Internal Audit Follow-Up Report

Transcription

1 Internal Audit Follow-Up Report Purchasing Process Efficiency TxDOT Internal Audit Division

2 Objective To assess the status of corrective actions for high-risk Management Action Plans (MAPs) previously communicated in the Purchasing Process Efficiency audit report issued May Summary Results Testing consisted of an evaluation of four MAPs to determine if corrective actions were implemented as agreed. MAP Status Comments 1 Open Corrective actions that require completion to address identified risks from the original audit report. 3 Closed Corrective actions have been completed. Scope The engagement was performed by Letta Hinton, Rita Ruiz, Sara Silva, and Casey Kopcho (Engagement Lead). The engagement was conducted during the period from September 28, 2017 to November 17, The engagement focused on blanket purchase orders (PO) exceeding contract amounts, liquidated damages resulting from late deliveries, inefficiencies leading up to PO issuance, and vendor performance evaluation reporting. Methodology The methodology used to complete the objectives of this engagement included: Conducted interviews with key personnel in the Procurement Division (PRO) such as business analysts and purchasing branch managers. Reviewed TxDOT internal documents such as the Purchasing Manual, Vendor Performance Process, PRO s Buy-Ways August Newsletter, Vendor Performance Forms and memorandum regarding Enterprise Learning Management (ELM) trainings for purchasing roles. Reviewed relevant TxDOT-Now tickets and determined status of ticket. Observed errors generated by Enterprise Resource Planning (ERP) system when a requisition exceeded PO maximum amount, contract release amount, and contract updates. Judgmentally selected and tested a sample of six POs for equipment purchases to verify Due Date field (within ERP system) is updated with Delivery Date from the TxSmartBuy order. Judgmentally selected and tested a sample of five POs with amounts over $25,000 and verified if a vendor performance evaluation was completed. Background This report is prepared for the Texas Transportation Commission and for the Administration and Management of TxDOT. The report presents the results of the Purchasing Process Efficiency Follow-Up engagement which was conducted as part of the Fiscal Year (FY) 2018 Audit Plan. August

3 The purchasing process begins when an end user enters a requisition into TxDOT s ERP system. It is then routed to an approver, who is designated by the district or division with delegation of signature authority, and is responsible for reviewing, approving, or denying the requisition. If approved, the system routes the requisition for creation of a PO. The requisition is then routed to a purchaser who is responsible for creating the PO. If a purchaser receives a requisition with minimal information (i.e., incomplete scope of work), the purchaser contacts the end user to obtain the additional information. The purchaser does not return the requisition to the end user; instead, the purchaser works with the end user to correct the requisition so that the purchaser can issue the PO. Once the end user receives the item, the end user inspects and accepts the item and enters the receipt date into TxDOT s ERP system. If the item is not accepted, the end user contacts the purchaser to discuss corrective action. Once the vendor sends an invoice to TxDOT for payment, Finance, responsible for paying the invoice, will pay if a receipt date is in the ERP system. If the purchase request is for a commodity that costs over $25,000 or for a service that costs over $100,000, the Comptroller of Public Accounts (CPA) requires the purchaser to complete additional paperwork and to delegate the request to CPA for further processing. [Note: As of January 2017, the delegation requirement for commodities increased from $25,000 to $50,000.] In addition, CPA has communicated that they will complete commodities purchases within 90 days of receipt compared to up to six months it previously took to complete. We conducted this follow-up engagement in accordance with Generally Accepted Government Auditing Standards and in conformance with the International Standards for the Professional Practice of Internal Auditing. Those standards require that we plan and perform the engagement to obtain sufficient, appropriate evidence to provide a reasonable basis for our conclusions based on our engagement objective. Recommendations to mitigate risks identified were previously provided to management during the original engagement to assist in the formulation of the management action plans referenced in this report. The Internal Audit Division uses the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Integrated Framework version August

4 Detailed MAP Follow-Up Status MAP Status: Open Corrective actions that require completion to address identified risks from the original audit report. Original Audit Finding No. 3: Inefficiencies Leading up to Purchase Order (PO) Issuance MAP Owner: Dee Dee Evans, Business Analyst & Kenneth Woods, Director, Procurement Division MAP 3.1 Procurement Division (PRO) will coordinate with both the Information Management Division (IMD) to semi-annually obtain a list of new PO module users with update roles and with Human Resources Division (HRD) to obtain a list of users that have taken the specific PO Module training, compare the list, and notify the districts/divisions of the users who have not taken the training requesting they do so. PRO will notify end users of reference materials located in the PRO SharePoint.* Procedures will be developed to address the cause and evidence noted above and will be made available in the Internal Procedures Guide to augment detailed procedures for specific methods of purchase and policy information in the Purchasing Manual. Specific enterprise resource planning system instructions will be made available on the ERP Knowledge Center website.* *Items were considered complete Original Completion Date: September 15, 2017 Revised Completion Date: October 15, 2018 August

5 MAP Status: Closed Corrective actions have been completed. Original Audit Finding No. 1: Blanket Purchase Orders (POs) Exceeded Contract Amounts MAP Owner: Dee Dee Evans, Business Analyst, Procurement Division MAP 1.1: Procurement Division (PRO) is in the process of reconciling the POs and determining if the POs can contractually be increased to allow for continued us or if the POs will be closed and new POs put in place Tickets are in place to resolve the above issue. PRO is in the process of working with TxDOT s third-party enterprise resource planning technical team to test software patches received from the software provider that will address the identified issue. Specifically, the patches will address error generation when a requisition exceeds PO maximum amount, contract release amounts, and contract updates. Once program fixes are migrated to the production environment by Information Management Division (IMD), PRO will validate the program is working properly. Original Completion Date: July 15, 2017 Actual Completion Date: October 10, 2017 Original Audit Finding No. 2: Liquidated Damages Resulting from Late Deliveries MAP Owner: Jo Woten, Purchasing Branch Manager, Procurement Division MAP 2.1: Procurement Division (PRO) will coordinate with Fleet Operations Division to establish and implement a process for tracking and collecting liquidated damages. PRO will establish and implement a process to ensure documentation of prior written approval for late deliveries is in the purchase order file. PRO will update the applicable manuals to include a process for the aforementioned bullet points Instructions for purchases on the enterprise resource planning system request for quote (RFQ) requirements regarding TxSmartBuy (TSB) orders will be updated to specifically call out the requirement to update the Due Date field with the delivery date from the TSB order. The current interface program will result in the due date entered on the RFQ being reflected on the resulting enterprise resource planning system PO. No interface changes required Original Completion Date: August 15, 2017 Actual Completion Date: August 8, 2017 August

6 Original Audit Finding No. 4: Vendor Performance Evaluation Reporting MAP Owner: Russell Tomlinson, Purchasing Branch Manager, Procurement Division MAP 4.1: Procurement Division (PRO) will establish and implement a process to ensure all purchase orders $25,000 or greater have vendor performance completed and submitted to the Comptroller of Public Accounts. Specifically, PRO will develop a process to remind districts/divisions (DDs) of the requirements to complete vendor performance evaluations and communicate the information to PRO. The process will include a follow-up to ensure the information is received, entered in the vendor performance system (VPS), and maintained in the PO file. Non-compliance will be elevated to the applicable DDs as required. Original Completion Date: September 15, 2017 Actual Completion Date: March 20, 2018 Closing Comments The results of this MAP Follow-Up engagement were discussed with the Procurement Division Director on August 16, The Internal Audit Division appreciates the cooperation and assistance received from the Procurement Division personnel during this engagement. August