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Lessons learned

June 24, 2011
Cape Coral Daily Breeze

Receipt this week of the long-awaited independent audit of the city of Cape Coral's fuel processes did little to quell the controversy surrounding a consultant's report presented to council last November.

That's too bad.

One, the months-in-the-making look at the city's fuel receipt and disbursement processes cost a lot of money as well as time and effort, not only on the part of the Lee County Clerk of the Courts Office, which assigned two auditors to the effort, but also on the part of the city's much understaffed auditor's office and its much overworked interim auditor, Margaret Krym.

Two, it does, in fact, answer some key questions, although in a way that probably caused some serious stress on both sides of the "unaccounted for" fuel controversy.

It also provides a pretty good game plan for the controls component of a fleet management system, the lack of which spurred the audit and remains the primary issue at hand.

First, some background.

Upon his hire, newly appointed City Manager Gary King appointed a pair of consultants to assist in his look at certain city operations. Bill Towler was tapped to examine aspects of the city's fleet management operations and he soon targeted city fuel processes and management.

Mr. Towler found a plethora of problems encompassing fuel receipt and fuel disbursement procedures, the monitoring software used and system controls. His Nov. 15, 2010, report advised council that the city failed to properly monitor fuel in and fuel out and that equipment intended to provide a system of controls was antiquated and, in some cases, missing, broken or bypassed.

In addition, he drew some conclusions - that municipal use of fuel for its various vehicles and motorized equipment had increased "over 360,000 gallons annually, nearly 100% since FY 2006, representing approximately $1,000,000 (additional) annual fuel costs at current pricing levels" even as the city had reduced staff, fleet size and work-equipment usage.

Actual savings projected for this fiscal year alone? $1,044,964.20, to be achieved by implementing proper controls and accountability of the fuel management process and restoring the integrity of the related data records so as to bring fuel consumption back to the levels used in 2006.

In his presentation to council, Mr. Towler stressed that he was not accusing any employees of theft but did state a key control system had been disabled, that data had been manually altered, and that fuel in and fuel out could not be reconciled over the five-year period examined.

Mr. King, who has said he worked with Mr. Towler throughout the process, concurred and ordered a forensic audit to be performed by the city's fuel software provider while also requesting Ms. Kyrm's office conduct "an internal audit of the existing system and records for further analysis regarding current vulnerabilities and possible misuse or theft."

Based on the report and presentation, Cape Coral City Council then authorized the outside audit, opting to ask the Clerk of the Court's Office to perform the job as such reviews are among its responsibilities.

The fact that Mr. Green's office also had fraud auditors at hand, was a cited plus.

The prospect of a million dollar a year savings and its flip side - the possibility that there had been a comparable over-expenditure or loss over the past five years - also spurred the city manager's office to order a criminal investigation into the matter and an approach, according to at least one on-camera news report, with a similar request to the Florida Department of Law Enforcement.

So what did the audit performed by Mr. Green's Office conclude?

Mr. Towler's findings were correct: The city's control system was severely inadequate, its record keeping poor, its reconciliation processes non-existent and its management oversight sorely lacking.

It also revealed some things not previously brought to light - that fuel tax returns filed with the State Department of Revenues were missing fuel invoices and so fuel purchases were under reported and the city's outdated Fuel Management System included no software support agreement with the vendor.

It failed, however, to confirm the key conclusions drawn by Mr. Towler and Mr. King: that $5 million in fuel was unaccounted for.

"Financial accounting data shows a difference of $31,693 between payments made for purchases and fuel costs allocated to user departments from 2005 though 2010," the audit report states.

The report found that there was no evidence to conclusively indicate inappropriate changes were made to the data base, and found there was no information indicating fraud, illegal acts or abuse.

It also confirmed what the previous department head - whose input was not part of the written report or verbal presentation to council - maintained: That the numbers used to draw conclusions concerning fuel in and fuel out had been significantly distorted as historical transaction data was removed from the active database when a vehicle was taken out of service or an employee left.

It's pretty safe to say that despite the lack of oversight and controls, it's unlikely that the city is going to realize a million-dollar-plus savings by Sept. 30 and another million a year thereafter.

Where are we now?

Well, in terms of systems and procedures, light years ahead of where we were before Mr. Towler and Mr. King began their efforts. As outlined in the Clerk of the Courts audit report, Mr. King's office has already addressed internal controls improvements, deficiencies and has worked to reduce the risks associated with the previous system.

Mr. Green's office also has provided a series of recommendations, including that the city replace its current "Fuel Management System" with a "Fleet Management System." According to Mr. King, he is well into the process of reorganizing operations on the staff level to this end.

However, the city is still chasing ghosts with some insisting that since the system held such a great potential for fraud or misuse that the fact that it was not found does not prove it did not happen.

True enough, perhaps.

But given that since November the matter has been investigated by the city manager's hand-picked consultant, the city manager himself, the Cape Coral Police Department, the software consultant was hired to conduct a "forensic audit" of its system and related data, Ms. Krym's office and the office of Charlie Green - none of whom came up with specifics in hand - we'll say it's time to move on and concentrate on the improvements under way and recommended.

This likely will involve some expense that will not result in any immediate savings as it entails replacement of the software system, something twice recommended by staff since 2005 but never implemented.

Put this out to bid or request for proposal, whichever is appropriate, and get a functional system in place.

And, please, please, please learn from the mistakes that spurred what should have been a routine analysis of departmental procedures and processes into a costly eight-month quest for millions of dollars worth of "unaccounted for" or "missing fuel."

Had a staff response to Mr. Towler's conclusions been a part of the initial report, the data issue may have been resolved before some of our elected officials did what politicians are wont to do - run with it for the biggest and best sound bite.

An example?

"It could be any number of things," said one elected official in an on-air broadcast. "It could be we're not getting all that we're paying for or it could be we are using it for non-city purposes. It could be there are leaks."

That would be theft, theft and, given the amount of fuel said to be unaccounted for, an environmental calamity.

Bold claims, so don't blame "the media" - especially if you're on camera and the clips can come back to haunt you even if you are just extrapolating from the city manager's memo calling for an internal audit to investigate, yes, "current vulnerabilities and possible misuse or theft."

Finally, there is a reason the city has hiring procedures and processes for outside consultants and vendors. It assures process integrity - that word again - by pulling politics from the process. It provides assurance that the most qualified person has been tapped to do the work and negates claims of cronyism which can taint a project from the git-go.

While the city is looking at its processes, council should put this one under the microscope.

For make no mistake, Mr. Towler faces the same fate as his "unaccounted for" fuel - despite confirmation of virtually all of his findings, if not conclusions, there are many who continue to maintain his hiring smacked of cronyism and, as such, his work assignment was a means to an end. Even if they can't specifically prove it.

Continue with the process improvements, add the recommendations within the audit that make sense, replace the software, pull everyone into the loop early on if irregularities are found in other departments - and stop tainting fact-finding with politics and by-passed hiring procedures.

Then maybe this controversy can be quelled after all.

- Breeze editorial

 
 

 

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