s 352.439 L72SVFM 2009 1 A Report TO THE Montana Legislature ^^^^^^H IPerformance Audit State Vehicle Fleet Management Multiple Agencies September 2009 Legislative Audit Division 09P-04 MontanaStateLibrary 3 0864 1005 8605 9 Performance Audits Legislative Audit Committee Performance audits conducted by the Legislative Audit Division are designed to assess state government operations. From the Representatives audit work, a determination is made as to v^^hether agencies and programs are accomplishing their purposes, and whether they Dee Brown Betsy Hands can do so with greater efficiency and economy. Scott Mendenhall Carolyn Pease-Lopez We conducted this performance audit in accordance with Wayne Stahl generally accepted government auditing standards. Those Bill Wilson standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for Senators our findings and conclusions based on our audit objectives. We Greg Barkus believe that the evidence obtained provides a reasonable basis for John Brenden our findings and conclusions based on our audit objectives. Taylor Brown Mike Cooney Members of the performance audit staff hold degrees in disci- Cliff Larsen Mitch Tropila plines appropriateto the auditprocess. Areas ofexpertise include business and public administration, journalism, accounting, economics, sociology, finance, political science, english, anthropology, computer science, education, international Audit Staff relations/security, and chemistry. Performance Lisa Blanford PerformanceauditsareperformedattherequestoftheLegislative Ross Johnson Audit Committee which is a bicameral and bipartisan standing Kent Wilcox committee ofthe Montana Legislature. The committee consists of six members of the Senate and six members of the House of Representatives. Fraud Hotline Help eliminate fraud, WASTE, and abuse IN Directcommentsor inquiriesto: state government. LegislativeAuditDivision Call the Fraud Room 160, State Capitol Hotline at: P.O. Box20170s MT (Statewide) Helena, 59620-1705 1-800-222-4446 (406) 444-3122 (in Helena) Reports can be found in electronic format at: 444-4446 http://leg.mt.gov/audit LEGISLATIVE AUDIT DIVISION Tori Hunthausen, Legislative Auditor Deputy Legislative Auditors Monica Huv?, Leaial Counsel James Gillett Angie Grove September 2009 The Legislative Audit Committee ol the Montana State Legislature: This is our performance audit of State Vehicle Fleet Management. Montana's vehicle fleet management is decentralized, with each agency responsible for its respective fleet. This reportprovides thelegislatureintormation andrecommendations regardingtheneed for a fleet management information system, optimizing vehicle utilization, assignment of vehicles to individual employees, preventive maintenance intervals and controls, commuting use ofstate vehicles, improving controls regarding driver requirements, and improving the vehicle procurement process. We wish to express our appreciation to agency personnel for their cooperation and assistance during the audit. Tori Hunthausen, CPA LegislativeAuditor Room 160 •Stare Capitol Building• PO Box201705 • Helena, MT• 59620-1705 Phone (406) 444-3122 • F.-VX(406) 444-9784• E-Mailladgmt.gov Digitized by the Internet Archive in 2011 with funding from IVIontana State Library http://www.archive.org/details/statevehicleflee2009mont Table of Contents ' Figures and Tables iii Appointed and Administrative Officials iv Report Summary S-1 CHAPTER - INTRODUCTION I 1 Introduction 1 Audit Scope 1 Agencies Reviewed 1 Audit Objectives 2 Audit Methodologies 2 Review ofSample ofVehicles 2 Areas for Further Study 3 Vehicle Fleet Management at the Montana University System 3 Controls Over Fuel Purchasing Cards 3 Report Organization 3 CHAPTER - BACKGROUND II 5 Introduction 5 What Is Fleet Management? 5 Effective Fleet Management Is Complex 6 State Government Has a Decentralized Fleet Management System 6 Cost and Size ofthe StateVehicle Fleet 7 Montana Has a Large Fleet ofStateVehicles 7 State Laws, Administrative Rules, and State Policies 7 Effective Fleet Management Is Essential 8 CHAPTER -MANAGEMENT DATA KEYTOANEFFECTIVEAND EFFICIENT FLEET III IS MANAGEMENTSYSTEM 9 Introduction 9 Fleet Management Information Systems 9 Lack ofInformation Hinders Effective Management 10 ComprehensiveVehicle Inventory Unavailable 10 Opportunities to Improve Data Collection 10 CHAPTER IV- FLEET MANAGEMENT POLICIESAND CONTROLS 13 Introduction 13 Overall Lack ofPolicy and Controls for State Government Fleet Management 13 Vehicle Utilization 14 Many StateVehicles are Underutilized 15 Determining Cost Effectiveness 15 Low Mileage Vehicles May Be Necessary 16 Past Efforts to Improve Utilization 17 Low Utilization Rates Increase Fleet Costs 17 Permanent Vehicle Assignment 18 Formal Assignment Criteria Is Often Lacking 18 Assignment Practices Are Inconsistent 19 InconsistentAssignment May Increase Costs, Decrease Effectiveness 19 Preventive Maintenance 20 09P-04 Montana Legislative Audit Division Maintenance May Be Performed Too Frequently 20 LackofTimely Maintenance May Decrease Vehicle Safetyand Durability 20 Commuting 21 Recent Changes to Commuting Statutes and Controls 21 Agency Commuting Practices 22 Some Commuting Issues NotAddressed in Current Policies 23 DriverRequirements 23 Current Practices Require Employees to ReportViolations 24 Existing Rules and Controls Ineffective 24 CHAPTERV-NEWVEHICLE PROCUREMENT PROCESSES 25 Introduction 25 Vehicle Procurement Practices 25 Compliance With the Fuel EfficiencyLaw 25 Vehicle Purchase Prices Appear to Be Competitive With Market Prices 26 Improving the New Vehicle Procurement Process 27 State LawAllows Life-Cycle Costs as Purchase Criteria 27 Vehicle Procurement Process Can Exclude ImportantLife-Cycle Cost Factors 27 DOA Does NotAlways Consider Estimated Fuel Costs forVehicle Purchases 28 EffectofExcluding Fuel Costs 28 Life-Cycle Costs as Bid Evaluation Criteria 29 DOA Should Revise its Vehicle Procurement Process to Consider Fuel Costs forAll New Vehicle Purchases 