Columbus City Schools Office of Internal Audit

Transcription

1 Transportation Department Transportation Vendors Contract Compliance Audit Report Date: January 22, 2010 Internal Audit Mission Statement The s mission is to provide independent, objective risk assessment, audit and consulting services designed to assist District management in maintaining effective internal controls and yet, achieving a balance between operational efficiency, while promoting the achievement of District goals.

2 Table of Contents Page Executive Summary Conclusions Duplicate Vendor Bus Driver Monitoring Files Contract Compliance Explanation of Duplicate Vendor Bus Driver Monitoring Files Description of Monitoring Files Restoration of Monitoring Files Audit Objectives, Scope and Methodology Issues and Recommendations..8 Management Responses and Action Plans..15 2

3 Executive Summary The Columbus City Schools Transportation Department provides daily bus service to 30,000 students within the boundaries of the 209 square mile district. Service is provided to elementary, middle, and high schools students living more than two miles from their selected school. The Columbus City Schools District (district) entered into contracts with outside bus and van transportation companies to provide buses, vans and drivers to augment the 543 unit, Board of Education owned, bus fleet. Funding for pupil transportation is provided at the state level through the State Department of Education and with local tax dollars. The annual budget for the Transportation Department is approximately $52 million dollars, including approximately $1.8 million for repairs and maintenance. The Transportation Department serves a total of 224 educational facilities, including the non-public and charter schools. The Internal Auditor (IA) examined the content of the duplicate Vendor Bus Driver Monitoring Files and reviewed the requirements contained in transportation vendor contracts to determine the effectiveness of the compliance monitoring system and the status of vendor compliance with contract terms. The Internal Audit Report contains recommendations and suggestions designed to assist the Transportation Department in performing the critical monitoring and contract compliance responsibilities. The following summarizes our significant issues and conclusions: Conclusions Duplicate Vendor Bus and Van Driver Monitoring Files The IA concludes, after a remedial effort to restore the files, the duplicate Transportation Vendor Bus and Van Driver Monitoring Files are now complete and contain the required duplicate documentation copies. The IA concludes the monitoring system for the duplicate Vendor Bus and Van Driver Files is not effective as currently staffed and operated. 3

4 Contract Compliance The IA concludes the Transportation Vendors are generally compliant with contract terms, with the following exceptions: Contract performance bonds are deficient for two bus transportation vendors, Contract payment terms related to SERS (School Employee Retirement System) employer costs are not compliant with contract terms for three bus transportation vendors, Insurance information was missing from the files for the two van vendors. The required van provider information was subsequently provided on January 20, The Transportation Department is currently in the process of resolving the vendor contract compliance and obtaining required vendor documentation. 4

5 Explanation of Duplicate Vendor Bus Driver Monitoring Files Description of Monitoring Files Transportation contract vendor services are required to fulfill the daily demand to transport students attending district schools, non-public schools and charter schools in the region. Approximately 271 vendor buses and 10 vendor vans were utilized daily during the period under review. The district significantly enhanced the monitoring of vendor transportation contractors, following an incident when a vendor employee operated a bus under contract to the district without proper credentials. The district created and filled a new position, the School Transportation Compliance Officer, reporting to the Director of Transportation, tasked with performing vendor monitoring responsibilities. The School Transportation Compliance Officer s fundamental monitoring control relies upon the maintenance of a duplicate set of the compliance documentation for each driver, required by law to be maintained by the respective transportation vendors in their administrative offices. The district s duplicate files are housed in the district s administrative transportation office located at the 17 th Avenue, Columbus, Ohio location. The duplicate Vendor Bus Driver Monitoring Files include the same information required to be maintained for a qualified district employee driving a Columbus City Schools bus. The School Transportation Compliance Officer position is a part-time position, with the district employee working up to three (3) days per week. The School Transportation Compliance Officer has been assigned additional responsibilities including managing the school guard crossing program. We were informed the additional duties and the school guard crossing program now consume approximately one-third of the available work hours of this position. 5

