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HomeMy WebLinkAboutCCL Final ReportDESCHUTES COUNTY / OREGON DEPARTMENT OF TRANSPORTATION SITE REVIEW PROCESS REPORT SEPTEMBER 19, 2008 CENTRAL CASCADE LINE, INC. BACKGROUND In June 2008, Deschutes County initiated a review process to determine if Central Cascade Lines, Inc. (CCL) is qualified to receive certain federal and state funding to operate public transportation programs. The County contacted the Oregon Department of Transportation (ODOT) to provide technical assistance in the review process. Although the review was prompted by specific complaints made by former employees and passengers of the agency, the process was primarily intended to determine if CCL, a new organization incorporated in the State of Oregon in 2006, is operating in accordance with state and federal laws and regulations governing such programs in anticipation of receiving public funding. This report outlines findings as determined through the site review process and represents the joint observations, opinions, and conclusions of County and ODOT staff assigned to conduct the review. To date, the review process has consisted of the following: 1. Site Review Checklist: CCL completed and submitted on June 30, 2008 a site review checklist which answered specific questions related to the organization’s financial, management, and legal sufficiency; transit operations, safety, and security procedures; and compliance with the Americans with Disabilities Act (ADA). 2. Initial Site Visit: County and ODOT staff visited CCL on July 18, 2008 for the purpose of verifying information provided in the site review checklist by viewing written records and operational systems. Steps 1 and 2 of the process were described at length in a summary report which was prepared by County and ODOT staff on July 31, 2008 and presented to the Deschutes County Board of Commissioners in a public meeting held on August 4, 2008. That report, included background information about CCL, a history of the issues, and an assessment of the agency’s operational capabilities at the time of the visit. The report concluded that CCL was unable to provide documentation necessary to verify compliance with the requirements necessary to receive public funding. 3. Request for Additional Documentation: During the August 4 meeting, the Deschutes County Board of Commissioners agreed to give CCL additional time to compile and submit the necessary documentation. Ms. Lupita Lewis, representing CCL, was asked to provide a timeline in which the agency could accomplish this task. In an electronic message dated August 6, Ms. Lewis indicated that the documents described as insufficient in the summary report would be delivered to the County by August 25, 2008. CCL submitted some, but not all, of the documents requested by this date. County staff requested the missing information in a series of follow-up Page 1 of 13 communications, but several items, including a procurement policy, driver training plan, and safety and security plan were never delivered. At no time following the Deschutes County Board of Commissioners meeting did Ms. Lewis or any other representative of CCL request technical assistance from either the County or ODOT in preparing the requested documents and, although the Board of Commissioners indicated that an extension could potentially be granted with adequate notice, CCL did not request additional time to complete or submit the documents. 4. Second Site Visit: County and ODOT staff conducted a second site visit on August 28, 2008 to determine if CCL was operating in accordance with the policies and procedures both submitted during the initial site visit and in response to the subsequent request for additional documentation. CCL was provided, in advance of the visit, with a list of supporting documents and other information for reviewers to evaluate on site. Board President Lupita Lewis, Board Vice President T J Miller, Board member Berry Mills, Deschutes County Citizens Action Group member Tom Bradler, and Certified Public Accountant (CPA) Chris Telfer were present during the site visit on behalf of CCL. Deschutes County Management Analyst Judith Ure, ODOT Public Transit Division Capital Program Manager Joni Bramlett, and ODOT Public Transit Division Internal Fiscal Analyst Jim Jordan served as reviewers on behalf of the County and the State. Lupita Lewis requested permission to make an audio-recording of the site visit for future reference. Permission was given and Berry Mills operated the equipment to do so. ASSESSMENT The following sections of this report represent an overview of the issues and findings identified by County and ODOT staff during the review process. Financial Policies, Procedures, and Controls Issue 1: CCL’s financial policies, procedures, and systems do not address several of the minimum requirements outlined in the July 31, 2008 Site Review Summary report, including: • Segregation of grant funds, matching funds, and expenditures. • Cash handling procedures and frequency of bank deposits. • Persons with authority for payment authorization and use of business credit cards. • Fare collection and accounting procedures. In addition, the document contains confusing or undefined terms and roles, including an executive