Audit Objective
Did the Town of Lockport (Town) Highway Superintendent (Superintendent) properly safeguard and account for fuel inventory?
Audit Period
January 1, 2023 – September 24, 2024
Understanding the Audit Area
A town may maintain fuel tanks for fueling town equipment and vehicles and may agree to authorize other municipal entities to purchase fuel from the town. A superintendent is responsible for implementing controls to safeguard fuel from unauthorized use and to ensure fuel inventory and usage is appropriately accounted for and billed.
The Town maintains two 4,000-gallon fuel tanks, one diesel and one unleaded. In addition to authorizing Town departments’ access to fuel vehicles and equipment, the Town authorized three fire companies’ access to fuel vehicles and bills them based on usage. The Town uses a computerized fuel management system (fuel system) intended to help safeguard and account for the Town’s fuel inventory. The Town’s fuel system requires an individual to have both a user fuel card and a vehicle/equipment fuel card (fuel cards) to pump fuel from the Town’s tanks. These fuel cards are an essential control intended to limit access and reduce the risk of unauthorized access to the fuel pumps and improper fuel usage.
The Town purchased 71,389 gallons of fuel totaling $201,709 and used 73,304 gallons of fuel totaling $208,937 from January 1, 2023 through July 25, 2024. Of that total, 13,538 gallons (18 percent) pumped were associated with fire company fuel cards.
Strong and effective internal controls are required to ensure all fuel inventory is safeguarded and all inventory, usage and sales of fuel are accurately accounted for.
The Superintendent in office during the audit fieldwork was appointed on August 16, 2023. The former Superintendent was in office for the remainder of the audit period.
Audit Summary
The Superintendent did not properly safeguard and account for fuel inventory. The Superintendent also did not realize that he needed to safeguard fuel, monitor fuel usage or oversee the Highway Department Clerk’s (Clerk) work related to the fuel system. Due to the lack of controls and oversight of fuel operations, billing errors occurred and the potential for inappropriate use of Town fuel to occur and go undetected was significant. Specifically:
- The Superintendent relied on the Clerk to manage the fuel system but did not monitor the Clerk’s work to ensure she properly managed the fuel cards that grant access to the fuel system, which diminished the controls the fuel system was intended to provide.
- The Clerk did not ensure fuel card assignments were accurate and updated. As a result, fuel usage reports generated by the fuel system did not always accurately reflect the individual or vehicle/equipment using the fuel and the Superintendent would not be able to use these reports to ensure fuel cards were only being used by authorized individuals for proper purposes. The Superintendent did not request or review the fuel usage reports.
- The Superintendent also did not review footage from surveillance cameras (cameras) that could be used to monitor the fuel pumps and would have helped in identifying certain non-Town vehicles accessing or attempting to access fuel.
- The Superintendent was unaware of the billing discrepancies for Town departments and the fire companies because he did not review fuel usage reports or bills. The Clerk underbilled for fuel usage of 1,683 gallons totaling $4,751.
- $3,667 (1,295 gallons) was attributable to Town departments.
- $1,084 (388 gallons) was attributable to the fire companies who contracted with the Town for fuel.
Without an accurate and up-to-date fuel card inventory, neither the Clerk nor the Superintendent could properly monitor fuel usage or ensure fuel cards were only being used by authorized individuals for proper purposes. Periodically reviewing fuel usage records provides a way to identify questionable fuel usage and can help Town officials ensure that fuel is not used for other than Town purposes. Completing periodic physical inventory readings and reconciling the amount of fuel in the tanks to the amount in the fuel system would help officials detect potential leaks and confirm the fuel system is reporting accurate tank readings.
Due to the lack of guidance and the Superintendent’s lack of monitoring fuel usage and lack of understanding of the fuel system’s capabilities and controls, officials cannot be certain that Town fuel was not used by unauthorized individuals and/or for improper purposes. The Superintendent did not establish written procedures for safeguarding and accounting for fuel, including billing other Town departments and the fire companies that use the Town’s fuel pumps. In addition, because the Superintendent did not monitor fuel bills or fuel usage reports and did not oversee the Clerk’s work, the potential for errors in fuel billing to occur and go undetected increased significantly.
The report includes 20 recommendations that, if implemented, will improve the Town’s accounting for and safeguarding of fuel inventory. Town officials agreed with our recommendations and indicated they will take corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the Office of the New York State Comptroller’s (OSC) authority as set forth in Article 3 of the New York State General Municipal Law. Our methodology and standards are included in Appendix C.
The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of the New York State General Municipal Law. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in the Town Clerk’s office.