compliance review - broward county, florida

Compliance Review Review of the ShuttlePort Florida, LLC, Contract at the Fort Lauderdale-Hollywood International Airport _______________________________________________________________________ June 18, 2007 Report No. 07- 21

Office of the County Auditor

Evan A. Lukic, CPA County Auditor

Compliance Review

Office of the County Auditor 2

Table of Contents

Executive Summary............................................................................................3

Purpose and Scope ............................................................................................3

Methodology........................................................................................................4

Background.........................................................................................................4

Findings and Recommendations.......................................................................9

Compliance Review


Executive Summary This report summarizes our review of the airport shuttle bus services at the Fort Lauderdale-Hollywood International Airport. This review was undertaken at the request of the Board of County Commissioners following a fatal accident on February 18, 2007 involving two ShuttlePort Florida, LLC (ShuttlePort) vehicles. Our objective was to evaluate ShuttlePort’s compliance with the terms and requirements of their shuttle service management agreement (contract) with Broward County. Our review covered the period October 1, 2006 through March 31, 2007. A safety compliance review conducted by the Florida Department of Transportation (FDOT) subsequent to the accident cited 13 violations and raised issues regarding ShuttlePort’s compliance with the requirements of its contract with the County. Our review was not intended to re-address the safety issues identified in the FDOT Compliance report, however violation of safety laws and regulations are matters of non-compliance pursuant to Article 9.1 of the contract. A copy of the FDOT report dated March 29, 2007 and ShuttlePort’s response are included at Appendix I. We concluded that ShuttlePort complied with the contract requirements reviewed except for the provisions requiring compliance with safety laws and regulations for motor carriers and the limitation on driver points on the State of Florida Motor Vehicle Record. In addition our review disclosed control deficiencies over vehicle maintenance and repairs performed by a subcontractor of ShuttlePort and a lack of adequate contract administration. These deficiencies indicate the County may have overpaid for vehicle maintenance and repairs. As a result our office has initiated a separate review of vehicle maintenance practices and repairs. We have included recommendations in the report to address the deficiencies noted.

Purpose and Scope The objective of our review was to determine whether ShuttlePort was in compliance with the contract requirements. Our review covered the six month period October 1, 2006 to March 31, 2007.

Compliance Review


Methodology To accomplish our objective, we:

• Reviewed o The management agreement dated October 1, 2002 (including all

amendments) between ShuttlePort Florida, LLC. and Broward County

o Florida Department of Transportation (FDOT) compliance report, dated March 29, 2007 and ShuttlePort’s response dated April 17, 2007

o 2004 Broward Business Opportunity Act o Selected invoices, reports, and other supporting documentation o ShuttlePort’s payroll and personnel records and trip tickets

• Examined documentation supporting compliance with specific contract provisions as appropriate

• Interviewed ShuttlePort, Broward County Aviation Department (BCAD), and Accounting Division’s staff

• Toured and observed the shuttle operations • Surveyed six largest Florida transit and airport shuttle systems

Background On October 1, 2002, the Board of County Commissioners entered into a five-year management agreement (contract) with ShuttlePort Florida, LLC1 (ShuttlePort) for the period November 1, 2002 through October 31, 2007. The contract provides for a five year renewal term. Under the contract, ShuttlePort provides shuttle services to the Fort Lauderdale International Airport between the terminals, the parking facilities, and the Consolidated Rental Car Facility. These services include:

• transporting passengers and employees to and from the airport terminals to the Rental Car Facility, employee and remote parking lots; and

• transporting passengers in the Palm and Hibiscus parking garages using trams

Transport to/from terminals and remote Parking Lots Passengers board buses at shuttle stops at the lower lever of each terminal and are transported to their designated parking location. Buses display their destinations which may include employee lot, park-n-save, Tower lot, etc. These

1 On January 1, 2006, ShuttlePort was acquired by Veolia Transportation. ShuttlePort maintains it’s identity as a division of Veolia. Veolia is an international transportation provider and operates transportation systems at several international airports.

