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Office of the District of Columbia Auditor
Poor Management Oversight and Financial Irregularities Plague the District’s Abandoned and Junk Vehicle Program
June 5, 2001

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Abandoned car on Taylor Street, NW, May 21, 2001

OFFICE OF THE DISTRICT OF COLUMBIA AUDITOR
717 14TH STREET N.W., SUITE 900
WASHINGTON, D.C. 20005
TEL. 202-727-3600 · FAX: 202-724-8814

Deborah K. Nichols
District of Columbia Auditor
013:01 DCA

Poor Management Oversight and Financial Irregularities Plague the District's Abandoned and Junk Vehicle Program

June 5, 2001

TABLE OF CONTENTS

EXECUTIVE SUMMARY
PURPOSE
OBJECTIVES, SCOPE, AND METHODOLOGY
BACKGROUND

Staffing
AJVD Budget
Revenue

FINDINGS

AJVD Failed to Adhere to Applicable Financial Management Policies, Procedures, and Standards
AJVD Failed to Restrict Access to the Cash Collection Area During Auctions
DPW and CFO Managers Failed to Properly Train Employees Used As Cashiers During Auctions
DPW and CFO Managers Failed to Ensure Proper Segregation of Duties
Duties Assigned to Property Control Specialists Appeared to Pose a Conflict of Interest
DPW and CFO Managers Failed to Bond AJVD Employees Who Handled Cash During Auctions
The Lack of Internal Accounting Controls Resulted in Cash Shortages

Failure to Perform a Reconciliation After Each Auction
Voided Transactions Were Not Properly Controlled By Management
The Auditor Found Approximately $90,000 in Revenue Variances Reported in Auction Statistics Reports Versus Revenue Reported in Daily Teller Sheets During the Three-year Audit Period
Outdated Equipment and Technology Contributes to the Erosion of AJVD's Accounting Controls and the Ineffective Performance of its Cash Handling Function

Executive Branch Failed to Adhere to Statutory Reporting Requirement for the Abandoned and Junk Vehicle Fund
AJVD Failed to Consistently Remove Vehicles from Public Streets in a Timely Manner
AJVD Inaccurately Reported Performance Results on the Number of Abandoned and Junk Vehicles Removed from Public Streets and Private Property
Outdated Computer Hardware and Software Failed to Support AJVD's Operations
More Efficient Allocation of AJVD's Investigative Staff Is Needed

AJVD is Operating in An Unsafe Environment
AJVD's Fees Are Insufficient to Cover Some of its Operating Costs

CONCLUSION
AGENCY COMMENTS

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EXECUTIVE SUMMARY

PURPOSE

Pursuant to Public Law 93-198, Section 455, the District of Columbia Auditor examined the accounts and operations of the Abandoned and Junk Vehicle Division (AJVD) of the Department of Public Works to determine whether it operated effectively, efficiently and in accordance with its stated mission, applicable laws, regulations, and standards.

CONCLUSION

The Auditor's examination of the accounts and operations of the Abandoned and Junk Vehicle Division (AJVD) revealed the presence of significant operational, management, and financial management deficiencies and irregularities.

Performance and Operational Management

Within the operational area, AJVD failed to timely remove abandoned and junk vehicles pursuant to the laws governing abandoned and junk vehicles. Based on the Auditor's analysis of a random sample of 625 abandoned and junk vehicle records, AJVD did not remove from public space a majority of abandoned and junk vehicles within 7 to 10 days as stated in the Mayor's Fiscal Year 1999 Performance Measures Scorecard (Scorecard).1 Overall, the analysis indicated that abandoned and junk vehicles were towed from District streets an average of 24 calendar days after a complaint was filed with AJVD. In a significant number of cases, abandoned vehicles were not removed from public space until at least 45 days after a complaint was received, and in some cases over 100 days after a complaint. (See Appendix 1 and Table V)

The Auditor's review further indicated that AJVD is not resolving hundreds of abandoned and junk vehicle complaints filed with it during the course of a fiscal year. The Auditor's analysis of data provided for the audit revealed the existence of approximately 3,300 apparently unresolved abandoned and junk vehicle complaints filed with AJVD during the audit period. (See Appendices 2 and 3 for examples of unresolved abandoned and junk vehicle complaints.)

Prompt removal of abandoned and junk vehicles from District Streets and public spaces promotes health and safety and improves the quality of life of District residents and visitors; facilitates the unimpeded flow of traffic; makes available valuable parking spaces on District neighborhood streets where parking spaces are limited; and reduces potential legal liabilities that may flow from the failure to timely and effectively perform this governmental function. The Abandoned and Junk Vehicle Division must significantly improve the performance and timeliness of the removal of abandoned and junk vehicles from District streets, public space, and private property.

The Auditor's examination further revealed that AJVD's performance statistics regarding the number of vehicles it removed from District streets were artificially inflated by as much as 51 % to 55%. It appears that thousands of vehicles AJVD claimed to have removed from City streets were in fact vehicles initially towed to the Brentwood Impoundment Lot by the Parking Enforcement Division as a result of parking violations. When these vehicles were not claimed by their owners within a reasonable period of time, they were subsequently towed from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot where the Abandoned and Junk Vehicle Division stores abandoned and junk vehicles. AJVD inappropriately included these vehicles in calculating its "number of vehicles removed from public space" performance result.

In fiscal year 1999, AJVD reported that it removed 7,629 abandoned and junk vehicles from public space. However, we found that approximately 4,185 of the claimed vehicles were actually transferred from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot.

Reported performance results for the same measure during fiscal year 2000 indicated that AJVD removed 8,627 abandoned and junk vehicles from public space. Again, the Auditor found that this performance result was artificially inflated by counting vehicles transferred between impoundment lots. The Auditor's analysis revealed that AJVD removed between 3,941 and 4,225 abandoned and junk vehicles from public space rather than 8,627. Approximately 4,402 of the 8,627 vehicles included in this performance result had already been removed from public streets to the Brentwood Impoundment Lot by the Parking Enforcement Division for parking violations.

While AJVD counted vehicles transferred between impoundment lots as a measure of its performance of the removal of abandoned and junk vehicles from District streets and public space, it did not adequately account for the disposition of abandoned and junk vehicle complaints received during each of the three fiscal years under review. During fiscal years 1999 and 2000, respectively, the disposition of approximately 3,300 complaints were unaccounted for by AJVD. It appears that AJVD failed to respond within a reasonable time, if at all, to 3,300 abandoned and junk vehicle complaints.

The Auditor also found that AJVD did not efficiently deploy its investigative manpower; failed to establish specific performance standards and measures for its investigators; did not monitor, track, and account for investigators' performance and productivity; and did not allocate investigators' in a manner that reflected an equitable distribution of AJVD's workload. All wards were assigned one investigator even though abandoned and junk vehicles were most pervasive in Wards 1, 4, 5, 6, 7, and 8. During the audit period, investigators assigned to Wards 2 and 3, where abandoned and junk vehicles were less prevalent, were not periodically re-deployed to assist investigators assigned to areas with a high concentration of abandoned and junk vehicles. As a consequence, AJVD's workload was unevenly distributed among its investigative staff with investigators in Wards 2 and 3 carrying the lightest workloads.

Financial Management

Within AJVD's financial operations, the Auditor found that supervision, administration, and monitoring of AJVD's cash collections and cash handling functions were governed by a system of poor financial management practices, a weak internal control environment, and ineffective internal controls. Specific deficiencies included, but were not limited to:

  • poor controls over cash; 

  • failure to restrict access to cash and the cash collection area during semi-monthly auctions; 

  • failure to segregate duties related to cash collections and cash handling functions; 

  • chronic failure to conduct reconciliations, resolve cash drawer discrepancies, and investigate cash shortages; 

  • failure to bond employees who handled cash, and 

  • inadequate and ineffective management oversight of the cash collection and cash handling processes.

The area used by AJVD as a cashier's office during semi-monthly auctions was inadequately restricted from access by unauthorized DPW and AJVD employees. Cashiers were free to fraternize with other AJVD and DPW employees and to read newspapers and magazines while performing their cashier functions. These distractions interfered with cashiers' ability to devote their full-time and attention to their duties, and may have posed a significant risk for error and a substantial opportunity for theft and/or fraud.

AJVD managers used property control specialists to perform the duties and responsibilities of cashiers during semi-monthly auctions. There was no evidence to suggest that these employees possessed prior experience as cashiers, were trained to perform as cashiers, or had ever undergone a criminal background check to ensure the absence of prior criminal convictions. Further, the Auditor found that none of the employees handling cash were bonded.

There was no evidence available for the Auditor's review indicating that the District Treasurer's office, or any other accountable officer in DPW or the Office of the Chief Financial Officer of the District of Columbia, ever conducted periodic reconciliations of AJVD's revenue collections. As a consequence of the failure to regularly perform a detailed reconciliation after each auction, AJVD suffered undetected financial losses that may have been the result of negligence or employee misconduct, if not both. The Auditor could not find any evidence that accountable officials in DPW or the OCFO took any action to identify, investigate, or resolve inconsistencies between the amount of cash collected, cash register tapes, cash register receipts, and other available financial information that would have revealed the existence and source of financial discrepancies after each auction.

During the semi-monthly auctions conducted during the audit period, AJVD collected an average of $66,000 per auction. Through a comparison of relevant financial records for auctions held during the audit period, the Auditor found auction revenue variances averaging approximately $30,000 annually, or approximately $90,000 during the three-year audit period. In reviewing records for the ten-year period between fiscal years 1990 and 2000, the Auditor determined that AJVD may have incurred cash shortages in excess of $300,000. The shortages may be attributed to: (a) cashier errors due to inexperience, incompetence, or inattentiveness; (b) employee embezzlement; and/or (c) thefts resulting from collusion between a cashier and a bidder. As a consequence, losses regularly occurred without detection and without the benefit of any measure of accountability. This matter has been referred to the Office of the Inspector General for further investigation.

During the fieldwork phase of the audit, the Auditor found numerous unsupported, voided transactions that did not receive the prior approval of a designated AJVD supervisor or manager. Prior to and during the audit, AJVD managers did not properly control, account for, or require management's authorization to void financial transactions during AJVD auctions. As a consequence, cashiers routinely voided financial transactions without management's review, approval, or knowledge.

AJVD currently uses outdated cash registers that lack adequate accounting controls and thus may be easily manipulated. Internal control deficiencies may allow cashiers to manipulate certain critical documentation supporting sales transactions. In a significant number of cases, amounts recorded on cash register tapes were noticeably smaller than the actual purchase price entered into AJVD's computer. In other instances, the Auditor found that some sales transactions were listed on a master computer printout but were not found on cash register tapes or credit card receipts. These patterns suggested that: (1) a cashier may have collected the amount required by the bid sheet, issued a proper receipt to the bidder, and misappropriated funds from the cash drawer before the drawer was counted; or (2) the cashier colluded with a bidder by not collecting the amount due, but nevertheless issued a receipt that corresponded to the bid sheet and transaction data entered into AJVD's computer.

Another area of vulnerability that may have facilitated the loss of revenue is AJVD's failure to effectively control access to the computer system that generates documentation necessary for the successful bidder to obtain a certificate of title on each vehicle purchased at an auction. Uncontrolled access to the computer system may have provided an opportunity for AJVD employees to input false financial and related information in order to generate documentation necessary to obtain a certificate of title. Failure to effectively control access to the computer system appears to have been another possible contributing factor to AJVD's revenue losses.

Finally, the Auditor found that the District of Columbia's $10 vehicle storage fee is the lowest storage fee charged by surrounding jurisdictions, other urban areas, and the private sector. Surrounding jurisdictions such as Fairfax, Prince George's and Montgomery Counties charge $25 per day for storage. Cities such as New York, Baltimore, Los Angeles, and Atlanta have similar abandoned and junk vehicle programs, and their storage fees range from $35 to $50 per day. Increasing the storage fee could provide a significant source of additional revenue to the Abandoned and Junk Vehicle Division Fund.

