Division of ocaL overnment & schooL ccountabiLity Lockport City … · 2017. 12. 7. · Division of...

Division of LocaL Government & schooL accountabiLity

o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r

report of ExaminationPeriod Covered:

July 1, 2013 — May 21, 2015

2015M-200

Lockport City School District

Monitoring Transportation Contracts and Costs

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

INTRODUCTION 2 Background 2 Objective 2 Scope and Methodology 3 CommentsofDistrictOfficialsandCorrectiveAction 3

MONITORING TRANSPORTATION CONTRACTS AND COSTS 4 Transportation Services Consultant 5 Contracts for Transportation Services 7 Fuel Purchases 8 Recommendations 9

APPENDIX A ResponseFromDistrictOfficials 10APPENDIX B AuditMethodologyandStandards 13APPENDIX C HowtoObtainAdditionalCopiesoftheReport 14APPENDIX D LocalRegionalOfficeListing 15

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability January2016

DearSchoolDistrictOfficials:

AtoppriorityoftheOfficeoftheStateComptrolleristohelpschooldistrictofficialsmanagetheirdistrictsefficientlyandeffectivelyand,bysodoing,provideaccountabilityfor taxdollarsspent tosupportdistrictoperations.TheComptrolleroverseesthefiscalaffairsofdistrictsstatewide,aswellasdistricts’compliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversight is accomplished, in part, throughour audits,which identify opportunities for improvingdistrictoperationsandBoardofEducationgovernance.Auditsalsocanidentifystrategiestoreducedistrict costs and to strengthen controls intended to safeguard district assets.

Following is a report of our audit of the Lockport City School District, entitled MonitoringTransportationContractsandCosts.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneral Municipal Law.

This audit’s results and recommendations are resources for district officials to use in effectivelymanagingoperationsandinmeetingtheexpectationsoftheirconstituents.Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedattheendofthis report.

Respectfullysubmitted,

Office of the State ComptrollerDivision of Local Governmentand School Accountability

State of New YorkOffice of the State Comptroller

2 Office Of the New YOrk State cOmptrOller2

Background

Introduction

Objective

The Lockport City School District (District) is located in the City of Lockport and portions of theTowns of Lockport, Cambria andPendleton,inNiagaraCounty.TheDistrictisgovernedbytheBoardofEducation(Board),whichiscomposedofnineelectedmembers.The Board is responsible for the general management and control of theDistrict’s financial and educational affairs.The SuperintendentofSchoolsistheDistrict’schiefexecutiveofficerandisresponsible,along with other administrative staff, for the District’s day-to-daymanagementundertheBoard’sdirection.TheAssistantSuperintendentfor Finance and Management Services (Assistant Superintendent)is responsible for financial services, including reviewing monthlytransportation invoices and bus routes for possible consolidations or additions. The District operates seven schools with approximately 5,300students. The District’s budgeted appropriations for the 2014-15fiscalyeartotaled$86.6millionandwerefundedprimarilywithStateaid,realpropertytaxesandtheappropriationoffundbalance.

Transporting students to and from various schools and programs represents a significant District cost. For 2014-15 the District’stransportationcostswere$4.8million(6percentoftotalexpenditures).The District has six subcontracts with one transportation vendor(Vendor)forbusservice.TheDistrictalsoenteredintocontractswitha transportation management company Consultant (Consultant) to provide transportation coordination and oversight services.

Our prior audit,1 dated November 2008, contained multiplerecommendationsregardingtheDistrict’s transportationoperations,such as to seek competition for primary transportation services and enterintonewcontracts,toappointanindividualwhoisfreefromtheinfluenceofthetransportationvendortooverseeDistricttransportationservices and to conduct periodic reviews of its transportation vendors to ensure the services were provided and billed in accordance with applicablecontractsandextensions.

The objective of our audit was to evaluate the District’s transportation operations.Ourauditaddressedthefollowingrelatedquestion:

1 Lockport City School District, Internal Controls Over Selected Financial Operations (2008M-159)


Scope andMethodology

Comments ofDistrict Officials andCorrective Action

• DotheBoardandDistrictofficialshaveaneffectiveprocessto monitor transportation costs and ensure that billing is appropriate and accurate?

