Executive Summary: Internal Audit Report # 09-04 Property and Building Management Audit Organization Impact: Overall Conclusions: Is accountability and responsibilities for facilities and property management clearly delineated? The Capital Projects Group (CPG) is responsible for overseeing the design and construction of facility assets while the StarTran, Inc. Building Maintenance Department is responsible for maintaining these assets following inspection and acceptance, e.g. Certificate of Occupancy. Although the Building Maintenance Department and Capital Projects Group impact each other, both departments have acknowledged the need for greater cooperation during the commissioning of new facilities and infrastructure. For example, weaknesses exist in the transfer process which may lead to omissions in adding assets to Spear 4i Work Management System (Spear) to enable subsequent scheduling of preventative maintenance. To reduce the risk of future asset omissions, Capital Projects Group (CPG) and Building Maintenance (BMT) staff will clarify specific responsibilities, requirements, and criteria as well as documenting involvement in project planning and close-out phases. When Internal Audit compared the contractual scopes of services for outsourced maintenance work to job descriptions for building and facilities maintenance staffs, overlapping responsibilities were identified in seven of thirteen primary maintenance contracts managed by Building Maintenance. For one of these contracts, a modification is currently underway to remove the identified overlap. 1 While the current managers of the Maintenance and Contracts & Procurement Departments state that overlaps are controlled and that they have a good understanding of the extent and limits of responsibilities, when practice and written documentation diverge, the risk of duplication and inflated costs is increased. Furthermore, since the Building Maintenance Department and Capital Projects Group perform interrelated work, this has confused end-users attempting to submit maintenance requests and obtain status on existing requests. 1 A pending modification to the Veolia commuter and freight rail services contract will remove responsibility and accountability for landscaping and custodial services.
Authority management is consolidating strategic management over the Authority s facilities and infrastructure and maintenance contractors. Staffing decisions to address conditions identified in this audit have been made and resulting position changes will be reflected in the FY2010 Operating Budget. Are systems and processes in place and working effectively to capture, manage, and complete maintenance work orders? The Spear Work Management System is in place to capture and manage maintenance work orders, but it has not been fully utilized as intended. While the Spear work order system procured from Hansen Information Technologies was implemented primarily for maintaining vehicle assets, it was also designed to serve facility and property maintenance needs as well. The work order system provides the capability to capture and analyze a broad set of data pertaining to these functions. However, an incomplete universe of the required assets and preventative maintenance elements currently limits the Authority s ability to leverage Spear s capabilities in building a comprehensive facilities maintenance plan. For instance, the project of entering all equipment located at the North Operations facility in Spear is not complete. To address this, all equipment and/or assets as well as preventative maintenance requirements (except for fixed route services contracted to Veolia at the Northeast Operations location 2 ) will be identified and captured into the Spear system by November 12, 2009. 3 The Building Owners and Managers Association (BOMA) states that once all preventative maintenance information is known, staffing levels can be validated and personnel scheduled based upon the length of time anticipated to accomplish the identified tasks. 4 Although the FY2009 Building Maintenance Business Plan includes an initiative to populate data on planned task times, the initiative remains outstanding as the planned hours are not consistently recorded in Spear. Lastly, some work orders are not consistently processed properly, leading to omitted or inaccurate data captured in this primary tracking system. Along with capturing assets and preventative maintenance requirements in Spear, estimated times to complete maintenance tasks will be included in preventative maintenance tasks. Beginning July 15, 2009, Building Maintenance Supervisors will review and reinforce work order accuracy to ensure that work order data accurately reflects efforts to complete the preventative maintenance plan. Do appropriate quantity and composition of maintenance staff exist to ensure timely and quality services? Internal Audit was unable to determine whether the appropriate quantity and composition of maintenance staff exist to ensure timely and quality services. Overall maintenance needs and effective labor budgeting cannot be identified without a complete preventative maintenance plan based solely on verifiable, accurate data. Given audit findings regarding the use of the Spear system to track preventative maintenance, the assumptions used in these calculations could not be fully validated by Internal Audit. However, once all preventative maintenance and budget times are 2 Maintenance functions for the Northeast Operations facility (located at 5316 51 st Street) is currently contracted to Veolia and will remain the responsibility of current and future service providers operating from this location. 3 This finding is consistent with a deficiency raised by the FY2009 FTA Triennial review. The FTA required that the facilities maintenance plan for the North Operations location be completed no later than November 12, 2009. 4 Source: BOMA (Building Owners and Managers Association International) Preventative Maintenance and Building Operation Efficiency, 2003, pg. 28, 33, 42. Capital Metro Property and Building Management Audit #09-04 Page 2 of 6