MAJOR FINDINGS

  1. AJVD failed to adhere to applicable financial management policies, procedures, and standards.

  2. AJVD failed to restrict access to the cash collection area during auctions.

  3. DPW and CFO managers failed to properly train employees used as cashiers during auctions.

  4. DPW and CFO managers failed to ensure proper segregation of duties.

  5. Duties assigned to property control specialists appeared to pose a conflict of interest.

  6. DPW and CFO managers failed to bond AJVD employees who handled cash during auctions.

  7. The lack of internal accounting controls resulted in cash shortages:

    1. failure to perform a reconciliation after each auction;

    2. voided transactions were not properly controlled by management;

    3. The Auditor found approximately $90,000 in revenue variances reported in the auction statistic reports and revenue reported in the tellers' daily sheets during the three-year audit period; and

    4. Outdated equipment and technology contributes to the erosion of AJVD's accounting controls and the ineffective performance of its cash handling function.

  8. Executive branch failed to adhere to the statutory reporting requirement for the Abandoned and Junk Vehicle Fund.

  9. AJVD failed to consistently remove abandoned and junk vehicles from District streets in a timely manner.

  10. AJV inaccurately reported performance results on the number of abandoned and junk vehicles removed from public streets and private property.

  11. Outdated computer hardware and software failed to support AJVD's operations.

  12. More efficient allocation of AJVD's investigative staff is needed.

  13. AJVD is operating in an unsafe environment.

  14. AJVD's fees are insufficient to cover some of its operating costs.

MAJOR RECOMMENDATIONS

  1. The Acting Chief of the Abandoned and Junk Vehicle Division must comply with all financial policies and procedures of the Office of the Chief Financial Officer related to the handling of and accountability for cash collections.

  2. The Director of Public Works should no longer permit AJVD to use its employees as cashiers unless they are properly trained and bonded.

  3. A further analysis and investigation by the Office of Inspector General must be performed to determine the specific source and cause of any variances between sales and cash collected.

  4. The District's Chief Financial Officer should provide AJVD with trained cashiers to work AJVD's semi-monthly auctions.

  5. A secured room with controlled access must be immediately established for use as a cashier's office during AJVD auctions.

  6. The DPW CFO must immediately develop and implement a financial policy and procedures manual for use by AJVD managers and employees who handle cash during auctions. The manual should include standards and procedures pertaining to cashier performance and standards of conduct which must be adhered to while performing cashier duties and responsibilities.

  7. The Acting Chief of AJVD and DPW's CFO must comply with all policies and procedures of the Office of the Chief Financial Officer regarding the collection and reconciliation of funds received following AJVD auctions.

  8. The Director of Public Works should provide AJVD with state-of-the-art computerized cash registers to ensure that all information keyed into the cash register generates both a customer receipt and register tape with all the pertinent information. The computerized cash registers should interface with AJVD's computer system, and should also be programmed to require the prior approval of an AJVD supervisor or manager before any changes to a transaction, including voids, may be processed.

  9. AJVD must immediately begin using pre-numbered mufti-part receipts to ensure accountability for all transactions processed during auctions.

  10. AJVD must immediately segregate the cash collection, cash counting, and deposit functions in accordance with the policies and procedures of the Office of the Chief Financial Officer and related accounting, auditing, and financial management standards.

  11. The DPW CFO must assign a qualified staff member to supervise the cash handling functions for all AJVD auctions and assist in the reconciliation of cash receipts to accounting records.

  12. The Mayor, or his designee, immediately comply with D. C. Code, Section 40-834(d), by submitting to the Council annual reports of the AJVD Fund's receipts and disbursements for fiscal years 1998, 1999, and 2000.

  13. The Department of Public Works and the Abandoned and Junk Vehicle Division seek legislative action to shorten the three-day time frame required prior to removal of abandoned and junk vehicles from public space by the owner, lien holder, or Department of Public Works.

  14. The Auditor recommends that the Acting Chief of AJVD accurately report performance results for all of AJVD's performance measures, and that the Parking Enforcement Administrator verify the methodology used to quantify performance results and the accuracy of the reported results.

  15. The Parking Enforcement Administrator and the Acting Chief of AJVD should work closely with the Office of the Chief Technology Officer to develop specifications for computer hardware and software that meets all of AJVD's technological, management reporting, performance, and tracking needs. The Auditor further recommends that as many phases of AJVD's operation as possible should be computerized. A new system should, at minimum, allow: 1) a better internal control system; 2) the ability to interface updated cash registers with the computer system; 3) the ability to more efficiently monitor and track employees' productivity; 4) the ability to quickly input and retrieve owner information; 5) the ability to generate useful integrated management reports; and 6) enhance AJVD's overall efficiency and performance.

  16. AJVD managers must develop a deployment strategy for allocating investigators to the various wards of the city with the greatest concentration of abandoned and junk vehicles to facilitate the achievement of its mission and maximize the performance of its investigators.

  17. The Acting Chief of AJVD must establish specific performance standards and measures for AJVD investigators.

  18. The Acting Chief of AJVD must establish a reliable performance monitoring and tracking system for AJVD investigators and other AJVD employees responsible for the identification and removal of abandoned and junk vehicles from public space.

  19. A written agreement should be executed between the Metropolitan Police Department and AJVD to provide at least two MPD officers for each auction, one of which should be
    stationed in the cashier's office.

  20. The Abandoned and Junk Vehicle Division should install security glass throughout its offices, with the cashier's office receiving priority. AJVD should also install security cameras within the cashier's office and in other strategic locations.

  21. DPW and the AJVD management should make formal arrangements with nearby DC Village or the Potomac Training Center for parking spaces during auctions. Appropriate notification of parking restrictions should be placed in newspaper advertisements, appropriate signs posted along Shepherd Parkway, and appropriate signs posted at the DC Village Property/Potomac Training Center directing customers to legal parking. If an agreement is not reached, DPW, the Parking Services Division, and AJVD should develop a parking plan that meets AJVD's parking requirements on auction days.

  22. DPW's Director, the Parking Enforcement Administrator, DPW's CFO, and AJVD managers must raise AJVD's fees and/or reduce its expenditures in order to ensure that its expenditures are properly aligned with its revenues and that AJVD's mission is not compromised by inadequacies in its fee structure.

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PURPOSE

Pursuant to Public Law 93-198, Section 455, the District of Columbia Auditor examined the accounts and operations of the Abandoned and Junk Vehicle Division (AJVD) of the Department of Public Works (DPW) to determine whether it operated effectively, efficiently and in accordance with its stated mission, applicable laws, regulations, and standards.

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OBJECTIVES, SCOPE, AND METHODOLOGY

The objectives of the audit were to determine:

  1. whether the Abandoned and Junk Vehicle Division met its mission and performance measures for fiscal years 1998, 1999, and 2000;

  2. whether the abandoned and junk vehicle program is operated efficiently, effectively, and in a manner that holds staff accountable;

  3. the amount of revenue generated by the program, the amount expended, and the disposition of any surplus; and

  4. whether AJVD's internal controls provided adequate safeguards over assets.

The audit covered fiscal years 1998, 1999, and 2000. In conducting the audit, the Auditor reviewed D.C. Code, Sections 40-812 through 40-836; management reports; policies and procedures applicable to AJVD's operations; AJVD staffing, budgets, performance measures, and performance results; the program's strategic plan; and applicable management reform initiatives. Additionally, the Auditor interviewed appropriate AJVD and DPW officials and employees, as well as representatives of DPW's Chief Financial Officer (DPW CFO).

The Auditor examined expenditure:, financial transaction data, and related reports to assess AJVD's performance and compliance with applicable laws, regulations, and standards.

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BACKGROUND

D. C. Code, Section 40-832, established an Abandoned and Junk Vehicle Division under the jurisdiction of the Department of Public Works. However, pursuant to D.C. Code, Sections 47317.1, 47-317.3 and 47-317.3a, AJVD's financial operations are under the jurisdiction and control of the District's Chief Financial Officer.

The Abandoned and Junk Vehicle Division's mission is to help improve the quality of life in the District of Columbia and enhance the District's ability to compete for residents, business, tourism, and trade. AJVD is responsible for removing abandoned and junk vehicles from District streets, public space, and private property in order to protect health and safety and improve the quality of life of District residents and visitors. The Department of Public Works' organizational chart, which includes the Abandoned and Junk Vehicle Division, is presented below.

DEPARTMENT OF PUBLIC WORKS ORGANIZATION CHART

Organizational Chart of DPW

Source: FY 2000 Proposed Operating Budget & Financial Plan dated June 1, 2000

The Abandoned and Junk Vehicle Division is required to: 

  • determine whether a vehicle is abandoned or junk in accordance with D.C. Code, §40-831;

  • determine whether the vehicle has been stolen and, if so, relinquish custody of the vehicle to the Metropolitan Police Department:

  • place a conspicuous warning notice on the vehicle informing the owner that, unless the vehicle is removed within 72 consecutive hours, it shall be removed by the District government;

  • impound abandoned vehicles, when appropriate;

  • notify the owner and any lien holder of record that the abandoned vehicle will be sold at public auction if not reclaimed within 45 days after the date of the notice;

  • sell any abandoned vehicle at public auction and use the proceeds of the sale in accordance with D.C. Code, Section 40-812.2;

  • place a conspicuous warning notice on a junk vehicle on public property informing the over that the District government shall tow and transfer the vehicle and recycle, dismantle. salvage, or demolish the vehicle immediately; and

  • implement and enforce Chapter 6 of Title 5, with respect to a junk vehicle on private property, if the junk vehicle has been deemed a nuisance.

D. C. Code, Section 40-831, defines abandoned and junk vehicles as follows:

(1) "Abandoned vehicle" means any motor vehicle, trailer, or semitrailer;

    (A) That is inoperable and left unattended on public property for more than 72 hours;

(B) That has remained illegally on public property for more than 72 hours;

(C) That has remained on public property for more than 72 hours and:

i) Is not displaying current valid registration; or

ii) Is displaying registration of another vehicle;

(D) That has remained on private property for more than 30 days and is inoperable in that one or more of its major mechanical components, including, but not limited to, engine, transmission, drive train or wheels, is missing or not functional unless such vehicle is kept in an enclosed building completely shielded from the view of individuals on the adjoining properties; or

(E) That has remained unclaimed for 45 days after proper notice.

(1) "Junk vehicle" means any vehicle that is wrecked, dismantled, or in irreparable condition.

Further, D. C. Code, Section 40-812(a), states in relevant part that:

(a) It shall be a violation of Chapter 6 of this title to park, store, or leave a vehicle of any kind, including an abandoned or junk vehicle, whether attended or not, or for the owner of any vehicle to allow the vehicle to be parked, stored, or left, whether attended or not, upon any public or private property in the District of Columbia, including any public highway, lot, field, road, street, lane or other property without the consent of the owner of the public or private property. It shall also be a violation of Chapter 6 of this title, even when the owner consents to having the abandoned or junk vehicle parked, stored, or left on the property, to do the following: to park, store, or leave an abandoned or junk vehicle on public property; or to park, store, or leave an abandoned or junk vehicle on private property for more than 3 months. The Abandoned and Junk Vehicle Division shall remove and impound any abandoned or junk vehicle that is parked, stored, or left in violation of this subchapter and keep the abandoned or junk vehicle impounded until an owner or authorized person pays the Abandoned and Junk Vehicle Division a towing fee of $75 and a reasonable fee for storage.

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Staffing

During fiscal year 2000, the .abandoned and Junked Vehicle Division was staffed by 28 employees. The staff included an acting division chief, a manager of the Investigations Branch, a manager of the Storage and Auctions Branch, nine investigators, an acting investigator supervisor, a motor vehicle operator, an administrative assistant, three complaint clerks, nine property control specialists, and a property control specialist supervisor. In addition to identifying, removing, and maintaining custody of and recordkeeping for abandoned and junk vehicles, property control specialists and investigators also serve as auctioneers and cashiers during semi-monthly auctions of abandoned and junk vehicles.

Property control specialists: 1) receive, research, and record pertinent information on vehicles entering the AJVD impoundment lot; 2) perform custodial searches and notify MPD regarding vehicles on AJVD's impoundment lot that have been reported stolen; and 3) notify registered owners and lien holders that vehicles have been impounded and will be sold at auction unless claimed. They also perform functions during semimonthly auctions including, but not limited to: I ) generating lists of vehicles scheduled for auction; 2) removing and disposing of license plates prior to auction; 3) conducting final searches of vehicles; 4) updating AJVD's computerized database with information regarding the sale of vehicles; and 5) performing other important functions. The official position description for property control specialists does not include cashiering as an official duty, however, cashiering was a responsibility of property control specialists during the audit period and subsequent thereto.

