Loading...
Property Management Internal Services ChargesMIAMI BEACH BUDGET AND PERFORMANCE IMPROVEMENT Internal Audit Division INTERNAL AUDIT REPORT Jimmy L. Morales, City Manager Cintya G. Ramos, Budget and Pe "improvement Director ~ James J. Sutter, Internal Auditor TO: VIA: FROM: DATE: AUDIT: PERIOD: ~ October 19, 2016 Property Management Divisio Internal Service Charges Billings Audit October 1, 2014-July 28, 2016 This report is the result of an audit that was requested by the City Administration to review the methodology and the processes used in the documenting and recording of labor hours and materials purchased by Property Management Division personnel and their subsequent internal service charges billed to the participating users. The selected audit period covers October 1, 2014 through July 28, 2016 as it represents the period for which the division's Administration Section generated a closed work order report in the Cityworks software which served as the basis for testing. INTRODUCTION The City's 2015/16 fiscal year adopted budget book states that the Property Management Division is responsible for the operation, maintenance, and repair of 46 municipal buildings; 21 beachfront facilities; 26 lifeguard stands; 23 water fountains; monuments; beach showers; playground equipment; 1.3 miles of boardwalk; and 4 miles of beachwalk. To help maintain these facilities, the Property Management Division employs such licensed tradesmen as painters, carpenters, electricians and plumbers who are assigned throughout the City to perform work ranging from the repair of lifeguard stands to the painting of offices based on received Property Management Work Request Forms, emails, etc. Property Management's Administration Section opens sequentially numbered work orders in the Cityworks software (Cityworks) and responds to the requestor with the work order number and the trade supervisor to which the work is assigned. Cityworks has been in use by the Public Works Utilities Divisions for water, storm water, streets, sanitation and Geographic Information System (GIS) since May 2006. The software was subsequently implemented by Engineering, the Convention Center and then the Property Management Division in 2011. Meanwhile, preventive maintenance work order requests are submitted to the Administration Section by division supervisors and are opened with a printed copy of the work order submitted. Preventive maintenance is designed to preserve and restore reliability by replacing worn components before they actually fail. Examples of preventive maintenance include the replacing of filters, checking for water leaks or clogged drains and so on. All hours worked by Property Management staff are to be recorded on individually prepared Daily Field Work Sheets which capture the date that the work was performed, the tradesman's name,·the work order number, the location, the number of labor hours worked, a description of the work performed and a costing of the materials used. These Daily Field Work Sheets are to be submitted at the end of each day to the Administration Section for entry into Cityworks. We ore committed to provtd1ng excellent public service and safely to all who live, work, and ploy in our vibrant, tropical, historic commumty Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 All Property Management Division incurred labor and material costs on completed work orders are to be charged back by the Administration Section to the user departments/divisions in an attempt to recover all costs. Administrative charges are allocated only to those departments/divisions that utilized Property Management's services during the corresponding time period. The total number of labor hours worked (typically rounded to the nearest thirty minutes to simplify the reporting process) is multiplied by the standard labor hourly rate, which is fixed for the fiscal year, to determine the applicable amount to bill. As part of the budget process, the Administration Section staff calculated the standard labor hourly rate to be $65.17 for the 2013/14 fiscal year, $93.93 for the 2014/15 fiscal year and $80.76 for the 2015/16 fiscal year. These hourly rates are calculated by dividing the total amounts budgeted for repairs and maintenance costs (502 costs) plus construction costs (508 costs) for the upcoming fiscal year by the total annual number of labor hours available (including temporary workers). Similar calculations are conducted for Lincoln Road which is then factored into these weighted average standard labor hourly rate calculations. Meanwhile, material costs are not marked up as they are billed based on actual costs. Any received purchase documentation such as credit card slips, warehouse invoices, etc. is to be submitted as support for the subsequent billing. Once all the work for the assigned work order is finished, the trade supervisor is to input the work order's completion date into Cityworks. The Administrative Section will then close out these work orders every two weeks based on the City's established payroll periods so that no other information can be added or deleted and billing can occur. Any open work orders as of September 301h (the City's fiscal year end) that contain amounts to be billed are also closed so that all work performed during the fiscal year is billed during that period. New work orders will be created in the next fiscal year for any remaining work to be performed on these engagements. The Administration Section creates Work Order Completed Reports by completion date range and data from these reports are entered in an Excel report by department and