Audit Finds Chattanooga Fleet Spent More Than $1M Without Authorization
City audit finds fleet division bypassed approval requirements on over a million dollars in spending.
Source: Chattanooga Times Free Press ↗
More than $1 million in unauthorized spending flowed through Chattanooga’s fleet management division between 2022 and 2025, according to an August audit by City Auditor Stan Sewell.
“What was discovered runs counter to the checks and balances of the policies we have in place and is unacceptable,” Stephanie Cepak, a spokesperson for Mayor Tim Kelly, said in a statement. “The city is actively working to address the recommendations in the audit.”
The audit examined whether the procurement process for a vehicle and equipment parts contract produced the best and lowest bid and whether internal controls ensured billing complied with approved contract pricing. Fleet management operates two garages and is responsible for maintenance and repair of city vehicles and equipment.
In 2021, the Chattanooga City Council approved two four-year contracts, one with Lee Smith of Thompson Truck Group and one with Ken Smith of Mid America Parts Distributor, not to exceed a combined $1.25 million. The total overage between 2022 and 2025 reached $1,067,166, driven by unmonitored purchasing card usage. City code requires council approval for contracts over $50,000; because no monitoring was in place, those overages never went before the council. Policy also prohibits purchasing cards for repetitive items or goods and services covered under negotiated contracts.
Fleet did not pay established contract prices for parts, and the audit found billing errors from both vendors. “By failing to pay agreed-upon rates and allowing freight markups, the city incurred inaccurate expenditures which increased the costs,” the audit said. “Without proper verification of part prices, the city remains vulnerable to ongoing vendor overcharges.”
“We recommended actions to monitor spending, refine bid analysis and develop price verification mechanisms,” the audit said. Cepak said all employees identified as involved have been placed on paid administrative leave pending an investigation; she declined to name them because they are on leave.
A project manager has been assigned to conduct a full audit of all fleet garage parts invoices, and the Department of Public Works is putting the fleet garage parts contract out to bid. “Training on the proper policies and procedures will be conducted,” Cepak said.