Compliance Review


buses also transport passengers from the parking and employee lots to the lower level of each terminal. Transport to/from the Rental Car Facility Arriving passengers at terminals 2, 3, and 4 wanting to rent cars from the Rental Car Facility board shuttle buses at the ground transportation areas on the lower level between the terminals. Passengers returning rental cars to the Rental Car Facility board the buses and are transported to the departure levels of terminals 2, 3 and 4. Passengers arriving/departing at terminal 1 are required to utilize the pedestrian walkway between the terminal and the Rental Car Facility. Transport within Garage Facilities Trams are used on the first floor of the Palm and Hibiscus garages to transport passengers to and from their cars or between terminals. Exhibit B of the contract requires ShuttlePort to schedule a sufficient number of buses and trams and coordinate their positions throughout the designated routes to meet passenger demand and maintain maximum passenger wait times as follows: Employee Lot Route 10 minutes Remote Lots2 15 minutes Garage Tram Route 8 minutes Shuttle Bus Operations As of May 1, 2007, ShuttlePort had 192 fulltime employees; 149 drivers and 43 other staff (managers, supervisors, dispatchers, and safety training staff) to operate the fleet of 60 vehicles 24 hours a day, seven days a week. Drivers ShuttlePort drivers must take and pass drug and medical tests and possess a commercial driving license (CDL) before operating a ShuttlePort vehicle. The contract requires that ShuttlePort does not employ drivers with 3 points or more as shown on the driver’s record as compiled by the Department of Motor Vehicles of the State of Florida.3 Equipment Article 5 of the contract requires that ShuttlePort provide a “Core Bus Fleet” sufficient to provide the normal day-to-day scheduled Shuttle Bus Services and shall be responsible for the leasing, purchase, ownership and maintenance of the Fleet. ShuttlePort shall pay-off the leases associates with the vehicles and the costs associated with such payments shall be reimbursable.

2 Includes Park-n-Save Lot, Tower Lot and Holiday Lot 3 Article 7Airport Shuttle Bus Services Agreement at Fort Lauderdale–Hollywood International Airport dated October 1, 2002

Compliance Review


At the beginning of the contract, ShuttlePort received 21 vehicles (184 buses and three trams) which were transferred from the former provider. Thirteen of the buses and two trams were subsequently sold. During the term of the contract, ShuttlePort purchased 51 buses and 3 trams which increased their fleet to the 60 vehicles as follows:

• 27 buses - used for the Rental Car Facility • 29 buses - used for the parking operations (employee and remote parking) • 4 Trams - used for passenger transportation within the garage facilities

Forty seven buses and three of the trams above are secured by master security agreements and promissory notes for approximately $16.18 million. Monthly, the County reimburses approximately $260,000 in equipment financing to ShuttlePort. Exhibit 1 below lists the vehicles purchased and the unpaid amount as at March 31, 2007:

EXHIBIT 1 Equipment Financing Summary

Description Model Year

Original Amount

No. of Vehicles Interest Rate Unpaid balance

3/31/07

$ 2,434,848 * 6.75% $ 1,720,240Eldorado buses 2005 5,112,565 20 7.00% 3,677,221 Eldorado buses 2005 1,789,397 7 7.10% 1,288,315 Eldorado buses 2005 3,823,638 15 7.25% 2,839,335 Eldorado Hybrid buses 2005 2,725,000 5 7.90% 2,184,933

Trams 2005 294,078 3 7.90% 179,923 Total $ 16,179,526 50 $ 11,889,967

Source: Prepared by the Office of the County Auditor from the Equipment Amortization Tables *Amount represents down-payment on the bus orders The equipment financing may be assigned by ShuttlePort with prior written consent by the lender and payments to the financing company will continue to be reimbursed by the County. Vehicle Maintenance and Repairs ShuttlePort subcontracts with Penske Truck Leasing Co. (Penske) for routine preventative maintenance at the ShuttlePort facility. The sub-contractor is paid approximately $80,000 monthly for maintenance based on a fixed monthly maintenance fee and mileage charges as shown in Exhibit 2 below.