committee, operations manager, budget holder, executive director, audit committee, and external auditor which are not reflected on CCL’s organizational chart and are not referenced in the agency’s articles of incorporation or by-laws. Although the agency’s by-laws state that “business and affairs of the corporation shall be managed by its Board of Directors,” the document does not include a date or signatures indicating that it was formally adopted and meeting minutes subsequently provided by CCL do not show that such action was taken. Page 2 of 13 Finding 1.1: CCL’s financial policies and procedures are not sufficient regarding many key business practices necessary to responsibly manage public funds. Finding 1.2: CCL’s financial policies and procedures are not consistent with its organizational structure and operations. Finding 1.3: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Issue 2: All financial responsibilities are assigned to a single person with no clear separation of duties or established system of checks and balances. Lupita Lewis, as President of CCL, receives payments, prepares deposits, writes checks, reconciles bank accounts, and performs all bookkeeping functions. While CCL employs a contractual accountant to prepare tax returns and some reports, this individual does not review financial records for accuracy or perform any routine reconcilements. The agency’s Financial Policies and Procedures document identifies certain functions to be carried out by an audit committee and external auditor, but these positions are not represented within organization and an audit has not been performed to date. There is no record that the Board of Directors has received regular financial reports or authorized any of the agency’s financial transactions. Finding 2.1: CCL’s financial management system does not have sufficient internal controls in place to effectively guard against potential errors, inaccuracy, misuse of funds, or fraud. Finding 2.2: CCL is not operating in accordance with its financial policies and procedures regarding audit requirements. Finding 2.3: CCL is not operating in accordance with its by-laws and articles of incorporation regarding Board oversight. Budget and Accounting Systems Issue 4: Although the Financial Policies and Procedures document states that “the annual budget of the organization shall be prepared by the Executive Director and approved by the Board on an annual basis,” CCL has not developed or approved an operating budget. CCL has also not identified an adequate level of reserves that “relate to current and long-range spending plans” as stated in the Financial Policies and Procedures document. A significant portion of the agency’s revenue was obtained from two separate personal loans on which no repayments have been made to date. On more than one occasion, CCL has requested emergency funds from the Deschutes County Board of Commissioners and ODOT to support basic expenses such as fuel, maintenance, and repairs. Finding 4.1: CCL is not operating in accordance with its financial policies and procedures in regard to an operating budget, spending plans, or reserves. Page 3 of 13 Finding 4.2: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Finding 4.3: CCL’s current financial capacity is limited and its resources are insufficient to ensure predictable and uninterrupted services. Issue 5: Financial systems and reports provide conflicting information at times. The cash balance shown on the first year tax return is different from the amount shown in the agency’s financial system for the same period. Bank reconcilements do not always correspond with financial statements. Although the agency’s Financial Policies and Procedures document states that “revenue shall be recorded in the period earned” and “all expenses shall be recorded when incurred,” financial transactions are not always recorded in a timely manner. In one case, a significant revenue source was not entered into the financial system until several months after receipt and, at the time of the August 28, 2008 site visit, no accounting entries had been made since July 7, 2008. Finding 5.1: CCL’s financial systems and processes do not provide a consistent, easily verifiable statement of the agency’s financial position at any given time. Finding 5.2: CCL is not operating in accordance with its financial policies and procedures in regard to timely recording of transactions. Issue 6: CCL has no system in place to record or track volunteer hours, reimbursements, and/or contributions. In the initial site visit, Ms. Lewis indicated that records were not kept of volunteer services because volunteers do not receive compensation. However, two payments for $1,000 each that were made to Ray Lewis were recorded in the agency’s financial system for undefined “volunteer services”. Finding 6.1: CCL’s financial policies, procedures, and systems do not adequately account for or report volunteer hours or services. Finding 6.2: CCL’s accounting system does not provide adequate information to determine if compensation or reimbursement made to volunteers is appropriate, allowable, or consistent with the agency’s stated practices. Issue 7: Much of CCL’s start up and operating revenue appears to have been secured through two separate, interest-free