WEST VIRGINIA UNIVERSITY PARKERSBURG

Transcription

1 WEST VIRGINIA UNIVERSITY PARKERSBURG PURCHASING PERFORMANCE AND COMPLIANCE AUDIT YEAR ENDED JUNE 30, 2003

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3 Description of Agency The Organization s legal name is West Virginia University Parkersburg (WVUP). WVUP is a governmental entity and it is a regional campus of West Virginia University. WVUP is part of the West Virginia Higher Education Fund, which is a component unit of the State of West Virginia. WVUP is composed of seven academic divisions. West Virginia University and its regional campuses are governed by the West Virginia University Board of Governors as established by Senate Bill 653 in West Virginia State Code Section 18B-2A-1. Senate Bill 653 was enacted by the West Virginia Legislature on March 19, 2000 and restructured public higher education in West Virginia. Effective July 1, 2001, certain powers were transferred to the Governing Board of each of the institutions of higher education in the West Virginia system. These powers and duties include, but are not limited to: the power to determine, control, supervise, and manage the financial, business and educational policies and affairs of the institution under its jurisdiction; the duty to develop a master plan for the institution; the power to prescribe the specific functions and institution s budget request; the duty to review at least every five years all academic programs offered at the institution; and the power to fix tuition and other fees for the different classes or categories of students enrolled at its institution. Senate Bill 653 also created the West Virginia Higher Education Policy Commission (the Commission), which is responsible for developing, gaining consensus around and overseeing the implementation and development of a higher education public policy agenda. Also, as established by West Virginia State Code Section 18B-5-4, the Commission is responsible for developing rules governing and controlling acquisitions and purchases for the Commission and Governing Boards. WVUP is a state-supported interactive college located in Parkersburg, West Virginia offering two-year and four-year undergraduate programs. Students can choose from several associate programs and baccalaureate programs. In addition, WVUP offers a wide variety of additional credit classes, seminars, and workshops. The enrollment at WVUP is approximately 3,500. WVUP is accredited by the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools. The facility also has accreditations from various other boards and associations for specific disciplines.

4 4 Audit Methodology PROCUREMENT COMPLIANCE AND INTERNAL CONTROL To satisfy the procurement compliance and internal control objective noted above, we performed the following procedures: 1. Chief Procurement Officer (CPO) Designation Reviewed the CPO designation made by the institution of higher education president and evaluated whether the designation was filed with the Vice Chancellor for Administration, State Auditor, and the Attorney General. No relevant exceptions noted. 2. CPO Responsibilities Reviewed the responsibilities that the CPO was performing to evaluate compliance with the responsibilities and duties as defined in the West Virginia Higher Education Purchasing Procedures Manual. No relevant exceptions noted. 3. Appointment of Buyers Obtained a listing of Buyers appointed by the CPO and reviewed the designation to ensure that it was made in writing and filed with the Vice Chancellor for Administration, State Auditor, and the Attorney General. No relevant exceptions noted. 4. Review of Buyer s Credentials Reviewed the personnel file for all Buyer s appointed to determine at a minimum either; (a) the Buyer was a graduate of an accredited college or university; or (b) the Buyer has at least four year s experience in purchasing for any unit of government or any business, commercial or industrial enterprise. No relevant exceptions noted.

5 5 5. Insurance Bond Obtained the institution of higher education insurance coverage to evaluate that bond coverage was executed for all Buyer s and CPO s appointed. No relevant exceptions noted. 6. Review of Authority Revocations Obtained a listing of delegated authority revoked by the CPO and reviewed the written notification made to the Vice Chancellor for Administration, State Auditor, and the Attorney General. No relevant exceptions noted. 7. Review of Procedures for Purchases Not Exceeding $5,000 Obtained a copy of the institution of higher education guidelines and procedures established by the CPO for purchases not exceeding $5,000 and determined whether the procedures and any modifications had been filed with the Vice Chancellor for Administration. No relevant exceptions noted. 8. Test Selected Procurement Transactions Not Exceeding $5,000 Reviewed 10 procurement transactions under the $5,000 limit to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code. No relevant exceptions noted. 9. Test Selected Procurement Transactions Exceeding $5,000 But Not Exceeding $25,000 Reviewed 10 procurement transactions between $5,001 and $25,000 to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code. Three items noted, see and