6 Restoration of Monitoring Files The Transportation Department, at the request of IA, requested each vendor to provide the duplicate copies of the information required to restore the content of the duplicate Bus Driver Monitoring Files. The vendors all complied with the request and the Transportation Department then filed the missing documentation in the respective vendor Bus Driver Monitoring files. The IA then followed up the Transportation Department s remedial effort to restore the files with a second review of selected Bus Driver Monitoring Files, finding the duplicate files to be generally complete. 6

7 Audit Objectives The objectives of the audit are: To determine transportation vendor contract compliance with the terms and conditions contained in the respective district contracts. To determine the adequacy of the monitoring of transportation vendor contracts. To determine transportation vendor contract compliance with applicable laws and regulations. Audit Scope and Methodology The scope of the Transportation Vendor Contract Compliance Audit includes determination of the status of the Bus Driver Monitoring Files and determination of the status of contractor compliance with contract terms for the review period. The transportation vendor contractors included in this review are: Capital Transportation, Inc., Community Bus Services, Inc., Laidlaw Transit, Inc. dba First Group Inc., V.A.T., Inc., V.A.T., LLC formerly W.C. Brunk, Clipper Transportation and TriStar Transportation. The report is updated for information received up through the report date. 7

8 Issues and Recommendations School Transportation Compliance Officer and Bus Driver Monitoring Files Issue The IA s initial review of the duplicate Bus Driver Monitoring Files found many missing and incomplete duplicate vendor bus driver files. The district procedure requires the School Transportation Compliance Officer to obtain, file and maintain a duplicate set of vendor transportation driver files in the Transportation Office. This method was chosen, by the district, to reduce the risk of a non-compliant vendor employee operating a bus contracted to the Columbus City Schools. The maintenance, filing and monitoring of the content of the duplicate Bus Driver Monitoring Files is the responsibility of the School Transportation Compliance Officer. This position is currently filled by a part-time district employee. The IA reviewed the vendors bus driver hiring activity during 2008 and The review disclosed several vendors were experiencing an increase in their employee bus driver turnover during 2009 when compared to The higher turnover was concentrated in the second quarter. The increased driver turnover generates an increase in the number of duplicate Bus Driver Monitoring Files required to be established and maintained. The specific reasons for the increases in vendor bus driver turnover were not immediately understood, however, the IA noted the increase in vendor bus driver turnover significantly decreased the effectiveness of the driver file monitoring performed by the School Transportation Compliance Officer. As a result, on November 13, 2009, to restore the integrity of the duplicate Bus Driver Monitoring Files, the Director of Transportation requested the vendors to submit a complete set of all vendor employee information that day. The transportation vendors immediately complied. 8

9 IA reviewed the restored files. Miscellaneous items were found missing, which were brought to the attention of the Director of Transportation and have been resolved. During our review we noted the School Transportation Compliance Officer is working a three (3) day, per week, work schedule and is not required to be on the premises during all weeks when school is in session. No employee serves as a backup for this position when the School Transportation Compliance Officer is out on leave. The School Transportation Compliance Officer is assigned additional transportation department duties including the monitoring of crossing guard guidelines and occasional participation in employee expulsion hearings. The School Transportation Compliance Officer informed the IA, the additional duties consume approximately one-third of the part-time employee s scheduled three (3) day work week. The limited number of days the School Transportation Compliance Officer employee is actually performing the monitoring task, the clerical nature of this monitoring activity and the dilution of the monitoring time available with additional duties, results in an ineffective vendor bus driver monitoring system. Recommendation No.1: Eliminate Duplicate Bus Driver Monitoring Files IA recommends the Transportation Department consider eliminating the time spent gathering, filing and ineffectively maintaining the duplicate Bus Driver Monitoring Files. IA suggests this clerical time be converted to actual monitoring activity performed during vendor site visits. IA concludes the effectiveness of the monitoring activity will be significantly improved if the monitoring effort is applied to a rigid schedule including increased vendor site visitations, inspection of the original driver files and timely reviews of compliance issues, directly with the vendors. Evidence of the condition of vendor compliance should be maintained and regular visits should demonstrate 100% vendor compliance. 9

