A U D I T R E P O R T. Audit of Lee County Procurement Department

Transcription

1 A U D I T R E Audit of Lee County Procurement Department P O R T Internal Audit Department Audit Number December 2013

2 January 10, 2014 The Honorable Linda Doggett Clerk, Lee County Re: Audit of Lee County Procurement Department Dear Ms. Linda Doggett: The Internal Audit Department has conducted an audit of Lee County Procurement Department. E. Michael Johnson, CIA, has completed this review. Mabel Febles, Internal Audit Administrative Analyst has conducted an ACL data analysis of the P-Card portion. The response to the auditor s conclusions, issues, and recommendations are attached to this report. The auditor wishes to thank the Procurement Department s employees for their assistance and cooperation during the review. This report will be posted to the Clerk of Courts website under Internal Audit, Audit Reports. The hyperlink to the report will be sent to the Lee County Board of County Commissioners and appropriate parties. Sincerely, Tim Parks, Chief Internal Audit Officer Internal Audit Department TJP/mf

3 Table of Contents Audit of Lee County Procurement Department Page Executive Summary 1 Introduction 2 Conclusion 2 Background 3-5 Issues 5-9 Exhibits: Scope 10 LCPD Organization Chart 11 Response 12

4 Lee County Clerk of Courts EXECUTIVE SUMMARY The audit of the Lee County Procurement Department identified positive service elements of the organization including: Operating in an organized and professional manner Managing department expenses to stay within its authorized budget levels Developing procedures to assure department compliance with State and County statutes and codes Performing a proficient County P-Card administration Achieving product and services cost savings through contract bidding and internet search processes Designing and adopting methods to increase its operational efficiencies and reduce labor intensive activities. Issues identified for management s consideration to improve procedures and performance includes: Expanding its Risk Assessment Program Revising and updating Procurement manuals Reconciling Uniform Expense Account Code omissions or revisions Mitigating the workload related employee stress and tension cited in their interviews The recommendations for attending to these issues were developed in a collaborative effort with the Lee County Procurement Department. They are practical, implementable, and mitigate the risk of future occurrence. The auditor s findings, issues, and conclusions were reviewed with the Lee County Procurement Department s Director and responses to the recommendations are included in the Audit Report. 1

5 Audit of Lee County Procurement Department Introduction The Lee County Clerk of Courts Internal Audit Department has completed a scheduled audit of the Lee County Procurement Department (LCPD). The audit was performed by Mike Johnson, CIA. The audit concentrated on LCPD s compliance with State and Local regulations, risk assessment, employee issues, and Procurement Card (P-Card) administration. Where feasible, this audit avoided duplicating the activities and assessments included in the recent 2012 National Institute of Governmental Procurement, Inc. s (NIGP) Procurement Process and Contract Management Redesign Report. A summary of the redesigned report is included in this audit report. The audit was performed in accordance with general auditing standards for the professional practice of Internal Auditing. Audit work papers contain details supporting the conclusions, findings, and recommendations in this report. The scope and cost of the audit are in Exhibit No. 1. Conclusion The audit of the Lee County Procurement Department identified positive service elements of the organization including: Operating in an organized and professional manner. Managing department expenses to stay within its authorized budget levels. Developing procedures to assure Department compliance with State and County statutes and codes. Performing a proficient County P-Card administration. Achieving product and services cost savings through contract bidding and internet search processes. Designing and adopting methods to increase its operational efficiencies and reduce labor intensive activities. Issues identified for management s consideration to improve procedures and performance includes expanding its Risk Assessment Program, revising and updating Procurement Manuals, reconciling Uniform Expense Account Code omissions or revisions, and mitigating the workload related employee stress and tension cited in their interviews. The recommendations for attending to these issues were developed in a collaborative effort with the LCPD. They are practical, implementable, and mitigate the risk of future occurrence. The Issues, Findings, Conclusions, and LCPD s responses to the recommendations are included in the audit report. 2

6 Background LCPD The Procurement Management Goals are to: Staff Provide clear and concise guidelines on acceptable procurement methods. Provide training (classes) to equip our internal and external customers with the tools needed to obtain goods and services. Provide professional guidance and assistance per Administrative Codes #4-1 and #4-4. Procure goods and services through a competitive process when requested or if we deem necessary. Monitor purchases to ensure compliance with established policies and procedures and to determine the areas where additional training is needed. The Contracts section merged with the Purchasing office in July 2010 and formed the Procurement Department. On December 19, 2011, the current Director was promoted to his position. There has been a reduction of a Contracts Manager and Administrative Assistant positions subsequent to the merger. The Current Procurement Organization Chart (Exhibit No. 2) includes: Reporting to the Director are the following positions: Six Procurement Analysts (two vacancies), Buyer, and an Office Manager. Reporting to the Office Manager are three Administrative Specialists positions (one vacancy). The Director indicated the vacant Administrative Specialist position will be replaced with an additional Buyer position. The Buyer positions will then be used for possible grooming and advancement to an Analyst position. Budget Procurement Department Budgets for Fiscal Years 2011, 2012, and 2013 are: Department Expense Budget Budget $1,043,943 $1,024,683 $922,421 Actual Expense $1,015,690 $887,271 $787,838 Personnel Expense Budget $873,616 $902,122 $801,265 Actual Expense $860,099 $766,061 $672,598 3