AJVD investigators are primarily responsible for investigating complaints of abandoned or junk vehicles. Their specific duties include: 1) investigating complaints of abandoned vehicles; 2) issuing notices of infraction; 3) determining equipment needed and arranging vehicle removal; 4) determining if a vehicle should be impounded or disposed of; and S) assisting AJVD in conducting auctions.

AJVD Budget

The Abandoned and Junk Vehicle Division's operating budget is funded by revenue generated from storage and towing fees, proceeds from the sale of abandoned and junked vehicles, the sale of personal property left in abandoned and junk vehicles, and the sale of junk vehicles. These revenues are intended to cover the costs of AJVD's operations.

During the three-year audit period, as presented in Chart I (below), AJVD collected an average of $79,951 per auction during fiscal year 1998; $66,489 per auction during fiscal year 1999 (which was approximately $13,462 less per auction than collected in fiscal year 1998); and $52,161 per auction during fiscal year 2000 (which was approximately $14,328 less per auction than collected in fiscal year 1999 and $27,790 less per auction than collected in fiscal year 1998).

Revenues collected by AJVD during two of the three fiscal years under audit were insufficient to cover AJVD's operating costs. Yet, during this period, neither DPW nor AJVD managers initiated any discernible measures to adjust fees or reduce expenditures. Instead, it appears that DPW subsidized AJVD's operating costs when actual revenue collections did not meet revenue projections.

CHART I
Average Amount of Revenue Collected Per Auction For Fiscal Years 1998, 1999 and 2000

Source: Abandoned and Junk Vehicle Division and the Office of the D.C. Auditor

AJVD's budgets for fiscal years I 9y9 and 2000 appeared to have been based on actual fiscal year 1998 revenue collections of approximately $1.9 million. However, the use of $1.9 million for budget purposes for fiscal years 1999 and 2000 significantly exceeded actual revenue collected by AJVD during those fiscal years. Actual revenue collected during fiscal year 1999 fell short of the $1.9 million projection by approximately $359.334. For fiscal year 2000, DPW again used the $1.9 million revenue projection and again actual revenue collected fell even shorter by $661,050. The $1.9 million revenue projection for fiscal years 1999 and 2000 significantly exceeded actual revenue collections by $359,334 and $661,050, respectively. To correct this imbalance, fees should be raised and/or expenditures reduced to ensure: (1) that expenditures do not exceed actual revenue collected; and (2) that AJVD's mission is not compromised by its inability to generate sufficient revenue to cover its costs. AJVD's approved budget, revenue and expenditures for fiscal years 1998, 1999, and 2000 are summarized in Table I below.

TABLE I
AJVD BUDGET, REVENUE AND EXPENDITURES

Fiscal Year Revenue/Budget Projections Actual Revenue Collections Expenditures Variance Between Actual Revenue & Expenditures
Surplus
(Deficit)
Revenue Variance from Budget Projections
1998 $1,900,000 $1,873,828 $1,873,828 -$0- ($26,172)
1999 $1,900,000 $1,540,666 $1,678,781 ($138,115) ($359,334)
2000 $1,900,000 $1,238,950 $1,944,365 ($705,415) ($661,050)
TOTAL $5,700,000 $4,653,444 $5,496,974 ($843,530) ($1,046,556)

Source: DPW's CFO/AJVD's Revenue & Expenditure Report

Revenue

D.C. Code, Section 40-834, requires the deposit of all revenue collected by AJVD into the Abandoned and Junk Vehicle Division Fund (Fund). Revenue deposited into the AJVD Fund is for the sole use of AJVD, is to be deposited into the Fund as soon as practicable, and does not lapse to the District's general fund at the end of each fiscal year. The Abandoned and Junk Vehicle Division pays all of its expenses from money deposited into the Fund. In reviewing the AJVD Fund and revenue deposited therein, the Auditor was provided different revenue totals by AJVD and the DPW CFO for each year of the audit period.

Table II presents operating revenue collected from the sale of vehicles and personal property, vehicles sold for scrap, and towing and storage fees collected during fiscal years 1998, 1999, and 2000, as reported both by AJVD and the DPW CFO.

TABLE II
AJVD REVENUE

Categories Fiscal Year 1998 Fiscal Year 1999 Fiscal Year 2000 Combined Funds
Auction Sales $1,733,432 $1,434,361 $1,106,449 $4,274,242
Personal Property $32,845 $33,048 $25,190 $91,083
Scrap Metal $850 $10,950 $10,990 $22,790
Towing and Storage $151,707 $117,380 $109,239 $378,326
Total Per AJVD Revenue Report $1,918,834 $1,595,739 $1,251,868 $4,766,441
Total Revenue Per DPW CFO $1,873,828 $1,540,666 $1,238,950 $4,653,444
Variance $45,006 $55,073 $12,918 $112,997

Source: AJVD's Revenue and Expenditure Reports and the DPW's CFO

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FINDINGS

AJVD FAILED TO ADHERE TO APPLICABLE FINANCIAL MANAGEMENT POLICIES, PROCEDURES. AND STANDARDS

The OCFO's Financial Policies and Procedures Manual, Section 1010.300, states in relevant part that there is a relatively high risk associated with transactions involving cash; thus a strong system of internal control is required. The OCFO has directed that affected agencies adopt and adhere to the following policies:

  1. All cash receipts must be promptly recorded and controlled.

  2. Segregation of duties must be the first priority of an agency when handling cash receipts and disbursements and performing record-keeping functions.

  3. Cash received must be deposited with the Office of Finance and Treasury (OFT), intact, and on a timely (daily) basis. (Auditor's Emphasis).

  4. Cash must be properly safeguarded and recorded.

  5. Access to cash must be limited to as few employees as possible.

  6. All employees who handle cash must be bonded (Auditor's Emphasis)

  7. All cash overages and shortages must be controlled and disposed of in accordance with established procedures. If significant shortages/overages occur, the Accounting Operations Manager in OFOS [Office of Financial Operations and Systems] is to be contacted.

The Auditor found that during fiscal years 1998 through 2000, AJVD failed to adequately adhere to Section 1010.300 of the OCFO's Policies and Procedures Manual. Overall, the Auditor found that supervision, administration, and monitoring of AJVD's cash handling function was governed by a system of poor financial management practices, a weak internal control environment, and ineffective internal controls including. but not limited to:

  • poor controls over cash;

  • failure to restrict access to cash and the cash collection area during semi-monthly auctions;

  • failure to segregate duties related to cash collections and cash handling functions;

  • chronic failure to conduct reconciliations, resolve cash drawer discrepancies, and investigate cash shortages as required by the OCFO's Policies and Procedures Manual; and

  • inadequate and ineffective oversight of the cash collection and cash handling processes.

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AJVD Failed to Restrict Access to the Cash Collection Area During Auctions

As previously noted, the OCFO's Policies and Procedures Manual states that access to cash must be limited to as few employees as possible. During the field work phase of the audit, the Auditor found that the area used by AJVD as a cashier's office during auctions was inadequately restricted from access by unauthorized DPW and AJVD employees. During auctions, the audit team observed various AJVD employees performing their respective duties, including the collection and control of cash, in one open room. Further, the audit team observed that employees assigned to other functions within AJVD were allowed unfettered access to the area where cash was collected and maintained. Cashiers were free to fraternize with other AJVD and DPW employees and to read newspapers and magazines while performing their cashier functions. These distractions prevented cashiers from devoting full time and attention to their duties, and may have posed a risk for error and a substantial opportunity for theft.

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DPW and CFO Managers Failed to Properly Train Employees Used As Cashiers During Auctions

The Auditor found that AJVD used property control specialists to perform the duties and responsibilities of cashiers during semi-monthly auctions. The duties, responsibilities, and core competencies required of cashiers were not part of the official position description of AJVD's property control specialists. There was no evidence to suggest that any of the employees used as cashiers possessed prior experience as cashiers, were trained to perform as cashiers, or had ever undergone a criminal background check to ensure the absence of prior criminal convictions. It appeared that most AJVD property control specialists had no cashiering or related financial experience.

The Acting Chief of AJVD, officials in DPW's Parking Enforcement Administration, and DPW's Chief Financial Officer, who were responsible for providing management supervision and oversight of AJVD's programmatic and financial operations, failed to provide AJVD with properly trained and qualified cashiers. Further, they failed to ensure that AJVD employees who performed cashier functions were adequately trained to carry out this task. It appears that property control specialists may have received only minimal instructions on how to operate the cash register and issue receipts to customers. Also, there was no evidence that they were provided with any written procedures or ethical standards to guide their performance while collecting and handling cash receipts during auctions.

Even though AJVD requested assistance from the District's Chief Financial Officer (CFO), the Auditor found that the CFO failed to provide AJVD with trained, bonded cashiers during semimonthly auctions, did not provide cashier training, and did not provide any other related resources or support to ensure that auction revenue collected was accounted for and properly handled. The Auditor found that the CFO also did not provide any financial oversight and monitoring of AJVD's semi-monthly auctions. When no assistance and oversight were provided by the OCFO, the Parking Enforcement Administrator and AJVD managers did not assume the responsibility of adequately training property control specialists to effectively perform as cashiers. These managers did not order or direct the establishment of adequate internal accounting controls to guarantee the integrity of AJVD's revenue collection activities. Further, they did not establish an employee code of ethics or written procedures for property control specialists or any other AJVD employees performing as cashiers during semi-monthly auctions.

 The Auditor found that accountable DPW and CFO officials did not ensure that the cash handling activities of the Acting Chief of AJVD were properly segregated. During auctions, the Acting Chief of AJVD collected proceeds from the sale of personal property and counted all auction cash drawers, including his own.

Due to the inexperience of individuals assigned to perform cashier duties, the lack of training provided to them, ineffective financial management practices, and the failure to establish effective internal accounting controls, the Auditor found a significant number of financial irregularities which are discussed later in this report.

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DPW and CFO Managers Failed to Ensure Proper Segregation of Duties

The OCFO's Financial Policies and Procedures Manual states that a segregation of duties must be the first priority of an agency when handling cash receipts and disbursements. Moreover, a proper segregation of duties is necessary to prevent the mishandling of cash, safeguard receipts against loss, and protect employees from inappropriate charges of mishandling cash.

The Auditor found that accountable DPW and CFO officials did not ensure that the cash handling activities of the Acting Chief of AJVD were properly segregated. During auctions, the Acting Chief of AJVD collected proceeds from the sale of personal property and counted all auction cash drawers, including his own.

Once all cash drawers were counted and tallied, a collection sheet was prepared by the Acting Chief of AJVD, which included the total amount of cash and checks received, as well as the total of credit card payments received. The Acting Chief then prepared a deposit slip that included the cash and cashier's checks from the auction. Wells Fargo subsequently collected the cash and cashier's checks for deposit the next business day into the Abandoned and Junk Vehicle Division Fund. Wells Fargo also returned validated copies of the deposit slip to AJVD.

The Acting Chief of AJVD was the only employee to count AJVD's auction revenue collections, verify the cash, sign all financial/accounting forms, prepare the deposit slip, and perform recordkeeping functions related to AJVD' revenue collections. While this violated the segregation of duties principle, the Auditor's review indicated no discernible irregularities in cash collected by the Acting Chief.

There was no evidence available for the Auditor's review indicating that the Treasurer's office, or any other accountable officer in DPW or the OCFO, ever conducted a reconciliation of AJVD's revenue collections. The Auditor did note that the DPW CFO conducted an audit of AJVD in October 1997, however, none of the recommendations made by the DPW CFO had been implemented as of October 2000.

Generally accepted accounting standards stipulate that no one person should receive, count and deposit cash receipts, in addition to maintaining the entity's accounting records. The failure of accountable officials to ensure the adequate segregation of duties violated the OCFO's policies and procedures and related generally accepted accounting standards, thus posing a significant risk that revenue may be lost due to negligence and/or theft. At least two to three individuals should have been involved in processing revenue collected from each auction. This would have established an appropriate system of checks and balances for cash collections.