4 ShuttlePort assumed leases for five of the 18 buses and the other 13 were paid for in full

Compliance Review


EXHIBIT 2 Maintenance Rates

Description of Vehicles Monthly

Fixed Fee Mileage

Rate Hourly Rate

Parts Mark-Up

El Dorado Axess (Rental Car Facility) $ 600.00 $ 0.3524 N/A N/AEl Dorado Axess 600.00 0.2396 N/A N/AEl Dorado Aero-Elite 362.37 0.2159 N/A N/AThomas Built 195.00 $ 47.50 10%Tram Trailers 49.00 47.50 10%El Dorado Axess (Hybrid) 600.00 0.3524 N/A N/ATrams 600.00 0.1996 N/A N/ASource: Vehicle Maintenance Agreement between Penske and ShuttlePort - Schedule W dated 12/29/05 Some warranty and other specialized repairs may be performed by Penske and local specialty vendors. Insurance Article 11.2 of the contract requires that ShuttlePort provide workers compensation coverage in the amount of $100,000 per person/accident and general liability and automobile liability coverages in the amount of $500,000 per occurrence. ShuttlePort provides coverage in excess of contract requirements: workers compensation coverage for $1 million per person/accident and general liability and automobile liability for $2 million dollars per occurrence. Performance Bond Article 11.16 requires an irrevocable letter of credit or a payment and performance bond for $500,000 for the term of the contract and for six month following the contract termination date. We noted that the performance bond provided by ShuttlePort complies with contract requirements. Subcontracts (W/MBE Goal) Article 4 of the contact established a SDBE goal of 12%. ShuttlePort utilizes nine W/MBE vendors for services such as fueling, uniforms, office administration and the ambassador program. Payments to W/MBE vendors represented 19% in Fiscal years 2005 and 2006 and 17% for the six month period ended March 31, 2007 of all payments from the County. Contract Administration BCAD operations personnel are responsible for administration of the contract including oversight of shuttle operations, reviewing and approving of all invoices, and performing customer service compliance inspections to ensure that:

• Buses are operating timely • Required announcements are accurate and timely • Drivers wear uniforms • Buses are clean, in good working order and • Wheelchair lifts and other equipment are operational, etc.

Compliance Review


Payments to ShuttlePort Article 6.4 of the contract requires that ShuttlePort submit a payment report (invoice) on the 1st and 15th day of each month, certified by an officer of the Company. The invoice includes the monthly installment of the management fee and reimbursable expenses. During the period November 1, 2002 through March 31, 2007 the County paid ShuttlePort approximately $52.12 million which includes management fees of approximately $2.25 million summarized in Exhibit 3 below.

EXHIBIT 3

Summary of Payments to ShuttlePort 11/1/2002 to 3/31/2007

Reimbursed Expenditures

Management Fee Parking Rental Car FacilityFY 2003 $ 320,833 $ 5,758,637FY 2004 360,500 6,437,092

N/A

FY 2005 581,750 8,728,949 $ 5,282,814FY 2006 642,583 9,004,422 6,718,891

FY 2007(a) 346,026 4,594,878 3,340,950

Total $ 2,251,692 $ 34,523,978 $ 15,342,655Source: Prepared by the Office of the County Auditor from Advantage and LGFS Accounting Systems (a) = Payments from October 1, 2006 to March 31, 2007 N/A = Rental Car Facility opened January 27, 2007 In fiscal year 2006, ShuttlePort transported approximately 6 million passengers (See Appendix II) and was paid approximately $16.3 million, including $642,583 in management fees. EXHIBIT 4 (page 9) represents fiscal year 2006 expenditures for shuttle operations.