7 Balance $13,517 $136,061 $128,667 Percent Personnel Expense of Dept. Expense 85% 86% 85% $1,000,000 $800,000 $600,000 $400,000 $200,000 Budget Actual Expense $ Personnel Expense As shown, LCPD has operated within its budget since the last audit in Realized Cost Savings The Procurement process involves locating and purchasing materials, supplies, equipment, and services at the best value consistent with operational needs while maintaining fair and open competition. Fiscal Year County Contract Savings attributed to their Bidding Processes were identified by the Office Manager as: FY $6,888, FY $9,966, FY $7,587, NIGP Procurement Process and Management Redesign Review LCPD requested the NIGP to perform a Procurement Process and Contract Management Redesign Review in three areas of the Lee County (County) procurement program that included: Statutes, Ordinances, Policies and Procedures Contract Documents and Procurement Processes The Disadvantaged Business Enterprise (DBE) Program The March 2, 2012, final report included 153 recommendations proposed by the NIGP regarding the following: 4

8 Ordinances and Statutes (70) Contract Documents (61) DBE (16) Department Issues (5) An Improvement Plan The Director s current interest in adopting and implementing each of the recommendations were noted as: Currently implemented Will be addressed in the current re-write of their manual and standard operating procedures To be determined Under legal review Does not fit with their current business plan An unrealistic expectation considering the resources required to implement The Director will continue the evaluation of the NIGP recommendations for adoption, as the workload permits. Issues Issue No. 1: LCPD Risk Assessment Program At the Audit Kick-off meeting, risk management and control were discussed with the LCPD management. They acknowledge having little experience associated with this activity. They were asked to complete a Risk Assessment Survey. The objectives for LCPD were to identify internal and external threats and risks that would jeopardize or prevent the department from achieving its stated goals and identify the controls in place to mitigate those risks. Findings LCPD completed and returned the survey on October 11, They identified the following risks as of current primary importance and the related controls: Risk No.1: Favoring a specific vendor for the award of contracts and/or the approval of purchases Controls: Lee County Lobbying Ordinance requires all employees within the Purchasing Division and Contracts Office, with the exception of the secretarial staff, to keep a Lobbying Contact Log. 5

9 LCPD Procedures require a daily review of purchase orders for possible vendor favoritism Risk No. 2: Employee Financial Fraud Control Controls: The Local Government Employee Financial Disclosure Requirements included in the Florida Commission on Ethics Laws Conclusion The LCPD Risk Assessment Program is considered incomplete based on the identification of only two risks that threaten the success of its organization. It reflected LCPD s limited previous exposure to risk assessment processes. Considering the magnitude and span of the Department s responsibilities and operations, the potential may exist for unidentified external and systemic risks which would negatively impact achieving its mission and goals. Recommendation It is recommended that LCPD consider expanding its risk management efforts to include Risk Identification and Control discussions with management and with those departments depending on its procurement support function. Issue No. 2: Outdated and incomplete Lee County Purchasing and Payment Procedures Manual, and Contracts Manual Lee County Board of County Commissions Administrative Codes AC4-1 and AC4-4 provide for a Lee County Purchasing and Payment Procedures Manual and a Contract Manual, respectively. The manuals stated purposes are to serve as guides to all County departments, divisions, and employees regarding the contract and purchasing policies and procedures of Lee County, Florida. The Contract Manual serves as the basis for Contract Management s policies and procedures for Lee County. The contract function involves the procurement of construction, professional, and other professional services at the lowest and best possible cost. It must be consistent with the quality needed to meet standards established and approved by the Lee County Board of County Commissioners. The Purchasing Manual serves as the basis for purchasing policies and procedures for Lee County. The purchasing function involves the procurement of materials, supplies, equipment, and services at the best value consistent with operational needs, while maintaining fair and open competition. 6

