Water Management still leaky — $18.2 mill loss in supplies, IG says
BY FRAN SPIELMAN City Hall Reporter November 5, 2013 12:46PM
Updated: December 7, 2013 6:22AM
Chicago’s Department of Water Management has tightened warehouse security, but internal controls remain “inadequate” to prevent loss or theft of $18.2 million worth of pipes, valves and other supplies used to repair water and sewer mains, a follow-up audit concluded Tuesday.
Thirteen months after concluding there was a “serious potential for loss or theft” of costly metal parts, Inspector General Joe Ferguson said not enough has changed at the city department at the center of the Hired Truck scandal.
Security cameras, guards and swipe card access panels have been installed to tighten “security vulnerabilities” at a main warehouse that once leaked like a sieve, Ferguson said. The department also has corrected a “database reporting error” that caused an “understatement of at least $152,955” in the year-end balance reported to the city comptroller’s office.
But the newly-reappointed inspector general said Water Management has made “no meaningful progress towards fixing the deficient internal inventory controls” he identified last fall.
Physical inventory at three storage facilities still doesn’t match “inventory balances” recorded by an internal software system for 34 of 84 parts sampled — or 40 percent of the sample.
That’s a mere 3 percent improvement from a year ago in a department knee-deep in a $3 billion rebuilding program bankrolled by Mayor Rahm Emanuel’s plan to double water and sewer fees over four years.
And a record keeping problem that caused Water Management to overstate its inventory of parts used to repair fire hydrants still has not been corrected, even though the department claims to have upgraded its software system.
“Internal controls are still inadequate to ensure that assets are properly accounted for and safeguarded,” Ferguson wrote in the follow-up audit.
Water Management Commissioner Tom Powers cited “a number of possible reasons” for the discrepancies, including employees “incorrectly counting the number of parts in inventory and cycle counts not being performed routinely.” He also cited a staffing shortage.
But Ferguson didn’t buy it. Some of those same explanations were offered last year.
“These responses in themselves point to persistent systemic deficiencies in the department’s inventory processes and reporting,” he wrote.
“Furthermore, inaccurate inventory balances of parts used to repair fire hydrant heads persist and may lead to a 2013 year-end financial overstatement [as] much as our original audit found.”
Water Management spokesman Tom Laporte responded to the IG’s audit by pointing to the changes the department has made.
“We agree that there is always room for improvement, and in response to the 2012 audit, we have added security measures, undertaken a new process to enhance training and have added more cameras,” Laporte said.
“The Inspector General’s auditors acknowledged that many of the miscounts were either already accounted for in paper back-up, or were of low value or discontinued items. We conduct daily spot counts on high value items, and going forward, the Department will complete cycle counts quarterly to ensure accurate inventory control.”
Ferguson said the department is “in the process of developing written policies and procedures to guide manual inventory operations.” But he noted that the department is “still not following the comptroller’s required citywide inventory policies” and procedures.
“In the absence of policies and procedures for manual inventory operations, there is no consistent guidance for reporting inventory deficiencies to management or facilitating management oversight of inventory processes,” he wrote.
Water Management’s parts inventory is stored at five locations. Two of them — the main warehouse at 39th and Iron and a pipe yard at 31st and Rockwell — order parts from outside vendors.
The Water Management audit was one of two Ferguson conducted last year to shine the light on, what he called “sub-standard” inventory controls at major city departments.
The inspector general also concluded that the Chicago Police Department was unable to locate a “significant volume” of evidence and property found or seized by its officers because 2.2 million items were being inadequately protected, documented and stored.