10 Assurance of Required Vendor Insurance Coverage Issue IA noted the current compliance review methods employed by the Transportation Department were not effective in establishing vendor compliance, or non-compliance, with the various terms and conditions of the contracts. IA noted, in part, due to the circumstances previously described, the School Transportation Compliance Officer is unable to effectively monitor vendor contract compliance. The IA review noted insurance related information missing from several contractor portfolios. This information is required to be provided as a condition in the contract. The contractors, V.A.T., Inc., and V.A.T., LLC., could not produce a required performance bond. The Director of Transportation indicates this information has been requested. Recommendation No. 2: Focus School Transportation Compliance Officer Responsibilities IA recommends the responsibilities and time available to complete the responsibilities of the School Transportation Compliance Officer be immediately reviewed by the Director of Transportation. If this review determines the current time dedicated to the School Transportation Compliance Officer s responsibilities is inadequate, the time on task should be increased by either eliminating extraneous responsibilities or increasing monitoring hours available. 10

11 Recommendation No. 3: Perform a Compliance Review of All Vendor Transportation Contracts IA recommends the School Transportation Compliance Officer review all vendor contracts and bring each vendor into compliance with terms and conditions as specified in their contract. Recommendation No. 4: Provide Backup and Succession Planning For the School Transportation Compliance Officer IA recommends succession planning and backup is established for this position. IA recommends a backup for this position is identified and adequate training be provided for the identified backup. Monthly Invoice Approval and Vendor Random Drug Testing Lists Issue IA requested the current vendor employee bus driver lists and the random drug test lists for subsequent comparison to the files and to the vendor invoices. IA was initially unable to perform the reviews as these lists were not maintained by the Transportation Office. The vendor bus driver lists and a current list of vendor employees eligible for the random drug testing were requested from each vendor by the Director of Transportation along with a list of terminated vendor employees. IA subsequently received the lists and completed the reviews. The results were provided to the Director of Transportation to serve as the foundation to restore the contents of the duplicate Bus Driver Monitoring Files. The random drug testing vendor list review noted no significant discrepancies on the eligible drug test lists, with the exception of the two van vendors who are not required to participate in random drug testing. The invoice review disclosed questions related to responsibility for payment of the employer share of certain vendors SERS employee benefit costs and certain GPS costs. 11

12 Recommendation No. 5: Compare the Monthly Vendor Invoice to the Schedule of Authorized Qualified Vendor Drivers Before Approving the Invoice IA recommends the School Transportation Compliance Officer maintain current schedules reflecting the authorized, qualified vendor bus drivers and the list of current vendor employees eligible for random drug tests. IA recommends the drivers appearing on the monthly vendor invoices be compared with the schedule of authorized, qualified vendor bus drivers, as reflected on the vendor master list. Discrepancies should be noted and resolved immediately. The district should request updates of the driver list and drug test list when vendor bus driver employee turnover is experienced. IA noted employees of the two van providers are not required by law to participate in random drug and alcohol testing. The district utilizes ten (10) contractor vans. The IA believes it would be an improvement in the quality of monitoring and assurance of safety if the van drivers were requested to voluntarily agree to a random drug testing procedure. Payment of the Employer Share (14%) of School Employee Retirement System (SERS) Benefit Cost by the Outside Transportation Vendor Issue The vendor transportation contracts commit the district, to provide administrative support, to process and forward the vendor contractor employee payroll withholdings to SERS, for credit to the vendor employee s retirement account with SERS. The contracts for Capital Transportation, Inc., Laidlaw Transit, Inc. dba First Group Inc., V.A.T., Inc., V.A.T., LLC formerly W.C. Brunk, state the vendor will be responsible for payment of all compensation and related fringe benefits under the contract, inclusive of all applicable payroll taxes and deductions required by local, State, and federal law, and all workers compensation, unemployment compensation, social security and Medicare charges. 12

