Healthcare audit saves $2.1 million; audit of Public Safety shows lack of controls, excessive overtime, no weapons inventory

For Immediate Release
August 5, 2009

Contact: Steve Wasko at 313-873-4542; cell 313-212-5636; steven.wasko@detroitk12.org
Jennifer Mrozowski at 313-873-8401; cell: 313-401-9018; jennifer.mrozowski@detroitk12.org

An audit of Detroit Public Schools’ Office of Public Safety over a two-year period showed a lack of controls over cash management, excessive overtime by some Police and Security Officers and unused or wasted inventory. Meanwhile, an audit of healthcare dependents showed 411 ineligible people on the rolls, including some who were deceased.

The audit of the Office of Public Safety and an audit of healthcare eligibility were the latest in a series of operational audits that Emergency Financial Manager Robert Bobb ordered to be conducted throughout Detroit Public Schools’ departments to streamline the district’s finances and uncover misspending and wrongdoing.

“We commend the work of our Police and Security Officers in trying to make our schools safer,” Bobb said. “And yet, the audit of the Office of Public Safety showed a lack of controls that could place our children, staff or the citizens of Detroit in harm’s way, including no weapons inventory. That’s unacceptable.”

“Improving the safety in our schools is critical. This audit provides the basis for a reorganization of the operations of the Office of Public Safety to include better controls and cash management procedures and a necessary overhaul of our inventory system,” Bobb said.

Bobb also said the audit of healthcare eligibility produced needed savings in healthcare, which is one of the district’s fastest-growing expenses, and helped rid the rolls of people who should not be receiving costly district-paid healthcare.

“The healthcare audit, where we found 411 ineligible people on the rolls, including some who were deceased, brings an immediate savings of $2.1 million,” Bobb said. “Both audits help us achieve our mission to root out waste, fraud and corruption.”

Police Chief Roderick Grimes, who was appointed chief in June, said his department welcomes the review and is putting new systems in place to ensure better attendance, improved cash management and proper inventory. In addition, the department will make use of equipment that was discovered. Items that cannot be used will be disposed of or sold.

“This audit will help improve operations in the Office of Public Safety, which is a necessary step to ensuring that safety permeates every corner of the district and its schools,” Grimes said.

Among the audit findings:

*Poor attendance: Poor work attendance by Public Safety Officers has resulted in excessive overtime expenses for the department. On average, Police and Security Officers worked one month less than the minimal number of days assigned. That means in some cases, an officer takes 25 vacation and 17 sick leave days, 12 District holidays – and another month off. In addition, for the two-year period of 2008 and 2009, 55 Office of Public Safety (OPS) employees were on Workers Compensation and 11 received workers compensation both years. The number of missed work days results in manpower shortages. The actual amount of overtime in 2007-08 was $790,604 — or $740,604 over the budgeted $50,000 for overtime. Although the overtime expense of $465,369 was much lower in 2008-09, it still exceeded the budgeted amount by over $400,000.
Corrective action: Attendance and overtime is now being monitored.

*Missing or unused equipment: An inventory of OPS stock items found 160 blackberry phones, 97 two-way phones, 1,872 master locks, 132 safety kits, 50 hand-held radios and 13 printers stored at OPS facilities that were not recorded in the inventory records. Some of the items were new and could have been used by other departments or sold.
Corrective action: A plan has been put in place to make use of or sell unused equipment.

*Lack of weapons inventory: OPS did not have a master inventory list for weapons. The audit process included tracking 107 weapons, including two reported stolen and one that is at the Detroit Crime Lab.
Corrective action: A master weapons list now has been created.

*Unused vehicles: OPS did not maintain a vehicle log and personnel could not validate the number of fleet vehicles assigned to the department or where they are located. The audit found that OPS vehicles are located at various locations throughout the city (OPS Headquarters, Grant School, Farnsworth and East and West Terminals). An inventory was taken of all OPS vehicles; 80 vehicles were accounted for. However, 15 were inoperable, including 12 that were considered scrap and 3 with accident damage. The audit found 11 motorcycles that have been unused for 8 to 10 years, with mileage as low as 168. All the vehicles are registered and insured.
Corrective action: An inventory has since been created and a plan put in place to make use of or sell unused equipment and vehicles.

*Lack of cash management controls: A review of OPS’ cash management process for replacement badges found $750 in money orders in the desk drawer of the former Chief of OPS, according to the audit. The money accounted for 30 badges at $25 each, but auditors found no documentation of such activity, and they could not identify where any prior monies collected for replacement badges were deposited in a bank account. The auditors also noted that more than 75 percent of OPS expenditures were paid to three vendors over a three-year period, with more than 60 percent going to one vendor who provided integrated security services on school-based surveillance systems. OPS did not monitor vendor performance and specifically failed to review vendor invoices to ensure services that were billed were actually performed, resulting in overpayment for hours worked in one case.
Corrective action: A review of vendor contracts is under way, vendor performance is being monitored and a new cash management system has been put in place.

*Ineligible dependents: The healthcare audit provided a grace period for employees to remove ineligible dependents from their district-paid insurance. Based on Detroit Public Schools’ per-member per-year cost for 2009 of $4,790, the removal of the 411 ineligible dependents, including some who were deceased, will save the district about $821,000 from now to the end of the calendar year. For 2010, the full year savings, assuming health care inflation of 8 percent, would be about $2.1 million.
Corrective action: Ineligible dependents removed from health care rolls. District will pursue repayment, hereafter, when employees place ineligible dependents on rolls.

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