promissory notes issued by Ray Lewis in an amount totaling approximately $100,000. There is no evidence that the Board of Directors has ever approved the two promissory notes as required by the agency’s by-laws. Finding 7.1: CCL is not operating in accordance with its by-laws as they relate to contracting indebtedness. Finding 7.2: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Page 4 of 13 Use of State and Federal Funds Issue 8: CCL did not submit a procurement policy in anticipation of receiving public funds and as outlined in the July 31, 2008 Site Review Summary report and requested by County staff in subsequent follow-up communications. Finding 8.1: CCL does not have the capacity to conduct a procurement process that conforms with state and federal rules and regulations guiding the use of public funds. Issue 9: CCL’s financial policies and procedures do not address tracking of equipment purchased with state and federal funds in anticipation of receiving public funds and as outlined in the July 31, 2008 Site Review Summary report, including: • Maintaining use consistent with purpose. • Identifying items as purchased with state or federal funds. • Keeping adequate records; protecting items from misuse, misappropriation, waste, etc. • Tracking items through a physical inventory system. Finding 9.1: CCL does not have an adequate system in place to effectively track and monitor equipment and therefore cannot use state and federal funds for this purpose. Issue 10: Of the four vehicles currently owned by CCL (none of which were purchased with public funds), one ownership title was missing at the time of the August 28, 2008 site visit. CCL subsequently provided to the County a copy of a request for duplicate title made to the Oregon Driver and Motor Vehicle Division (DMV). Finding 10.1: CCL does not have an adequate system in place to effectively track and monitor equipment. Issue 11: CCL provided no evidence of a system in place to account for public funds, including the minimum requirements stated in the July 31, 2008 Site Review Summary report: • A defined method to distribute costs. • A defined method to distribute administration and communal expenses. • A method of allocating costs to individual grant agreements. Finding 11.1: CCL’s financial system does not provide the means necessary to effectively track and account for public funds. Grant Administration Issue 12: CCL provided no policies or procedures addressing the subject of grant management and the agency does not have a cost allocation or other system in place to account for grants, including the minimum requirements stated in the July 31, 2008 Site Review Summary report: Page 5 of 13 • Tracking matching funds contributed to grants. • Tracking cash donations and in-kind non-cash contributions. • Documenting the source and amount of in-kind, non-cash contributions. • Documenting tasks and hours per task performed by volunteers. • Documenting volunteer reimbursements and/or payments. Finding 12.1: CCL does not have the capacity to properly account for grant revenues and expenditures. Issue 13: During the August 28, 2008 site visit, Ms. Lewis and the agency’s accountant indicated that all of CCL’s operational costs were being recorded against STF formula funds which are restricted by Deschutes County specifically for services for the elderly and persons with disabilities. Finding 13.1: CCL does not have the capacity to properly account for public funds which may be restricted in nature and/or require distinct matching funds or in-kind contributions that must be attributable and limited to the approved project. Issue 14: CCL has received a total of $22,500 in economic development grants awarded by the Deschutes County Board of Commissioners, including: • $1,500 awarded in 2006 to purchase a computer, monitor, portable computer with speech output, printer, office supplies, and a grant reference manual. • $2,500 awarded in 2007 for operational costs related to providing a shuttle service between La Pine and the Deschutes County fairgrounds during the 2007 County Fair event. • $3,500 awarded in 2007 to repair/replace the transmission and shift differential on a 25- passenger bus. • $10,000 awarded in 2007 for emergency funds to pay for fuel and wages. • $5,000 awarded in 2008 to purchase a high-speed photocopier. However, the agency has no system in place to track the receipt of local grants, account for the funds, or track the expenditures and did not provide evidence that the funds were used as intended. Finding 14.1: CCL does not have the capacity to properly account for grants and related expenditures. Finding 14.2: CCL cannot provide assurance that grant funds received have been expended consistent with their intended use. Procurement Policy and Procedures Issue 15: CCL did not submit procurement policies or procedures for review. Page 6 of 13 Finding 15.1: CCL does not have satisfactory procurement policies and procedures in place to make capital purchases in accordance with rules and guidelines regulating public funds. Management Operational Policies and Procedures Issue 16: Many of the documents submitted by CCL appear to be copied from published manuals, government guides, or materials developed by other agencies. Much of the information