13 IA reviewed vendor invoices and found the district deducts 10% from the vendor invoices for SERS payroll related costs, withholds this amount from the payment to the vendor and forwards the 10% withheld to SERS. The withheld 10% is the employee funded share of the SERS benefit. IA noted the district is forwarding to SERS, an amount equivalent to 24% of the vendor employee wages for contractors V.A.T., Inc., V.A.T., LLC., Captial Transportation, Inc. The vendor Laidlaw Transit, Inc. dba First Group Inc., is funding the 14% employer share. Recommendation No. 6: Determine How SERS Employer Costs Should Be Funded for Vendors IA recommends the Director of Transportation determine the intent of the SERS employer funding sections in the vendor contracts. The contracts should then be followed and monitored with the appropriate payment/funding arrangement. Should it be determined the district is not responsible for funding the employer share 14% of SERS benefit costs for the vendors listed above, the affected vendors should be requested to refund the appropriate amount to the district covering the entire period of the currently in force contracts. Transportation Contractor Vehicles Are Required To Carry Global Positioning System (GPS) Transmitters on Board Issue The district contract requires all district transportation vendors to carry a Global Positioning System. Vendor contracts allow vendors to increase their rates by three (3) percent, annually. The vendor contracts are silent with respect to the funding of the GPS costs. IA reviewed the vendor invoices and found the vendors are charging the district for the monthly cost of vendor GPS systems. 13

14 Recommendation No. 7: Determine the Party Responsible For the Cost of GPS Systems in the Vendor Vehicles IA recommends the district clarify the intent of the contracts with respect to the funding of costs associated with mandated GPS systems on vendor vehicles. The contract should then be enforced and costs funded as intended by the contract. Should it be determined the district has paid for GPS costs that appropriately were the responsibility of the vendor, the vendors should be requested to refund the appropriate amount to the district covering the entire period of the currently in force contract. Request for Proposal to Attract Bids for Outside Bus Vendor Services Issue All district contracts with the current transportation vendors expire on June 30, The district transportation department is developing a request for proposal (RFP) to solicit bids for a new three (3) year transportation vendor contract. IA was informed the district s professional Purchasing Department is not involved in this major contract bid development activity. Recommendation No. 8: IA Recommends the Director of Purchasing Control the RFP Development, Bid Solicitation and Bid Opening and the Director of Purchasing Be Named To the Vendor Evaluation Team IA observes the Director of Transportation infrequently performs this type of major RFP and bid evaluation activity. The Director of Purchasing is dedicated daily to this very time consuming and technically demanding activity. The Director of Purchasing is knowledgeable in the current applicable law and requirements of the process. The IA believes the district will be well served to apply the best available district resources to the RFP process. The IA believes properly aligning this responsibility will eliminate distractions pulling the Director of Transportation away from daily operational responsibilities and allow the Director of Transportation to properly concentrate on the significant effort required to restore the critical monitoring capabilities in the Transportation Department. 14

15 Management Responses and Action Plans Recommendation No. 1 Eliminate Duplicate Bus Files NOTE: All drivers are in compliance with the State of Ohio, and the Ohio Department of Education (ODE) rules and requirements, and meet or exceed existing revised code and administrative rule requirements. A driver compliance file consists of making sure 14 different areas of requirements are met before a driver is allowed to drive. The Transportation Department contacted ODE, and based upon its recommendation CCS should maintain their own copies of driver s compliance files on site. The Transportation Department also contacted two local school districts and one large Ohio urban school district in an attempt to review other districts procedures and best practices. (The large urban school district is 100% contracted labor). It has been determined that not only is this a best practice, but by maintaining this set of driver s files, the Transportation Department is able to maintain a pro-active management tool as it provides the safest methods and highest quality personnel to deliver transportation services. Offsite or non-storage of such records, not only heightens the opportunity for error, but it also places the district in the unenviable position of being in a reactive and defensive mode of operation should there be an incident during transportation. The Transportation Department maintains a practice of providing safe and compliant transportation as required by law but with a strong emphasis focused on safety. By maintaining such files, the Transportation Department ensures compliance not only on the local district level, but from any and all contractors that might provide services. Without such files on record, the Transportation Department would not be notified in a timely manner of violations or personnel issues that are critical to maintaining this safety record. Presently, the Transportation Department is exploring additional driver compliance computer software to alleviate the manual method of record keeping, for such items as expiration notices. This would be in addition to the already in place ODE electronic notification system. The Transportation Compliance Officer presently performs site visits and randomly audits contractor s driver files. Future visits by the compliance officer will be recorded and maintained in a log of such visits in the office of the Director of Transportation. Target Implementation date: Immediately Responsibility: COO / Director 15

