OIG No. 21-09: Public Works Warehouse Inventory Valuation as of September 30, 2020Joseph M. Centorino, Inspector General
TO:
FROM:
DATE:
PROJECT:
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
December 8, 2020
Public Works Warehouse Inventory Valuation as of September 30, 2020
OIG No. 21-09
The City's Public Works Department is responsible for providing services such as planning,
design, construction, maintenance, repair, and operation of City infrastructure, including utility
systems, City buildings, and facilities. The Public Works Department warehouse, through its
operations, handles the purchases and distribution of materials and supplies for daily use, and
supplies infrastructure and construction materials to the Water, Sewer, Pump Stations,
Stormwater, and Streets and Streetlight Divisions.
As part of the department's daily warehouse operations, materials are received and issued for all
phases of Public Works operations. At the same time, work order numbers are created in
Cityworks {the City's infrastructure management software) to track the cost of labor, materials,
and equipment used in projects performed by the Public Works Department. They enable the
department to determine the value of the projects and to recover the cost of repair or replacement
of City property damaged by an outside party. Small materials and equipment, such as tools and
raincoats that are not job-specific, are charged to the individual truck numbers to record
disbursement at no charge.
The Public Works Department stores all its inventory parts in the following four (4) locations at
451 Dade Boulevard, which are all protected by cameras recording all activities. A summary of
these areas and their contents, along with any additional security measures maintained, is
provided below:
1. Warehouse - The largest and only indoor storage facility for inventory parts, which is
further protected by an alarm and identification reader, so access is restricted to
authorized employees.
2. Yard 1-- This secure fenced area with a covered roof is located directly south of the
warehouse at the bottom of the loading dock ramp, and is used to safeguard such larger,
frequently issued inventory parts as clamps, valves, and glands.
3. Yard 2- This secure fenced area is located south of Yard 1 and behind the water tanks
bordering Miami Beach Senior High School. The parts stored in this area consist primarily
of light poles, hydrants, pipes, offsets, and caps.
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4. Central Yard Area - A fenced less secure area that houses City vehicles, miscellaneous
equipment, and inventory, such as sand, rock, and asphalt. Authorized access after
regular working hours can be requested by contacting the Control Room from the call box
located at the entrance to the facility.
Public Works Department personnel perform an annual physical warehouse inventory count of all
parts at the end of each fiscal year to determine their corresponding number of the units on hand
or quantities. Office of the Inspector General (OIG) staff concurrently conducted test counts of
randomly selected parts. Any noted differences from the quantities recorded in Cityworks were
subsequently re-counted with an assigned staff member until a consensus is reached.
Warehouse staff records the final on-hand quantities in Cityworks as determined by the annual
physical inventory count for all parts thereby typically resulting in a new fiscal year-end value.
Once completed, OIG staff verifies that all sampled parts are correctly valued before giving its
approval to warehouse staff to resume normal operations.
These calculated totals are then forwarded to the Finance Department, which is responsible for
preparing a journal entry to adjust the applicable general ledger inventory balances. Lastly, the
City's designated external auditors are notified of these results.
Testing Results
Upon receipt of Cityworks provided reports valuing all inventory parts prior to the start of the
physical inventory count, OIG staff randomly selected and performed test counts of 305 different
parts totaling 12,913 units on hand (quantities) with a cumulative value of $1,291,427.53. A
comparison of the units on hand with our physical test counts identified differences for nine of the
305 sampled parts or 2.95%. More specifically, there was a net difference of 11 units on hand
totaling an immaterial $1,813.38 as some sampled parts quantities were overstated, while others
were understated. The table below summarizes the percentage difference (number of sampled
parts where OIG staff's physical count differed from the Cityworks recorded units on hand divided
by the total number of sampled parts) and the corresponding net dollar difference as calculated
during the past five fiscal years testing.
09/30/2016 09/302017 09/30/2018 09/30/2019 09/30/2020
Percentage Difference 31.50% 5.69% 0.00% 3.98% 2.95%
Net Dollar Difference ($28,691.17) ($1,359.40) $0.00 ($4,430.20) $1,813.38
Public Works warehouse staff should be commended for their hard work in sorting through the
inventory parts on hand, determining its obsolescence and reorganizing the remaining parts on
the newly purchased and installed adjustable racks. Consequently, this year's inventory was
more organized, occupied less space and was easier to locate and count than in prior years.
In addition to these positives, warehouse staff have been performing cycle counts over the past
four fiscal years which has also resulted in significantly lower September 30" percentage
differences than in the fiscal years prior (31.50% in 09/30/2016). Cycle counts involve counting
a small subset of inventory, in a specific location, on various days throughout the years and
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adjusting the listed Cityworks units on hand accordingly. The OIG emphasizes that it is important
that Public Works Department designated staff identify the root cause of any noted quantity
differences found during either cycle counts or annual physical inventory counts to help prevent
similar errors from reoccurring.
