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Berkeley Fleet Replacement Fund Short Millions

Berkeley City Auditor Jenny Wong

Wednesday June 02, 2021 - 10:57:00 AM

Today, we released a new audit titled Fleet Replacement Fund Short Millions. This audit outlines how the City’s fund to replace city vehicles and large equipment (Replacement Fund) is insufficient by millions of dollars, and has been poorly managed due in part to a lack of information and policy guidance. This shortfall may lead to higher long-term costs and may jeopardize the City’s planned transition to an all-electric fleet by 2030.

The City maintains the Replacement Fund for 486 vehicles and units of equipment to provide citywide services from public safety to park maintenance. In FY 2020, the Replacement Fund fell $7.2 million short of the American Public Works Association guidelines of about $23 million. It is not possible to determine the exact fleet replacement funding level needed as the Public Works Department does not have an estimate for total fleet replacement costs, but the current funding is not enough to replace all the vehicles that are due or overdue for replacement or scheduled to be replaced in FY 2021. The number of vehicles past due for replacement is up to 174 vehicles, which is a threefold increase since fiscal year 2010. Timely replacement of fleet assets is important because keeping vehicles and equipment past their replacement date may result in excessive repair and maintenance costs.

Further, Public Works’ fleet replacement model is not working. Departments pay into the Replacement Fund on a monthly basis to pay for the eventual replacement of their share of the fleet, but those funds are not designated to specific departments. Based on the current funding model, the City has used those funds for other purposes, such as personnel, but has not calculated those costs into the monthly contributions from departments. As a result, the current balance is $18.6 million less than what departments have contributed to replace vehicles and equipment.

While the total department contribution amount may be higher than what is needed, the departments do not have information about the total dollar value of their fleet replacement needs. Moreover, Public Works could not provide a specific accounting for the $18.6 million discrepancy it collected from departments. The audit found the gap is due in large part of the fund being used for items beyond the direct cost of fleet replacement. These include:

Personnel costs
Reallocation of funds to cover budget shortfalls
Customization and specialized fleet gear
Replacement of fleet assets that have not been funded

The funding gap jeopardizes the City’s ability to maintain its fleet over the long term and Berkeley’s climate change mitigation goal to attain an all-electric fleet by 2030. In July 2020, Public Works presented the City’s Municipal Fleet Electrification Assessment, prepared by East Bay Community Energy, on the timeline and cost of transitioning to an electric fleet by 2030. The assessment estimated that it would cost about $1.2 million to buy electric vehicles to replace 32 gas-powered and hybrid light-duty vehicles due for replacement in FY 2021, 29 of which are funded by the Replacement Fund. According to the City’s fleet data, Public Works has only collected $747,000 to replace those 29 vehicles with electric ones in FY 2021.

The audit recommends Public Works collaborate with the City Manager’s Office to adjust the fleet funding model to account for the true costs of managing the fleet, update its electric vehicle transition plan, and ensure the new fleet management system has the accurate data needed to manage the Replacement Fund. The Public Works Department agreed with these findings and recommendations.