was not thoroughly or completely modified to reflect CCL’s specific business practices. In numerous cases, position titles and sub-committees are referenced that do not appear on CCL’s organizational chart, articles of incorporation, or by-laws; boilerplate language with sample business names, places of business, schedules, and other information was not replaced with appropriate information; and options were not selected from the various models provided as examples. In one instance, text was photocopied directly from a reference book with no apparent attempt made to customize the information. Finding 16.1: CCL’s policies and procedures do not provide sufficient documentation of the agency’s actual business practices. Finding 16.2: As submitted, many of CCL’s policies and procedures are more suitable for a different type or size of organization and therefore may bind the agency to more restrictive requirements than are appropriate for its size and operations. Issue 17: None of the policies and procedures documents submitted by CCL includes dates or signatures that indicate review, approval, or acceptance by the agency’s Board of Directors. Copies of the Board’s meeting minutes provided by CCL during the August 28, 2008 site visit do not show that such action was taken. Finding 17.1: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Board of Directors Issue 18: Board actions are recorded only sporadically in CCL’s Board meeting minutes and there is no record of discussions being held or votes being taken on many significant and important issues, including: • Changes in membership and new directors. • Adoption of policies and procedures. • Financial reports. • Budget development or approval. • Significant expenditures. • Loan acceptance. Page 7 of 13 Finding 18.1: CCL’s Board of Directors is not conducting adequate oversight of the agency’s activities and operations. Finding 18.2: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Issue 19: Copies of Board meeting minutes provided by CCL are not signed. In addition, Board meeting minutes do not show that minutes of the prior meeting are read or approved. Some of the copies provided appear to be blank templates with times, dates, locations, names, topics, and other information not recorded in the designated placeholders. Meeting dates shown on the minutes at times appear to be incorrect or are missing entirely. CCL did not provide copies of meeting agendas. Finding 19.1: CCL’s Board meetings are not sufficiently documented to provide a clear and accurate accounting of Board proceedings. Finding 19.2: CCL’s record of Board activities provides no evidence of adequate oversight by Board members. Issue 20: Board rosters and meeting attendance records indicate that CCL’s Board membership changes frequently with at least one new member at each meeting held. However, there is no corresponding documentation within the Board meeting minutes of new members being recruited, selected, or installed as required by the agency’s by-laws and articles of incorporation. In addition, CCL has no established process in place for recruiting or selecting new members. According to Ms. Lewis, Board vacancies are not advertised, but are communicated via word-of- mouth. Finding 20.1: CCL is not operating in accordance with its by-laws or articles of incorporation as they relate to Board management. Finding 20.2: CCL’s record of Board activities provides no evidence of adequate oversight by Board members regarding recruiting, selection, or installation of new members. Issue 21: CCL’s by-laws provide for the positions of president, vice president, treasurer, and secretary on its Board. Board meeting minutes do not show that Board members have ever held a vote to designate who fills these positions. Additionally, CCL has not designated a treasurer on its Board to date. Finding 21.1: CCL is not operating in accordance with its by-laws as they describe Board appointments or composition. Finding 21.2: CCL is not operating in accordance with its by-laws in regard to appointing a treasurer and ensuring that the responsibilities of the treasurer are carried out. Page 8 of 13 Finding 21.3: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Issue 22: CCL has no paid employees other than drivers. As Board President, Ms. Lewis manages Board activities, functions as a voting Board member, and supervises and controls all of the business and affairs of the corporation as provided for in the agency’s by-laws. However, none of the documents provided by CCL address how these various roles are to be managed without conflict. As Board meeting minutes do not provide a complete record of significant votes taken, it is unclear whether Ms. Lewis routinely abstains from voting on issues in which she may have a personal interest, such as the acceptance of a loan made by a family member, payments made to a family member for volunteer services, or approval of a lease agreement which involves family property. Finding 22.1: CCL does not have adequate policies or procedures in place to ensure internal controls or the prevention of a conflict of interest. Finding 22.2: CCL’s Board meetings are not sufficiently documented to provide a clear and accurate accounting of Board actions taken to prevent a conflict of