WeexaminedtheDistrict’s transportationoperationsfor theperiodJuly1,2013throughMay21,2015.Inaddition,wereviewedcertaindocumentationdatingback to2009andcontactedDistrictofficialssubsequenttothecompletionoffieldworkinordertocompleteouraudit objective.

We conducted our audit in accordance with generally accepted governmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixBofthisreport.Unlessotherwiseindicatedinthisreport,samplesfortestingwereselectedbasedonprofessionaljudgment,asitwasnottheintenttoprojecttheresultsontotheentirepopulation.Where applicable, information is presented concerningthe value and/or size of the relevant population and the sample selectedforexamination.

The results of our audit and recommendations have been discussed withDistrictofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report.District officialsgenerally agreed with our findings and recommendations andindicated they planned to initiate or have already taken corrective action.

The Board has the responsibility to initiate corrective action. Pursuant toSection35of theGeneralMunicipalLaw,Section2116-a(3)(c)of theNewYork State Education Law, and Section 170.12 of theRegulationsoftheCommissionerofEducation,awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendationsinthisreportmustbepreparedandprovidedtoourofficewithin90days,withacopyforwardedtotheCommissionerofEducation.Tothe extent practicable, implementation of the CAPmust begin bytheendof thenextfiscalyear.Formore informationonpreparingandfilingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report, which you received with the draft audit report. TheBoardshouldmaketheCAPavailableforpublicreviewintheDistrictClerk’soffice.


Monitoring Transportation Contracts and Costs

The District uses the services of an outside vendor for student transportation on a daily basis to and from District facilities and otherlocationsandforextracurriculartrips.TheBoardisresponsiblefor ensuring that the District obtains these services in the most economicalandefficientmannerpossibleandverifyingthatcontractsareexecutedaccordingly.

The District also contracted with the Consultant to oversee and coordinate transportation services for $32,600 annually.2However,wefound that,as reported inourprioraudit, thecompaniesof theConsultantandtheVendorappeartoberelatedoraffiliatedtoeachother.TheConsultant and theVendor share the sameheadquartersand use the same letterhead and billing/remittance address. The same individual,aspresidentofbothcompanies, signs thecontractsandthe claims for payment. Furthermore, the individual assigned bythe Consultant to be the District’s representative formerly held the positionofgeneralmanagerfortheVendorforatleast20years.Thisapparent relationship between the two companies raises a substantial concern as to whether the Consultant could truly provide independent monitoring and consulting services in the District’s best interests. Despite the concerns raised in our prior audit and a report by an independenttransportationadvisor(Advisor)hiredbytheBoard,theDistrict entered into a new contract with the same Consultant when thecontractexpiredin2009.

WefoundthattheBoardhasnotprovidedsufficientoversightoftheConsultant and theVendor. District officials have not periodicallysolicitedbidsorproposalsforprimarytransportationservices.Instead,they have subsequently extended the contracts annually as theyexpired.3Inaddition,wefoundthattheConsultantdidnotprovidealloftheserviceswhich,basedonthecontractwiththeDistrict,appearedto be the Consultant’s responsibility. The Consultant reviewed the Vendor’smonthlybillings.We reviewed22disbursements totalingover$1.2millionandfoundminordeficiencies.However,wefoundthat the mileage information submitted by the Vendor for fuelreimbursements was not supported by appropriate documentation

2 Thefirstcontractwasexecutedfor the1997-98fiscalyear, re-bid in2009fortheyears2009-10through2011-12andextendedin2012foranadditionalthreeyears.Aftertheconclusionofourauditfieldwork,thecontractexpiredinJuly2015andtheDistrict,afterarequestforproposals,hassubsequentlyenteredintoa transportation oversight services contract with a new consultant.