budget code. After being checked for accuracy, this Excel report is reviewed by the Property Management Director before being sent to the Finance Department for journal entry input in the City's Financial System. Also, included in this journal entry are the following items charged back by the Administrative Section to the user departments/divisions: • The billing of contract maintenance between users on a monthly basis as outlined in the budget process and approved by the Procurement Department. These contracts include elevator and generator maintenance, fire safety equipment and janitorial services among others. Actual payments and billing by vendor contracts are reviewed during the fiscal year to ensure charges are billed correctly and are reconciled to actual payments made at the end of the fiscal year. • City buildings' electricity charges are downloaded from the Florida Power & Light website on a monthly basis. These buildings include the Police Station, Historic City Hall, City Hall, Scott Rakow Youth Center, etc. with the charges allocated based on the departments/divisions occupied square footage. • Any common area maintenance charges associated with multi-use buildings (City Hall, Page 2 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 Police Department, Old City Hall, etc.) are allocated based on the departments/divisions occupied square footage. • New work that is not included in the departments/divisions regular maintenance and is paid under the user's budget code from other operating and/or capital renewal expenditures is separated out. • Special programs can be defined as any locations charged to a different fund (RDA, Normandy Isle Guard House, ih Street Garage, Dade County Clerk's Office, etc.). Upon request, the Administrative Section provided Cityworks generated reports for 10/01/14- 09/30/15 and 10/01/15 -07/28/16 that listed the following number and cost of closed work orders for each Property Management trade: Period in which Work Property #of Created Labor Material Total Cost Order was Closed Management Work Orders Dollars Dollars Trade 10/01/14-09/30/15 AIC 1,060 $664,310.72 $161 ,082.28 $825,393.00 Electric 898 $378,057.24 $138,872.12 $516,929.36 Maintenance 2,096 $3,976,717.45 $305,015.16 $4,281,732.61 Paint 731 $439,443.03 $386,716.12 $826,159.15 PlumbinQ 1,148 $696,255.57 $72,725.38 $768,980.95 Total 5,933 $6,154,784.01 $1,064,411.06 $7,219,195.07 10/01/15-07/28/16 AIC 960 $449,858.88 $251,855.93 $701,714.81 Electric 1,123 $190,688.03 $161,835.88 $352,523.91 Maintenance 1,821 $2,939,058.57 $824,283.60 $3,763,342.17 Paint 588 $329,886.11 $316,393.51 $646,279.62 Plumbing 1,289 $638,057.78 $172,062.70 $810,120.48 Total 5,781 $4,547,549.37 $1,726,431.62 $6,273,980.99 A total of 11,714 (5,933 + 5,781) work orders were closed by Property Management during the designated twenty-two month audit period, for an average of 532 per month. However, these figures include work orders opened to account for administrative and non-direct costs associated with the operation of the Property Management Division, as well as some work orders opened in duplicate and closed, and others not approved for work. OVERALL OPINION The Property Management Division's internal service charges billings are a complicated process that depends on the accuracy and completeness of tradesmen, supervisors and administrative staff alike. Improvements are needed as there are not sufficient internal controls implemented or followed as the primary focus is on performing the needed work and in billing all associated costs. Participating users have few options other than to use the division's services and pay the billed charges. During our testing, we noted the following internal service charges billing shortcomings which are in need of improvement: • Budgeted preventive maintenance labor hours and engagements are not always being completed which increases the likelihood of future breakdowns and costly repairs. • Twenty-one (21) completed work orders prior to October 1, 2015 were not closed as of September 1, 2016 with six (6) containing $960.80 in labor charges that were not billed to the appropriate users. Page 3 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 • Six (6) of the one hundred (1 00) sampled closed work orders or 6.00% were charged standard labor hourly rates that were $25.08 less than the established rate and three administrative employees' salaries are included in the annual calculations despite not being directly involved in the work order process. • Incorrect square footage assessments for the Procurement and Human Resources Departments has resulted in inaccurate common area maintenance charges billed since August 2015 and the Parking Department has paid for all electricity and common area maintenance charges incurring in the 1755 Meridian Avenue building despite sharing the premises with several other City departments/divisions. • Sampled Daily Field Work Sheets and work orders were not always neatly, accurately and fully completed. • A comparison of the entries in Cityworks with the information on the Daily Field Work Sheets raises concerns as to the accuracy of the subsequent internal service charges billings. • The lack of documented supervisory oversight and accountability could allow incorrect internal service charges billings to go undetected. • The Property Management Division did not maintain standard operating procedures detailing the internal service charge billing process despite the heavy reliance on one employee. PURPOSE The purpose of this audit is to determine whether actual operations were in compliance with division standing operating procedures; whether provided labor and materials were properly documented and accurately charged back so that all associated costs are reimbursed; whether internal controls are soundly developed and functioning; and whether all tested transactions were correctly recorded in the City's Financial System. OBJECTIVES 1. Confirm that documented updated standard operating policies exist, are known to staff and are closely followed. 