Town of Tuxedo. Procurement of Goods and Services. Report of Examination. Thomas P. DiNapoli. Period Covered: March 1, 2011 August 4, M-270

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1 O FFICE OF THE NEW YORK STATE COMPTROLLER DIVISION OF LOCAL GOVERNMENT & SCHOOL ACCOUNTABILITY Town of Tuxedo Procurement of Goods and Services Report of Examination Period Covered: March 1, 2011 August 4, M-270 Thomas P. DiNapoli

2 Table of Contents AUTHORITY LETTER 2 Page INTRODUCTION 3 Background 3 Objective 3 Scope and Methodology 3 Comments of Local Officials and Corrective Action 3 PROCUREMENT 4 Price Quotes and Proposals 4 Professional Services 5 Recommendations 5 APPENDIX A Response From Local Officials 7 APPENDIX B Audit Methodology and Standards 9 APPENDIX C How to Obtain Additional Copies of the Report 10 APPENDIX D Local Regional Office Listing 11 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

3 State of New York Division of Local Government and School Accountability March 2012 Dear Town Officials: A top priority of the is to help local government officials manage government resources efficiently and effectively and, by so doing, provide accountability for tax dollars spent to support government operations. The Comptroller oversees the fiscal affairs of local governments statewide, as well as compliance with relevant statutes and observance of good business practices. This fiscal oversight is accomplished, in part, through our audits, which identify opportunities for improving operations and Town Board governance. Audits also can identify strategies to reduce costs and to strengthen controls intended to safeguard local government assets. Following is a report of our audit of the Town of Tuxedo, entitled Procurement of Goods and Services. This audit was conducted pursuant to Article V, Section 1 of the State Constitution and the State Comptroller s authority as set forth in Article 3 of the General Municipal Law. This audit s results and recommendations are resources for local government officials to use in effectively managing operations and in meeting the expectations of their constituents. If you have questions about this report, please feel free to contact the local regional office for your county, as listed at the end of this report. Respectfully submitted, Offi ce of the State Comptroller Division of Local Government and School Accountability 2 OFFICE OF THE NEW YORK STATE COMPTROLLER

4 Introduction Background The Town of Tuxedo (Town) is located in Orange County and includes the incorporated Village of Tuxedo Park. The Town encompasses 47 square miles which includes Bear Mountain, Harriman and Sterling Forest State Parks. The Town has approximately 3,400 residents. The Town provides general governmental support including police and fire protection, highway and road maintenance, a library, and sewer and refuse districts. The Town Board (Board) is the legislative body responsible for managing Town operations including finance and internal controls. The Board comprises four elected members who each serve a fouryear term. The Town Supervisor, who serves a two-year term, is the Town s chief financial officer. Objective The objective of our audit was to review the Town s purchasing process. Our audit addressed the following related question: Did the Town utilize competitive methods when procuring goods and services not required to be competitively bid? Scope and Methodology Comments of Local Officials and Corrective Action We evaluated the Town s purchasing process for goods and services not subject to the competitive bidding requirements for the period March 1, 2011, through August 4, We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information on such standards and the methodology used in performing this audit are included in Appendix B of this report. The results of our audit and recommendations have been discussed with Town officials and their comments, which appear in Appendix A, have been considered in preparing this report. Town officials agreed with the findings and recommendations and indicated they will take corrective action. The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and forwarded to our office within 90 days, pursuant to Section 35 of the General Municipal Law. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Town to make this plan available for public review in the Town Clerk s office. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33

5 Procurement General Municipal Law requires the Board to adopt written policies and procedures for the procurement of goods and services that are not subject to competitive bidding requirements. These policies and procedures should indicate when Town officials must obtain quotes or request proposals, indicate the procedures for determining which method will be used, and provide for adequate documentation of the actions taken. The Board adopted a procurement policy in 1993 which was updated in March Department heads are responsible for obtaining the quotes or proposals for purchases not subject to competitive bidding requirements. Town officials did not use competitive methods when procuring goods and services that were not subject to the competitive bidding requirements. Town officials did not seek competition for the 19 purchases made during our audit period, totaling $91,113, for which the Town s purchasing policy required quotes or proposals. In addition, although not required by law or Town policy, the Town did not seek competition when engaging 10 professional service providers at a cost of $326,362. Furthermore, the Town had not entered into formal contracts with nine of the providers. As a result, the Board and Town officials cannot be assured that Town funds were used in the most efficient and economical manner. Price Quotes and Proposals The primary purpose for obtaining bids, quotes and proposals is to encourage competition in the procurement of supplies, equipment and services that will be paid for with public funds. The appropriate use of competition provides taxpayers with the greatest assurance that goods and services are procured in the most prudent and economical manner; that goods and services of desired quality are being acquired at the lowest possible price; and that procurement is not influenced by favoritism, improvidence, extravagance, fraud and corruption. The Town s procurement policy specifies dollar thresholds for when quotes or proposals should be obtained and the type of supporting documentation that should be attached to the claim for payment. We tested all 19 purchases made during the audit period that required written quotes. The 19 purchases were made from 12 vendors and totaled $91,113. Department heads did not obtain quotes as required by the procurement policy prior to making these purchases. For example, quotes were not obtained for the replacement of a culvert at a cost of $20,745 and the purchase of asphalt at a cost of $15,098. Quotes were also not supplied for installation of the fire alarm costing 4 OFFICE OF THE NEW YORK STATE COMPTROLLER

