Press Releases

Controller’s Audit Finds Over $1 Million in Overcharges by NAPA
Findings Focused On Just One Year of a Five-Year Contract

March 17, 2016 --  A newly released vendor contract performance audit by the Office of the City Controller’s Audit Division concludes the Genuine Parts Company (NAPA) overcharged the City of Houston (City) by more than $1 million in management fees, employee salaries, no-cost parts, and erroneous tax reimbursement. The primary objectives of this audit were to consider the processes and internal controls related to: 

  • NAPA management fee invoicing and supporting documentation;
  • Fleet Management Department contract oversight; and
  • Issuance of Category 2 (zero cost) inventory.

The audit focused on just a single year (calendar year 2014) of a five-year contact. The City’s Fleet Management Department (FMD) is also cited in the audit for not providing adequate oversight of the contract (Contract 4600010761).

Background: In an effort to create efficiencies and eliminate redundancy, the City  created FMD in October 2010 to consolidate City fleet operations.  In December 2010, the City entered into a five-year contract with NAPA to assume responsibility for stocking and operating the City’s maintenance facility storerooms.  The contract began on January 18, 2011, with a five-year life span and a maximum spend amount of $95,068,804.  The initial consolidation consisted of moving fleet divisions within Houston Fire Department (HFD), Solid Waste Management Department (SWD) and the Houston Police Department (HPD) under the management of FMD and selling their existing parts inventory to NAPA. With the addition of the Houston Airport System’s (HAS) facilities in May 2013, the contract amount was increased by $23,767,201 to $118,836,005.

The audit findings:  The audit found that in 2014 NAPA overcharged the City $1,022,776 related to NAPA’s management fees and $24,426 for Category 2 parts (previously owned City parts deemed obsolete by NAPA but which could be issued in the future at zero-cost for older vehicles).
The overcharges in management fees were in three categories:

  • The City was invoiced a total of $299,421 in management fees that were based on percentages of sales rather than actual operating costs as outlined in the contract;
  • There was $147,521 in overcharges for NAPA storeroom employees and delivery drivers as well as $380,990 in overcharges for Jones Delivery vehicle delivery drivers. (Jones Delivery is a MWBE subcontractor.) Rates charged did not conform to the rate limits for storeroom employees and delivery drivers set in the contract, and in fact exceeded the labor rates set forth in the contract by 9 percent;
  • The City was invoiced $182,166 for property taxes related to business inventory held at City maintenance facilities resulting in a reimbursement of taxes (tax refund) that was not approved by the City’s Legal Department or City Council.

“Clearly, large contracts like this five-year contract with NAPA are complex and involve a number of people in managing them, and we rate them as ‘high-risk,’” says City Controller Chris B. Brown. “NAPA is not in agreement with much of the audit’s findings, but it is troubling to us that a substantial amount of management overcharges have been found in just one year of the contract. I am glad to report that NAPA agrees the zero-cost parts were billed in error and a credit for those parts has been issued to the City. This audit additionally shows that the City—here, the Fleet Management Department—also needs to be more aware of a large contract’s intricacies and more diligent in monitoring its course.”

The entire audit report, “2016-07 Fleet Management Department (FMD) Vendor Contract Performance Audit – Genuine Parts Company (NAPA),” can be seen online at: