Daily Bus Reports. 8

13 ANNEX A VERBATIM COMMENTS BY SCHOOL DISTRICT INTER-OFFICE CORRESPONDENCE Los Angeles Unified School District TO: Mr. Alfred Rodas, DATE: July 7, 2000 Audit Manager FROM: SUBJECT: Enrique Boull t, Deputy Director TRANSPORTATION BRANCH RESPONSE TO DRAFT REPORT ON AUDIT OF SCHOOL DISTRICT BUS OPERATIONS Thank you for meeting with us on Wednesday, June 28, 2000 to further clarify the Transportation Branch s audit recommendations pertaining to budget and cost measurements. Also present were Mr. Alan Tomiyama and Mr. Antonio Rodriguez. As expressed to you previously, the Transportation Branch is open to implementing any and all changes that will assist us in becoming more efficient in our support of the instructional program. You explained how regionalizing certain budgetary aspects could be a valuable management tool toward improving efficiencies and accountabilities for branch management. As such, we concur and plan to implement the audit recommendations listed below: Recommendation #1:! Regionalize cost measures such as overtime costs, cost per driver, cost per student, etc., to evaluate regional performance.! Distribute reports to RTM s showing quarterly and year-to-date cost measures by region on a comparative basis. School District Response:! The District concurs, and will phase in regional cost measures and reports starting with overtime expenditures and contract bus excess charges. These will be used on a comparative basis with existing measurements to evaluate effectiveness on regional cost measures. The target date for implementation of the aforementioned is September 1,

14 ANNEX A Recommendation #2:! Develop budgets at the regional office or internal Branch section level in lieu of or in addition to the program level-based budget. Prepare quarterly report comparing actual and budgeted costs for each of the regional offices and internal Branch sections. School District Response: EB:jm! The District concurs with this recommendation and will begin in the 2000/2001 school year with regionalized budgets for alterations and improvements, administrative salaries and, supplies and equipment accounts. The Branch will then evaluate regional reports in comparison to Branch data to ascertain benefits of regionalizing budgets and, if successful, look at other areas of the budget for further expansion. The target date for implementation of the aforementioned is September 1, c: A. Tomiyama A. Rodriguez J. Yap 10

15 ANNEX A Recommendation 3: Develop a salvaged vehicle policy that: Requires parties who purchased salvaged vehicles from the District to send their payments directly to the Branch Fleet Services Manager who should review the supporting documents, such as the title transfer, bill of sale and related invoices for completeness and accuracy before forwarding the payment received to the District s General Accounting Office. Directs the Fleet Services Manager to review, at least quarterly, a listing of all vehicles newly identified as salvage and to investigate any discrepancies or unusual transactions. Transportation Branch Response: Management, supervisory, and office staff have reviewed the audit findings and agree that a better method of tracking and separation of responsibilities are needed in this area. The following is the procedure implemented on April 10, However, the second recommendation has already been in place as reflected in the required Quarterly Reports submitted to the Director throughout the year. Auctioneer has been notified via phone and mail to forward any and all payment vouchers to the LAUSD Fleet Maintenance Manager along with supporting documents from transfer of vehicle(s). Fleet Manager will continue to review with Principal Clerk all transactions and documentation for accuracy and make working copies and file accordingly. File copies will be maintained in the Automotive Maintenance Office for a period of five years for audit and review purposes. Fleet Manager will forward payment voucher(s) to the General Accounting Office. Recommendation 4: Require that written authorization be produced and maintained with the bus file before any vehicle is removed from the garage for sale at auction. Transportation Branch Response: The Fleet Maintenance Section has reviewed the audit findings and has produced an updated version of the form that was currently used when any District vehicle was found to have met the salvage criteria. The major improvements to the form are in the area of review from the local site supervisor, review of information recommending the vehicle to be salvaged, and the final approval from the Director. This form was revised and reintroduced on April 18, 2000 and has been implemented at all District Garages. All documents related to all vehicle salvage transactions will be maintained on file/storage at the Automotive Maintenance Office or designated storage area for a period of five years for audit and review purposes. 11

16 Recommendation 5: Develop a written parts inventory count policy that requires: A second individual to perform parts inventory recounts when inventory count discrepancies are being investigated. Garage Supervisors to review and sign the parts inventory work sheets indicating that count discrepancies were adequately resolved. Transportation Branch Response: Management and supervisory staff recognize the need to separate and implement separate levels of responsibility within each garage site regarding inventory control. The following procedure has been discussed and implemented as of May 25, Cyclical Inventory Procedure Cyclical inventory work sheet is printed Saturday Assigned parts person performs count from generated report. Using the PIC 5330 screen, all items are inputted either manually or by hand scanner. Assigned person must sign off on generated work sheet once the input has been completed. Cyclical inventory comparison report Assigned parts person on Monday or Tuesday runs report PIC5340A. Review, check and confirm discrepancies. Record on work sheet. Any discrepancies are corrected and re-inputted on screen PIC5330 utilizing the same date of the first count. Assigned person must sign off on generated work sheet once the corrections have been completed. Assigned parts person notifies the Garage Supervisor that the cyclical inventory has been completed. Cyclical inventory final Site supervisor or designee runs the comparison report PIC5430A. Supervisor reviews report for discrepancies and or further corrections. Once satisfied with all items, supervisor will sign the comparison report. Communication is made with the Supervising Automotive Parts Storekeeper for an inventory update. Cyclical inventory work sheet and counts files All weekly cyclical inventory count work sheets will be attached together and maintained on file at each site location from where they were generated. All files must be maintained for a period of five years for audit and/or review purposes. 12

17 Recommendation 6: The Branch should: Automate the ridership survey process by forwarding an Excel template of the survey report to the regional offices for completion. Direct the Central Planner to review the electronic surveys and ensure that a hard copy of these is returned to the regional offices for their review, approval and signature. Transportation Branch Response: The Branch has recently implemented an automated infrastructure necessary to eliminate many manually intensive processes, including its internal ridership survey reports. Utilizing a local area network and Lotus Notes software, all ridership surveys will be completed online and electronically shared between regional and central office staffs. Hard copies will be forwarded to respective Regional Managers for review, approval, and signature. Direct the Regional Transportation Managers to help ensure the accuracy of driver time reporting by conducting a quarterly review of a sample of the Daily Bus Reports, as well as of other daily bus records, such as the Tachograph Charts and Vehicle Condition Reports. Transportation Branch Response: The Regional Transportation Managers have annually conducted random audits of daily time reports and tachograph charts. This school year, every area was subjected to an audit review with follow-up training sessions in procedures needing attention. Additionally, training classes have been scheduled for all new supervisory personnel in tachograph chart reading and review. The Branch will continue to audit these documents to ensure the accuracy of the data. Direct the Regional Transportation Managers to cross-check the ridership data in the Central Planner s monthly Survey Summary Report to the data compiled by the respective Regional Planners. Transportation Branch Response: All ridership data will be reviewed and approved by Area Bus Supervisors and summary reports will be verified and approved by Regional Planners. Direct the Area Bus Supervisors to ensure that the Daily Bus Report (DBR s) along with the supporting documents are accurate and complete. The Area Bus Supervisor should explain any discrepancies or unclear remarks in the Comment Section as well as initial any changes made to the original. Transportation Branch Response: All Area Bus Supervisors and Assistant Area Bus Supervisors have received additional training on DBR review and approval along with a revised copy of DBR Procedure Manual reflecting additional comments section. 13

18 ANNEX B REPORT DISTRIBUTION Members, Board of Education Superintendent of Schools Chief Financial Officer Director, Transportation Branch Deputy Director, Transportation Branch Executive Administrator of Business, Finance, Facilities and Information Technology 14

19 ANNEX C AUDIT TEAM Alfred Rodas Roger Datu Siony Rivera Phil Savala Norma Valenciano Special Acknowledgment The Inspector General also would like to acknowledge the thorough and capable assistance of the accounting firm Deloitte & Touche LLP and its employees who assisted in the audit. 15