Richmond DPU warehouses found to be poorly managed, with costly inventory discrepancies
RICHMOND, Va. (WRIC) -- Two Richmond Department of Utilities (DPU) warehouses were found to be poorly managed, reporting wildly inaccurate inventory totals and overall presenting a "significant risk of error, fraud and waste" to the city. Additionally, in the months following the audit that made these discoveries, the city of Richmond has not made the majority of the improvements it said it would. Richmond's Office of the City Auditor (OCA) is conducting audits on the inventory management and efficiency of city-owned warehouses. Two such audits were performed on the DPU's Main Warehouse and Wastewater Treatment Plant Warehouse in late 2024. These warehouses hold inventory related to the city's water system, such as maintenance materials and even critical replacement parts kept on hand in case of an emergency. However, the OCA found that both warehouses fell short when it came to managing their respective inventories, putting millions of dollars in materials at risk. 8NEWS INVESTIGATES: Richmond Area Water Crisis "The current environment exposes the City to significant risks of error, fraud and waste, which could go undetected," the OCA said. A summary of the auditors' findings Auditors discovered overall poor and unreliable record-keeping, with staff having no policies or procedures to reference when trying to keep track of supplies. Seemingly due to this lack of official guidance, staff at these warehouses were either not aware of or not carrying out best inventory practices -- such as regular and complete counts of all products, noting the cost of any given material when available, or removing material from the warehouse's inventory when it's sent to a job site or taken by a contractor, among others. This resulted in major discrepancies, some amounting to hundreds of thousands of dollars -- such as $955,000 in overstated inventory at the Main Warehouse and at least $404,265 in missing product at the Wastewater Treatment Plant Warehouse, to name two examples. That missing product, according to the OCA, was primarily a type of chain used for maintenance. These CAN-AM chains could not be found largely because they were not tracked or documented by warehouse staff. Five concerning truths about Richmond’s public water system: 2022 EPA report This is because they -- alongside some other materials -- are stored outside in unsecured areas and not maintained by staff, despite said materials still being their responsibility. Inappropriately stored materials were found at the Main Warehouse, as well, where they were kept in a "Building 20." This building, according to the OCA, was partially demolished -- yet nearly $250,000 in items were still being kept inside. "The roof of the remaining portion of the building is [compromised], and the inventory items are exposed to the weather elements, falling debris and pests," the OCA said. "While conducting physical inventory counts, [auditors] noted rust damage and deterioration to some of the items." In both cases, the OCA noted concerns that these products could be damaged, lost or stolen. While security at the warehouses themselves was found to be effective, these items -- the ones left outside or in a dilapidated building -- are not at all secured. Building 20 could also pose a safety risk to warehouse staff who need to enter it, according to OCA. Richmond Mayor says DPU director’s decision to step down was ‘amicable,’ new director announced Additionally, over 7,000 feet of Amwell chains reflected in the Wastewater Treatment Plant Warehouse's inventory could not be verified, as "multiple types of unmarked chains were stored in the area" where Amwell chains were said to be kept. The unaccounted-for Amwell chains are valued at $390,825. The OCA added that the CAN-AM chains were reportedly bought to replace the Amwell chains, which are no longer meant to be in use as they are more prone to breakage. Staff said that was why the Amwell chains could not be found, as they should no longer be on-site. However, the OCA found evidence of Amwell chains being ordered for use as recently as June 2024. If the current methods for tracking inventory remain in place, the OCA estimates that at least $2.4 million in materials at the Main Warehouse and $563,000 in materials at the Wastewater Treatment Plant Warehouse would not be counted accurately. Auditors' recommendations and the city's inaction As a result of these audits, the OCA issued dozens of recommendations for the Main Warehouse and the Wastewater Treatment Plant Warehouse -- 13 and 18, respectively. All recommendations came with a due date. VDH says Richmond is not capable of reliably providing citizens with water As of Oct. 8, 2024, eight Main Warehouse recommendations had been partially implemented by the city and five had not been implemented. In the case of the Wastewater Treatment Plant Warehouse, three had been implemented, two had been partially implemented and 13 remained unimplemented as of Nov. 13
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RICHMOND, Va. (WRIC) -- Two Richmond Department of Utilities (DPU) warehouses were found to be poorly managed, reporting wildly inaccurate inventory totals and overall presenting a "significant risk of error, fraud and waste" to the city. Additionally, in the months following the audit that made these discoveries, the city of Richmond has not made the majority of the improvements it said it would.
Richmond's Office of the City Auditor (OCA) is conducting audits on the inventory management and efficiency of city-owned warehouses. Two such audits were performed on the DPU's Main Warehouse and Wastewater Treatment Plant Warehouse in late 2024.