interest. Labor and Employee Relations Issue 23: The Employee Policies and Procedures document submitted by CCL appears to be copied from a commercially published resource. In several sections, boilerplate language and fill-in fields have not been appropriately modified or selected. Positions referenced in the document are inconsistent with CCL’s organization chart, by-laws, and articles of incorporation. The document does not include dates or signatures that indicate review, approval, or acceptance by the agency’s Board of Directors. Copies of the Board’s meeting minutes provided by CCL during the August 28, 2008 site visit do not show that such action was taken. Finding 23.1: CCL’s Employee Policies and Procedures document does not provide an accurate representation of the agency’s actual structure or business practices. Finding 23.2: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Passenger Guidelines and Service Delivery Issue 24: Neither the Riders Guide and Fares or Guide for Passengers documents includes dates or signatures that indicate review, approval, or acceptance by the agency’s Board of Directors. Copies of the Board’s meeting minutes provided by CCL during the August 28, 2008 site visit do not show that such action was taken. Page 9 of 13 Finding 24.1: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Issue 25: The Riders Guide and Fares document submitted by CCL references an appeals board. There is no description of an appeals board within the agency’s organizational chart, by-laws, or articles of incorporation and no record of who serves on it or how it is selected. Board meeting minutes do not show that an appeals board has been appointed. Finding 25.1: CCL’s description of its passenger appeals process is not consistent with the agency’s actual structure or business practices. Issue 26: CCL’s Riders Guide and Fares document states that personal attendants may ride at half price. Both the Riders Guide and Fares document and the Guide for Passengers with Disabilities indicate that portable oxygen tanks will not be transported. Both documents also outline conditions under which requests for rides are documented as refused, rather than denied. The Americans with Disabilities Act (ADA) requires that personal attendants ride free of charge, that portable oxygen tanks be allowed, and that rides that cannot be arranged at the requested time be documented as denied, rather than refused. Finding 26.1: CCL’s policies and procedures regarding personal attendants are not in compliance with Americans with Disabilities Act (ADA) requirements. Finding 26.2: CCL’s policies and procedures regarding portable oxygen tanks are not in compliance with ADA requirements. Finding 26.3: CCL’s policies and procedures regarding denied and refused rides are not in compliance with ADA requirements. Driver Training Issue 27: CCL did not submit a driver training program as outlined in the July 31, 2008 Site Review Summary document. Although a section is reserved within the table of contents of the Vehicle Safety document, the associated information was not provided. Finding 27.1: CCL did not provide a documented driver training program. While not federally mandated, most public transportation providers do adopt and follow a written driver training program as a best practice. Issue 28: A copy of Board meeting minutes dated May 15, 2008 indicates that a Board member has, on at least one occasion, acted in the capacity of a driver. There is no documented evidence that Board members have been screened for proper qualifications or have received driver training. Finding 28.1: Although not federally mandated, CCL should adopt a driver training plan that specifies how all individuals who operate the agency’s vehicles or transport passengers are managed to ensure safety. Page 10 of 13 Safety and Security Plan Issue 29: CCL did not submit a safety and security plan as outlined in the July 31, 2008 Site Review Summary document. Although sections are reserved within the table of contents of the Vehicle Safety document for such topics as safety, emergencies, accidents, insurance, fires and evacuations, hold ups and robberies, natural disasters, blood borne pathogens, and infection control, the associated information was not provided. Finding 29.1: CCL does not have a safety and security plan in place, indicating a lack of operational and management capability. Issue 30: CCL has inconsistently reported or portrayed the circumstances of at least one vehicular accident. On the initial site review checklist, Ms. Lewis indicated that CCL had experienced no significant accidents. However, in an earlier grant status report, CCL reported an accident that occurred in November 2007 in which one passenger submitted an insurance claim for an injury received. Ms. Lewis stated that, to her knowledge, no payment was made, but a Driver and Motor Vehicle Services Division (DMV) report shows that a settlement was paid in the amount of $2,500. Ms. Lewis also stated that the event was minor. However, the vehicle involved, purchased for $41,010 on January 26, 2007, was sold less than five months after the accident occurred for $1,248, an amount that appears to be representative of a total loss. According to Ms. Lewis, the vehicle was sold because it did