Compliance Review


EXHIBIT 4 FY 2006 Payments to Shuttleport

(in millions)

$6.4 39%

$0.6 4%

$1.0 6%$1.1

7%$1.9

12%

$2.0 12% $3.3

20%Wages/Benefits Shuttleport Bus Equipment Fuel Maintenance and Repair Other operating expense Ambassador Program Management Fee TOTAL AMOUNT $16.3 million

Source: Compiled from ShuttlePort’s invoices by the Office of the County Auditor The annual budget for FY 2007 for shuttle operations is approximately $19.3 million including approximately $694,000 in management fees:

• $10.74 million for the parking operations, which is funded by airport operating budget.

• $8.60 million for the Rental Car Facility, which is funded by common facility charge (CFC). A daily CFC fee of $3.955 charged by the rental car companies to customers.

Findings and Recommendations Finding 1 ShuttlePort did not comply with contract provisions requiring compliance with safety laws and regulations for motor carriers and limiting driver points on their State of Florida Motor Vehicle records. The compliance report performed by FDOT dated March 29, 2007 identified a series of violations to safety laws and regulations. Article 9.1 requires ShuttlePort to comply with all Federal, State and Local Government Rules and Regulations. Article 7.20 of the agreement requires that ShuttlePort’s drivers not have three or more points on the State of Florida Motor Vehicle Record compiled by the Department of Motor Vehicles. In February 2007, ShuttlePort reviewed their drivers’ MVRs and noted 34 of its 160 drivers (21%) had three or more points; of these 34 drivers, 10 (29%) had three or more points within the last 3 years. As of 5 The CFC was increased in FY 2006 from $2.75 to $3.95 for each day of rental.

Compliance Review


May 1, 2007, all of the 10 drivers with three or more points in the last three years have been terminated or reassigned to non-driver positions. Our review of ShuttlePort’s payroll records, trip sheets and employee files for the 34 employees disclosed 20 of the 34 drivers with three or more points assessed more than three years ago are still employed as drivers. ShuttlePort’s hiring practices include the hiring of drivers who have three or more points if such points were assessed more than three years prior to their hire date. This practice is inconsistent with the contract requirements. Furthermore ShuttlePort did not comply with their stated policy. We noted that 17 of the 34 drivers (50%) were hired by ShuttlePort with three or more points assessed within three years of their hire date. Driver requirements in the ShuttlePort contract are more stringent than other airport shuttle systems. We surveyed six mass transit and five airport shuttle systems in Florida and found varying degrees of driver requirements; all had less stringent requirements for bus drivers than the ShuttlePort contract. Broward County Office of Transportation driver criteria detailed in Appendix III, allows one moving violation (the equivalent of 3 or 4 points) within three years of hire date. Recommendations: We recommend the Board of County Commissioners direct the County Administrator to:

1. Closely monitor ShuttlePort’s progress in resolving the violations noted in the FDOT report and formally advise the Board of such progress.

2. Require that BCAD staff to routinely review ShuttlePort’s practices for compliance with contract requirements.

3. Evaluate the reasonableness of the contract’s existing driving record requirements and amend the contract as appropriate.

Finding 2 Management and documentation of vehicle maintenance and repairs is inadequate to ensure that maintenance and repair costs are justified, as a result the County may have overpaid for vehicle repairs. Article 5 of the contract requires ShuttlePort to provide a “Core Bus Fleet” sufficient for the normal day-to-day scheduled Shuttle Bus Services and be responsible for the leasing, purchase, ownership and maintenance of the Fleet. ShuttlePort sub-contracts maintenance of the fleet with Penske Truck Leasing Co. (Penske).

Compliance Review


A review of the subcontract with Penske disclosed that:

• Maintenance of fleet is based upon a fixed monthly rate per vehicle plus a mileage charge except for the maintenance of the Thomas buses and tram trailers which are billed at $47.50 per hour for labor and 110% of parts costs.

• The fixed monthly maintenance charges include all maintenance and repairs except for tires, washing of the vehicles and non-maintenance repairs.