6 $3,211 and for the well drilling at Tichy Field which cost $3,475. In addition, the Board approved claims for payment even though quotes were not attached to the claim vouchers as required by the Town s policy. The failure of Town officials to ensure compliance with the procurement policy places the Town at risk of not obtaining goods and services at the lowest available price. Professional Services Although the Town is not legally required to use a competitive process when procuring professional services, using competition, such as a request for proposal (RFP) process, helps to ensure that the Town receives the desired services for the best price. In addition, written agreements for professional services provide the Town, along with the vendor furnishing services, with a clearly defined and mutually agreed-upon basis for entitlement to compensation. It is important for written agreements to include the timeframe and description of services to be provided, and they may be used to verify that the fees charged are in accordance with Board resolutions. The Town s procurement policy did not require the use of competition when seeking professional services. According to Town records, the last time professional services were obtained using competition was in We reviewed claim vouchers, totaling $326,362, paid to all 10 professional service vendors who were engaged by the Town during the audit period. Town officials did not issue RFPs for the services provided by these vendors, which included $95,088 for legal services, $96,729 for paramedic services, $7,293 for administration of the Town s workers compensation, and $10,752 for computer services. In addition, the Town did not have written agreements with nine of the 10 vendors. The Town had only fees schedules with the nine vendors. Only one vendor, the computer services vendor, had a written agreement with the Town. Without a competitive process and written agreements establishing the services to be provided, delivery timeframes, and the amount of compensation, the Town may not be procuring professional services in the most prudent and economical manner and is at increased risk of paying for services that were not rendered. Recommendations 1. The Board should implement the Town s procurement policy by ensuring that department heads obtain the required quotes or proposals for the procurement of goods and services not subject to the competitive bidding requirements. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55

7 2. The Board should ensure that all required supporting documentation is attached to the voucher package prior to approving claims for payment. 3. The Board should consider updating the Town s procurement policy to include use of competitive methods when professional services are procured. 4. The Board should enter into written agreements with professional services providers. 6 OFFICE OF THE NEW YORK STATE COMPTROLLER

8 APPENDIX A RESPONSE FROM LOCAL OFFICIALS The Town officials response to this audit can be found on the following page. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 77

9 8 OFFICE OF THE NEW YORK STATE COMPTROLLER

10 APPENDIX B AUDIT METHODOLOGY AND STANDARDS The objective of our audit was to determine if purchasing and the procurement of professional services for items under the bidding threshold were in accordance with the Town s policy. To accomplish this, we interviewed appropriate Town officials and employees, tested selected records, and examined pertinent documents for the period March 1, 2011, through August 4, Our procedures included the following: We reviewed the Board meetings from January 1, 2010 through July 31, We reviewed the procurement policy and procedures. We examined the vouchers for quotes to determine compliance with the Town s purchasing policy and procedures. We examined all vouchers from number 235 to number 9524 for purchases that met the purchasing policy criteria as of March We reviewed the contracts for professional service providers. We reviewed the letters of intent for professional service providers. We conducted this performance audit in accordance with generally accepted government auditing standards (GAGAS). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 99

11 APPENDIX C HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT To obtain copies of this report, write or visit our web page: Public Information Office 110 State Street, 15th Floor Albany, New York (518) OFFICE OF THE NEW YORK STATE COMPTROLLER

12 APPENDIX D OFFICE OF THE STATE COMPTROLLER DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY Steven J. Hancox, Deputy Comptroller Nathaalie N. Carey, Assistant Comptroller LOCAL REGIONAL OFFICE LISTING BINGHAMTON REGIONAL OFFICE H. Todd Eames, Chief Examiner State Office Building - Suite Hawley Street Binghamton, New York (607) Fax (607) Muni-Binghamton@osc.state.ny.us Serving: Broome, Chenango, Cortland, Delaware, Otsego, Schoharie, Sullivan, Tioga, Tompkins Counties BUFFALO REGIONAL OFFICE Robert Meller, Chief Examiner 295 Main Street, Suite 1032 Buffalo, New York (716) Fax (716) Muni-Buffalo@osc.state.ny.us Serving: Allegany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, Wyoming Counties NEWBURGH REGIONAL OFFICE Christopher Ellis, Chief Examiner 33 Airport Center Drive, Suite 103 New Windsor, New York (845) Fax (845) Muni-Newburgh@osc.state.ny.us Serving: Columbia, Dutchess, Greene, Orange, Putnam, Rockland, Ulster, Westchester Counties ROCHESTER REGIONAL OFFICE Edward V. Grant, Jr., Chief Examiner The Powers Building 16 West Main Street Suite 522 Rochester, New York (585) Fax (585) Muni-Rochester@osc.state.ny.us Serving: Cayuga, Chemung, Livingston, Monroe, Ontario, Schuyler, Seneca, Steuben, Wayne, Yates Counties GLENS FALLS REGIONAL OFFICE Jeffrey P. Leonard, Chief Examiner One Broad Street Plaza Glens Falls, New York (518) Fax (518) Muni-GlensFalls@osc.state.ny.us Serving: Albany, Clinton, Essex, Franklin, Fulton, Hamilton, Montgomery, Rensselaer, Saratoga, Schenectady, Warren, Washington Counties SYRACUSE REGIONAL OFFICE Rebecca Wilcox, Chief Examiner State Office Building, Room E. Washington Street Syracuse, New York (315) Fax (315) Muni-Syracuse@osc.state.ny.us Serving: Herkimer, Jefferson, Lewis, Madison, Oneida, Onondaga, Oswego, St. Lawrence Counties HAUPPAUGE REGIONAL OFFICE Ira McCracken, Chief Examiner NYS Office Building, Room 3A10 Veterans Memorial Highway Hauppauge, New York (631) Fax (631) Muni-Hauppauge@osc.state.ny.us STATEWIDE AND REGIONAL PROJECTS Ann C. Singer, Chief Examiner State Office Building - Suite Hawley Street Binghamton, New York (607) Fax (607) Serving: Nassau and Suffolk Counties DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 111

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