not meet CCL’s needs. Finding 30.1: Either CCL has misrepresented facts related to the November 2007 accident or the agency does not have the capacity to maintain accurate records related to accident history. Vehicle Maintenance Plan Issue 31: The Vehicle Maintenance Plan document did not include the steps for a quarterly preventative maintenance program. Associated pages were either not prepared or were omitted from the document. Finding 31.1: CCL does not have a complete vehicle maintenance plan in place, indicating a lack of operational and management capability. Issue 32: The Vehicle Maintenance Plan document does not properly address testing and maintenance of wheelchair lifts as required by the ADA. The preventative maintenance schedule does not provide for daily cycling of the lift to verify that it is functioning and maintenance is only scheduled on an annual basis. Finding 32.1: CCL’s procedures to test and maintain wheelchair lifts are not consistent with ADA requirements, Federal Transit Administration (FTA) regulations, or Motor Carrier Division standards. Page 11 of 13 Anti-Drug Use and Alcohol Abuse Prevention Program Issue 32: CCL submitted three different documents that address its drug and alcohol abuse prevention programs, including an Employment Policies and Procedures document, Drug and Alcohol Policies and Procedures document, and an Alcohol Policy document. It is not clear which are currently in effect and provisions described among the various documents differ at times. The Drug and Alcohol Policies and Procedures document appears to be a direct photocopy of a book or manual which includes boilerplate language and fill-in fields that have not been modified to reflect CCL’s adopted policies, procedures, or practices as well as sections that are labeled as optional which have not been selected one way or the other. None of the documents includes dates or signatures that indicate review, approval, or acceptance by the agency’s Board of Directors. Copies of the Board’s meeting minutes provided by CCL during the August 28, 2008 site visit do not show that such action was taken. Finding 32.1: Documentation of CCL’s anti-drug use and alcohol abuse prevention program is inadequate for review and, therefore, compliance can’t be verified. Finding 32.2: As submitted, CCL’s Drug and Alcohol Policies and Procedures document may bind the agency to more restrictive requirements than are appropriate for its size and operations. Finding 32.3: CCL is not operating in accordance with its by-laws and articles of incorporation in regard to Board oversight. Issue 33: In a random sampling of CCL’s employee records, only two of five files that were reviewed showed evidence that a drug test had been administered. Of those two, only one recorded the test results. During the initial site visit, Ms. Lewis indicated that all employees are administered pre-employment tests and that all drivers are included in a random testing pool. Finding 33.1: CCL’s description of its drug testing program is not supported by documentation. Issue 34: During both the July 18 and August 28, 2008 site visits, Ms. Lewis and others were unable to locate a key to open a file cabinet containing confidential employee files. During the August 28 visit, however, a duplicate key was found in Ms. Lewis’ briefcase and the file cabinet was made accessible to reviewers. Finding 34.1: CCL’s security procedures for handling confidential records are deficient. Finding 34.2: As the key to the confidential files is not kept in a secure location and was missing at the time of the review, records could potentially have been compromised. Page 12 of 13 CONCLUSION The issues and findings described above demonstrate a present unreadiness and inability to properly manage public funding in accordance with state and federal laws and regulations and in accordance with Federal Transit Administration certifications and assurances, ADA requirements, Department of Transportation guidelines, or industry standards. The agency’s by- laws, articles of incorporation, policies, procedures, and business practices are inconsistent as documented. Written policies and procedures are often incomplete or inadequate and there is little or no evidence that the Board of Directors has formally adopted them or that they are being followed. CCL’s financial policies, procedures, and systems are insufficient to account for public funds or to track and monitor expenditures made with such resources. The agency does not have effective internal controls in place to ensure against errors, inaccuracies, fraud, or misuse of funds. Documentation to demonstrate sufficient oversight by the agency’s Board of Directors is lacking and CCL’s organizational structure does not appear to allow for independent review of policy and fiscal management. As a result of the site review process, County staff has concluded, and ODOT concurs, that CCL does not have the institutional, managerial, and financial capability to ensure proper planning, management, and completion of projects and is therefore not qualified to receive certain federal and state funding assistance, including Special Transportation Fund Discretionary and Formula Grants, to operate a public transportation program at this time. Page 13 of 13