2. Confirm that well organized, complete and sufficient documentation is maintained to adequately support all tested transactions. 3. Confirm that the methodology for the internal service charge billing process is sufficient. 4. Confirm that the work requested and completed is timely and accurately recorded and billed to users. 5. Confirm that common area maintenance charges for City operated buildings are calculated based on reasonable estimates and are being correctly allocated. Page 4 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 FINDINGS, RECOMMENDATIONS AND MANAGEMENT RESPONSES 1. Finding: Budgeted Preventive Maintenance Labor Hours and Engagements are Not Always being Completed which Increases the Likelihood of Future Breakdowns and Costly Repairs The Property Management Division budgeted 18,163 labor hours in the 2014115 and 2015/16 fiscal years to the completion of various preventive maintenance projects (replacing air conditioning filters; checking for water leaks or clogged drains; etc.). However, review of the closed work orders found that only 14,753.50 (10/01/14 - 09/30/15) and 9,070.25 (10/01/15 -07/28/16) labor hours were directly attributed to these preventive maintenance budgeted projects. The 2015/16 fiscal year 49.94% completed preventive maintenance labor hours' percentage (9,070.25/18, 163) will most likely increase during the remainder of the fiscal year. Although there are contributing factors as to their non-completion (less staff, more work requests, etc.), the end result of not performing the scheduled preventive maintenance will most likely be more frequent breakdowns and costlier repairs to the City. In addition, the Cityworks software (Cityworks) contains a feature whereby preventive maintenance work orders can be automatically created every month, every three months, etc. as needed to save the Administrative Section input time and to help ensure that the work is completed. However, staff had to discontinue using this feature as there was not sufficient staff to complete all these assignments. As a result, opened preventive maintenance work orders were being closed with no work being performed and no charges billed. Lastly, this feature was being incorrectly used to record the administrative staff's hours which also inflated the number of preventive maintenance hours as only the tradesmen actually perform the assigned work. Consequently, one has to remove all labor hours assigned to Administrative Section and supervisors to calculate the actual number of preventive maintenance labor hours performed for a given period. Recommendation(s): Property Management Division administrative personnel should meet with the trade supervisors to review the designated preventive maintenance repairs to determine if any can be performed less frequently and not adversely impact future costs. If so, the budgeted labor hours should be adjusted accordingly. If not, management should establish a master plan through which these assignments can be completed and the automatic work order feature in Cityworks can be re-instituted. Finally, Administrative Section labor hours should not be prospectively entered as preventive maintenance hours. Management Response: Management agrees with the findings and recommendations. Weekly meetings with trade supervisors will be held in order to identify all preventive maintenance repairs that need to be done throughout the City. Property Management administration will develop a master list, which will be evaluated and possibly condensed to where work can be thoroughly completed with current staffing levels. As a result, the appropriate amount of preventative maintenance hours will be properly budgeted each year. Any administrative costs will be categorized as non-direct costs. Page 5 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19,2016 2. Finding: Twenty-One (21) Completed Work Orders prior to October 1, 2015 were not Closed as of September 1, 2016 with Six (6) Containing $960.80 in Labor Charges that were not Billed to the Appropriate Users Once all the work for the assigned work order is finished, the trade supervisor is to input the work order's completion date in Cityworks. The Administrative Section will subsequently close out these work orders every two weeks based on the City's established payroll periods so that no other information can be added or deleted and billing can occur. Any open work orders as of September 301h (the City's fiscal year end) that contain amounts to be billed are also closed so that all work performed during the fiscal year is billed during that period. A Cityworks generated report on September 1, 2016 identified twenty-one (21) work orders whose status was changed to completed prior to October 1, 2015 that were not closed to date. One of these work orders, number 79514 was for preventive maintenance and was projected to start on June 18, 2014 and finish two days later, contained $363.42 in labor charges incurred from work performed in May and July 2016 that was not billed as of September 1, 2016. There were five additional non-preventive maintenance work orders numbered 87504, 95826, 90078, 88694 and 98958 that contained labor charges incurred prior to October 1, 2015 of $597.38 ($93.93 + 80.76 + 93.93 + 140.90 + 187.86) that were similarly not billed as of September 1, 2016. Recommendation(s): The aforementioned twenty-one (21) preventive maintenance works completed prior to October 1, 2015 should be closed with the $960.80 ($363.42 + $597.38) in labor charges billed to the appropriate users. Going forward, the Administration Section should better ensure that all completed work orders are timely closed with any incurred charges promptly billed to the users. Management Response: Management agrees with findings and recommendation. All completed work orders will be closed and billed out in a timely manner to the users. 