completed, this information will be used by management for analysis and to validate staffing decisions. In the interim, the Building Maintenance Department recently estimated projected staffing levels based on the maintenance needs and square footage of existing facilities. These calculations indicate that the Building Maintenance Department needs an additional five full-time equivalent (FTE) positions to meet all maintenance obligations. 5 Is adequate oversight provided to ensure contracted property management tasks are performed in compliance with contract terms and conditions? At the time of audit fieldwork, Internal Audit evaluated thirteen maintenance contracts valued at $3,763,040. 6 The supervisory tasks, estimated time for completion, and evidence of contractor monitoring and oversight for these contracts have not been routinely documented or captured in Spear. As a result, Internal Audit was unable to fully ascertain the adequacy of contractor monitoring. The Building Maintenance Superintendent is responsible for monitoring and inspecting work performed by these contractors. Effective oversight is required to verify that these functions are performed according to contract specifications. Outsourced maintenance work has an increased risk of ongoing poor or inadequate performance when there is not regular monitoring and oversight. Remote locations for which maintenance is largely performed by contractors, such as the transit centers and rail stations, carry an increased risk since casual oversight is less likely. To address this risk, the Building Maintenance Superintendent has developed a checklist for performing oversight of contractor maintenance and appropriate intervals for all contractor performance inspections and criteria for evaluation will be determined. Evidence of periodic inspections will be documented and maintained and any deficiencies identified will be addressed with the contractor and escalated to the corresponding Contracts Administrator. Are effective processes in place to manage lease agreements and maximize rental income for Authority-owned real property leased to others? Management of downtown property leases was transferred from the Rail Project Manager to the Real Estate Department in 2008 in order to increase rental income. Prior to the transfer, property rental rates had rarely increased. Now, comparisons of actual to market value rental rates are being monitored by the Real Estate Manager. As of November 2008, the downtown property lease rates ranged between 45% and 85% below market value. 7 Rental rates are still well below market values, but annual rental increases now average approximately eight percent. However, formal revenue 5 The summary of the unaudited analysis prepared for the FY2010 Budget by the Maintenance Department indicates that current staffing of 18 FTEs (comprising 14 technicians, 1 utility worker, 2 supervisors, and 1 superintendent) should be expanded to 23 FTEs (adding 4 technicians and 1 coordinator). This recent estimate is similar to positions requested in FY 2007 which have not been funded. 6 The figure presented is the cumulative authorized amount for the maintenance contracts of which $1,935,150.34 has been expended as of May 31, 2009. This figure excludes the cost of the two Veolia contracts for which the maintenance components are a negligible and indivisible amount of the overall contract costs. 7 Because of his expertise, market rental values were calculated by the Real Estate Manager and not separately validated by Internal Audit. Capital Metro Property and Building Management Audit #09-04 Page 3 of 6
goals and related procedures to maximize rental income on downtown property have not yet been established. 8 Unlike rental properties, management of Rail ROW license agreements has not fully transitioned from the Rail Program Manager to the Real Estate Department. As such, formal procedures for managing rail right-of-way (ROW) do not exist. Currently, there is confusion as to how and when responsibilities transition from the initial approvals of new license agreements by the Rail Program Manager to the ongoing management performed by the Real Estate Manager. For example, although the Real Estate Manager has initiated fee increases, the Rail Program Manager is still processing new license applications and setting initial license rates. However, once under the Real Estate Manager, annual fees on license agreements have been increased. Over 60 percent of these agreements (87 of 143) reflect an increase varying from 7 percent to 40 percent. Another 22 percent (32 of 143) increased at even higher levels to catch-up for unadjusted years. However, at least twelve of those higher increases exceeded specified allowable limits. When increasing rates, greater attention will be given to lease terms both to maximize the fair value of these arrangements and to ensure that increases are allowable according to the specific provisions of the related lease agreements. Corrective action plans to formalize internal processes and responsibilities for the management of license agreements are detailed in the report. Audit Highlights Major Issues and Action Plans: This executive summary includes only the most significant audit issues. All audit issues and corrective action plans are included in the detailed audit report. For additional information, refer to the corresponding recommendation there. 1. Centralize accountability and strategic leadership for facility management within Capital Metro. Opportunities exist to re-focus the organizational structures and FY2010 operating budgets of the Building Maintenance and Capital Projects Group. Executive management closely evaluated the following impacts when considering potential structural and funding changes: Need for increased coordination between departments, especially when commissioning of new facilities and infrastructure; Skill sets and expertise of department personnel; Customer service; and Accountability and responsibility for oversight of external contractors. To leverage this opportunity, responsibility for maintaining Capital Metro properties will be assigned based upon a property s classification as either a public facility or an operations facility. Effective by October 1, 2009, the Director of Capital Projects Group and Property Manager will be responsible for all components and contracted services for public facilities which include bus stops, shelters, benches, transit centers, park & ride facilities, and rail 8 The FY 2009 Business Plan for the Real Estate Department included formalizing real estate procedures as a planned initiative. Capital Metro Property and Building Management Audit #09-04 Page 4 of 6