3 FouroftheDistrict’ssixsubcontractswerelastbidin1982,1983,1989and1995andtheremainingtwoin2009.


andtheDistrictwasoverbilledforover5,200gallonsoffuelwithavalueofapproximately$16,300for2013-14.

Inourpreviousauditreport,ourOfficerecommendedappointingaDistrictofficialoranothervendor,whoisfreefromtheinfluenceoftheVendor,tooverseeDistricttransportationservices.Inresponse,theBoardcontractedwiththeAdvisorin2008toreviewthetransportationservices and to help assess if the Consultant’s contract was in the District’s best interest.4InaMarch4,2009presentationtotheBoard,andinareportdatedFebruary2009,theAdvisorrecommendedthatthe Board terminate the transportation services oversight contract with theConsultantattheearliestpossibledate,citingapotentialconflictof interest for the Consultant to perform the duties. The contract with the Consultant contains a provision that allows the Board to terminate thecontractwithanadvancewrittennoticeof30days.

Subsequent to theAdvisor’s recommendation, in 2009 the Boardinvited competitive bids for the transportation coordination and oversightservicesandfourindividualsandbusinesses,includingtheConsultant,responded.DespiterecommendationsfromourpreviousauditandtheAdvisor,theBoardawardedthe2009contractagaintothe Consultant.5 The Consultant’s 2009 contract with the District includes acomprehensive list of responsibilities related to the administration of transportation services. These services were approximately thesameastheservicessetforthinthepreviouscontract,which,inmostinstances,werenotprovidedbytheConsultantasfoundinourprioraudit.Theseresponsibilities,amongothers,included:

• Review monthly transportation invoices with theAssistantSuperintendent,includingadditionalservicesbilling.

• Review current transportation contracts for recommendations of possible consolidation or coordination.

• Review and make recommendations relating to the need for additional vehicles, aides or both with the AssistantSuperintendent.

Transportation Services Consultant

4 TheAdvisorreceivedaone-timepaymentof$16,300.5 TheBoardPresidentindicatedthattheBoardawardedthe2009contracttotheConsultantbecauseofthelong-standingworkingrelationshipstheDistricthadwith theConsultant andVendor. It is our understanding that the terms of the2009 contract between theConsultant andDistrictwere then extended for anadditionalthreeyears,expiringinJuly2015.


• Assistinanalyzingtransportationcostsandprovideorobtaininformation necessary for such analysis.

• Assist in preparingNewYork State EducationDepartmenttransportation reports.

• Make period reports on the number of students using the transportationservices,onnotlessthanamonthlybasis.

Given the Consultant’s apparent lack of independence and association with theVendor, and lack of performance per the initial contract,we continue to questionwhether these services can effectively beprovidedtotheDistrict.Forexample,wequestioniftheConsultantwould recommend actions that would result in potentially reducing theVendor’s revenues, such as consolidating contracts and routesand reducing vehicles or aides, andwe found no instances of theConsultant recommending actions that would result in reduced revenuesfortheVendor.Wealsodiscussedthecontract’sprovisionswiththeConsultantandvariousDistrictofficialsandfoundthattheConsultant provides very few of the services detailed in the contract. Inourprioraudit,wereportedonthesedeficienciesandonthelackof performance by the Consultant; however, the Board not onlyhiredtheConsultantagainbutalsoappears,basedonthelanguagein the contract, to have failed to ensure theConsultant performedall services asper the agreement.For example,of the six serviceslistedabove,wefoundthatonlyonewasprovidedbytheConsultant– the review of monthly bills, which is done in conjunction withtheAssistant Superintendent.Therefore,we selected and reviewed22 billings6 totalingover$1.2million7 and found that generally the claims appear to be for proper District purposes. The billing rates appear to be in compliance with contractual rates and the payment claimsfortheestablishedsportingandfieldtriprunswereproperlyauthorized.WeidentifiedminordeficienciesthatwerediscussedwithDistrictofficials.