3. Finding: Six (6) of the One Hundred (100) Sampled Closed Work Orders or6.00% were Charged Standard Labor Hourly Rates that were $25. 08 Less than the Established Rate and Three Administrative Employees' Salaries are Included in the Annual Calculations despite not being Directly Involved in the Work Order Process As part of the budget process, Administration Section staff calculated the standard labor hourly rate to be $65.17 for the 2013/14 fiscal year, $93.93 for the 2014/15 fiscal year and $80.76 for the 2015/16 fiscal year. These rates are calculated by dividing the total amounts budgeted for repairs and maintenance costs (502 costs) plus construction costs (508 costs) for the upcoming fiscal year by the total annual number of labor hours available (including temporary workers). Similar calculations are conducted for Lincoln Road before the weighted average standard labor hour rate for both is determined. These rates represent the amounts to be applied in Cityworks to all labor hours billed during the designated fiscal year. Upon request, the Administrative Section provided Cityworks reports of all the closed work orders for October 1, 2014 through September 30, 2015 and October 1, 2015 Page 6 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 through July 28, 2016 (the date in which the report was generated). From these reports, a total of one hundred (1 00) randomly sampled closed work orders were selected for testing which was stratified to include fifty (50) from each period. A corresponding review of the standard labor hourly rates billed found that six (6) work orders incorrectly charged $68.85 (a $25.08 per hour difference from $93.93) resulting in under billings of $3,686.72 during the 2014/15 fiscal year. Subsequent inquiries learned that the standard labor hourly rate was initially set at $68.85 for the fiscal year before the Administrative Section became cognizant that various positions were eliminated which resulted in the rate increasing accordingly to $93.93. Since this change was made several weeks into the new fiscal year, Administrative Section staff had to adjust all the work orders already billed at the lower rate to the higher rate but these six (6) work orders were not corrected. Further review of the annual standard labor hourly rate calculations found that administrative charges (administrative salaries; tradesmen's work performed at Property Management Divisional offices; tradesmen's non-productive hours due to staff meetings, cleaning out their trucks, etc.) accounted for more than 50% of the total annual rate. In reviewing administrative salaries, it was found that they included the ADA Coordinator and two Construction Managers which are not involved in the internal service billing and/or work order process. Although the division's objective is to charge back all costs incurred, their removal and payment from other funding sources would help reduce the annual standard labor hourly rate accordingly. Recommendation( s): Going forward, Administrative Section staff should ensure that they have all the necessary information before calculating the standard labor hourly rate for the upcoming fiscal year. Otherwise, their billings will be inaccurate unless the cumbersome task of re- billing all prior billed work orders is performed. The Administrative Section should review the 2014/15 closed work order billings to determine if any others were charged the incorrect amount of $68.85. Regardless, management should decide whether to re-invoice the affected users in an effort to recover any under billed amounts. Lastly, management should determine if alternate funding sources can be used to pay the salaries of any Property Management Division employees that are not directly involved in the internal service billing and/or work order process. Management Response: Management agrees with findings and recommendation. The administration section will review closed work orders for FY14/15 billings for incorrect amounts and re-invoice affected users. Management is currently working with Office of Budget and Performance Improvement to hire an outside consultant that will review the City's "Internal Service Charges" formula and determine if a change in methodology is necessary. 