• The subcontract does not define non-maintenance repairs. • The subcontract does not provide labor rates for non-maintenance repairs.

As a result, labor charges for non-maintenance repair orders could not be compared to agreed upon rates. Labor rates imputed from work orders varied significantly, ranging from $77.43 to $124.45 per hour.

• Penske retains title and possession of all repairs parts, limiting the ability to confirm which parts were actually replaced.

• The subcontract does not specify the pricing for parts for vehicles other than the Thomas buses and tram trailers.

We selected 10 vehicle maintenance and repair invoices totaling $228,852 for December 2006 and February 2007 to substantiate the cost and completion of repairs and to agree rates for maintenance to the subcontract. Our review disclosed: • Parts, sublet repairs and miscellaneous charges totaling $20,424 were not

supported by invoices from the parts supplier or sublet vendor. • Charges for repairs by Penske included $17,517 for labor at rates imputed

from work orders ranging from $77.43 to $124.45 per hour. These rates were not authorized by the contract.

• Rates billed for repairs to Thomas buses and tram trailers exceeded the subcontract rate of $47.50 per hour.

• Certain items billed as repairs appeared to be maintenance items. • The County was frequently billed for recharging vehicle batteries due to

driver negligence.

Compliance Review


Recommendations: We recommend the Board of County Commissioners direct the County Administrator to take immediate action to establish management control over maintenance and repairs of the shuttle fleet vehicles including:

4. Amending the ShuttlePort contract to include: • Prior approval of all future repair orders by qualified personnel to

ensure the repairs are necessary, are not maintenance items, and costs for such repairs are reasonable

• Inspection of all future repairs performed to ensure that the repairs are completed as required.

• Labor rates for all non-covered items including non-maintenance repairs and tires replacement/repairs.

• Clear definition of non-maintenance repair items. • Payment by ShuttlePort of all cost of repairs caused by their acts or

negligence of their staff.

5. Obtain support for the $20,424 in undocumented charges identified above or recover the payment from ShuttlePort.

Finding 3 Monthly invoices lacked sufficient evidence of review by BCAD staff. Sound business practices require invoices be properly reviewed prior to approval for payment. These reviews should be documented so that the nature and extent of the review process can be assessed. We found no documentation to substantiate detailed invoice reviews was performed. BCAD’s management stated that their review of ShuttlePort’s monthly invoices includes monitoring overtime trends, determining that repairs over $2,500 were approved by BCAD prior to expenditure, and ensuring that only contract allowable items are billed. The exceptions found during our review indicate that BCAD staff review of invoices was not adequate to identify billing irregularities and compliance with the contract. We noted that invoices for December 2006 and February 2007 did not reflect evidence of review by BCAD and did not contain sufficient documentation to complete an informed review. The invoices from ShuttlePort were missing:

• Supporting schedules and payroll reports (documents necessary to support payroll and benefits amount billed).

• Invoices for parts and sublet repairs. • A basis for the hourly labor rates charged.

Compliance Review


Following our request, ShuttlePort provided sufficient documentation in support of the payroll charges. Documentation has not been received for the parts and sublet repairs.

Recommendation: 6. We recommend the Board of County Commissioners direct the County

Administrator to implement procedures to ensure that all future invoices are properly reviewed prior to payment including assignment of qualified, knowledgeable staff, management oversight and a desk guide for invoice review.

Finding 4 The Payroll Assistant performs all aspects of the payroll process resulting in lack of segregation of duties. “Segregation of duties” (SOD) is a control which requires more than one individual to be responsible for completing a process.6 This preventative control makes it difficult for intentional wrongdoing because it requires collusion of two or more individuals and provides opportunities for detection of unintentional errors. The payroll assistant, a subcontractor employee, performs the complete payroll function which is a lack of segregation of duties. The payroll assistant performs the following:

• calculates hours worked • enters payroll data in the payroll system and generate sample payroll

reports (the sample reports are reviewed by the Assistant General Manager (AGM))