6 6 10. Test Selected Procurement Transactions Exceeding $25,000 Reviewed 5 procurement transactions greater than $25,000 to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code. Three items noted, see and Test Selected Procurement Transactions Exceeding $15,000 Reviewed 6 procurement transactions greater than $15,000 to evaluate compliance with the Attorney General and State Auditor s Office requirements. No relevant exceptions noted. 12. Test Selected Special Procurement Transactions Reviewed 11 special procurement transactions which are defined as sole/single source procurement contracts, emergency contracts, motor vehicle contracts, open-end contracts, and professional service contracts to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code. One item noted, see Test for Potential Stringing Utilizing data extraction software, reviewed all purchase orders issued during the fiscal year ended June 30, 2003 for potential stringing. No relevant exceptions noted.

7 7 14. Test Selected Complaints, Protests, and Reconsiderations Reviewed for complaints, protests, and reconsiderations filed during the period of review to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code. There were no complaints, protests, or reconsiderations during the review period. 15. Test Selected Vendor Suspensions Reviewed for vendors suspended during the period of review to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code. There were no vendor suspensions during the review period. 16. Review Receiving and Inventory Procedures Obtained a copy of the institution of higher education guidelines and procedures for receiving and distributing materials, supplies, equipment, services, and printing to departments and offices and reviewed the procedures to evaluate compliance with the West Virginia Higher Education Purchasing Procedures Manual and the applicable sections of West Virginia State Code. Two items noted, see Review Inventory Dispositions Reviewed 20 dispositions of surplus equipment, supplies, and materials to evaluate compliance with the institution of higher education s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code. One item noted, see

8 8 18. Review Prompt Payment Act Procedures Obtained a copy of the institution of higher education guidelines and procedures for administering the requirements of the West Virginia State Code Prompt Payment Act to evaluate compliance with the West Virginia Higher Education Purchasing Procedures Manual and the applicable sections of West Virginia State Code. No relevant exceptions noted. 19. Review Selected Transactions for Compliance with Prompt Payment Act Reviewed 20 invoices paid during the period of review to evaluate compliance with the requirements of the West Virginia State Code Prompt Payment Act. Nine items noted, see Review Annual Report to Vice Chancellor Reviewed the annual prescribed report submitted to the Vice Chancellor for Administration and subsequently to the Finance Committees of the House of Delegates and the Senate to evaluate compliance with the requirements of the filing. No relevant exceptions noted.

9 Procurement - Time and Date Stamp of Bids Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section of the West Virginia Higher Education Purchasing Procedures Manual states that: Upon its receipt, each bid and modification shall be time and date stamped Envelopes with the time and date stamp are not being maintained after the bid opening; therefore, we could not determine compliance with the requirement of the West Virginia Higher Education Purchasing Procedures Manual. We noted two instances during our test work; however, most of WVUP s purchase orders are from negotiated statewide contracts and/or contracts with West Virginia University. We were unable to determine whether WVUP was in compliance with the West Virginia Higher Education Purchasing Procedures Manual section as noted above. Envelopes with the time and date stamp were discarded after the bid opening date and no other evidence exists to support the time and date stamp. We recommend that WVUP either maintain the envelopes with the time and date stamp or document the time and date from the envelopes onto the bidopening log during the official bid opening. WVUP will implement this recommendation. A column has been added to the log sheet, where the date and time a bid was received will now be recorded. See attachment

