Gassing up

 Cayman Islands Auditor General Dan Duguay recently estimated – based on a report done by another auditing agency – that $500,000 worth of petrol purchased at the government fuel depot by employees of five departments was not used for job-related functions or even for government-owned vehicles.
   The purchases occurred with government issued gas cards between January 2008 and March 2009. A full 33 per cent of those purchases were viewed as “suspicious” by the auditor general’s office and identified problems that “should have been investigated by the organisations involved”.
   Duguay admits his office did not do the bulk of the work on this review; that was performed by the internal audit unit. However, he recently presented a report to the Cayman Islands Legislative Assembly based on that report, with his own comments added in, to ensure lawmakers were aware of the situation.
   The auditor general said he, along with internal audit unit Director Don House, have met with Police Commissioner David Baines to inform Cayman’s top cop of what their efforts had uncovered.
   To this date, Duguay says he’s unaware of any criminal investigation that has occurred as a result of the audit’s findings.
   When asked about whether the “suspicious” fuel purchases would be subject to a criminal investigation, the Royal Cayman Islands Police Service provided the following response:
   “If and where any criminal activity is suspected we will carry out an investigation. We will prosecute anyone deemed to have committed a criminal act.”
    Duguay said his office has taken the matter about as far as it can.
   “We’re not criminal investigators,” he said during a recent interview about the audit. “The police commissioner is aware of our concerns.”
   RCIPS declined to comment further regarding any issues of criminality surrounding the fuel depot purchases.
   
   ‘High probability’ of fraud
   The government’s internal audit unit looked at the five departments and statutory authorities that accounted for more than 73 per cent of fuel purchases at the North Sound Road facility between January 2008 and March 2009. Those agencies reviewed included the Royal Cayman Islands Police Service, the Department of Environmental Health, the Water Authority, the Public Works Department and the National Roads Authority.
   The audit unit’s conclusion was that a lack of internal controls by the management of these five departments led to the potential for significant fraud to occur with the purchasing of fuel.
   It also noted that similar problems might have occurred with other government agencies that were not reviewed.
   “Although testing was only conducted on the top five consumers of fuel from (the Department of Vehicle and Equipment Services), we feel that it is likely that the concerns noted for these five agencies would be seen in most of the other 55 agencies that purchase fuel,” the internal audit unit’s report concluded.
   There were approximately 1,600 gas cards identified to have been in use during the period reviewed by the internal audit unit. Central government, statutory authorities and government-owned companies combined employ slightly more than 6,000 people in the Cayman Islands.
   That means about 27 per cent of all those employed by government had fuel cards, although the report did identify a number of government employees (about 100) who possessed more than one such card.
   A number of problems with vehicle fuelling – described as “severe breakdowns in all elements of the control system” were identified by the auditor general’s office:
   1. Twenty-six per cent of the fuel cards and drivers cards issued by the five government agencies reviewed belonged to people who were no longer employed with the agencies who had issued those cards.
   2. Vehicle cards issued by the five agencies could not be found in the records of those agencies.
   3. The review of nearly 10,000 fuel purchases over a 15-month period found that the employees or ex-employees using the gas cards only entered the vehicle’s odometer readings about eight per cent of the time.
   4. The Department of Vehicle and Emergency Services, which supervises the government fuel depot on North Sound Road, does not use cameras to monitor that location.
   These factors make it difficult to prove who was using the card, and for what vehicle.
   “To pinpoint one specific person, we may not have enough evidence,” said Deputy Auditor General Garnet Harrison.
   The internal audit unit report was completed in December 2009, although Department of Vehicle and Equipment Services officials had issued warnings about government workers’ use of the fuel depot as early as May 2009 in an internal memo.
   Harrison said that internal audit reports are typically sent to the Financial Secretary and copied to the auditor general’s office. They are not formally presented to members of the Legislative Assembly as are the auditor general’s reports.
   In this case, Duguay said he believed the gas card report was significant enough to be brought to lawmakers’, and the general public’s attention.
   “We came to the conclusion that it was a very high probability that significant fraud relating to the use of fuel for non-governmental purposes had, and continues, to take place,” Duguay noted in his report.
   
   The break down
   For the 15 months studied by the internal audit unit, government fuel purchases totalled  $2.53 million.
   The largest single purchaser was the Department of Environmental Health at $730,710 (30 per cent), followed by the National Roads Authority at $385,337 (15 per cent), the Royal Cayman Islands Police Service at $322,362 (13 per cent), the Water Authority $286,363 (11 per cent), and the Public Works Department at $112,570 (four per cent).
   The 50 other government agencies that receive gas cards spent $691,297 during the period, but they were not reviewed by the internal audit unit.
   The Department of Vehicle and Equipment Services uses a fuel management system called GASBOY. To use the system, government employees need two cards; a driver’s card and a vehicle card. Driver’s cards are given to those who have control of a government vehicle. Vehicle cards are assigned to any government apparatus – such as cars, trucks, and generators – that needs petrol to operate.
   To use the gas pumps the worker must first enter their driver card with a personal identification number. The user then has to ID which vehicle or apparatus is being fuelled.
   After fuelling, GASBOY generates two reports: fuel usage by vehicle, and fuel usage by department. According to auditors, both reports should allow anyone looking at them to ensure fuel purchases are for reasonable government use.
   According to the auditor general, “practically every control in place to monitor usage had been circumvented or inadequately controlled”.
   In addition, auditors stated that reports from the GASBOY system were not adequately reviewed for “unusual behaviour”.
   Auditor General Duguay pointed out that there were simply too many cards (1,600) issued to government users.
   Some 863 of those cards that were assigned to the five government agencies who used the most fuel were studied. Roughly 25 per cent of those fuel cards (228) were issued to people who were not on the payroll of the government entity any longer.
   “It was suggested…that the main cause of this was that employees leaving the civil service did not turn in the gas cards and the entities involved did not take proactive measures to ensure that these cards could not be used,”. Duguay commented.  
   