Although the Consultant participated in reviewing the monthlybills, we found that the Vendor’s employees or District officialsperformedmost of the duties and prepared reports that, accordingto the language of the contract, appear to be the responsibility ofthe Consultant. For example, the Consultant did not appear to beawareofallthereportingrequirementssetforthinthecontract.TheConsultant indicated that he is primarily responsible for coordinating

6 WejudgmentallyselectedsixbillingsforregularlyscheduledrunsforthemonthsofNovemberandDecember2014andJanuary2015,and16paymentsforfieldand sports trips from throughout our audit period.

7 Thebillingforregularlyscheduledrunstotaledapproximately$1.3million.


requestsfortransportationchanges,requestsduringtheschoolyearandreviewingthebills.However,thecontractprovides,inpart,thatthe Consultant annually submit a report to the District of services provided and documentation to show that the Consultant’s services resultedinamoreefficient,economicalorsafepupiltransportationprogram. The Consultant never provided such a report to District officials.TheConsultantindicatedthathehaslimitedknowledgeofcomputersand,therefore,anyreportswouldhavehadtobegeneratedbyDistrictofficialsorVendoremployees.

FromDecember2009throughMarch2015,theDistrictpaidatotalof$179,194totheConsultant.BecausetheConsultantdidnotprovideall the services which appear to be the Consultant’s responsibility per thecontractualagreement,andmanyservicesarebeingperformedbyDistrictofficialsorVendoremployees,wequestionthepaymentstotheConsultantandhowcontinuingthecontractbenefitstheDistrictandtaxpayers.

The Board is responsible for ensuring that the District procures the desired goods and services in compliance with the District’s policies andlegalrequirements.Toaccomplishthis,itisimportantthatDistrictofficials periodically evaluate and seek bids or issue requests forproposals for transportation services.8 The use of competition provides taxpayerswithmoreassurancethatgoodsandservicesareprocuredin a prudent and economical manner and that the procurement is not influencedbyfavoritismorestablishedrelationships.

TheBoardandDistrictofficialshavenotperiodicallysolicitedbidsorproposals for transportation services. The District’s four subcontracts werelastbidbetween1982and1995andtheremainingtwoin2009.9

District officials stated they have extended the contracts annuallyas they expired due to the non-competitive nature of the market.DistrictofficialsindicatedthatusingabidprocessislikelytoresultinhighercoststhanifacontractisextendedbecausecostincreaseswererestrictedtotheloweroftheConsumerPriceIndex(CPI)ortheratesnegotiatedwith theVendor.While thismightbe true insomeinstances,Districtofficialsshouldconductareviewandexplorewaysto attract more vendors to possibly lower transportation costs now and in the future.

Contracts for Transportation Services

8 Ingeneral,EducationLawprovidesthattransportationcontractsmaybeawardedto the lowest responsible bidder or based on an evaluation of proposals in response toarequestforproposals.

9 Thecontractswerelastbidasfollows:PupilstoPublic,Private,andParochialSchools–1982,AthleticandEducationalTrips–1983,IntramuralActivities–1989,VariousSchoolPrograms–1995,SpecialEducationHometoSchoolandEarlyRelease–2009.


District officials are responsible for establishing adequate controlsover the purchase and use of fuel. The fuel purchased by the District and furnished to its Vendor should be used to transport Districtstudentsasperthetransportationcontracts.DistrictofficialsshouldcloselymonitorperiodicfuelusagereportedbytheVendorbecausetheVendorordersthefuel,10 reconciles the amounts used annually and retainsthefuelinitsownstoragetanks,whicharesharedwithotherschool districts.11 WereviewedthereconciliationreportpreparedbytheVendorforthe2013-14schoolyear.WefoundthattheDistrictwasgivenaone-pagesummarized report showinggrossmileage,withoutanysupportingdocumentation to show the actual route miles logged by the drivers. The District and the Consultant did not request documentationto support the number of daily route miles used to calculate the predetermined amount of fuel to be provided by the District.12

During 2013-14, the District paid $276,640 for 116,206 gallonsof diesel fuel that was delivered to the Vendor’s storage tanks.We compared the route mileage provided by the Consultant to the reconciliation summary and found that fuel purchased by the District appearedtoexceedfuelusedbytheVendorbyover5,200gallons,orapproximately$16,300whichwasnotcreditedbacktotheDistrict.13 We found that the District was overcharged by the Vendor anadditional5percentfor“buswarm-upandidletime”during2013-14.Thecontractcontainsnoprovisionforsuchacharge.Districtofficialsstated that they provided this additional fuel because it has always been provided and that fuel used for warming up the buses is needed for the run.