10 Findings These findings are consistent with those presented in the previous 2010 Contracts Audit and the 2012 NIGP Review Report: The Contract Manual has not been updated to reflect the contract management program s merger in 2010 with the procurement program. Important references regarding authority, responsibilities, and workflow have not been changed, revised, or updated. The County s Purchasing and Contracts manuals cover a full range of procurement activities. Overall, they are adequate in laying out procedures, but theyare just fair in identifying Board policies. The manuals need to effectively delineate the differences between policies and procedures. Although the County s procurement program promotes competitive procurement practices, definition of terms are often lacking and many of its processes are outdated or not fully developed. They are not clearly articulated or presented in an organized or consistent manner. The two manuals are repetitious and descriptions of procurement methods require updating. Conclusion The Contracts and Purchasing Manuals require revisions and updates to: Fulfill their stated purposes of serving as guides to all County departments, divisions, and employees regarding the contract and purchasing policies and procedures of Lee County. Reflect the 2010 merger of the contract management and purchasing groups and the subsequent changes and revisions regarding authority, responsibilities, and workflow. Include or reference supplemental information that provides the detailed procedures and steps required to accomplish LCPD s contract and purchasing processes. Recommendation It is recommended that LCPD consider producing and issuing a Procurement Manual(s) that takes into account the changes listed above. Issue No. 3 Reconciling Uniform Expense Object Code Omissions or New Revisions The Lee County Procurement Card Program is designed to improve efficiency in processing purchases from any vendor that accepts the Procurement Card. This program allows the Cardholder to purchase approved commodities directly from our vendors. Each Procurement Card is issued to a named individual and Lee County BOCC is clearly shown on the card as the Governmental buyer of goods. Procurement management and the Clerk of Court s Finance Department monitor the performance of the program. As part of this audit, Mabel Febles, Internal Audit Administrative Analyst, completed an ACL data analysis of Lee County s Procurement Card (P-Card) usage. ACL is a software tool that 7

11 allows the Internal Audit Department to read and analyze data from numerous databases and to obtain the requested results. Findings The testing transactions were in compliance with the P-Card policies and procedures. Florida purchases were made tax exempt. Transactions included the appropriate documentation. The latest copy of the mandatory P-card training program about the usage of P- Cards was provided to our department. The P-Card Administrator keeps hand written notes with descriptive information that applies to some Object Codes that might be helpful. According to her notes, Object Code # needs approval from ITG or the Procurement Director, and this is not stated on the Uniform Expense Object Codes reference list. Also Object Code # was being charged incorrectly on the sample of transactions tested. Conclusion Not alerting the Lee County Department of Budget Services (LCDBS) of omissions found or new revisions made in their reference material, could result in purchases being made without their prerequisites such as required approvals being satisfied or appropriate usage of the codes. Recommendation It is recommended that LCPD consider establishing a policy of alerting the LCDBS of omissions found or new revisions made by the Procurement Department. Issue No. 4 Employee workload related stress and tension Interviews were held with all LCPD members to solicit their opinions on topics relative to their assignments, training, job aids, and work environment. Findings When the employees were asked to Describe your workload; do you have a backlog?, several stated the demanding nature of their workload is causing them to experience undue stress and tension associated with accomplishing their assignments. Their opinions regarding the underlying causes for this burden included vacant positions and new inexperienced colleagues. An additional consequence of this circumstance is that members have little time available to advise, assist, and cross-train their coworkers. 8

12 . In his interview, the Director stated that he is currently planning to fill the vacant positions. However, his concern is that only candidates with little or no experience will be offered to fill his vacancies. LCPD has, or is in the process of completing the following actions to increase its operational efficiencies and reduce labor intensive activities: Conclusion All pre-merger (referred to as Legacy ) procedure and process documentation has been, or is being evaluated to determine what steps need to be changed, eliminated, amended, automated, etc. to efficiently adapt its current operating environment. Standard Procurement Process and Contract Document Templates were prepared to provide for uniformity, proficiency, and simplicity in their use. The Lee County Procurement Management Web Site and RSS Feed are now used to disseminate LCPD notices, policies, guides, contract history, meeting information, and answers to frequently asked questions (FAQ). Previously, the delivery of this information required labor intensive efforts such as mailings, phone calls, reproducing documentation and meetings. Although not all identified their workload as having a negative effect on them, this situation of vacant positions and the limited time available to assist and cross-train others may eventually adversely affect the group in total. LCPD is taking action to reduce employee workload by designing and adopting methods to increase its operational efficiencies and reduce labor intensive activities. Recommendations Consider requesting additional resources for developing and presenting employee training. It would be used as a method to reduce the dependency on others for completing assignments and for training new employees. Consider having periodic staff meetings to include discussion of the stress issue. Continue to pursue opportunities to reduce workload through automation. 9

13 Exhibit No. 1 Lee County Procurement Department Audit Scope Review mission, organization chart, policies, procedures, internal controls, and work flow; and test for employee compliance. Review and evaluate the Department s Risk Management. Review and evaluate the Department s Performance Measurement System. Determine that the Organization s goals and objectives are documented. Review and verify the accuracy of employee job descriptions, assignments, and functions. Interview employees regarding department policies, procedures, and operations. Review the budget and budget status. Review department procedures for monitoring its budget on a continuing basis. Review 2012 NIGP Process Redesign Recommendations and Procurement's decisions to adopt and implement them. Review for Department compliance with applicable laws, regulations, policies, and procedures. Review the P-Card administration and compliance to policies and procedures. Complete a P-Card ACL data analysis review. 10

14 Exhibit No. 2 LCPD ORGANIZATION CHART 12/2/

15 12/18/13 Mabel Good morning. Thank you for the opportunity to review the draft audit report of Procurement. Having done so, I have no revisions or comments to offer and would ask you to proceed. Bob Robert D. Franceschini, C.P.M., CPPB Procurement Director Division of Procurement Management P F rfranceschini@leegov.com Join our online public forum at 12