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Duties Assigned to Property Control Specialists Appeared to Pose a Conflict of Interest

The duties of property control specialists and their use as cashiers created a potential risk for manipulation of AJVD's accounting records and misappropriation of auction revenue. As previously noted, the normal duties of property control specialists included: 1) receiving, researching, and recording pertinent information on vehicles entering the AJVD impoundment lot; 2) performing custodial searches and notifying MPD regarding stolen vehicles towed to the AJVD lot; and 3) notifying registered owners and lien holders that vehicles had been impounded and would be sold at auction unless claimed. They also perform functions related to scheduled auctions including, but not limited to: 1) generating lists of vehicles scheduled for auction; 2) removing and disposing of license plates prior to auction; 3) conducting final searches of vehicles; 4) updating AJVD's computerized database with information regarding the sale of vehicles; and 5) controlling customers/crowds during AJVD auctions.

The Auditor found that AJVD did not segregate conflicting duties of the property control specialist with those of cashiers. Property control specialists and cashiers performed separate and distinct functions. However, at least two functions appeared to conflict with the duties performed as cashier and those performed as property control specialist. First, property control specialists generated lists of vehicles scheduled for auction which gave them prior knowledge of vehicles to be auctioned and, thus, posed the risk of collusion by sharing vehicle auction information with one or more potential bidders prior to the auction date. Second, property control specialists updated AJVD's database with vehicle sales information which was ultimately needed to obtain a certificate of title. The information entered into the computer was used to generate a certificate of title. This posed a conflict because the cashier who collected cash from the customer could subsequently enter false sales information into the computer in order to facilitate the production of documentation necessary to obtain a certificate of title. AJVD's failure to segregate these functions may have provided an opportunity for cashiers/property control specialists to manipulate AJVD's accounting and related financial transaction records, thus resulting in financial irregularities.

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DPW and CFO Managers Failed to Bond AJVD Employees Who Handled Cash During Auctions

The OCFO's Policies and Procedures Manual states that all individuals who handle cash must be bonded. The Auditor found that none of AJVD's employees who handled cash were bonded, including the Acting Chief. If AJVD employees who handled cash had been bonded, the bond company may have reimbursed the District government for any losses incurred as a result of employee negligence or dishonesty up to the amount of the bond. As a result of the failure to bond employees performing cash collections and cash handling functions, any revenue lost or stolen by cashiers during semi-monthly auctions could not be recovered through bond insurance.

The Lack of Internal Accounting Controls Resulted in Cash Shortages

Section 1010.300 of the OCFO's Policies and Procedures Manual states that all cash overages and shortages must be controlled and disposed of in accordance with established procedures, and if significant shortages/overages occur, the Accounting Operations Manager in the Office of Financial Operations and Systems (OFOS) is to be contacted. The OCFO's Policies and Procedures Manual further states that all cash overages and shortages must be controlled and cash discrepancies must be resolved in accordance with established procedures.

1. Failure to Perform a Reconciliation After Each Auction

The Auditor found that after each AJVD auction neither the DPW CFO nor AJVD managers reconciled cash drawers with cash register tapes, bid sheets, and other sales transaction information. The Acting Chief performed a limited reconciliation of cash collected to cash register tapes, which would always agree. However, a more extensive reconciliation including other sales transaction data, which would have revealed numerous discrepancies, was never performed.

Reconciliations performed by the audit team revealed significant cash shortages in AJVD's auction revenue collections for fiscal years 1998, 1999 and 2000. The Auditor also found cash receipts containing unresolved discrepancies. As a consequence of the failure to perform detailed reconciliations after each auction, AJVD suffered undetected financial losses that may have been the result of negligence or employee misconduct, if not both.

The Auditor found no evidence that the Administrator of the Parking Enforcement Administration, the DPW CFO, or the Acting Chief of AJVD took any action to identify, investigate, or resolve inconsistencies between the amount of cash collected, cash register tapes, cash register receipts, and other available information that would have revealed the existence and source of financial discrepancies. There was also no evidence that cash shortages were ever reported by the Acting Chief to OFOS as required by the CFO's Policies and Procedures Manual.

II. Voided Transactions Were Not Properly Controlled By Management

Voided transactions must be properly controlled, accounted for, and allowed only upon management's authorization. If not appropriately authorized and controlled, voided transactions may be improperly used to embezzle cash or to fraudulently transfer property in an environment of inadequate or weak internal controls. During the audit period through the field work phase of the audit, the Auditor found that AJVD managers did not properly control, account for, or require management's authorization for cashiers to void financial transactions during AJVD auctions. The Auditor documented numerous unsupported voided transactions that did not receive management's prior review and approval during the audit period. Cashiers were allowed to void transactions without management's review, approval, or knowledge. Further, a paper trail for each voided transaction was not created and maintained for purposes of accountability and subsequent review.

III. The Auditor Found Approximately 590,000 in Revenue Variances Reported in Auction Statistics Reports Versus Revenue Reported in Daily Teller Sheets During the Three-year Audit Period 

The Auditor compared auction sales lists, which is a manual report that is produced at each auction as bids are processed, to cash register receipts to determine whether the amounts agreed. There are approximately 15 to 20 bid sheets completed during each auction.. Each bid sheet contains approximately 21 vehicles successfully bid upon. As each bid sheet is completed, it is brought into the AJVD office where the information is entered into AJVD's computer system. The information entered into the computer produces a number of reports, including an auction statistics report2 and a customer sales ticket.3 The customer sales ticket is used to generate documentation necessary to obtain a certificate of title for each vehicle purchased at auction. The customer sales ticket is also used to verify that the customer's cash receipt is correct. 

The Auditor compared auction sales lists, auction statistics reports, and copies of customer sales tickets to records of actual cash collected on the teller's daily sheet from auctions held during fiscal years 1998, 1999, and 2000. (The Auditor notes that the DPW CFO's audit performed in October 1997 indicated that this step was necessary to determine whether the cash counted was indeed the amount taken in.) Through this comparison, the Auditor found auction revenue variances averaging approximately $30,000 annually, or approximately $90,000 during the three-year audit period. 

While the audit covered fiscal years 1998, 1999 and 2000, the Auditor also reviewed AJVD's data relative to auction receipts for fiscal years 1990 through 1997. In reviewing the records for the ten-year period between fiscal years 1990 and 2000, the Auditor determined that AJVD incurred cash shortages in excess of $300,000.  

During a review of individual transactions, the Auditor observed a pattern of inconsistencies between the cash register totals and data contained in auction statistics reports. The shortages ranged from $300 to $5,000 per auction.  

It is important to note that upon entry into the auction, customers are required to pay a $100 registration fee if they desire to bid on a vehicle. If no purchase is made, the $100 is refunded to the customer. If the customer purchases a vehicle, the $100 is applied to the purchase price. In many cases, the Auditor found that cashiers applied multiple $100 deductions to bidder sales transactions thus creating numerous $100 cash discrepancies. 

The shortages documented by the audit team may be attributed to: (a) cashier errors due to inexperience, incompetence, or inattentiveness; (b) employee embezzlement; and/or (c) thefts resulting from collusion between a cashier and a bidder. The Auditor's examination indicated that: (1) weaknesses in AJVD's accounting controls; (2) lapses in AJVD's internal control environment; and (3) other financial management deficiencies created the opportunity for negligent and/or intentional financial irregularities. As a consequence, financial losses occurred without detection and without the benefit of any measure of accountability. 

Table III presents a sample of monthly variances between auction sales lists, auction statistics reports, customer sales tickets, and tellers' daily reports.

TABLE III
Sample of Revenue Collection Discrepancies: Fiscal Year 1998 Thru 2000

Auction Month Year Number of Sales Auction Sale List Auction Statistic Report Sales Ticket Teller Daily Report Variance
May 98 613 $214,241 $209,953 $4,288
Jun 98 629 $159,551 $162,297 ($2,746)
Sep 98 550 $144,295 $137,527 $6,768
Oct 98 592 $140,565 $131,648 $8,917
Dec 98 554 $160,750 $155,560 $5,190
Jan 99 641 $111,335 $100,108 $11,227
Jun 99 562 $107,965 $99,451 $8,514
Sep 99 608 $102,822 $98,404 $4,418
Oct 99 531 $76,505 $76,374 $131
Jan 00 388 $80,985 $79,281 $1,704
Mar 00 647 $152,375 $149,470 $2,905
Aug 00 479 $90,710 $86,720 $3,990
TOTAL 6794 $1,542,099 $1,486,793 $55,306

Source: The Auditor's analysis of the auction sales lists and auction statistics report versus she cash register tape.

IV. Outdated Equipment and Tech Technology Contributes to the Erosion of AJYD's Accounting Controls and the Ineffective Performance of its Cash Handling Function

AJVD currently uses outdated cash registers that lack adequate accounting controls and thus may be easily manipulated. For example, cashiers have the ability to input one amount into the cash register to ensure that cash in the register and cash register tapes are equal. The amount that should have been collected for the sale is entered into AJVD's computerized database to ensure that the computer records, the customer's handwritten receipt, and the customer's sales ticket are correct. When a customer makes payment, the customer is issued a handwritten receipt prepared by the cashier that is not an integral part of the cash register system. This internal control weakness may have allowed cashiers to manipulate certain critical documentation supporting the sales transaction.

The receipt that the cashier issues to the customer must correspond to the data entered into the computer system in order to generate documentation necessary for the customer to obtain a certificate of title, however, the customer's receipt may not correspond to the cash register tape or cash actually collected from the customer. Upon receiving the handwritten receipt, the customer proceeds to the next area to receive documentation necessary to obtain a certificate of title.

The Auditor found that, in a significant number of cases, amounts recorded on cash register tapes were noticeably smaller than the actual purchase price entered into AJVD's computer. In other instances, the Auditor found that some sales were listed on the computer printout but were not found on cash register tapes or on credit card receipts. These patterns suggested that: (1) a cashier may be collecting the amount required by the bid sheet, issuing a proper receipt to the bidder, and misappropriating cash before the cash drawer is counted; or (2) the cashier may have colluded with the bidder by not collecting from the bidder the amount owed but, nevertheless, issuing a receipt to the bidder that corresponded to the bid sheet.

Table IV presents examples of sales listed in AJVD's computerized records that the audit team could not find through a review of cash register tapes, cash drawer counts, or credit card receipts. This represents revenue that was not part of the cash register record and therefore was not included in any revenue collection totals or deposits. The discrepancies presented in Table IV are included in the Auditor's finding that $90,000 has not been accounted for during the audit period.

TABLE IV
Examples of Sales Listed on the Computer Printout But Not Found on Cash Register or Credit Card Receipts: Fiscal Fear 1998 Thru 2000

Auction Date Bidder Number Total Sales Price Total Uncollected
9/1/98 5896 $2,190 $2,190
  5934 $1,600 $1,600
9/15/98 1817 $600 $600
  1846 $1,415 $1,415
  1916 $2,000 $2,000
6/1/99 3366 $2,275 $2,275
  3381 $1,550 $1,550
  3430 $70 $70
6/15/99 2408 $1,800 $1,800
  2510 $825 $825
  2566 $235 $235
  2599 $25 $25
2/15/00 170 $60 $60
  192 $3,700 $3,700
Grand Total of Discrepancy $18,345

Source: The Auditor's analysis of auction statistics reports and auction sales lists versus cash register tapes.

A further review of transaction data also indicated that some purchases may not have been listed on either the cash register tapes or auction statistics reports, and thus may indicate that substantially more revenue has been lost or misappropriated. For example, the Auditor found that there was at least one auction sale that appeared unpaid, however, the customer is listed on the auction statistics report as a paying bidder. The audit team questioned the AJVD staff regarding payment for the transaction but adequate clarification was not provided. The transaction was for $17,100 in May 1998. The transaction was listed on the cash register tape, voided without management's review and approval, and never reentered; however, it was listed on the auction statistics report as being paid by the bidder. A further examination of the financial records indicated that the cashier's daily teller sheet was $17,100 short. There were also at least two other instances totaling approximately $1,900 in which customers listed as non-paying bidders were actually listed on the cash register receipts as having paid. Further, there were approximately seven other transactions, during a five-month period, totaling $1,420 that were listed on the cash register tapes but not listed on auction statistics reports.

One vulnerable area that may have facilitated the loss of revenue is AJVD's failure to effectively control access to the computer system that generates documentation necessary for the customer to obtain a certificate of title. This weakness could have provided an opportunity for property control specialists and other .AJVD employees to input false information in order to generate such documentation. Failure to effectively control access to the computer system appears to have been a contributing factor to AJVD's revenue losses.