Public Works Department's response:
The following has been implemented as per the attached revised Warehouse Operations
Procedure (SOP):
Auditing of Materials
• Before an "Audit" transaction is conducted, detailed justification must be provided.
Justification must include, but not limited to:
1. Pictures deeming material to be damaged
2. Letters I E-Mails from Manufacturer deeming material obsolete or unserviceable
3. E-Mails from division supervisors deeming material obsolete or unserviceable
4. E-Mail from Warehouse Supervisor or Storekeeper Ill requesting material details
to be updated (Returns to supplier, Unit of Measure update, etc.)
• When conducting an Audit transaction in C/TYWORKS, the user must input an account
number and input a detailed reason to why the audition transaction is being conducted.
Once this transaction is completed, the transaction will be printed.
• Once an Audit is conducted in CITYWORKS the "Inventory Audit Form" must be
completed and signed by the employee conducting the audit, then signed and approved
by the Warehouse Supervisor, Division Superintendent, and Department Director.
Fiscal Year-End Inventory Valuation{s)
The table below shows the five (5) most recent year-end rounded physical count valuations of the
Public Works Department's warehouse inventory:
09130/2016 10/31/2017* 09/30/2018 09/30/2019 09/30/2020**
$2,084,662 $1,689,014 $1,795,501 $1,963,870 $2,614,727
+ The 2017 fiscal year-end valuation was delayed one month due to the impact of Hurricane Irma.
** The September 30, 2020 inventory valuation was substantially higher due to the recent purchases of approximately $500,000
in water and sewer motors that were stored in the last aisle of the warehouse.
The September 30, 2020 valuation is comprised of the following Public Works divisional totals,
presented in descending order below:
Water
Sewer
Streetlights
Stormwater
Streets
$956,879.65
$824,499.18
$601,341.04
$186,999.75
$45,007.02
Total $2,614,726.64
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OIG staff verified that Public Works warehouse staff accurately made the necessary corrections
in Cityworks and that all our test counts were correctly reported in the final inventory reports. As
a result, the OIG recommends that Finance Department use the valuation of $2,614,726.64 as of
September 30, 2020.
Additional Observations
An unannounced site visit to the Public Works Department's Control Room on September 23,
2020, found that a handful of cameras were in disrepair as either their pictures were blacked out
or unclear. These cameras and their recordings should be well maintained as they serve as a
deterrent to any potentially misbehaving individuals and could help identify wrongdoers more
quickly.
Public Works Department's response:
The Public Works Division's Control Room and Warehouse personnel is aware of the existing
deficient and dated surveillance system, several attempts in prior years to make repairs and add
storage capacity have not yielded positive results. On August 31, 2020 Control Room staff again
reported several cameras malfunctioning and proceeded to call on the maintenance provider to
make repairs. Temporary repairs were completed on September 10, 2020 only to have cameras
go out again a week later.
As part of the FY 2020-21 Budget process the Division requested the amount of $120,000 for the
installation of a new surveillance system that would meet the division's needs and adhere to prior
audit findings and recommendations, only $47,300 were approved for said installation as provided
below.
Account Division FY 2021 FY2021
Requested Actual/ Allocated
Amount Amount
425-0410-000325 Water $30,000 $4,000
425-0420-000325 Sewer $30,000 $3,300
427-0427-000325 Storm water $30,000 $10,000
011-0840-000325 Streets & Street Lighting $30,000 $30,000
Presently the Division is working with the Procurement Department on the below !TB (Invitation
to Bid) to price the needed upgrades:
SPECIFICATIONS:
Purchase and delivery of upgrade, install and maintenance of Close Caption Television (CCTV)
for Public Work Main Yard Security Cameras to include but not limited to configuration and testing;
quarterly inspection of system for quality of operation; Service calls on an as needed basis; 12
month warranty on camera installed; One site one (1) time training for 10 city employees.
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SCOPE OF WORK:
Successful bidders (s) will be required to provide purchase and delivery of upgrade, install and
maintenance of Close Caption Television (CCTV) for Public Work Main Yard Security Cameras.
It shall be the responsibility of the vendor to deliver the materials and perform
upgrades/installations between the business hours of 7:30AM through 3:30PM Monday through
Friday.
Mark Coolidge, Chief Auditor
D te
l-08-3000
Date
cc: Jimmy L. Morales, City Manager
Alina Tejeda Hudak, Assistant City Manager
John Woodruff, Chief Financial Officer
Roy Coley, Public Works Department Director
Rodolfo De La Torre, Public Works Department Infrastructure Division Director
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6" Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Fax: 305.587.2401 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
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