   Problem areas
   More than 100 employees had been issued two or more active fuel cards.
   “The issue of fuel card distribution indicates a total lack of management control and responsibility over the crucial control,” Duguay’s report noted.
   The internal audit unit found four of the five government agencies reviewed did not have proper procedures for fuel card management and usage. Auditors also noted that four of the five agencies didn’t even require employees to sign a fuel card usage agreement – hindering management’s abilities to hold workers accountable if they did abuse gas cards.
   There were nearly 10,000 fuel purchases made between January 2008 and March 2009 that were studied by the internal audit unit. Auditors identified a significant number of those that raised red flags.
   For instance, there were 1,477 fuel purchases made during the period that occurred less than one hour apart from each other. Those purchases sometimes exceeded the tank capacity of the vehicle the government employee claimed was being filled.
   Another 1,416 fuel purchases involved the same fuel card being used twice in one day.
   In some cases, government agencies gave perfectly reasonable answers for why fuel cards would have been used more than once an hour or the same cards used twice.
   The Royal Cayman Islands Police Service noted that some transactions during the January 2008 to March 2009 period occurred just prior to an approaching hurricane.
   “(It) is part of the RCIPS hurricane plan to ensure that all of their vehicles are filled with gasoline when Islands are put on a hurricane watch or warning,” the police service noted in its management response to the audit. “The majority of the multiple transactions highlighted in the audit were due to this policy in which a single officer would use his or her fuel card to fuel all police vehicles.”
   The Department of Environmental Health noted that some of its garbage trucks and some other vehicles are fuelled twice a day because of double-shifts. Workers leaving a shift must make sure the truck is filled prior to their relief workers coming on, department officials said.
   Another major problem identified by the audit unit involved gas cards that were registered to people who were no longer government employees.
   The internal audit unit stated that the RCIPS, for example, had 505 “active” employee fuel cards, but that nearly 28 per cent of those (141 cards) belonged to individuals who were ex-RCIPS employees.  
   One of those ex-RCIPS employees made 156 transactions at the Department of Vehicle and Equipment Services facility between 1 January, 2008 and 17 January, 2009. That employee had left the police service on 28 February, 2007, audit records showed.
   Another RCIPS employee who left the service in November 2008, had charges through March 2009 on the gas card was that previously assigned to them.
   There were eight former police service employees identified in the internal audit report who had made at least one gas card transaction after leaving the service.
   The police service wasn’t the only agency to have gas cards held, and in use by, former workers. According to audit records, there were 38 cards held by former Department of Environmental Health workers, 25 held by former Water Authority employees, and 24 held by ex-public works employees.
   The Department of Environmental Health told the audit unit it had deactivated the 38 cards belonging to its former workers shortly after the audit was released. The Water Authority said it had sent some requests for gas card cancellations to the Department of Vehicle and Equipment Services prior to the audit being completed. However, the Water Authority did not request confirmation that those requests had been affected.
   The Public Works Department may have sent requests to cancel gas cards held by ex-employees, but auditors said there was nothing on file to prove those requests had been made.
   According to an RCIPS statement submitted to the audit unit, processes were put in place to cancel ex-employees cards and that a list of deactivation requests had been sent to the Department of Vehicle and Equipment Services. The police service said it will request a quarterly report from vehicle and equipment services to verify that only current employees have active fuel cards.
   
   Fixing things
   The government’s internal audit unit has recommended that all agencies require employees to sign fuel usage agreements in the future. They’ve also said that only one gas card should be issued to each government employee.
   The five agencies involved in the fuel audit all agreed to those recommendations.
   The agencies also promised to do a better job of cancelling gas cards once an employee leaves their employment, and to more strictly monitor fuel usage by their current workers.
   “The internal controls surrounding the fuel usage and management processes require drastic improvements,” the internal audit unit’s report concluded.
   Implementing the audit unit’s recommendation would be a good first step, Duguay said. But he added that “more drastic steps” needed to be taken.
   “The present GASBOY system provides 24 hours per day access to fuel,” Duguay noted in his report. “However, the vast majority of government vehicles should be able to fuel during the normal hours of the work week.”
   “The office of the auditor general has concluded that the government should review its policies and controls for fuel distribution to ensure that they provide an effective means to ensure that fuel is used for government purposes only.”
  

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