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RECOMMENDATIONS

  1. The Acting Chief of the Abandoned and Junk Vehicle Division must comply with all financial policies and procedures of the Office of the Chief Financial Officer related to the handling of and accountability for cash collections.

  2. The Director of Public Works should no longer permit AJVD to use its employees as cashiers unless they are properly trained and bonded.

  3. A further analysis and investigation by the Office of Inspector General must be performed to determine the specific source and cause of any variances between sales and cash collected.

  4. The District's Chief Financial Officer should provide AJVD with trained cashiers to work AJVD's semi-monthly auctions.

  5. A secured room with controlled access must be immediately established for use as a cashier's office during AJVD auctions.

  6. The DPW CFO must immediately develop and implement a financial policy and procedures manual for use by AJVD managers and employees who handle cash during auctions. The manual should include standards and procedures pertaining to cashier performance and standards of conduct which must be adhered to while performing cashier duties and responsibilities.

  7. The Acting Chief of AJVD and DPW's CFO must comply with all policies and procedures of the Office of the Chief Financial Officer regarding the collection and reconciliation of auction proceeds.

  8. The Director of Public Works should provide AJVD with state-of-the-art computerized cash registers to ensure that all information keyed into the cash register generates both a customer receipt and register tape with all the pertinent information. The computerized cash registers should interface with AJVD's computer system, and should also be programmed to require the prior approval of an AJVD supervisor or manager before any changes to a transaction, including voids, may be processed.

  9. AJVD must immediately begin using pre-numbered multi-part receipts to ensure accountability for all transactions processed during auctions. 

  10. AJVD must immediately segregate the cash collection, cash counting, and deposit functions in accordance with the policies and procedures of the Office of the Chief Financial Officer and related accounting, auditing, and financial management standards.

  11. The DPW CFO must assign a qualified staff member to supervise the cash handling functions for all AJVD auctions and assist in the reconciliation of cash receipts to accounting records.

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Executive Branch Failed to Adhere to Statutory Reporting Requirement for the Abandoned and Junk Vehicle Fund

D.C. Code, Section 40-834(d), requires the Mayor to submit to the Council of the District of Columbia an annual statement of the Abandoned and Junk Vehicle Division Fund's receipts and disbursements. Based upon information received from the Secretary of the Council of the District of Columbia, the Mayor, or his designee, has failed to submit annual reports of the Fund's receipts and disbursements for fiscal years 1998, 1999, and 2000.

RECOMMENDATION

The Mayor, or his designee, immediately comply with D. C. Code, Section 40-834(d), by submitting to the Council annual reports of the AJVD Fund's receipts and disbursements for fiscal years 1998. 1999, and 2000.

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AJVD FAILED TO CONSISTENTLY REMOVE ABANDONED AND JUNK VEHICLES FROM DISTRICT STREETS IN A TIMELY MANNER

D. C. Code, Section 40-832, requires AJVD to place a written notice on suspected abandoned or junk vehicles stating that, unless it is moved within 72 hours, DPW (AJVD) may thereafter remove the vehicle from public space. The law does not require DPW (AJVD) to remove abandoned or junk vehicles from public space within a specified time period after the 72 hour notice period expires.

The Auditor relied upon information in a DPW database to determine the average number of calendar days it took AJVD to remove abandoned and junk vehicles from public space. Even though the database contained a significant amount of questionable and often incomplete information, the Auditor tested a random sample of 625 abandoned and junk vehicle entries from a total of approximately 6,200 operable entries. The sample size for attribute sampling was designed to yield a 90% confidence level and an error rate of not more than 1.5%. The universe from which the sample was selected did not include: ( I ) abandoned and junk vehicles transferred from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot because these vehicles had already been removed from District streets for parking violations; (2) vehicles that appear to have been removed after the receipt of a complaint but before AJVD affixed the notice required by law demanding removal of the vehicle within 72 hours;4 and (3) vehicles removed from private property.

The analysis indicated that AJVD did not remove a majority of the abandoned and junk vehicles in the sample from public space within 7 to 10 days as stated in the Mayor's Fiscal Year 1999 Performance Measures Scorecard (Scorecard).5 Overall, the analysis indicated that abandoned and junk vehicles were towed from public spaces an average of approximately 24 days after a complaint was filed with AJVD. In a significant number of cases, abandoned vehicles were not removed from public space until at least 45 days after a complaint was received and, in some cases, over 100 days after a complaint.

Further, the Auditor's review indicated that AJVD is not resolving hundreds of abandoned and junk vehicle complaints filed with it during the course of a fiscal year. The Auditor's analysis of various data provided for the audit revealed the existence of approximately 3,300 apparently unresolved abandoned and junk vehicle complaints filed with AJVD during the audit period. (See Appendices 2 and 3 for examples of unresolved abandoned and junk vehicle complaints.)

Prompt removal of abandoned and junk vehicles from District streets and public space promotes health and safety and improves the quality of life for District residents and visitors; facilitates the unimpeded flow of traffic; makes available valuable parking spaces on District neighborhood streets where parking spaces are limited; and reduces potential legal liabilities that may flow from the failure to timely and effectively perform this governmental function.

Table V, on page 25, [not available on-line] presents the Auditor's analysis of the number of days it took AJVD to remove abandoned and junk vehicles from public space. As indicated in Table V and Appendix 1, abandoned vehicles were removed from public space as few as 4 days to as many as 324 days after a complaint was filed with AJVD. Further, as indicated in Appendices 2 and 3, AJVD's disposition, if any, for thousands of other abandoned and junk vehicle complaints were not entered into the database which indicates that these complaints were never appropriately resolved.

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RECOMMENDATIONS

  1. AJVD must promptly remove abandoned and junk vehicles after the 72 hour notice period expires.

  2. The Department of Public Works and the Abandoned and Junk Vehicle Division seek legislative action to shorten the time frame for removing abandoned and junk vehicles from public space by the owner, lien holder, or Department of Public Works.

  3. AJVD managers promptly establish accurate, reliable, and verifiable performance standards and performance measures for investigators, other AJVD employees, and contractors who are responsible for the prompt identification and removal of abandoned and junk vehicles from public :pace. The performance standards and measures must be regularly tracked and reported for each employee and contractor.

  4. AJVD managers promptly establish a more reliable database of information relative to the receipt of abandoned and junk vehicle complaints and regularly produce written reports, cross-referenced to the database, pertaining to the status and resolution of all complaints received during each fiscal year and identify all unresolved complaints.

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AJVD INACCURATELY REPORTED PERFORMANCE RESULTS ON THE NUMBER OF ABANDONED AND JUNK VEHICLES REMOVED FROM PUBLIC STREETS AND PRIVATE PROPERTY

Agencies of the District government must accurately report performance results for each specific performance measure pursuant to the Government Managers Accountability Act of 1995 and the Government Performance Results Act. The methodology used to calculate or determine performance results must be objective, accurately quantified, and verifiable.

The Auditor's examination of AJVD's performance measures and performance results revealed inconsistencies in data reported for AJVD's removal of abandoned and junk vehicles from public streets. For example, the fiscal year 1999 performance measures Scorecard indicated that AJVD removed 7,629 abandoned and junk vehicles from public space. However, through an examination of AJVD's data related to this measure, the Auditor determined that the measure could only be achieved by including vehicles towed from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot. The Auditor found that approximately 4,185 of the 7,629 abandoned and junk vehicles that AJVD claimed to have removed from public space had, in fact, already been removed from City streets by the Parking Enforcement Division for parking violations. When these vehicles were not claimed by their owners within approximately 45 days, they were subsequently transferred from the Brentwood Impoundment lot to the Blue Plains Impoundment lot for auction by AJVD. Thus, counting vehicles transferred between impoundment lots substantially exaggerated AJVD's performance of the removal of abandoned and junk vehicles from public space, and raises questions of whether a significant portion of AJVD's resources were used by the Parking Enforcement Administration to help it manage space at the Brentwood Impoundment Lot rather than focus these resources on the removal of abandoned and junk vehicles from District streets and neighborhoods. The Auditor's analysis indicated that during fiscal year 1999 AJVD removed approximately 3,444 abandoned and junk vehicles from public streets and private property, or approximately 55% less than the reported 7,629.

AJVD'S reported performance results for the same measure during fiscal year 2000 indicated that AJVD removed 8,627 abandoned and junk vehicles. Again, the Auditor found that this performance result was artificially inflated by counting vehicles transferred between impoundment lots. The Auditor's analysis revealed that AJVD was responsible for the removal of approximately 3,941 to 4,225 abandoned and junk vehicles from public streets instead of the misreported 8,627. Approximately 4,402 of the 8,627 reported abandoned and junk vehicles removed from public space in fact had already been removed by the Parking Enforcement Division for parking violations. Vehicles not claimed by their owners within approximately 45 days were subsequently transferred from the Brentwood Impoundment Lot. Table VI presents discrepancies in performance results for the removal of abandoned and junk vehicles from public space for fiscal years 1998, 1999, and 2000.

TABLE VI
Auditor's Analysis of Abandoned and Junk Vehicle Division's Removal of Abandoned and Junk Vehicles from Public Streets and Private Property: Fiscal Years 1998 - 2000

Abandoned and Junk Vehicles Fiscal Year 1998 Fiscal Year 1999 Fiscal Year 2000 Total
Removals Reported by AJVD 5,960 7,629 8,627 22,216
Removed by AJVD 2,802 3,444 4,225 10,471
Transfers from Brentwood 3,158 4,185 4,402 11,745
Discrepancy 11,745

Source: The Department of Public Works and the Abandoned and Junk Vehicle Division

The audit team also found inconsistencies in performance results for other AJVD performance measures, such as the number of days it took AJVD to finally dispose of abandoned and junk vehicles towed to its impoundment lot. A fiscal year 1999 report prepared by the Division of Parking Services entitled "Regulate Parking on Public Space" claimed to track a vehicle from the date of a complaint to the final disposition (i.e., removal). (See Appendix A) This report indicated a baseline of 18 days for a final disposition of vehicles on the AJVD lot during one fiscal year in the AJVD system. The Auditor's test of the same information for fiscal year 1999 indicated that the final disposition of vehicles on AND's lot exceeded 60 days rather than the 18 day baseline.

RECOMMENDATION

The Auditor recommends that the Acting Chief of AJVD accurately report performance results for all of AND's performance measures, and that the Parking Enforcement Administrator verify the methodology used to quantify performance results and the accuracy of the reported results.

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OUTDATED COMPUTER HARDWARE AND SOFTWARE FAILED TO SUPPORT AJVD'S OPERATIONS

AJVD uses an outdated ten-year old software program to input and store information related to abandoned and junk vehicles entering and exiting AJVD's program. Further, AJVD's computer system periodically shuts down, thereby depriving AJVD access to information related to vehicles already in the database or the ability to input new vehicle information.

During fiscal year 1999, software and hardware were inoperable approximately 10 times for an average of two days each time. A number of technicians attempted to repair the system but were unable to do so. The shut-downs delayed AJVD's response to vehicle owner's inquiries, and required AJVD to manually record all information. Letters and other critical correspondence were also prepared manually. There were delays in all AJVD functions during shut-downs including delays in sending notices to vehicle owners, requesting stolen vehicle information through Wales,6 and retrieving vehicle information for release to owners. System shut-downs also occurred at least twice while AJVD prepared for an auction.

The software does not allow ease of access to data and is a virtually useless management reporting tool. Measuring AJVD's performance currently requires an arduous, inefficient and ineffective manual process of cross-referencing voluminous data in eight different reports. The use of such antiquated computer hardware and software contributes to performance and management inefficiencies and ineffectiveness.

RECOMMENDATION

The Parking Enforcement Administrator and the Acting Chief of AJVD should work closely with the Office of the Chief Technology Officer to develop specifications for computer hardware and software that meets all of AJVD's technological, management reporting, performance, and tracking needs. The Auditor further recommends that as many phases of AJVD's operation as possible should be computerized. A new system should, at minimum, allow: 1) a better internal control system; 2) the ability to interface updated cash registers with the computer system; 3) the ability to more efficiently monitor and track employees' productivity; 4) the ability to quickly input and retrieve owner information; 5) the ability to generate useful integrated management reports; and 6) enhance AJVD's overall efficiency and performance.

