Audit Report on the Effectiveness of the Department of Transportation in Maintaining Its Automotive Inventory

AUDIT REPORT IN BRIEF

This audit evaluated the effectiveness of the Department of Transportation (DOT) Fleet Services Division (Fleet Services) in maintaining inventory. DOT is responsible for providing for the safe and efficient movement of people, goods, and vehicles throughout the City. In support of this mission, DOT operates a fleet of approximately 2,700 vehicles, ranging from passenger vehicles to heavy-duty construction equipment. Fleet Services is responsible for managing an inventory of automotive parts for the DOT fleet.

DOT Fleet Services is generally effective in maintaining the agency’s automotive inventory. Our audit revealed that DOT: generally maintains inventory records that reflect its inventory on hand; manages its inventory to generally preclude overstocking and under-stocking; has internal controls that are generally adequate to help prevent and detect errors and irregularities; and adequately safeguards its inventory.

DOT’s management of its automotive inventory has improved since we last audited this area, in 1994; however, the effectiveness of DOT Fleet Services in maintaining inventory is hindered by inconsistent compliance with agency procedures. We believe this contributed to (1) gross discrepancies exceeding 50 percent at three of the 11 parts rooms reviewed between perpetual inventory records and the amounts on hand, (2) 28 percent of Fleet Services inventory being inactive, and possibly obsolete, for at least two years, and (3) a turnover rate of 1.37 for active inventory—below the automotive industry standard rate of 3.9. If DOT improved its inventory turnover rate to 2.37, we project that it could yield a one-time saving of more than $1.1 million.

Other weaknesses we identified included: limited evidence that inventory adjustments were authorized, inadequate investigation of physical count discrepancies, inadequate safeguarding of inventory at three parts rooms, mechanics not signing for all parts received, and oil use not being monitored or controlled at five parts rooms.

We made 13 recommendations to DOT, some of which are listed below. DOT should:

• Ensure that unauthorized personnel are not allowed in the Hamilton Avenue Shop (THAM) parts room, especially after operating hours.
• Require repair shops to place obsolete items in specially marked bins to be sent to the central warehouse (TCAS), as required by DOT procedures.
• Develop a plan showing how it will achieve inventory reductions totaling at least $1.18 million by improving turnover rates for its working inventory of items and achieving a one-time saving. Fleet Services should monitor the progress of the plan and report the results to DOT upper management.
• Ensure that Fleet Services follows the Department of Investigation standards governing inventory counts. Procedures should include the following steps: (1) count all items at the locations, (2) use the "double-blind" count methodology, and (3) use persons who are not assigned to the locations where the counts take place.
• Ensure that discrepancies between physical inventory count totals and the perpetual inventory records are investigated by the agency’s auditors (or those independent of inventory operations) before reconciliation adjustments are made and should forward significant differences to DOI, as required by DOI Standards.