These warehouses hold inventory related to the city's water system, such as maintenance materials and even critical replacement parts kept on hand in case of an emergency.
However, the OCA found that both warehouses fell short when it came to managing their respective inventories, putting millions of dollars in materials at risk.
8NEWS INVESTIGATES: Richmond Area Water Crisis
"The current environment exposes the City to significant risks of error, fraud and waste, which could go undetected," the OCA said.
A summary of the auditors' findings
Auditors discovered overall poor and unreliable record-keeping, with staff having no policies or procedures to reference when trying to keep track of supplies.
Seemingly due to this lack of official guidance, staff at these warehouses were either not aware of or not carrying out best inventory practices -- such as regular and complete counts of all products, noting the cost of any given material when available, or removing material from the warehouse's inventory when it's sent to a job site or taken by a contractor, among others.
This resulted in major discrepancies, some amounting to hundreds of thousands of dollars -- such as $955,000 in overstated inventory at the Main Warehouse and at least $404,265 in missing product at the Wastewater Treatment Plant Warehouse, to name two examples.
That missing product, according to the OCA, was primarily a type of chain used for maintenance. These CAN-AM chains could not be found largely because they were not tracked or documented by warehouse staff.
Five concerning truths about Richmond’s public water system: 2022 EPA report
This is because they -- alongside some other materials -- are stored outside in unsecured areas and not maintained by staff, despite said materials still being their responsibility.
Inappropriately stored materials were found at the Main Warehouse, as well, where they were kept in a "Building 20." This building, according to the OCA, was partially demolished -- yet nearly $250,000 in items were still being kept inside.
"The roof of the remaining portion of the building is [compromised], and the inventory items are exposed to the weather elements, falling debris and pests," the OCA said. "While conducting physical inventory counts, [auditors] noted rust damage and deterioration to some of the items."
In both cases, the OCA noted concerns that these products could be damaged, lost or stolen. While security at the warehouses themselves was found to be effective, these items -- the ones left outside or in a dilapidated building -- are not at all secured.
Building 20 could also pose a safety risk to warehouse staff who need to enter it, according to OCA.
Richmond Mayor says DPU director’s decision to step down was ‘amicable,’ new director announced
Additionally, over 7,000 feet of Amwell chains reflected in the Wastewater Treatment Plant Warehouse's inventory could not be verified, as "multiple types of unmarked chains were stored in the area" where Amwell chains were said to be kept. The unaccounted-for Amwell chains are valued at $390,825.
The OCA added that the CAN-AM chains were reportedly bought to replace the Amwell chains, which are no longer meant to be in use as they are more prone to breakage. Staff said that was why the Amwell chains could not be found, as they should no longer be on-site. However, the OCA found evidence of Amwell chains being ordered for use as recently as June 2024.
If the current methods for tracking inventory remain in place, the OCA estimates that at least $2.4 million in materials at the Main Warehouse and $563,000 in materials at the Wastewater Treatment Plant Warehouse would not be counted accurately.
Auditors' recommendations and the city's inaction
As a result of these audits, the OCA issued dozens of recommendations for the Main Warehouse and the Wastewater Treatment Plant Warehouse -- 13 and 18, respectively. All recommendations came with a due date.
VDH says Richmond is not capable of reliably providing citizens with water
As of Oct. 8, 2024, eight Main Warehouse recommendations had been partially implemented by the city and five had not been implemented.
In the case of the Wastewater Treatment Plant Warehouse, three had been implemented, two had been partially implemented and 13 remained unimplemented as of Nov. 13, 2024.
Every quarter, the OCA publishes an "Open Audit Report," detailing the status of its recommendations.
Per a Jan. 22 open audit report, Richmond DPU has not finalized any additional recommendations relating to these audits -- despite the fact that several were overdue.
This includes six high-priority recommendations -- those that address "critical issues" that "pose significant risks to the organization."
Among those incomplete and overdue recommendations are five having to do with developing and implementing inventory management practices, as well as one addressing the concerns about Building 20.
This is despite the fact that, in the audit reports, the city of Richmond wrote that such inventory policies had been written and would be "fully implement[ed]" by the original due date.
Two recommendations on these audits will be overdue soon. The first is due on Jan. 31 and has to do with tracking inventory used on work orders. The other is due March 31 and asks that a full inventory count be conducted.
Overall, DPU is overdue to implement 32 out of 46 of its active recommendations -- including a high-priority one originally due in November 2022.
The Rundown: Breaking down the Richmond water crisis
You can review these audit reports, or any other audit report performed by the OCA, in full on the office's website.