10 Procurement - Posting of Notice and Award Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section of the West Virginia Higher Education Purchasing Procedures Manual states that: The Chief Procurement Officer shall, in addition to advertising, post notice of all competitive acquisitions and purchases over $25,000 in the institution s purchasing office no less than 14 calendar days prior to the date bids are due. Furthermore, Section of the West Virginia Higher Education Purchasing Procedures Manual states that: Notice of the award shall be posted in the institution s purchasing office for competitive transactions greater than $5,000. Management informed us that notices of competitive acquisitions are posted in the institution s purchasing office; however, documentation to support the posting was not maintained. Further, there was no documentation to support the posting of awards for competitive transactions greater than $5,000. WVUP issued less than five purchase orders through competitive procurement that were greater than $25,000. The total purchase orders issued greater than $5,000 were approximately 40. We were unable to determine whether WVUP was in compliance with the West Virginia Higher Education Purchasing Procedures Manual section as noted above. Documentation of the required posting was not maintained to verify compliance with the West Virginia Higher Education Purchasing Procedures Manual. We recommend that WVUP maintain a log of postings with the date posted and/or maintain the documents posted with the date of the posting in the procurement file. WVUP disagrees with this recommendation. WVUP is in compliance with this criteria. WVUP does make a public posting of the advertisement of all bids outstanding. A public bid board in the main hallway of the campus is provided for this purpose. Outstanding bids are posted and not removed until bid opening date and time. WVUP is not aware of any requirement to maintain the suggested log or the posted materials after the bid opening. Further, WVUP has not received any complaints regarding failure to post such notices.

11 Procurement - Purchasing File Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section of the West Virginia Higher Education Purchasing Procedures Manual states that: The Chief Procurement Officer shall maintain a purchasing file for each procurement or acquisition which shall contain all relevant information pertaining to such purchase or acquisition, including but not limited to The quotations, bids, proposals or expressions of interest received in response to a solicitation For one of the eleven special contracts tested, management was unable to locate the competitive bid of the other proposal received. Management had the proposal for the vendor awarded the contract, the scoring sheets, and the price information. Based upon this information, it appeared that the vendor awarded the contract was the lowest responsible bidder. The contract was an open-ended purchase order for electrical services to be performed at the institution. The total amount disbursed on this contract for the fiscal year ended June 30, 2003 was approximately $9,700. The total non-payroll related expenditures for the fiscal year ended June 30, 2003 were approximately $3,000,000. WVUP is not in compliance with the West Virginia Higher Education Purchasing Procedures Manual section as noted above. Management did not know what happened to the other proposal/bid. We recommend that WVUP ensure that all future proposals/bids are maintained in accordance with the West Virginia Higher Education Purchasing Procedures Manual. WVUP agrees with this recommendation. Two bids pertaining to the file noted were received and considered. Only one bid is in the file. The other bid cannot be located. WVUP will take additional precautions to ensure that no files or documents are removed from any purchasing files and that the files are maintained in tact.

12 Receiving and Inventory Management - Filing with Vice Chancellor for Administration Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section of the West Virginia Higher Education Purchasing Procedures Manual States that: The Chief Procurement Officer shall establish institutional guidelines and procedures for receiving and distributing materials, supplies, equipment, services, and printing They shall be approved by the president and filed with the Vice Chancellor for Administration. Furthermore, Section states that: The Chief Procurement Officer shall develop inventory procedures and an inventory management system The institution s inventory procedures and inventory system shall be approved by the president, and a copy of the procedures and a description of the inventory management system shall be filed with the Vice Chancellor for Administration. WVUP did not submit the Receiving and Distributing procedures and the Inventory and Inventory Management Procedures to the Vice Chancellor for Administration. The policies were revised during the current fiscal year and were not submitted to the Vice Chancellor for Administration. The policies and procedures on file with the Vice Chancellor for receiving/distributing were from 1997, and the policies for inventory were from WVUP is not in compliance with the West Virginia Higher Education Purchasing Procedures Manual section as noted above. Management was unaware of the requirement to submit the policies to the Vice Chancellor for Administration of the West Virginia Higher Education Policy Commission. We recommend that WVUP ensure that all required policies and procedures are filed with the Vice Chancellor of Administration in accordance with the requirements of the West Virginia Higher Education Policy Commission. WVUP agrees with this recommendation and has now filed the purchasing handbook with the Policy Commission Office.