4. Finding: Incorrect Square Footage Assessments for the Procurement and Human Resources Departments has Resulted in Inaccurate Common Area Maintenance Charges since August 2015 and the Parking Department has Paid for all Electricity and Page 7 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 Common Area Maintenance Charges Incurring in the 1755 Meridian Avenue Building Despite Sharing the Premises with Several Other City Departments/Divisions Several departments/divisions share operating space inside City owned buildings located at 1700 Convention Center Drive, 777 1 ih Street, 555 1 ih Street, etc. Therefore, electricity and common area maintenance charges that cannot be easily separated and attributed to a particular department/division are allocated based on the square footage occupied inside the building. Internal Audit believes that this is an equitable manner for the Property Management Division to bill but the square footage measurements need to be correct. Testing was performed on the months of April 2016, May 2016 and June 2016 billings. The listed occupied square footage was not physically measured by Internal Audit but instead the measurements were checked for any known City departments/divisions that have moved, expanded, etc. during the past year. In doing so, it was found that the Procurement Department was charged monthly allocations of City Hall's common area maintenance despite moving to 1755 Meridian Avenue in August 2015. The City's Human Resources Department subsequently expanded into this space but there listed office space of 2, 711 square feet was not increased accordingly so they were under billed. In addition, the 1755 Meridian Avenue building is occupied by City departments/divisions such as Information Technology; Parking; Tourism, Culture and Economic Development; and Finance. Yet, it was found that the City's Parking Department has been directly billed by Florida Power & Light for all the electricity consumed both inside the building and in the attached parking garage since its inception as no allocations were made to the others similarly occupying space. Lastly, the Parking Department was billed and paid for all common area maintenance (elevators) charges billed inside the 1755 Meridian Avenue building. Recom mendation(s): The Property Management Division should immediately review and update their square footage calculations making any necessary billing adjustments. Once established, they should promptly revise their listed square footage measurements going forward after tradesmen perform any departmental/divisional relocations. The internal service charges for the Procurement and Human Resources Departments should be re-calculated since August 2015 and re-billed accordingly. Also, an allocation of electricity and common area maintenance charges for the 1755 Meridian Avenue building should be performed for all associated City departments/divisions similar to the methodology used in City Hall. In doing so, one should remember that the parking garage's actual square footage should be treated differently as it does not use as much electricity as the building. Management Response: Management agrees with findings and recommendation. Square footages will be recalculated and adjustments will be made to past billings. Management will ensure that all building square footage is accurate and any relocation is reviewed and documented properly. Page 8 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 5. Finding: Sampled Daily Field Work Sheets and Work Orders Were Not Always Neatly, Accurately and Fully Completed The Daily Field Work Sheets are individually prepared by tradesmen to manually record all work performed and the materials used in the completion of their assigned tasks. Meanwhile, work orders are used to accumulate all costs associated with that engagement in Cityworks so that they can be billed to the user. Review of the one hundred (1 00) randomly selected closed work orders and their corresponding Daily Field Work Sheets identified the following shortcomings in their preparation: a. Work order requests are currently received via Property Management Work Request Forms, emails, etc. and there is typically not sufficient communication with the users as to their status. b. There was little uniformity in staff's completion of the tested Daily Field Work Sheets. Some contained more detail while others contained minimal amounts; some were difficult to comprehend due to the preparer's poor handwriting, misspelled words and incomplete sentences; some included abbreviations which can cause confusion when unknown to the reader; etc. c. A significant number of reviewed Daily Field Work Sheets contained work order numbers that were already closed out due to delays in either their submittal to the Administration Section or in their subsequent entry into Cityworks. Consequently, the Administrative Section staff had to either create new work orders or assign the charges to other open work orders so that the needed billings could occur. For example, eight of the sixteen (50%) plumbing work orders listed on February 4, 2016 were changed to different work orders which created additional work for the Administrative Section and increased the possibility of mistakes. d. The Administration Section currently organizes the Daily Field Work Sheets by trade (Air Conditioning, Building Services, Electricians, Maintenance, Plumbing and Painters) and scans the documents into the City's network drive by the date performed thereby making them more difficult to locate. e. The detailed information describing the work performed on the Daily Field Work Sheets is currently not entered by administrative personnel into Cityworks as only the basic information needed for billing is entered. This shortcoming hinders management from performing analyses to determine staff productivity levels, standard times to complete assigned tasks, etc. f. The trade supervisors are to enter the completion date in Cityworks for the work order after the designated task is finished and charges are to be billed. If inadvertently overlooked and not entered, the work order could remain open and unbilled until the end of the fiscal year (September 301h) when all with internal service charges are to be closed out. If