16 Recommendation No. 2 Focus School Transportation Compliance Officer Responsibilities The Transportation Compliance Officer s current job responsibilities include maintaining the compliance files for over 1,000 transportation employees, safety patrol training/management, and adult crossing guard training/management and periodically conducts student expulsion hearings. Safety and Security is currently evaluating how to implement the safety patrol/management and adult crossing guard training/management responsibilities. Target Implementation date: on going Responsibility: COO / Director Recommendation No. 3 Perform A Compliance Review of All Vendor Transportation Contracts. Review of contractor transportation contracts will be included in the compliance officer duties. Target Implementation date: Immediately Responsibility : COO / Director Recommendation No. 4 Provide Back Up And Succession Planning For The School Transportation Compliance Officer Transportation will review and implement ways to assist with the duties of the Transportation Compliance Officer. A succession plan will be developed. Target Implementation date: July 2010 Responsibility: COO / Director 16

17 Recommendation No. 5 Approving The monthly Vendor Invoice And, Determining Authorized, Qualified Vendor Drivers. Scheduling of contractors routes is presently being maintained by our department s non-public routing supervisor. The compliance office will begin working with the routing supervisor to develop a more efficient method to include reconciling driver s lists and invoices. Due to third-party processing of the random drug testing list; the vendor list may not match day to day. (ex: contractor hires a new driver today, driver is added to contractor list immediately, the driver name is then submitted to the third-party drug test company for processing, third party takes approximately ten(10) days to process.) At this time all drivers are required to have a pre-employment drug test. As van drivers do not hold a CDL license, random drug testing is not required. CCS will require that all contract van drivers submit to random drug testing but it will come at an additional cost to the district Target Implementation date: Immediately Responsibility: Compliance Officer Recommendation No. 6 Determine How SERS employer Costs Should Be Funded For Vendors In accordance with the recommendation of the Internal Auditor, we have asked the General Counsel to review the contracts and statues to determine responsibility for paying the School Employee Retirement System for charges related to vendor employees who operate buses on behalf of the district. Target Implementation date: July 2010 Responsibility: General Counsel Contract Compliance: Transportation Contractor Vehicles Are Required To Carry Global Positioning System (GPS) Transmitter On Board. The new Transportation RFP will require vendors to include the GPS fees as part of the total bid price per route per day. It also states that CCS transportation staff will have full administrative rights to the vendors GPS system for the review of daily GPS information. Target Implementation date: July 2010 Responsibility: COO / Director 17

18 Recommendation No. 7 Determine The Party Responsible For The Cost Of GPS Systems In The Vendor Vehicles. The new Transportation RFP will require vendors to include the cost of GPS with the bid price. The current vendor contract states the buses must be GPS capable. As vendors acquired GPS systems for their fleet the added cost of the service has been passed down to CCS as a separate line item on each vendor invoice. Target Implementation date: July 2010 Responsibility: COO / Director Recommendation No. 8 IA Recommends The Director Of Purchasing Control The RFP Development, Bid Solicitation And Bid Opening And The Director Of Purchasing Be Named To The Vendor Evaluation Team. The Director of Purchasing authored the original RFP with input from the Director of Transportation. The Director of Purchasing continues to make changes to the new RFP with transportation input as regards new CCS, State, Federal and ODE rules and regulations. Transportation will implement IA recommendations. Target Implementation date: Immediately Responsibility: COO / Director 18