Auditors raise concerns about State Surplus inventory tracking

Online auction site is agency’s biggest moneymaker.

January 30, 2015
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Michigan’s State Surplus program is working on better methods to track inventory that includes anything from usable vehicles to old equipment and items abandoned at Michigan airports. Courtesy

LANSING — The D.J. Jacobetti Home for Veterans in Marquette was looking to unload a Chevy transport van with a wheelchair lift.

A medical transportation company in Flint was looking to pick one up.

Buyer and seller met Jan. 20 on MiBid, an Internet auction site overseen by Michigan’s State Surplus program. The van, a 2006 Chevy Express 3500 LS with 48,000 miles, sold to On the Move Transportation for $10,177.

The winning bid was a little pricey, said company President Gregory Leverette, but the premium price was worth it.

“State vehicles are usually maintained on a regular basis,” said Leverette, who’s been in the medical transport and charter bus business for about 15 years. “So I’ve had pretty good luck with the vehicles I’ve bought from them.”

MiBid, run by a private contractor, is the most lucrative method the State Surplus program has for disposing of old equipment that arrives from state and federal agencies. The program brought in about $1.5 million in fiscal year 2012-13, according to a state audit report, and more than 90 percent of that was from the online auction site.

Items for auction come from various state departments, local governments and abandoned items collected at Michigan airports by the U.S. Transportation Security Administration. The State Surplus website boasts a potential inventory of “cars, computers, paddle boats, pocket knives, wine keys, desks, lawn maintenance equipment, book shelves, jewelry, cameras, police cars, flat-screen TVs, and so much more!”

But auditors have raised concerns that State Surplus isn’t keeping proper track of the items that pass through its hands. A recent report found the program wasn’t doing enough to separate the people who collect revenue from the people who record it, raising “the risk of misappropriating State Surplus revenue.”

The audit also noted many items coming into State Surplus weren’t adequately tracked and couldn’t be accounted for.

Auditors didn’t find any evidence of wrongdoing, said Kelly Miller, state relations officer for the Office of the Auditor General, which conducted the review at a cost of about $100,000.

“What we looked at was the segregation of duties and the lack of documentation,” Miller said. “Those provided opportunities. We don’t know that anything wrong happened … only that the potential was raised.”

State Surplus acknowledges the issues and is working to correct them, said Kristi Thompson, who manages the program within the Department of Technology, Management and Budget.

“We’re going to re-evaluate our practices and procedures, and we’ve already started that,” Thompson said.

The department noted in the audit report that separating duties has been difficult because State Surplus is down to five full-time employees. When Thompson began her role in 2010, there were nine employees, she said.

Staffing has been reduced to match a drop in surplus sales, Thompson said. The surplus program pays for itself through sales revenues, and in recent years the number and quality of items for sale has diminished.

“State departments are holding onto things longer rather than replacing them more frequently,” Thompson said. “Obviously, the older an item is, the less resale value it has.”

As for untracked items, Thompson said sometimes items come in groups and are divided into separate auction lots. The department also told auditors that “most items transferred from state agencies for disposition were generally not worth the expense of inventorying.”

When property comes into State Surplus, employees decide whether to throw it away, give it away or sell it. Many items, like clothing or Christmas gifts left at airports, are donated to charities or school districts, Thompson said. Individual agencies also have been given more discretion to throw junk away rather than filling out paperwork and sending it to State Surplus for disposal, she said.

State vehicles account for the biggest chunk of surplus sales revenue — more than half the money that comes in from auction sales, according to the audit report. State Surplus takes a flat fee from those sales, and some revenue goes back to the originating agencies. A 2004 motorcoach with a wheelchair lift was the biggest selling item of the audit period, going for just over $82,000 in 2012.

Surplus vehicle sales can help businesspeople like On the Move Transportation President Leverette, who is comfortable enough with the process that he didn’t travel to inspect his new $10,000 van at the Jacobetti veterans home before bidding on it.

“Marquette’s a little ways away from me; I still have to get up there and get the thing,” Leverette said. “We’ve got to pick it up soon. We actually need it.”

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