there are no charges assigned to the work order, then it may remain open into future fiscal years. Ensuing inquiries with Administrative Section personnel on August 29, 2016 found that there were 521 open administrative related work orders whereby a large number could probably be closed out. Page 9 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 g. Property Management is not using Cityworks' geocoding or mapping feature which would be especially helpful for tradesmen in locating graffiti and beach maintenance (dunes, ropes, posts, etc.) assignments as they are not located inside City owned buildings. h. Monthly statements are not distributed to users nor are they required to review and verify the accuracy and completeness of internal service charges to their budgets. Recommendation(s): The implementation of the following recommendations should help make the data present on the Daily Field Work Sheets and in Cityworks more accurate and complete: a. The City's Information Technology Division (I.T.) should work with Property Management Division management to create a link on the City's intranet whereby authorized personnel (similar to those currently used for I.T. support desk tickets) can prepare and submit Property Management Work Request Forms electronically. This process would simplify the request for work process and allow requesters to view its status thereby improving interdepartmental communication. b. The Property Management Division should continue to explore automating the Daily Field Work Sheets through the usage of hand held devices and drop down menus to help eliminate confusion in reading tradesmen's handwriting. In the interim, there should be training held and verbiage incorporated into the standard operating procedures to instruct Property Management Division tradesmen as to the desired level of detail and format in describing the work performed. c. Daily Field Work Sheets should be timely submitted to the Administrative Section and promptly entered into Cityworks to help reduce the need to create new work orders. d. Each tradesman's Daily Field Work Sheets should be scanned into Cityworks and attached to the appropriate work order(s) so that the information is centralized and easily located. e. In lieu of implementing handheld devices, the description of the work performed by the tradesmen on the Daily Field Work Sheets should be entered into Cityworks to help management conduct various desired analyses on their staff and their work. f. Trade supervisors should better ensure that completion dates are entered timely for all finished work orders. Their review on a quarterly basis rather than only on September 301h should help to reduce the potential time upon which these work orders are billed. In addition, Administration Section personnel should review all open administrative work orders to determine if any can be closed. Page 10 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19,2016 g. If not cost prohibitive, the Property Management Division should consider implementing Cityworks' geocoding feature which would be especially helpful for any engagements not occurring in City owned buildings. h. There should be increased communication between the tradesmen and the users. The user should be instructed in advance as to the cost of the repair and materials needed above a designated threshold and then sign a document authorizing the work to be performed. Users should receive emails providing itemized invoices and/or summary reports of their internal service charges each billing period to help ensure their accuracy and to improve accountability and communication. Each user should then be permitted to timely notify the Property Management Division of any identified errors or questionable billings so that they can be further investigated. Lastly, users should be requested to complete a short survey concerning their experiences with Property Management Division staff to help identify possible shortcomings quicker. Management Response: Management agrees with findings and recommendation. Property Management is currently working with the City's Information Technology Department to revamp the work order request system. The goal is to make it more user-friendly on the customer end as well as easier to manage on the administrative end. The newest version of Cityworks will allow users to enter the hours spent on work orders via a mobile device and therefore, eliminate all handwritten entries on field sheets. In the interim, training will be provided to the tradesmen in regards to proper penmanship as well as submitting the field sheets in a timely manner. Once the field sheets are received, a copy of the work order(s) will be attached to the field sheets as back-up. Management is currently working to develop forms for requesting new work and providing for better reporting to our end users. There will also be a feature on the City's intranet, that will allow customers to see status of projects, pricing, and unit costs for any future work performed. 