The Town of Chapel Hill, N.C., was improperly billed at least $210,035 by a vendor for parts that did not match the associated work orders. This was discovered by the Office of the N.C. State Auditor, which recommended the town implement stricter controls when managing invoices.

Since 2012, the town has contracted with a local parts vendor to purchase and manage the parts inventory for the Fleet Management Division. This required the parts vendor to operate a work space within the town’s operations center to supply parts and maintain an adequate parts inventory. The vendor provided a monthly bill listing all parts invoiced with related costs and an on-site employee to manage the operation.

A work order is generated for each repair request and is assigned to a technician who is responsible for beginning the repair process and obtaining the needed parts from the on-site vendor. The parts vendor employee documents the parts provided to the technician in the town’s work order system and the vendor’s invoicing system. The fleet supervisor reviews the labor and repair work before closing the work order, and the customer department is charged for the parts and labor noted.

Between Jan. 1, 2016 and Mar. 31, 2017, the town’s parts vendor improperly billed at least $210,035 for parts not included on associated work orders. The town failed to detect the errors because the town’s work order system did not interface with the vendor’s invoice system, the parts vendor did not provide adequate parts detail reporting, and the town’s fleet manager did not sufficiently review the invoices.

The improper billing was done by submitting invoices for parts not listed on the work order, adding to the voice parts not listed on the work order, and creating duplicate invoices for the same work order. As a result of the billing errors, the town paid for:

• $130,810 for parts that did not fit town fleet vehicles

• $75,923 for parts that may fit a town vehicle, but did not match the associated work orders

• $2,147 in core deposit charges, which are fees attached to auto parts that can be remanufactured for future sale.

• $1,155 for duplicate invoices.

The parts vendor has already reimbursed the town $134,112 for parts improperly billed, according to a response from the town. The parts vendor was not specified in the report.

The Auditor’s Office recommends that the town seek repayment for parts not used, implement procedures to adequately review invoices and work orders, and review invoices prior to the investigation period for additional parts that were improperly billed.

In January 2019, the town implemented new parts accounting procedures.

Read the full audit here.