The Board and District officials’ failure to implement therecommendations from our previous audit14andfromtheirAdvisorregarding instituting effective processes and procedures to monitor

Fuel Purchases

10The legal propriety of theVendor ordering and storing fuel on behalf of theDistrict is not within the scope of this audit.

11Attheendoftheyear,theVendorpreparesareconciliationstatement,showingtheamountoffuelpurchasedbytheDistrict,theestimatedamountthatshouldhave been purchased based on the route miles and the resulting fuel due to the VendororcreditduetotheDistrict.

12TheConsultantstatedthattheroutemilesummariespresentedappearadequateandhe trusts theVendor’s employeesbecausehehaspersonallyworkedwiththem for a long time. However, during our audit, we asked for support fortheroutemilesandtheConsultantcontactedtheVendorat that timetoobtainsupporting documentation for the route miles reported.

13GallonspurchasedbytheDistrictanddeliveredwere116,206andgallonspermileage records (excludes the 5 percent “bus warm-up charge” assessed byVendor) that should have been deliveredwere 110,957, a difference of 5,249gallonsatanaveragepriceof$3.11basedontotalfiscalyeardeliveries.

14Asindicatedonpage2ofthisreport.


the transportation services continues to expose the District to therisk of inappropriate or inaccurate billing and resulted in the District apparentlybeingoverbilledbyapproximately$16,300.Additionally,the District, and ultimately taxpayers, may not have received theintended benefit of the Consultant contract since the Consultantcontinues tonotperformserviceswhich, according to the contractwith theDistrict,appear tobe the responsibilityof theConsultant.WithouteffectiveoversightbytheDistrictandBoard,andperiodiccompetitive bids or proposals, taxpayers have less assurance thattransportation services are being procured and provided in the most prudent and economical manner.

TheBoardshould:

1. Periodically evaluate its contracts and seek competition for transportation services.

Districtofficialsshould:

2. Require the Vendor to submit records to support the totalnumber of daily route miles used in calculating the District’s annual fuel use.

3. Ensure mileage information used to calculate the fuel usage complies with the contract.

Recommendations


APPENDIX A

RESPONSE FROM DISTRICT OFFICIALS

TheDistrictofficials’responsetothisauditcanbefoundonthefollowingpages.


APPENDIX B

AUDIT METHODOLOGY AND STANDARDS

Toachieveour audit objective andobtainvalid audit evidence,weperformed the following auditprocedures:

• We interviewed District officials to gain an understanding of the District’s monitoring oftransportation costs and policies and procedures over the awarding of the transportation contracts.

• We interviewedDistrict officials, staff and theConsultant to gain an understanding of therequirementsofthetransportationcontractsandthebillingprocess.

• We reviewed the District’s Board meeting minutes and policies relating to bids and the coordination and oversight of transportation services.

• WereviewedtheVendor’sandConsultant’scontractualagreements.

• We judgmentally selecteda sampleof six regular transportationbills for three consecutivemonthsand16othertransportationbillsandrelateddisbursementsforfieldtrips,sportsandother miscellaneous runs to ensure at least one bill from each of the District’s contracts was tested.

• Wereviewedall63paymentsmadetotheConsultantfromDecember2009throughMay2015.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.


APPENDIX C

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX DOFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller

GabrielF.Deyo,DeputyComptrollerTraceyHitchenBoyd,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]

Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties

BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]

Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties

GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOne Broad Street PlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]

Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties

HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]

Serving:NassauandSuffolkCounties

NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]

Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties

ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet,Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]

Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties

SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333 E. Washington StreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties

STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding,Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313

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