6. Finding: A Comparison of the Entries in Cityworks with the Information on the Daily Field Work Sheets Raises Concerns as to the Accuracy of the Subsequent Internal Service Charges Billings A comparison of the information in Cityworks for the one hundred (100) randomly sampled closed work orders with the reviewed supporting Daily Field Work Sheets found the following apparent deficiencies: a. Fifty-five (55) of the one hundred (1 00) work orders contained labor charges for which Daily Field Work Sheets are to be prepared and submitted for each tradesman working on that assignment. The other forty-five (45) work orders either billed materials only or contained no charges. A total of 149 Daily Field Work Sheets were selected for testing (87 from the 2014/15 fiscal year and 62 from the 2015/16 fiscal year) in support of these fifty- Page 11 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 five (55) work orders' labor hours' entries in Cityworks. Testing found that twenty-two (22) of these Daily Field Work Sheets or 14.77% were not scanned in the City's network drive as required. b. Twenty-eight (28) of the one hundred (1 00) sampled work orders did not contain any labor or material charges. Of these, twenty-two (22) or 78.57% did not contain any information indicating the reasons for the lack of charges (was the work order created in error, was any work actually performed, etc.) by the trade supervisor. c. Seventeen (17) of the one hundred (1 00) sampled work orders contained materials charges but no labor charges were billed. Such subcontractors as P & P Contracting, Inc.; R & D Electric; and AAA Doors performed the work on at least ten (1 0) of these work orders per the documentation present. Subsequent inquiries found that all subcontractor labor is commingled with any materials purchased and is reported as material charges. d. Twelve (12) of the one hundred (1 00) sampled work orders appear that materials were used but none were billed. Examples include work order 98167 whereby the Daily Field Work Sheet states that a new valve was installed; work order 110891 's Daily Field Work Sheet states that stencil no bike signs & removed graffiti, etc. Most of these work orders involve painting so that any purchased paint may be used at numerous job sites but it does seem unfair that one user is charged for all the materials and the others are not billed anything. e. The Administration Section did not enter a description of the materials used in Cityworks for any of the twenty-seven (27) work orders that billed materials. Furthermore, twenty-three (23) or 85.19% that did not have the supporting purchase documentation scanned into Cityworks thereby making it difficult to determine if the billing was accurate. f. A comparison of the information present on the Daily Field Work Sheets with those on the Cityworks work order found that work order #77213 contained a 30 minute difference. Although no documentation was found supporting the Administration Section's claim, they assumed that the labor hours were reduced in Cityworks because the Daily Field Work Sheets totaled 8.5 hours instead of 8.0 as no overtime was approved for that day. g. A plumber worked 5.50 hours on February 26, 2015 according to the Daily Field Work Sheets. However, these same hours were charged out to both Cityworks work order numbers 91405 and 91902 resulting in a $516.62 over billing. h. An entry error was made whereby 1.0 hour totaling $80.76 was inadvertently charged to work order number 105598 instead of to administrative time as the employee drove to Fleet Management to pick up a plumber. Recommendation(s): The implementation of the following recommendations should help make the data present on the Daily Field Work Sheets and work orders more accurate so that City Page 12 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19,2016 departments/divisions are properly billed: a. Each tradesman's Daily Field Work Sheets should be scanned into Cityworks and attached to the appropriate work order(s) so that the information is centralized and easily located. b. All work orders that are closed without any billings should indicate the reason(s) for their closure in Cityworks. c. Any work orders that contain material charges but not labor charges should indicate the reason(s) in Cityworks. Furthermore, Property Management should determine whether new fields can be created in Cityworks entitled subcontractor labor and subcontractor materials to track these associated costs separately from those costs generated by employees. d. Trade supervisors should review the Daily Field Work Sheets and physically sign them attesting to their accuracy. In doing so, they should ensure that the listed labor hours add up to 8.0 unless overtime was approved, that the listed labor hours appear correct for the work performed, that any materials used are reported, etc. Furthermore, they should perform unannounced spot checks daily on their staff to better ensure that desired productivity levels are reached. e. The Administration Section should ensure that Cityworks contains either a description of any materials purchased for a work order or the supporting documentation is scanned and attached to the work order. f. The reasons for any deviations between the hours listed on the Daily Field Work Sheets and those in Cityworks should be documented to provide an audit trail. g, h. The Administration Section should adjust the users' billings accordingly so that these inadvertent errors are corrected. Management Response: Management agrees with findings and recommendation. The Property Management Division is currently working with GIS on updating the categories on Cityworks. This will allow for a better system that allows for tracking of "Contractor Labor" and Contractor Materials". Management has already directed staff that every field sheet must be signed by employee performing the work and the Supervisor certifying that the information is accurate. Management will ensure that Cityworks contains a description of materials purchased for a work order and that the supporting documents are scanned. 