Audit Report on the New York City Department of Sanitation’s Controls Over Its Inventory of Vehicle Equipment and Supplies

Executive Summary

The objective of this audit was to determine whether the Department of Sanitation (DSNY) has adequate controls in place to monitor its inventory of vehicle equipment and supplies.  DSNY is responsible for management of New York City’s (the City’s) solid waste, including the collection of refuse and recyclables, and the cleanliness of City streets.  To accomplish this, DSNY has a fleet of 5,388 vehicles.  DSNY’s Bureau of Motor Equipment (BME) provides a full range of fleet-related functions including procurement, maintenance, repair and disposal.

On April 23, 2012, the Mayor signed Executive Order 161 consolidating the maintenance of motor vehicle fleets for City agencies.  DSNY was designated to be the “Center of Excellence” for medium and heavy-duty vehicles¹. As a result, BME is also responsible for the maintenance of medium and heavy-duty vehicles for four other agencies: the Department of Health and Mental Hygiene, the Department of Education, the Department of Parks and Recreation, and the Department of Environmental Protection.

In each of DSNY’s district garages, BME personnel complete repairs and perform routine maintenance of the vehicles assigned to that location.  More extensive repairs are performed in DSNY’s Central Repair Shop (CRS) and its four borough shops: the Queens Borough Shop (QBS), the Cioffe Borough Shop (Cioffe) in Brooklyn, the 26th Street Shop (26th Street) in Manhattan and the Richmond Borough Shop (RBS) in Staten Island.

In order to maintain the agencies’ fleets, DSNY has a parts inventory and distribution system.  BME’s Material Management division is responsible for purchasing, inventorying and managing repair parts and distributes more than $23 million in repair parts each year.  Material Management has four storerooms to house supplies: X02 – Common LT Truck Parts; X04 – Automotive Warehouse; X-11 DSNY Heavy Duty Components & Parts; and X23 – Snow Removal Parts.

According to a DSNY Fiscal Year 2015 Inventory Valuation report, as of June 30, 2015, the parts inventory for the four Material Management storerooms and the four borough shops was valued at over $18.7 million.

Audit Findings and Conclusion

DSNY needs to strengthen its controls over the monitoring of its inventory of vehicle equipment and supplies.  DSNY had insufficient evidence that discrepancies between amounts on hand and amounts recorded were investigated when identified.  During the period of January 1, 2016, through February 16, 2016—prior to our inventory counts conducted on February 17, 2016—DSNY made 168 inventory adjustments in M5, of which only 14 (8 percent) were adequately supported in DSNY’s records.  The audit also found that DSNY does not ensure that staff’s M5 user rights do not exceed their levels of responsibility, nor does DSNY ensure that there is adequate segregation of duties.  DSNY also does not perform periodic counts of its entire inventory to ensure the accuracy of its perpetual inventory records.  Consequently, although our counts of sampled items found minimal differences between the amounts on hand and the amounts recorded for six of the eight locations sampled, we do not have reasonable assurance that the inventory balances recorded in M5 reflect all authorized additions and depletions.

Our review also disclosed that DSNY: (1) has not developed written procedures that detail the steps for processing issuances, transfers, and adjustments; (2) has not enforced a protocol for relinquishing obsolete inventory; and (3) has certain items incorrectly valued at $0 per unit.

Audit Recommendations

Based on the audit, we make 14 recommendations, including:

• DSNY should ensure that count discrepancies are adequately investigated before inventory adjustments are made and that evidence of the investigation is maintained.
• DSNY should ensure that adjustments are appropriately documented and approved using Cycle Count/Supervisory Adjustment Checklist forms.
• DSNY should ensure that the M5 security profiles are updated for all employees, that they are in line with the employees’ job responsibilities, and that duties are adequately segregated.
• DSNY should ensure that inventory counts for all parts are conducted at least annually and that any discrepancies are investigated by individuals independent of the inventory operations.
• DSNY should establish and distribute written procedures for all inventory processes, including authorizing and recording issuances and transfers and conducting physical inventory counts.
• DSNY should conduct a review of all parts that have had no movement for over 13 months to determine whether the parts are obsolete and relinquish the obsolete parts in accordance with its protocol and DCAS requirements.
• DSNY should review all items recorded with a zero value in M5, determine whether the valuation is correct and modify the price of items that were incorrectly valued at zero.

Agency Response

In its response, DSNY agreed with all of the audit’s findings and recommendations.