Little Rock Police Union: Audit finds savings for raises

Little Rock, Arkansas

By Chelsea Boozer,

Arkansas Democrat-Gazette

When city officials told Little Rock's police union that if it could find money for employee raises, officials would take a look at the proposal, union leaders took the charge to heart.

Now the union has a 300-plus page report on the finances of the city's Fleet Services Department, in which an out-of-town consultant wrote that there are inefficiencies in the city's vehicle maintenance and the way parts and employees are managed.

While city leaders have yet to see a copy of the report, they told the Arkansas Democrat- Gazette on Monday that they don't agree with some of the findings relayed to them by a reporter.

Fraternal Order of Police President Jarred McCauley said more audits of other departments are coming. The union paid $18,000 for the Fleet Services report.

"I think the overall tone of this audit was to say, 'Look, you told us multiple times to show you the money. Now we've done your job for you. We showed you the money, the inefficient way you run Fleet Services and it makes me wonder, where else are you inefficient?'" McCauley said.

The audit comes after City Manager Bruce Moore reported that there is no money for employee raises this year beyond the onetime bonuses the city Board of Directors authorized previously.

"We have every intention of continuing to do these audits until the city balances its budget. ... At the end of the day, we are not trying to leverage raises, we are trying to communicate and show the city where they can have money to do better benefits," McCauley said.

Ohio-based accountant Wade Steen's report on Fleet Services doesn't lay out detailed solutions for each finding it lists or say what the total yearly savings would be if the city followed through with Steen's recommendations. He developed the report after reviewing a random sample of work orders completed on 100 vehicles serviced by the fleet department.

There are two ways in which divisions within city departments pay for vehicle service and repair. Each division pays a monthly percentage of the Fleet Services budget - which covers employees' salaries and other overhead costs - based on the vehicles and equipment that division owns and a two-year average of work on that division's equipment.

Other services - such as fuel, parts, nonroutine jobs and any work sent to an outside service shop - are billed directly each month based on actual cost. Fuel and parts both have markups levied on top of the actual cost.

Steen wrote in his report that, based on his review, the city only serviced 68 percent of its fleet last year, or 1,077 of 1,574 vehicles and equipment in inventory.

But Fleet Services Director Wendell Jones said that number is inaccurate, adding that all vehicles are serviced routinely.

A spreadsheet provided to the newspaper by Steen, who said he was given the document by the city, shows that 1,077city vehicles or equipment were serviced last year. Jones did not return multiple calls seeking comment on the spreadsheet.

Another finding Steen included in his report that he said is peculiar and rare is that Little Rock charges an 18 percent markup to departments above the actual cost of parts. The department also charges a 13 cent markup on fuel cost.

"To stockpile all types of parts, put them in a city vehicle, then charge the Parks Department or the Public Works Department 18 percent more than you paid for the part, I've just never seen that," Steen said. "If you think about managing your city and trying to utilize sources efficiently, there's not a good reason to do that. It just doesn't make any sense."

Jones said the markup was put in place years ago and he's not sure how the formula was created, but that the revenue pays for the five employees who staff the city's parts department within the Fleet Services Department.

Steen, who used to be a municipal finance director in Ohio and has reviewed several fleet services departments around the country since he became an independent accountant, said many fleet departments don't store parts anymore. Instead, they contract with a parts company to save money.

Little Rock's 18 percent markup generates about $367,000 a year, he said.

"If they are telling me it takes five guys to staff a parts department where you work on 1,000 vehicles, then each guy is in charge of 200 vehicles. So four vehicles a week come in and my job as one of the five guys is to get a friggin' air filter? That's insane. That's more asinine than [I originally thought]," Steen said.

In comparison, North Little Rock stores some of its own parts, but doesn't staff the department, its Director of Vehicle Maintenance Kenny Brock said.

Brock said North Little Rock doesn't charge a markup on parts or any other service and that they also don't charge the different departments for labor cost. Salaries of technicians are budgeted into the Vehicle Maintenance Department budget, he said. He added that the city is looking into contracting out its parts department to save money and benefit from the lower prices companies can get for buying parts in bulk.

Jones said contracting out Little Rock's parts department has "crossed our minds," but no cost analysis has been completed.

Little Rock's Fleet Services sometimes ends the year with a profit because the department services outside agencies and operates a Compressed Natural Gas station at which the public can purchase fuel, Finance Department Director Sara Lenehan said.

But anything that builds up in the balance is used for large-scale projects, such as putting in a fuel station at the new Pankey Police Station, or to purchase vehicles, she said.

"It's not like they are building up this big profit. Their billing to departments is to clear or reimburse the Fleet Department's expenses. It is not intended to produce a profit for the Fleet Department," Lenehan said.

Steen recommended in his report that the city immediately develop a comprehensive vehicle replacement plan, saying that he thinks the city's approach to managing its fleet is "reactive and not proactive."

Jones said the city has had a replacement plan since the 1 percent sales tax that voters approved in 2011. Each year the city allots $1.6 million for fleet replacement. Some years the city has found a little more than that to spend on new vehicle purchases. Jones did not provide the total number of vehicles that have been replaced since the sales tax.

"Now, is that enough money to replace all of our fleet? Obviously not. But prior to that we didn't have a dollar amount to allocate. We are looking at those things and I think as the years get better, our replacement dollars are going to increase," Jones said.

In response, Steen said a true plan would be to have a schedule of which vehicles will be replaced when based on miles and hours.

McCauley, the president of the Fraternal Order of Police, said he hopes the report will make the city recognize its inefficiencies and the areas in which it can save money, as well as open the door to better communication with the police union.

"Wade Steen has ensured us that most of the practices Little Rock [Fleet Services] does is very unorthodox," McCauley said. "It will be well worth the money we spent to see that the citizens see we are not only willing to police the community, but also police city government and its finances. It's [the citizen's] money."

In response to a request for an interview about the accountant's audit, Moore told the Democrat-Gazette that he hasn't seen the report yet and didn't agree to an interview.

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Copyright 2015, Arkansas Democrat-Gazette.