7. Finding: Trade Supervisors Lack of Documented Supervisory Oversight and Accountability Could Allow Incorrect Internal Service Charges Billings to go Uncorrected Property Management Division trade supervisors represent a compensating internal control to ensure that the assigned work is completed timely and that the listed materials are actually needed and used at the job site. The following shortcomings were noted in a review of their actions during the work order completion process: a. Although the trade supervisors indirectly give their approval to the work Page 13 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19,2016 performed and materials used by assigning a completion date to work orders, they don't specifically attest to their accuracy by signing the Daily Field Work Sheets. b. Trade supervisors don't have established benchmarks by which to measure staff's performance. There were no noted changes to labor hours on any of the sampled Daily Field Work Sheets making one believe that the information present is not scrutinized. c. Trade supervisors don't document their approval the purchase of materials for a work order or that unannounced site visits confirmed that they were actually used at the site. Recommendation( s): The implementation of the recommendations below should help improve internal controls and accountability: a. Trade supervisors should be required to physically sign the Daily Field Work Sheets to show that they reviewed and approved the forms. The accuracy of the entries is imperative as the Administrative Section can only invoice users based on the information present. Any noted deficiencies should be promptly addressed with their staff so that they can be immediately resolved and the billings prepared. b. Benchmarks should be established concerning the completion of various tasks, especially repetitive preventive maintenance work orders, so as to measure their employees' performance and the accuracy of the reported labor hours. c. All needed materials should be approved by the trade supervisors before being purchased when they cost above a designated threshold. Whenever possible, trade supervisors should be out in the field performing unannounced spot checks on their staff, verifying that purchased materials were actually used at the work site, etc. In addition, the trade supervisors should be required to prepare and submit Daily Field Work Sheets, bi-weekly time sheets, etc. accounting for each day's activities. The pending creation of a Grainger storeroom controlling the disbursement of needed materials should also help. Management Response: Management agrees with findings and recommendation. Management has directed Supervisors to have all field sheets signed certifying that the employee has completed the work indicated on work order. Management has directed that all material purchases must include an attached work order in order to provide for accountability. The City is working with Grainger to implement a "storeroom" that will eliminate any waste of materials and employees from having to drive around town looking for materials, which costs the City money from lack of production. Supervisors have also begun to conduct random inspections on the employees performing the work and scrutinizing the hours measuring the performance of those employees. Page 14 of 15 Internal Audit Report Property Management Internal Service Charges Billing Audit October 19, 2016 8. Finding: Divisional Standard Operating Procedures Detailing the Internal Billing Process were not Maintained Despite the Heavy Reliance on One Employee Inquiries found that the Property Management Division did not maintain standard operating procedures depicting the internal service charges billing process. This lack of updated procedures to help ensure the uninterrupted operation of the internal billing process is a matter of concern, given its heavy reliance on one individual (Office Associate V). Recommendation(s): The Property Management Division's standard operating procedures should be promptly prepared detailing each member's role in the internal service charges billing operation. Standard operating procedures are important as they serve both as a benchmark to measure individuals' performance and as an instruction manual in the event employees' change. Once completed, they should be distributed to all applicable personnel so that they can be read, understood and followed. Finally, Administrative Section personnel should be cross trained whenever possible to be able to fill in when others are on leave, terminated, etc. Management Response: Management agrees with findings and recommendation. Standard Operating Procedures are currently being formulated by the Interim Director. The Division's Senior Administrative Manager and Financial Analyst Ill will be cross-trained in the internal billing process to ensure proper back up protocols are in place. EXIT CONFERENCE An exit conference was held on September 16, 2016 in OBPI's Conference Room. Participants included Interim Property Management Division Director Adrian Morales, Senior Administrative Manager Santiago Sellan, Internal Auditor James Sutter and Senior Auditor Mark Coolidge. Audit findings and recommendations were discussed, as were management responses, which are included herein. All were in agreement with the contents of this audit report. JJS:MC:mc (Audit performed by Assistant Internal Auditor Mark D. Coolidge) F:\OBPI\$AUD\INTERNAL AUDIT FILES\DOC15-16\REPORTS -FINAL\PROPERTY MGMT INTERNAL SERVICE CHARGE BILLINGS RPT.docx cc: Mark Taxis, Assistant City Manager Alex Denis, Procurement Department Director Adrian Morales, Interim Property Management Department Director Page 15 of 15