The Lake County, Fla., fleet management division has been charging too much for labor costs and too little for parts costs, according to an audit from the county’s inspector general’s office that analyzed Oct. 1, 2013 to April 30.
The division charges $68 per hour for labor costs, which the auditor calculates is more than enough to cover costs, and management’s recommended increase of the labor rate to $103 was unnecessary, according to the audit. Additionally, the division charges a 15% markup on parts, which the auditor said is too low. A 20.6% surcharge should be sufficient in 2015 and that management’s recommendation to change this to 36.8% was too high, the audit found.
The fleet division charges 15% for outsourced work, which the audit found to be too high. Fleet charges this amount for employee time spent on work orders and calls related to the repair, but with a 15% markup, the auditor found this once meant fleet charged a department $2,751 just to manage an outsourced job.
Management had already expressed to the county board the desire to absorb these costs into the shop rate and eliminate the processing fee for outsourced work, and the auditor stated that this was reasonable since minimal time is spent on this activity.
The billing errors can be corrected if the fleet division analyzes its actual costs periodically and adjusts its rates accordingly and stop billing customers a surcharge on outsourced work, according to the audit.
Other recommendations included changing county policy to require departments to use fleet management, which is currently not mandated. Fleet should also develop and implement written policies and procedures, including a procedure for making the decision to outsource work; improve work order processing; ensure that preventive maintenance is performed on all vehicles in accordance with established standards; establish a formal performance measurement system; and implement a system of standard labor times for repairs and maintenance for comparison purposes.
Except for the deficiencies noted, fleet is providing cost-effective service, billings accurately reflect actual costs, and fleet is being used properly by departments, the auditor’s report stated. The fleet unit's management agreed with the auditor’s recommendations and has begun implementing many of them.
For the full audit, click here.