Palo Alto officials have halted the city's vehicle-replacement program after an audit found that more than a third of the vehicles in the city's fleet were underused in fiscal year 2009, according to a new report from City Auditor Lynda Brouchoud's office.
The report, which was released Wednesday afternoon, reviewed the mileage data for 120 transport vehicles (sedans, vans and light pick-up trucks) in the city's fleet and found that 38 percent of them were driven less than 2,500 miles -- the city's threshold for "minimal utilization."
The city's policy requires departments to obtain exemptions for all vehicles that don't meet the minimal utilization criteria. The policy, according to the audit, is designed to justify the continued use of these vehicles.
The city's high percentage of underutilized vehicles is particularly startling given that Palo Alto's 2,500-mile threshold is much lower than those in other nearby cities. Redwood City has a 5,000 annual-mile minimum (much like Palo Alto, before it changed to 2,500 in 1995), while San Jose has a 10,000-mile threshold for city-owned sedans and pick-up trucks. One of the audit's recommendations, in fact, is "increasing the standards to more cost-effective levels."
Palo Alto's underutilized vehicles cost the city about $396,000 in fiscal year 2009, which ended June 30, the audit found.
To avoid more unnecessary expenditures on unused vehicles, Palo Alto officials decided to freeze the city's replacement program for non-emergency vehicles once the auditor's office shared its preliminary results. The new audit recommends that the Public Works Department's fleet management continue this freeze until it can "reduce the size of the fleet and increase utilization."
By freezing its vehicle replacement program in 2010, the city refrained from spending about $2.5 million (about $948,000 of which would have funded underutilized vehicles). The audit recommends that the freeze continue until the fleet-management team comes up with a better plan for vehicle usage.
"In our opinion, fleet underutilization should be addressed before spending City resources on additional replacements and additions," the report states. "Public Works fleet management should develop an action plan to increase fleet utilization and ensure the City has the optimal size fleet and use of fleet resources."
The recommendation is one of 22 in the new audit, which was conducted by Senior Auditor Edwin Young. One of its most significant recommendations is replacing the current system, under which each department is allocated a certain number of vehicles, with a citywide vehicle pool that would be accessible to all departments.
A citywide pool would make it easier for departments to share vehicles and would improve fleet utilization, the audit argues. But the proposal has previously encountered resistance from some departments, which apparently didn't feel like sharing their cars with outsiders.
"Throughout the audit, PWD fleet management noted difficulty in encouraging departments to share vehicles or equipment, and a lack of authority to reassign or redistribute vehicles," the audit stated. "Once assigned a vehicle or equipment unit, individual departments maintain control over the use."
The audit also uncovered lax security at some city vehicles, including one unlocked Utilities Department truck that was left parked at the Stanford Medical Center with the keys in the ignition. An auditor also physically inspected 26 randomly selected city vehicles and found 10 Utilities Department trucks with doors unlocked and keys in the ignition at the Municipal Services Center lot.
The auditor shared these findings with the Utilities Department, which directed staff to cease this practice, according to the report. A follow-up inspection last year found all utilities trucks secured with keys removed except one (the lone offender subsequently removed the keys and locked the truck).
The audit cites one case in October 2007 when an unlocked Community Services Department truck with keys in the ignition was stolen from the Municipal Services Center (it was later recovered). In another case, $16,000 worth of equipment was stolen from three utilities services trucks.
The audit recommends that fleet management "include requirements for securing vehicles and equipment within the fleet policies and procedures" and "ensure compliance by employees."
According to the audit, the city's fleet has about 461 units of "rolling stock," which includes transport vehicles, public safety vehicles and heavy machines such as loaders and backhoes. The report also identifies 169 units of "non-rolling stock," which includes equipment such as trailers, compressors and generators.
Glenn Roberts, director of the Public Works Department, wrote in a response to the audit that staff agrees with all 22 of the audit's recommendations, including a new policy for securing vehicles. The department has already initiated a review of underutilized vehicles, Roberts wrote. Four such vehicles have already been voluntarily returned by departments, he noted.
Roberts also said the city's vehicle policy "will be revised to detail a more stringent review and approval process." He also agreed with the audit's recommendation on a citywide vehicle pool. Staff has already begun to implement a "centralized, automated pool reservation system" at the Municipal Service Center -- a project he expects to be completed this summer. Vehicles parked at the City Hall garage are scheduled to be added to the automated system by June 2011.
City staff will also seek outside assistance to further analyze vehicle utilization and evaluate cost-saving measures such as car pools, mileage reimbursement and the "outsourcing of specialized equipment needs," Roberts wrote.
"The goal of this effort will be to maximize the utilization of fleet resources, and to improve the cost-effectiveness of the City Fleet in support of City programs, while assuring reliable service delivery," Roberts wrote.
Bouchoud said she was pleased with staff's response to the audit's preliminary data, particularly with the decision not to spend $2.5 million on the vehicle-replacement program. City Manager James Keene is also including $483,000 in projected budget savings in the Vehicle Fund for fiscal year 2011.
"We're really happy that they took the information and were proactive in addressing it," Brouchoud said. "We had $2.5 million in savings in 2010 and another $483,000 in 2011 -- that's definitely progress."