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MORE EFFICIENT ALLOCATION OF AJVD'S INVESTIGATIVE STAFF IS NEEDED

As stated earlier, AJVD investigators are primarily responsible for investigating complaints of abandoned and junk vehicles. Their specific duties include the following: 1) investigating complaints of abandoned vehicles; 2) issuing Notices of Infraction; 3) determining equipment needed and arranging for vehicle removal; 4) determining whether a vehicle should be impounded or disposed of; and ?) assisting the AJVD in conducting auctions. AJVD investigators were responsible for conducting all abandoned and junk vehicle investigations.

The Auditor found that AJVD managers did not efficiently deploy the Division's existing investigative manpower. For example, the Auditor found that investigators assigned to areas of the District where fewer vehicles were abandoned or junked were not reassigned to assist with the identification and removal of abandoned and junk vehicles in areas of the District where there were a greater number of such vehicles.

As stated earlier, although performance measures were established, AJVD did not establish specific performance standards and measures for its investigators, did not track and account for investigators' performance and productivity, and AJVD managers did not allocate investigators in a manner that reflected an equitable distribution of AJVD's workload. Without adequate, effective performance measures and accountability, in addition to a reliable performance monitoring and tracking system, the abandoned and junk vehicle investigative function is ripe for abuse and negligent performance of assigned duties.

All wards are currently assigned one investigator. The Auditor determined that abandoned and junk vehicles were most pervasive in Wards 1, 4, 5, 6, 7, and 8. Investigators assigned to Wards 2 and 3, where abandoned and junk vehicles were less prevalent, were not periodically re-deployed to assist investigators assigned to areas with a high concentration of abandoned and junk vehicles. As a consequence, AJVD's workload was unevenly distributed among investigative staff with investigators in Wards 2 and 3 carrying the lightest work loads. Table VII presents the number of abandoned and junk vehicles removed from public space in all Wards during fiscal year 2000.

TABLE VII
Abandoned and Junked Vehicles By Ward: Fiscal Year 2000

Ward Total Abandoned Cars Percentage
Ward 1 538 14%
Ward 2 251 6%
Ward 3 38 1%
Ward 4  658 17%
Ward 5 568 14%
Ward 6 454 12%
Ward 7 495 13%
Ward 8 884 23%
TOTAL 3,886 100%

Source: AJVD Monthly Towing Statistics

RECOMMENDATIONS

  1. AJVD managers must develop a deployment strategy for allocating investigators to the various wards of the city with the greatest concentration of abandoned and junk vehicles to facilitate the achievement of its mission and maximize the performance of its investigators.

  2. The Acting Chief of AJVD must establish specific performance standards and measures for AJVD investigators.

  3. The Acting Chief of AJVD must establish a reliable performance monitoring and tracking system for AJVD investigators and other AJVD employees responsible for the identification and removal of abandoned and junk vehicles from public space.

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AJVD is Operating in An Unsafe Environment

Policies of the OCFO require that cash and other District assets must be properly safeguarded. In order to protect cash collected by AJVD during auctions, an adequate security presence must be maintained. Adequate security provides a deterrent and lessens the likelihood of theft. The Auditor found that AJVD collected an average of approximately $66,000 per auction during the audit period. During auctions, AJVD cashiers operated in an unsecured environment in that there was no discernible security presence in the cashier's office. Further, there was no formal agreement between AJVD and the Metropolitan Police Department to provide security, however, at least two police officers were generally present on the lot during most auctions.

The Auditor found that each of the five cashiers were located at windows to receive and disburse cash to customers who entered the lot on auction day. The windows were standard glass and provided little security. Likewise, AJVD's administrative offices and other areas had standard glass windows. The windows and doors were locked, however, they were not adequately secured in other ways. The Auditor further found that there were no security cameras or other surveillance equipment on the premises.

Additionally, the Auditor found that parking was also a safety issue during the audit period. The Abandoned and Junk Vehicle Division has a small parking lot. During regular operating hours, this lot is more than sufficient. However, during public auction days, customers double park along Shepherd Parkway, impeding the free flow of traffic. On one hand, this presents a public safety issue in case of a real emergency. On the other hand, it places auction customers in the untenable position of incurring parking tickets or having their own vehicle towed as a result of DPW's failure to provide them with adequate, legal parking facilities.

Customers attending auctions have received parking tickets. As noted in the organizational chart shown in the Background section of the report, AJVD is under the management control of the Parking Enforcement Administration, which is also responsible for issuing Notices of Parking Infraction (parking tickets). This indicates an inherent conflict in that the Parking Enforcement Administration, which oversees AJVD's operation, is also responsible for issuing tickets to AJVD customers.

The Department of Public Works has not provided AJVD with adequate parking during auctions and has not assisted it in developing and implementing an alternative parking plan. Thus, AJVD's auction customers are placed in the untenable position of being invited to auctions where there is insufficient legal parking and being ticketed or threatened with parking tickets. This treatment of AJVD customers should be abated immediately by the Director of the Department of Public Works and the Parking Enforcement Administrator.

RECOMMENDATIONS

  1. A written agreement should be executed between the Metropolitan Police Department and AJVD to provide at least two MPD officers for each auction, one of which should be stationed in the cashier's office.

  2. The Abandoned and Junk Vehicle Division should install security glass throughout its offices, with the cashier's office receiving priority. AJVD should also install security cameras within the cashier's office and in other strategic locations.

  3. DPW and the AJVD management should make formal arrangements with nearby DC Village or the Potomac Training Center for parking spaces during auctions.

Appropriate notification of parking restrictions should be placed in newspaper advertisements, appropriate signs posted along Shepherd Parkway, and appropriate signs posted at the DC Village Property/Potomac Training Center directing customers to legal parking. If an agreement is not reached, DPW, the Parking Services Division, and AJVD should develop a parking plan that meets AJVD's parking requirements on auction days.

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AJVD's Fees Are Insufficient to Cover Its Operating Costs

D. C. Code. Section 40-834, states that the Abandoned and Junk Vehicle Division shall pay all of its expenses out of money deposited in the AJVD Fund. In other words, as noted earlier in this report, these revenues are intended to cover the cost of AJVD's operations. The Auditor found that AJVD generated approximately $378,326 in revenue from storage and other fees during the fiscal years under audit. During fiscal years 1999 and 2000, AJVD experienced a deficit of approximately $138,115 and $705,41 -5. respectively. The deficits were attributed to several factors, including inadequate storage and other fees.

The fee for storing abandoned and junk vehicles is currently $10 per day, and is the same fee established approximately 10 years ago. The $10 fee does not cover the rising costs associated with vehicle storage. The costs associated with storage and activities related to abandoned and junk vehicles in the District's custody have all increased, including the cost of postage to inform vehicle owners that their vehicle has been towed, personnel needed from the moment the vehicle is issued a notice of infraction until the disposition of the vehicle, security necessary to protect the vehicle from vandalism, and advertisement to inform vehicle owners and others that the vehicle will be sold at auction. If AJVD had been able to collect a $25 storage fee, it would have generated approximately $55,395 more per year in storage fee revenue, or an additional $166,185, during the three-year audit period. This revenue estimate is based on the average of 3,693 vehicles towed from public space multiplied by the additional $15 that AJVD would be able to collect.

The Auditor found that the District of Columbia's fee for vehicle storage is far lower than the storage fee charged by surrounding jurisdictions, other urban areas, and the private sector. Surrounding jurisdictions such as Fairfax, Prince George's and Montgomery Counties each charge $25 per day for storage. Cities such as New York City, Baltimore, Los Angeles, and Atlanta have similar abandoned and junk vehicle programs, and their storage fees range from $35 to $50 per day.

RECOMMENDATION

DPW's Director, the Parking Enforcement Administrator, DPWs CFO, and AJVD managers must raise AJVD's fees and/or reduce its expenditures in order to ensure that its expenditures are properly aligned with its revenues and that AJVD's mission is not compromised by inadequacies in its fee structure.

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CONCLUSION

The Auditor's examination of the accounts and operations of the Abandoned and Junk Vehicle Division (AJVD) revealed the presence of significant operational, management, and financial management deficiencies and irregularities.

Performance and Operational Management

Within the operational area, AJVD failed to timely remove abandoned and junk vehicles pursuant to the laws governing abandoned and junk vehicles. Based on the Auditor's analysis of a random sample of 625 abandoned and junk vehicle records, AJVD did not remove from public space a majority of abandoned and junk vehicles within 7 to 10 days as stated in the Mayor's Fiscal Year 1999 Performance Measures Scorecard (Scorecard).7 Overall, the analysis indicated that abandoned and junk vehicles were towed from District streets an average of 24 calendar days after a complaint was filed with AJVD. In a significant number of cases, abandoned vehicles were not removed from public space until at least 45 days after a complaint was received, and in some cases over 100 days after a complaint. (See Appendix 1 and Table V)

The Auditor's review further indicated that AJVD is not resolving hundreds of abandoned and junk vehicle complaints filed with it during the course of a fiscal year. The Auditor's analysis of data provided for the audit revealed the existence of approximately 3,300 apparently unresolved abandoned and junk vehicle complaints filed with AJVD during the audit period. (See Appendices 2 and 3 for examples of unresolved abandoned and junk vehicle complaints.)

Prompt removal of abandoned and junk vehicles from District streets and public spaces promotes health and safety and improves the quality of life of District residents and visitors; facilitates the unimpeded flow of traffic; makes available valuable parking spaces on District neighborhood streets where parking spaces are limited; and reduces potential legal liabilities that may flow from the failure to timely and effectively perform this governmental function. The Abandoned and Junk Vehicle Division must significantly improve the performance and timeliness of the removal of abandoned and junk vehicles from District streets, public space, and private property.

The Auditor's examination further revealed that AJVD's performance statistics regarding the number of vehicles it removed from District streets were artificially inflated by as much as S 1 % to 55%. It appears that thousands of vehicles AJVD claimed to have removed from City streets were in fact vehicles initially towed to the Brentwood Impoundment Lot by the Parking Enforcement Division as a result of parking violations. When these vehicles were not claimed by their owners within a reasonable period of time, they were subsequently towed from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot where the Abandoned and Junk Vehicle Division stores abandoned and junk vehicles. AJVD inappropriately included these vehicles in calculating its "number of vehicles removed from public space" performance result.

In fiscal year 1999, AJVD reported that it removed 7,629 abandoned and junk vehicles from public space. However, we found that approximately 4,185 of the claimed vehicles were actually transferred from the Brentwood Impoundment Lot to the Blue Plains Impoundment Lot.

Reported performance results for the same measure during fiscal year 2000 indicated that AJVD removed 8,627 abandoned and junk vehicles from public space. Again, the Auditor found that this performance result was artificially inflated by counting vehicles transferred between impoundment lots. The Auditor's analysis revealed that AJVD removed between 3,941 and 4,225 abandoned and junk vehicles from public space rather than 8,627. Approximately 4,402 of the 8,627 vehicles included in this performance result had already been removed from public streets to the Brentwood Impoundment Lot by the Parking Enforcement Division for parking violations.

While AJVD counted vehicles transferred between impoundment lots as a measure of its performance of the removal of abandoned and junk vehicles from District streets and public space, it did not adequately account for the disposition of abandoned and junk vehicle complaints received during each of the three fiscal years under review. During fiscal years 1999 and 2000, respectively, the disposition of approximately 3,300 complaints were unaccounted for by AJVD. It appears that AJVD failed to respond within a reasonable time, if at all, to 3,300 abandoned and junk vehicle complaints.

The Auditor also found that AJVD did not efficiently deploy its investigative manpower; failed to establish specific performance standards and measures for its investigators; did not monitor, track, and account for investigators' performance and productivity; and did not allocate investigators' in a manner that reflected an equitable distribution of AJVD's workload. All wards were assigned one investigator even though abandoned and junk vehicles were most pervasive in Wards 1, 4, 5, 6, 7, and 8. During the audit period, investigators assigned to Wards 2 and 3, where abandoned and junk vehicles were less prevalent, were not periodically re-deployed to assist investigators assigned to areas with a high concentration of abandoned and junk vehicles. As a consequence, AJVD's workload was unevenly distributed among its investigative staff with investigators in Wards 2 and 3 carrying the lightest workloads.