29 DEPARTMENT RESPONSE A-1 MultipleAgencies A-3 Figures AND Tables Figures Figure 1 Fleer Managemenr Process 5 Figure 2 Choosing Transportation Options Based on Utilization 16 Tables Table 1 Number ofInsured State-Owned Passenger Vehicles 7 Table 2 Agency VehicleAnnual Mileage of Leased AgencyVehicles 15 Table 3 DitTerences in Estimated Fuel Costs by Vehicle Type 29 09P-04 Montana Legislative Audit Division Appointed and Administrative Officials Department ofAdministration Janet R. Kelly, Director Department ofCorrections Mike Ferriter, Director DepartmentofEnvironmental Richard Opper, Director Quality Department ofFish, Wildlife Joe Maurier, Director and Parks Department ofLabor and Keith Kelly, Commissioner Industry Department ofPublic Health Anna Whiting Sorrell, Director and Human Services Montana Department of Jim Lynch, Director Transportation S-l Report Summary State Vehicle Fleet Management Agencies lack important management information regarding their vehicles and opportunities exist to decrease costs associatedwith the state fleet. Audit Findings Vehicle transportation is vital to accomplishing many ofthe tasks ofstate government andvehiclesserveawidevarietyofneeds—from occasional basichighwaytransportation to routine off-road use. Each state agency is responsible for determining how best to satisfy its transportation needs. State government spent approximately $17 million on vehicle and fuel purchases in fiscal year 2008 and has a fleet ofapproximately 5,000 passengervehicles. Ourauditsoughtto assess the effectiveness ofmanagementpractices over this fleet by examining management activities at six state agencies, which were selected to provide a broad spectrum offieet management practices. We also examined purchasing activities at the Department ofAdministration (DOA). Our first objective considered whether agencies had ready access to fleet management information. We found state government lacks a system for collecting essential information. Only two agencies used department-wide tools for managing agency fleets. Even basic functions such as compiling a comprehensive vehicle inventory are challenging. Executive branch leadership has recognized that the information available to agencies does not promote effective management and has agreed to purchase a fleet management information tool for use by all agencies. Enhanced information can be used by agencies to ease compliance with existing state law and may promote more effective fleet management. Determining whether agencies enacted fleet management controls was our second objective. Agency controls that help ensure efficient and effective fleet management have been lacking in some key areas. Audit work indicated some state vehicles are underutilized—driven few miles, used infrequently, or otherwise ofquestionable value to thestate. Poor utilization increases expenses with littleorno benefit to agencies. Low utilization rates may also be caused by assignment ofvehicles to individual employees. Some employees may need permanently assigned vehicles to accomplish job duties, but we noted a lack of clear criteria for evaluating the need for permanent vehicle assignments which has resulted in inconsistent assignment practices. Establishing guidelines for utilization and assignment can reduce fleet costs through reduction of unnecessaryvehicles. Vehicle operation expenses have also been higher than necessary when employees commute in state vehicles and maintenance is performed more frequently than 09P-04 S-2 Montana Legislative Audit Division recommended by manufacturers. House Bill 602 passed by the 2009 Legislature addresses which employees are allowed to commute in state vehicles and provides a new control over the practice; however, the employees who commute in state vehicles may need to be assessed a taxable benefit, and further guidance in this area is needed. State administrative rules set more stringent requirements for operating state vehicles than for the general driving population. Employees are responsible for self-reporting driving violations. This type ofcontrol is unlikely to be effective in ensuring the safe operation ofstate vehicles. New opportunities for automated checks ofstate employee driver records may provide a more effective method of ensuring safe state vehicle operation. Our final objective was to determine whether the Department of Administration's (DOA) vehicle procurement process ensures compliance with state laws and provides assurance vehicle purchases are cost-effective. Controls are in place to ensure fuel DOA economy standards are met and prices obtained are reasonable. However, does not consider estimated fuel costs for vehicle purchases unless requested by agencies submitting purchase requisitions. Because life-cycle fuel costs are not always included in theprocurementprocess, someagencies maypurchasevehicles that do notminimize overall costs. Audit Recommendations Audit recommendations addressed improvements needed to more effectively manage DOA the state's fleet. Four recommendations were to and three recommendations were to sampled agencies. Recommendations address: Implementing a fleet management information system and ensuring data collection controls are in place. Establishing utilization guidelines that consider annual vehicle mileage and other criteria for determining the need forstate-owned vehicles. Developing assignment criteria and controls for monitoring permanent vehicle assignments to individual employees. Developing uniform statewide guidelines for administering IRS taxable commuting benefits. Adopting maintenance standards consistent with manufacturers' recommendations and using management information systems to ensure maintenance is completed. Exploring driver requirement controls to ensure employee compliance with state law and rules related to driver requirements. Revising the vehicle procurement process to apply a fuel cost calculation to each bid evaluation where fuel economy estimates are available.