The state auditor’s office, acting on a tip, has uncovered $210,035 the town of Chapel Hill paid to a vendor over 15 months for parts that were not needed or didn’t fit the town’s vehicles and equipment.
The vendor, Raleigh-based Walker Automotive Supply, has repaid the town $134,112.10 for the improper charges and fired an employee accused of altering work orders and submitting false invoices to the town’s fleet management division, Town Manager Maurice Jones said Tuesday in an email to the Town Council.
The town, based on the repayment and other changes, renewed Walker Automotive’s contract for one year in June, he said. The new contract is worth up to $809,708.86 in sales to the town through June 2020, up from a maximum of $432,300 cited in the 2012 contract.
Both contracts ensure Walker Automotive a 10% profit on all parts sold to the town. That markup is less than the town might pay to other suppliers, Chapel Hill spokeswoman Catherine Lazorko said in an email, and the relationship also saves the town personnel costs.
“The contract is the most cost effective and efficient method for the Town to purchase parts,” Jones said. “Prior to expiration of the contract, Town staff will evaluate the benefit of continued contracted parts management with this parts vendor and provide a report and recommendation to the Town Manager’s Office.”
A report from the Office of the State Auditor also blamed the town’s invoicing system and the failure of the town’s fleet manager to adequately check invoices against work orders.
The fleet management division is responsible for purchasing, maintaining and replacing 345 town vehicles, including firetrucks and police vehicles, solid waste trucks, construction and landscaping equipment. The division also maintains the town’s refueling facility.
The most recent contract shows fleet manager Barry Lowry is no longer employed by the town. Lowry worked as fleet manager from October 2006 until May 31, 2019, Lazorko said in an email Tuesday afternoon. No disciplinary actions were taken against him, she said.
Job search websites show the town is attempting to fill his position. Lowry was earning $74,502 a year when he left, Lazorko said.
The auditor’s report found that an employee working for Walker Automotive had billed the town for parts that were not requested, added charges to the invoices for parts that were requested, and created duplicate invoices for the same work orders, the report stated.
The invoices were filed with the town between January 2016 and March 2017, the report noted. Most of the charges were for parts that did not fit vehicles owned by the town, it said.
The town and Walker Automotive officials are reviewing additional invoices worth about $76,000, Jones said. Walker Automotive will be asked to repay those charges if they also are improper, and the review period could be expanded if necessary, he said.
The Orange County District Attorney’s Office is considering whether criminal charges are warranted, the report said.
Jones said the investigation was not made public until this week, because the state auditor’s office asked the town to wait until its report was published.
Chapel Hill hired Walker Automotive in 2012 through the National Joint Powers Alliance, a national cooperative that works with governments and other members to source competitively priced contract work.
Jones said other area towns have a similar arrangement with Walker Automotive but did not name them.
The employee who was fired operated an on-site parts store at the town’s Public Works Department until the spring of 2017, when the employee was promoted to another position with Walker Automotive, Jones said. Walker Automotive fired the employee in February 2018, he said.
Another Walker Automotive employee has been managing the parts store since 2017 and helped with the state auditor’s investigation, he said.
Several changes have been made to prevent future problems, he said, including a requirement that the town’s fleet manager and fleet service adviser confirm each work order has a corresponding invoice and that the total charge is correct. Fleet management staff and mechanics also must document and sign for each part that is ordered and used.
The state auditor’s report noted that the fleet manager only performed a cursory review of the monthly bill before, because he “trusted the parts vendor employee responsible for the invoicing.” The monthly bill generally included about 100 invoices, the report said.
Another change will allow only one invoice to be submitted for each work order, unless some of the work is outsourced to a service provider. The town in the future also could consider using software to streamline the parts ordering system and additional audits of Walker Automotive invoices.
Lazorko said other town departments do not generate as many vendor invoices as the fleet management division produces, and those departments have procedures in place for ensuring the town gets what it pays for from vendors.
“Current departmental procedures work well for the Town’s other vendors, and at this time, the Town has had no indication of improper invoicing from other vendors,” she said.