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Financial Management

Within AJVD's financial operations, the Auditor found that supervision, administration, and monitoring of AJVD's cash collections and cash handling functions were governed by a system of poor financial management practices, a weak internal control environment, and ineffective internal controls. Specific deficiencies included, but were not limited to:

  • poor controls over cash;

  • failure to restrict access to cash and the cash collection area during semi-monthly auctions; 

  • failure to segregate duties related to cash collections and cash handling functions;

  • chronic failure to conduct reconciliations, resolve cash drawer discrepancies, and investigate cash shortages;

  • failure to bond employees who handled cash, and

  • inadequate and ineffective management oversight of the cash collection and cash handling processes.

The area used by AJVD as a cashiers office during semi-monthly auctions was inadequately restricted from access by unauthorized DPW and AJVD employees. Cashiers were free to fraternize with other AJVD and DPW employees and to read newspapers and magazines while performing their cashier functions. These distractions interfered with cashiers' ability to devote their full-time and attention to their duties, and may have posed a significant risk for error and a substantial opportunity for theft and/or fraud.

AJVD managers used property control specialists to perform the duties and responsibilities of cashiers during semi-monthly auctions. There was no evidence to suggest that these employees possessed prior experience as cashiers, were trained to perform as cashiers, or had ever undergone a criminal background check to ensure the absence of prior criminal convictions. Further, the Auditor found that none of the employees handling cash were bonded.

There was no evidence available for the Auditor's review indicating that the District Treasurer's office, or any other accountable officer in DPW or the Office of the Chief Financial Officer of the District of Columbia, ever conducted periodic reconciliations of AJVD's revenue collections. As a consequence of the failure to regularly perform a detailed reconciliation after each auction, AJVD suffered undetected financial losses that may have been the result of negligence or employee misconduct, if not both. The Auditor could not find any evidence that accountable officials in DPW or the OCFO took any action to identify, investigate, or resolve inconsistencies between the amount of cash collected, cash register tapes, cash register receipts, and other available financial information that would have revealed the existence and source of financial discrepancies after each auction.

During the semi-monthly auctions conducted during the audit period, AJVD collected an average of $66,000 per auction. Through a comparison of relevant financial records for auctions held during the audit period, the Auditor found auction revenue variances averaging approximately $30,000 annually, or approximately $90,000 during the three-year audit period. In reviewing records for the ten-year period between fiscal years 1990 and 2000, the Auditor determined that AJVD may have incurred cash shortages in excess of $300,000. The shortages may be attributed to: (a) cashier errors due to inexperience, incompetence, or inattentiveness; (b) employee embezzlement; and/or (c) thefts resulting from collusion between a cashier and a bidder. As a consequence, losses regularly occurred without detection and without the benefit of any measure of accountability. This matter has been referred to the Office of the Inspector General for further investigation.

During the fieldwork phase of the audit, the Auditor found numerous unsupported, voided transactions that did not receive the prior approval of a designated AJVD supervisor or manager. Prior to and during the audit, AJVD managers did not properly control, account for, or require management's authorization to void financial transactions during AJVD auctions. As a consequence, cashiers routinely voided financial transactions without management's review, approval, or knowledge.

AJVD currently uses outdated cash registers that lack adequate accounting controls and thus may be easily manipulated. Internal control deficiencies may allow cashiers to manipulate certain critical documentation supporting sales transactions. In a significant number of cases, amounts recorded on cash register tapes were noticeably smaller than the actual purchase price entered into AJVD's computer. In other instances, the Auditor found that some sales transactions were listed on a master computer printout but were not found on cash register tapes or credit card receipts. These patterns suggested that: (1) a cashier may have collected the amount required by the bid sheet, issued a proper receipt to the bidder, and misappropriated funds from the cash drawer before the drawer was counted; or (2) the cashier colluded with a bidder by not collecting the amount due, but nevertheless issued a receipt that corresponded to the bid sheet and transaction data entered into AJVD's computer.

Another area of vulnerability that may have facilitated the loss of revenue is AJVD's failure to effectively control access to the computer system that generates documentation necessary for the successful bidder to obtain a certificate of title on each vehicle purchased at an auction. Uncontrolled access to the computer system may have provided an opportunity for AJVD employees to input false financial and related information in order to generate documentation necessary to obtain a certificate of title. Failure to effectively control access to the computer system appears to have been another possible contributing factor to AJVD's revenue losses.

Finally, the Auditor found that the District of Columbia's $10 vehicle storage fee is the lowest storage fee charged by surrounding jurisdictions, other urban areas, and the private sector. Surrounding jurisdictions such as Fairfax, Prince George's and Montgomery Counties charge $25 per day for storage. Cities such as New York, Baltimore, Los Angeles, and Atlanta have similar abandoned and junk vehicle programs, and their storage fees range from $35 to $50 per day. Increasing the storage fee could provide a significant source of additional revenue to the Abandoned and Junk Vehicle Division Fund.

Respectfully submitted,
Deborah K. Nichols
District of Columbia Auditor

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APPENDIX I: Elapsed Time Between an Abandoned or Junk Vehicle Complaint and AJVD's Removal of the Vehicle, Continued from Table V [not available on-line]

APPENDIX II: Examples of Unresolved Abandoned and Junk Vehicle Complaints That Lack Tracking and Resolution Data: October 1999 Thru March 2001 [not available on-line]

APPENDIX III: Examples of Unresolved Abandoned and Junk Vehicle Comaplints: October 1999 Thru December 1999 [not available on-line]

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AGENCY COMMENTS 

On February 14, 2001, the Office of the District of Columbia Auditor issued the initial draft report for review and comment to the Director of Public Works (DPW), the Office of the Chief Financial Officer, the Office of the Chief Technology Officer, the Acting Program Manager for the Abandoned and Junk Vehicle Division (.AJVD), and the Chief Financial Officer for DPW. Written comments were received from DPW's CFO. No comments were received from the Office of the Chief Technology Officer or the Chief Financial Officer of the District. The exit conference was held with the Chief Financial Officer for DPW, a program representative of AJVD, and the Director of Internal Audit for the District's Chief Financial Officer. A second draft report was issued to the original recipients on May 1, 2001.

Final written comments were received from the Director of DPW and the Chief Financial Officer for DPW on May 17, 2001. No comments were received from the Chief Technology Officer or the Chief Financial Officer of the District of Columbia. Where appropriate, amendments to the final report were made to reflect the comments received. The final written comments received by the Auditor have been appended, in their entirety, to this report.

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GOVERNMENT OF THE DISTRICT OF COLUMBIA
DEPARTMENT OF PUBLIC WORKS
2000 14th Street, N. W., Washington, D.C. 20009 (202) 673-6833

Office of the Director

May 17, 2001

Ms. Deborah K. Nichols
District of Columbia Auditor
Office of the District of Columbia Auditor
707 - 14th Street, N.W., Suite 900
Washington, D.C. 20005

Dear Ms. Nichols:

The Department of Public Works (DPW) and the Office of the Chief Financial Officer (OCFO) for the agency thank you for the opportunity to review the draft report, "Review of the Performance and Financial Management of the Abandoned and Junk Vehicle Division", (AJVD) for the Department of Public Works'.

Summarily, the draft audit noted deficiencies in many areas of its review. In response, we acknowledge the need to improve internal procedures and controls with regarding to this program's operation. Additionally, the draft report raised serious concerns regarding variances between cash transaction; i.e., sales, collections and deposits from the twice a month abandoned vehicle auction sales. In response OCFO senior auditing and financial personnel conducted a review of practices employed during an auction sale. As a result, we determined that the reconciliation and accounting processes were in disarray, which may have factored heavily into the miscalculation of the reported variances. However, this process did not account for the total disparity between the auction sales, collections, and deposits. Therefore, a request dated April 4, 2001, was made to the Office of the Inspector General to initiate an investigation.

Specifically, attached are the responses both programmatic and financial, to the findings and recommendations of this draft audit report.

We hope these responses are helpful and would appreciate inclusion in your final report reference to our responses to issues raised.

Thank you again for the courtesy the draft report. Please do not hesitate to contact us if you have questions.

Sincerely,
Leslie Hotaling
Director

Pamela D. Graham
Chief Financial Officer

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Response to the D.C. Auditor's Draft Report Entitled
Review of the Performance and Financial Management
of the Abandoned and Junk Vehicle Division

Submitted by the Office of the Chief Financial Officer

1. FINDING : Failure to restrict access to the cash collection area - page 12.
RECOMMENDATION : A secured room with controlled access must be immediately established for use as a cashier office during AJVD auctions.
RESPONSE : Disagree with recommendation.

We believe that all-feasible measures have been taken and that this area is secured and controlled. The cash collection for the twice a month abandoned and junk vehicle auction occurs adjacent to a perimeter wall of a large room with bidders conducting their business through a window from outside the building. The cash handling activities occur for a period of approximately 10 hours of any given month and the building has no non-use space. The primary use of this room, during other than an auction sale, is as an office space for 10 employees who are responsible for the day-to-day activities of the AJVD During an auction, access to this area is restricted to only personnel who are vital to auction related activities, i.e., auction management, generating titles, computer record searches, processing credit card transactions and mandated record disposal for titles for unsold vehicles. The security of the operation is further being addressed by an officer of the Metropolitan Police Department who is on duty at the entrance to the room when the auction is being conducted.

2. FINDING: Failure to properly train employees used as cashiers during auctions - page 13.
RECOMMENDATIONS: 

a. The Director of Public Works should no longer permit AJVD to use its employees as cashiers unless they are properly trained and bonded.
b. The District's Chief Financial Officer should provide AJVD with trained cashiers to work AJVD's semi-monthly actions.

RESPONSE : Agree with recommendations.

The Office of Finance and Treasury (OFT) will immediately train all AJVD personnel involved in auction sale activities to insure internal control and segregation of duties. Cashier training will include the investigation of shortages and counterfeit detection. In addition, OFT will have on site for each auction sale a supervisory cashier who will oversee the cash collection activities.

3. FINDING: Failure to segregate duties - page 14.
RECOMMENDATIONS :

a. The Acting Chief of the Abandoned and Junk Vehicle Division must comply with all financial policies and procedures of the Office of the Chief Financial Officer related to the handling of and accountability for cash collection.
b. AJVD must immediately segregate the cash collection, cash counting, and deposit functions in accordance with the policies and procedures of the Office of the Chief Financial Officer and related accounting, auditing and financial management standards.

RESPONSE : Agree with recommendations.

AJVD's limited staff placed restrictions on the controls that could be implemented prior to the audit report. However, with staff assistance from the OFT all cash collection, counting and deposit functions will be performed in accordance with the policies and procedures of the Office of the Chief Financial Officer and related accounting, auditing and financial management standards.

4. FINDING: Duties assigned to Property Control Specialist pose conflicts - page 15.
RECOMMENDATIONS : Same as #3 above.
RESPONSE : Same as #3 above.

5. FINDING: Failure to bond AJVD employees who handle cash - page 16.
RECOMMENDATION: The Acting Chief of the Abandoned and Junk Vehicle Division must comply with all financial policies and procedures of the Office of the Chief Financial Officer related to the handing of and accountability for cash collection.
RESPONSE: Agree with recommendation.

OFT is in the process of bonding its cashiers. We will consider the use of bonded cashiers at this site in the future. In the interim OFT, as noted above, will provide staff during auction sales to ensure the integrity of the operation.

6. FINDING: The lack of internal accounting controls resulted in cash shortages - page 17. Included were:

a. the failure to perform a reconciliation after each auction;
b. voided transactions which were not properly controlled by management;
c. approximately $90,000 in revenue variances reported in the auction statistics report and revenue
reported in the daily teller sheets during the three year audit period;
d. outdated equipment and technology contributes to the erosion of AJVD's accounting controls and
the ineffective performance of its cash handling function.

RECOMMENDATIONS:

a. A further analysis and investigation by the Office of Inspector General must be performed to determine the specific source and cause of any variances between sales and cash collected.
b. The DPW/OCFO must immediately develop and implement a financial policy and procedures manual for use by AJVD managers and employees who handle cash during auctions. The manual should include standards and procedure pertaining to cashier performance and standards of conduct which must be adhered to while performing cashier duties and responsibilities.
c. The Director of Public Works should provide AJVD with state-of-the-art computerized cash registers to ensure that all information keyed into the cash register generates both a customer receipt and register tape with all the pertinent information. The computerized cash registers should interface with AJVD's computer system, and should also be programmed to require the prior approval of an AJVD supervisor or manager before any changes to a transaction, including voids, may be processed.
d. AJVD must immediately begin using pre-numbered multi-part receipts to ensure accountability for all transactions processed during auctions.
e. The DPW/OCFO must assign a qualified staff member to supervise the cash handling functions for all AJVD auctions and assist in the reconciliation of cash receipts to accounting records.