• process changes resulting from the AGM’s review • transmits payroll data to an outside vendor for processing • receives checks from outside vendor • prepares a payroll log which is signed by each employee when the

check is picked up • distributes checks to the employees • performs the custodian function for unclaimed payroll checks

Lack of segregation of duties could result in unauthorized checks going undetected. 6 Sawyer’s Internal Auditing, The Practice of Modern Internal Auditing, Fifth Edition, Institute of Internal Auditors Auditing literature defines “segregation of duties” as a preventive control designed to preclude improper activity and is essential to ensure that errors or irregularities are detected on a timely basis in the normal course of business.

Compliance Review


Recommendation: 7. We recommend the Board of County Commissioners direct the County

Administrator to require BCAD to ensure ShuttlePort’s payroll function is adequately segregated.

Finding 5 Tires are not inventoried which could result in undetected loss. Good business practice requires that items of value such as tires should be inventoried periodically. This means all purchases and uses of tires should be logged and periodically counted and reconciled. We noted that no inventory record was maintained for 86 tires for the core fleet valued at approximately $23,000. Recommendation: 8. We recommend the Board of County Commissioners direct the County

Administrator to require BCAD ensure tires are properly accounted for and inventoried at least annually.

Compliance Review


Appendix I: Florida DOT Notice of Non-Compliance for ShuttlePort LLC Florida Dated March 29, 2007 and ShuttlePort Response for the Florida DOT Compliance Review

Compliance Review


Compliance Review


Appendix II : ShuttlePort Annual Service Report- Fiscal Year 2006

ShuttlePort - Ft Lauderdale FLL Shuttle Services 2006 FY/YTD Totals

Number of Passengers Service

To Airport From Airport Total

Total Service Hours

Total Round-Trips

Average Headways

Employee 1 698,165 651,988 1,350,153 40,518.0 80,838 7 Employee 2 333,754 356,247 690,001 32,824.0 63,165 8 Rental Car Facility 1,353,240 1,388,908 2,742,148 114,564.0 231,395 2 Port 33,311 26,454 59,765 3,565.0 3,566 0 Park-n-Save Lot 119,574 128,592 248,166 24,907.0 44,096 11 Tower Lot 64,491 77,640 142,131 19,135.0 38,692 12 Holiday Lot 41,802 39,436 81,238 12,100.0 22,091 13 Garage Tram 212,632 230,289 442,921 17,351.0 97,280 5 Loop 216,739 0 216,739 5,874.0 26,529 12 Red Dot Lot 0 0 0 0.0 0 0 Purple/Orange 5,456 4,230 9,686 744.0 1,443 0 Brown Lot 0 0 0 0.0 0 0 Specials 206 81 287 371.0 75 0 Totals 3,079,370.0 2,903,865.0 5,983,235.0 271,953.0

Source: ShuttlePort Annual Service report provided to the Broward County Aviation Department

Compliance Review


Appendix III

Broward County Office of Transportation NEW HIRE DRIVERS LICENSE CRITERIA

1. Applicant must have been a licensed driver for at least 3 years (Time spent

driving on a learners permit does not count toward this requirement).

2. NO MORE THAN ONE (1) MOVING VIOLATION in the past three (3) years.

3. NO AT-FAULT ACCIDENTS in the last three (3) years.

4. No Failures to Appear or Failures to Pay, in the last three (3) years.

5. No Reckless Driving within the last seven (7) years.

6. No Driving Under the Influence within the last seven (7) years. Two convictions, (lifetime), for DUI is an automatic disqualification.

7. No suspensions within the last three (3) years. (One suspension for PIP

permitted).

8. No Manslaughter resulting from the operation of a motor vehicle.

9. No Hit-Run, or Hit-Run Property Damage.

10. No Reckless Driving causing injury.

11. No Driving Under the Influence causing injury.

12. No combination of any violations that indicate a pattern of irresponsibility or poor judgment.

Source: Broward County Office of Transportation

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