platforms. The current staff of the Facilities Maintenance group will be combined within the Property Management/Capital Projects Group to facilitate this oversight responsibility. Alternately, the Director of Maintenance and Building Maintenance Superintendent will be responsible for all operations facilities, which includes 2910 East Fifth Street, 509 Thompson Lane, 624 Pleasant Valley, and North Operations locations. Revised contact information will be distributed to all personnel once the realignment of responsibilities has been completed. 3. Fully leverage Spear 4i Work Management System capabilities to manage preventative maintenance needs and resources. The Spear 4i Work Management System (Spear) has not been fully utilized to manage preventative maintenance on Authority facilities and supporting infrastructure. Best practice guidance from the Building Owners and Managers Association (BOMA) recommends building a facilities preventative maintenance plan bottom up based on a compilation of all identified maintenance requirements. However, an incomplete universe of the required preventative maintenance elements currently limits the Authority s ability to leverage Spear s capabilities in building a comprehensive facilities maintenance plan. 9 For example, not all preventative maintenance work orders for the North Operations Center have been created. 10 BOMA further states that once all preventative maintenance information is known, staffing levels can be validated and personnel scheduled based upon the length of time anticipated to accomplish the identified tasks. 11 Additionally, planned hours (benchmarked, budgeted time expectations) are not consistently recorded in Spear. Lastly, user data entry errors have rendered some work order time data in Spear unreliable for future analysis. To address this, the Director of Maintenance and Building Maintenance Superintendent will ensure that all assets and preventative maintenance requirements (except for Northeast Operations location 12 ) are entered into the Spear system by November 12, 2009. 13 To ensure that work order data accurately reflects actual efforts to perform preventative maintenance activities, the Building Maintenance Superintendent will review and reinforce to staff the need for work order accuracy. Once all preventative maintenance and budget times are completed, this information will be used to assess, and if appropriate adjust, future staffing levels. 4. Improve documentation and oversight of contractors performance. Although contractors perform a large component of the maintenance of Capital Metro facilities and infrastructure, only one of the primary maintenance contractors work orders have been tracked in Spear. In the case of one contractor (Veolia Rail), the failure to use Spear for facilities maintenance represents non-compliance with a contractual requirement. Similarly, the 9 See related Issue 2 regarding the accuracy and completeness of assets in the Spear system. 10 This observation is consistent with a deficiency included in the Federal Transit Administration s FY2009 Triennial review. 11 Source: BOMA (Building Owners and Managers Association International) Preventative Maintenance and Building Operation Efficiency, 2003, pg. 28, 33, 42. 12 Maintenance functions for the Northeast Operations facility (located at 5316 51 st Street) is currently contracted to Veolia and will remain the responsibility of current and future service providers operating from this location. 13 The November 12, 2009 deadline was dictated by the Federal Transit Administration as a result of its recent Triennial Review. Capital Metro Property and Building Management Audit #09-04 Page 5 of 6
subsequent supervisory tasks, estimated time for completion, and evidence of contractor monitoring and oversight are also not captured in the Spear system. Oversight of facility maintenance performed by Veolia, the fixed route services contractor operating out of the Northeast Operations location, had likewise not been documented. In order to better document oversight and track related time, the Building Maintenance Superintendent has developed a checklist for performing oversight of contractor maintenance to the Authority s Northeast Operations facility. By August 1, 2009, the Building Maintenance Superintendent will determine appropriate intervals for all contractor performance inspections and criteria for evaluation. Evidence of periodic inspections will be documented and maintained according to record retention policies. Deficiencies identified during these inspections will be addressed with the contractor and escalated to the corresponding Contracts Administrator. In addition, compliance with Spear usage by the rail contractor will be enforced by the Contracts Administrator. The Building Maintenance Superintendent will also record and track time spent performing management oversight tasks. Data will then be used to develop estimated time budgets for future analysis and staffing allocations. ACCEPTED: Signature on File Mayor John Cowman Chair, Planning, Finance & Audit Committee Signature on File Fred M. Gilliam President/CEO cc: Capital Metro Board of Directors Kerri Butcher, Interim Chief Counsel Terry Garcia Crews, General Manager, StarTran, Inc. Andrea Lofye, Interim Chief Operating Officer Doug Allen, EVP & Chief Development Officer Randall Hume, EVP Finance & Administration Scott Phebus, Assistant Director Operations Performance and Analysis Donna Simmons, Director, Human Resources Shanea Davis, Director, Contracts & Procurement John Hodges, Director, Capital Projects Group Carl Woodby, Director, Maintenance Perry Dillard, Building Maintenance Manager Vincent Sandoval, Real Estate Manager Bill LeJeune, Director, Rail Operations Sue Mugno, Rail Program Manager Capital Metro Property and Building Management Audit #09-04 Page 6 of 6