RESPONSE : Disagree with recommendations pending further analysis and disclosure.

Prior to the D.C. Auditor's draft report on AJVD, dated February 23, 2001, the AJVD program staff reconciled the auction sale cash collection. However, beginning with the first auction sale in March 2001, the OCFO assumed full responsibility for cash reconciliation from the auction sales.

Our review of the AJVD sale transactions did not support the finding regarding voided transactions. In fact, we determined that sales that were voided were approved and initialed by a supervisor and that the corrected entry followed the voided transactions.

The finding regarding the $90,000 revenue variance is in dispute because the auditor failed to specifically identify the transactions that contributed to these findings in the report. Following notification about purported discrepancies, OCFO senior auditing and financial personnel conducted a review of audit records and files for a controlled period. As a result, we determined that the reconciliation and accounting process employed was in disarray. This may have factored heavily into the miscalculation of the reported variances in the audit report. However, on a smaller scale, we discovered variances between auction sales amount, cash collections, and deposits. As a result, on April 4, 2001, the agency director requested the Office of the Inspector General investigate to determine extent and involvement.

A Business Process Reengineering (BPR) study through the Office of the City Administrator (OCA) was completed last year of the AJVD. The consultants from OOA Corporation have submitted a written report to the agency. Staff from the OCA is working with the AJVD to implement the study recommendations. The acquisition of equipment and technology needed to support this program are being considered concurrent with the recommendations regarding fee increases, increased budget authority or a reduction in the operation in order to fund program enhancements.

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Response to the D.C. Auditor's Draft Report Entitled
Review of the Performance and Financial Management
of the Abandoned and Junk Vehicle Division

Submitted by the Director, Department of Public Works

1. FINDING: AJVD failed to remove vehicles in a timely manner - page 26
RECOMMENDATION:

1. AJVD must comply with D.C. Code, Section 40-832, by removing abandoned and junk vehicles within 72 hours after placement of the notification on the vehicle.
2. . The Department of Public Works and the Abandoned and Junk Vehicle Division seek legislative action to shorten the three-day time frame for identifying and removing abandoned and junk vehicles from public space by the owner, lien holder, or Department of Public Works.

RESPONSE:

1. The Auditor incorrectly states that DC Code 40-832 requires removal within three days after placement of notification. In fact, the DC Code permits removal only AFTER 3 days, and the DPW is in compliance.
Upon identifying an abandoned or junk vehicle, D.C. Code, Section 40-832, requires AJVD to place a written notice on the vehicle stating that, unless moved, DPW may tow it only after 72 hours, or three days. If the vehicle has not been moved within that time, the vehicle is subject to removal. Within five days after removal, the owner or lien holder is notified by certified mail that the vehicle has been impounded and will be sold at auction after 45 days if the vehicle is not claimed.
2. Legislation is being sought that will allow AJVD to remove vehicles in a more expeditious manner. The Parking Services Administration concurs that 72 hours is inadequate, and are working with the Office of the City Administrator through a Business Process Re-engineering project to reduce the 72 hours to 24 hours. Further, the auditor's claim that "most" jurisdictions allow only 24hours before a vehicle may be removed is false. PSA, DPW, and the City Administrator's Office have begun a lengthy and detailed survey of best practices among other jurisdictions, and to date, have found that 24-hours is an exception, not the "norm." In fact, many jurisdictions parallel our timeframe, and some are longer.

2. FINDING: AJVD inaccurately reported performance results - page 28

RECOMMENDATIONS:

The Auditor recommends that the Acting Chief of AJVD accurately report performance results for all of AJVD's performance measures, and that the Parking Enforcement Administrator verify the methodology used to quantify performance results and the accuracy of the reported results.

RESPONSE : The Performance Measure Scorecard as reported by AJVD for fiscal year 1999, was 9 days to remove an abandoned vehicle from a public space and 37 days to remove abandoned vehicles from private property. There were many vehicles that were removed days past the average but there were many more that were removed before the average. .

The Performance Scorecard for fiscal years 1998 - 2000 indicates 11,745 transfers from Brentwood to Blue Plains impound lot. This figure is for contract removals and an additional 1,318 transfers were removed by DPW tow cranes, over the 3 year period.

AJVD managers are not aware of a Parking Services Performance Report for Fiscal Year 1999, or a reported 21 day baseline for a final disposition of vehicles impounded at AJVD in the AJVD system. However, PSA did internally track several performance measures in this timeframe that included cycle time from receipt of complaint to street removal of abandoned or junk vehicles (on both public and private space), and the number of requests responded to for pmate property and public space.

The auditor's analysis, based on a random sample of 1% of vehicles towed, is statistically insignificant. Further, information provided on the Table VI is suspect (see the 13th listed vehicle). Table VI indicates abandoned vehicles that originated from the Brentwood impound lot that were first towed as a traffic complaint or impounded at Brentwood for reasons other than as an abandoned vehicle. The complaint number for every vehicle fisted in Table VI was generated while the vehicle was impounded at the Brentwood impound lot.

An abandoned vehicle is impounded on the lot for at least 45 days or to the closest auction date after the 45 day impoundment, usually up to 60 days. Abandoned vehicles may be released prior to 45 days but not auctioned or sold. AJVD is not aware of any report indicating AJVD removing approximately 6,200 vehicles, in fiscal year 1999.

The data measured is not a good indicator because none of the complaints are abandoned vehicles from public space or private property but from another D.C. Government impound lot.

3. FINDING: Outdated computer hardware and software failed to support AJVD's operations - page 32

RECOMMENDATIONS: The Parking Enforcement Administrator and the Acting Chief of AJVD should work closely with the Office of the Chief Technology Officer to develop specifications for computer hardware and software that meets all of AJVD's technological management reporting, performance, and tracking needs. The Auditor further recommends that as many phases o AJVD's operation as possible should be computerized. A new system should, at minimum allow: 1) a better internal control system; 2) the ability to interface updated cash registers with the computer system; 3) the ability to more efficiently monitor and track employee's productivity; 4) the ability to quickly input and retrieve owner information; 5) the ability to generate useful integrated management reports; and 6) enhance AJVD's overall efficiency and performance.

RESPONSE: In addition to the BPR in project, there are a number of other citywide and agency-driven initiatives that incorporate AJVD into their planning. The use of state-of-the-art technology is central to these designs, and AJVD and related operations will be the centerpiece of many of these new initiatives.

Currently, an entirely new system is being designed with the help of the Office of the Chief Technology Officer (OCTO), which will automate many of AJVD's processes. Additionally, OCTO and PSA are seeking ways to connect AJVD systems to Hansen. In summary, technology will play a very significant role in how AJVD conducts business.

4. FINDING: More efficient allocation of investigative staff is needed - page 34

RECOMMENDATION: AJVD managers must develop a deployment strategy for allocating investigators to the various wards of the city with the greatest concentration on abandoned and junk vehicles to facilitate the achievement of its mission and maximize the performance of its investigators.

RESPONSE : AJVD has been working to purge abandoned and junk vehicles from District streets more rapidly. Investigators do work in tandem, or multiple investigators do work together, periodically, on special projects, when assistance is needed, or on the new "sweep" process implemented as a part of the AJVD BPR (beginning in Oct 2000). Additionally, several task forces are planning for the utilization of hand-held mobile data terminals for investigators in the field that will speed information processing, location of vehicles, and quicker removal of vehicles from the streets.

5. FINDING: AJVD is operating in an unsafe environment - page 36

RECOMMENDATIONS:

1. A written agreement should be executed between the Metropolitan Police Department and AJVD to provide at least two MPD officers for each auction, one of which should be stationed in the cashier's office.
2. The Abandoned and Junk Vehicle Division should install security glass throughout its offices, with the cashier's office receiving priority. AJVD should also install security cameras within the cashier's office and in other strategic locations.
3. DPW and the AJVD management should make formal arrangements with nearby DC Village or the Potomac Training Center for parking spaces during auctions. Appropriate notification of parking restrictions should be placed in newspaper advertisements, appropriate signs posted along Shepherd Parkway, and appropriate signs posted at the D.C. Village Property/Potomac Training Center directing customers to legal parking. If an agreement is not reached, DPW, the Parking Services Division, and AJVD should develop a panting plan that meets AJVD's parking requirements on auctions days.

RESPONSE: Regarding the unsafe environment alluded to in the audit report, the security team at AJVD was organized on the property, where a MPD officer was positioned on the lot, together with a security officer in the tower overlooking the property, as well as a security guard stationed in the AJVD building. An MPD officer has and will be on duty during auctions. The entire AJVD property is surrounded by a fence with barbwire, and in addition to the 24 hour security team, two K-9 security dogs roam the lot during off hours and weekends. Installation of security windows and cameras will be discussed and researched.

Regarding parking problem claims made by the audit, parking on auction day has been secured, with nearby parking provided by neighboring government facilities' lots. Announcements are made prior to the auction about illegally parked vehicles and where to park vehicles. Six tickets were issued over the period assessed try the auditor and four of those tickets were for expired tags.

Regarding the "hardened" cashier stations, AJVD, the CFO's office, and Treasury will conduct a study on the feasibility of such improvements.

The audit also claims that auction funds were kept locked overnight in an office safe at AJVD when in fact, all auction proceeds are picked up by armored car at the end of each auction

6. FINDING: AJVD storage fees are insufficient - page 38
RECOMMENDATION :
DPW's Director, the Parking Enforcement Administrator, DPWs CFO, and AJVD managers must raise AJVD's fees and/or reduce its expenditures in order to ensure that its expenditures are property aligned with its revenues and that AJVD's mission is not compromised by inadequacies in its fee structure.

RESPONSE : AJVD, together with the DPWs General Counsel's Office, are drafting a legislative package to improve upon processes at AJVD. Included in the package are several initiatives to increase fees charged for services at AJVD. Storage fees are under review as a part of this improvement process. Additionally, other revenue sources and cost cutting measures are under assessment, including a district-wide auction, elimination of junk vehicles from auction, marketing to dealer-level buyers, using auction houses to manage aspects of the auction, moving auction day to Saturday, and purchasing a vehicle crusher.

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1. The Mayor's Performance Measures Scorecard was created in response to the 1995 "Government Managers Accountability Act." It was instituted in an effort to accurately assess an agency's performance in areas that can be scored (e.g., the number vehicles removed, the number of notices issued, etc) and to evaluate performance based on the results of the Scorecard.

2. Auction statistics report - this report is produced from information input into the AJVD database from the auction sales list (outside bid sheet). It contains the auction date, number of sales, total sales amount, bid number, sales number, customer name, vehicle pen (AHVD identification number), status of the vehicle and the sates price.

3. Customer Sales Ticket - is produced from information entered into the AJVD database from the auction sales list (outside bid sheet). It contains the bidder number, the sales number, the bidder's name and address, the make and model of vehicle(s) purchased, the sales price, the VIN number, and the title number.

4. In conducting a review of information maintained by AJVD, the Auditor determined, after comparing the complaint, investigation, and removal dates for specific vehicles, that AJVD removed some vehicles within 3 days or less after the receipt of a complaint. The removal, if AND's data is accurate, occurred before or simultaneously with the investigation rather than sometime after the written notice was affixed to the vehicle.

5. The Mayor's Performance Measures Scorecard was created in response to the 1995 "Government Managers Accountability Act." It was instituted in an effort to accurately assess an agency's performance in areas that can be scored (e.g., the number of vehicles removed, the number of notices issued, etc.) and to evaluate performance based on the results of the Scorecard.

6. Wales is the soft-R software system stem used by taw enforcement officials to retrieve stolen vehicle information. 

7. The Mayor's Performance Measures Scorecard was created in response to the 1995 "Government Managers Accountability Act." It was instituted in an effort to accurately assess an agency's performance in areas that can be scored (e.g., the number of vehicles removed, the number of notices issued. etc) and to evaluate performance based on the results of the Scorecard.

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