13 Surplus Dispositions - Advertising Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section 18B-5-7 of the West Virginia State Code states in part that, At least ten days prior to the disposition, the commission or the governing boards, as applicable, shall advertise, by newspaper publication as a Class II legal advertisement The advertisement for the sealed bid surplus disposition reviewed was advertised on March 19, 2003; however, the sealed bids were required to be received by March 26, This appeared to be the only sealed bid surplus disposition conducted by WVUP during the period of review. WVUP is not in compliance with the requirements of West Virginia State Code section as noted above. WVUP did not advertise the surplus disposition bid in a timely manner to ensure compliance with West Virginia State Code. We recommend that WVUP advertise all future sealed bid surplus dispositions in accordance with West Virginia State Code. WVUP agrees with this recommendation. In one instance a bid was advertised 7 days prior to opening instead of the 10 day required time. WVUP will ensure compliance with the full 10 day rule in the future.

14 Procurement - Prompt Payment of Vendors Criteria: Condition: Section of the West Virginia Higher Education Purchasing Procedures Manual states in part that: An institution receiving a legitimate uncontested invoice shall process the invoice within ten working days from its receipt. Furthermore, Section b states that: All invoices should be date stamped upon receipt. Also, the accounts payable function may keep other documentation in its files as evidence of the date of receipt of the invoice. During our review of the prompt payment transactions tested, we noted the following: For five of the twenty transactions tested, the uncontested vendor invoices were not processed within ten working days from their receipt. For four of the twenty transactions tested, the invoices were not date stamped upon receipt. Context: Effect: Cause: The five instances totaled approximately $3,100. The four instances, which include one ($2,880) of the five instances above, totaled approximately $8,500. The total amount tested was approximately $38,000. The total number of vendor payments processed during the fiscal year ended June 30, 2003 was approximately 2,500 in the amount of approximately $3,000,000. In these instances, WVUP is not in compliance with the section of the Prompt Payment Act that states the agency must process the invoice to the Auditor within 10 days of receipt of a legitimate uncontested invoice. The vendor mailed the invoices directly to a Department instead of to the Procurement Office. Such invoices were not properly stamped and were held by the Department for several days without the knowledge of the Procurement Office. We recommend that WVUP reemphasize that all invoices should be mailed directly to the Business Office instead of to the Department receiving the goods or services. Furthermore, if an invoice is contested, WVUP should ensure that written documentation of the contested invoice is maintained.

15 Procurement - Prompt Payment of Vendors (Continued) Agency s Comments /Corrective Action: WVUP agrees with these findings. Internal procedures have been modified to ensure all invoices pass through the purchasing office to ensure date/time stamping. As to the late processing of the five invoices noted, one was received during Christmas break and not processed until after reopening of the college after the first of January; three were received during the state cut-off period for end of year closeout; and, one invoice was unexplainably delayed internally. These appear to be isolated instances. WVUP will make every attempt to meet the 10 day processing time.

16 16 PURCHASING CARD COMPLIANCE AND INTERNAL CONTROL To satisfy the purchasing card objective noted above, we performed the following procedures: 1. Review Purchasing Card Policies and Procedures Obtained and reviewed the institution of higher education s purchasing card program s policies and procedures and obtained an understanding of the internal controls over the purchasing card program during the period of our review. One item noted, see Review Prior Purchasing Card Audits Obtained a copy of the State Auditor s Office purchasing card audit conducted during the period of our review and noted any items of audit significance. There were no State Auditor s Office purchasing card audits conducted during the period under review. 3. Test Selected Cardholders Obtained a detail listing of the institution of higher education cardholders, transaction limits, and transactions for the period, and tested 3 cardholders to evaluate whether the cardholder was eligible to be assigned a purchasing card, whether transaction limits assigned to each cardholder were adhered to for individual transactions, and whether a cardholder agreement was signed and on file at the institution of higher education. No relevant exceptions noted. 4. Test for Potential Stringing Utilizing data extraction software, reviewed all purchases made with purchasing card during the fiscal year ended June 30, 2003 for potential stringing. One item noted, see

17 17 5. Test Selected Purchasing Card Transactions Reviewed 20 purchasing card transactions to evaluate compliance with the Institution s internal control policies and procedures, State Auditor s Office Purchasing Card Policies and Procedures, and the applicable sections of the West Virginia Code. No relevant exceptions noted. 6. Test Purchasing Card Transactions for Utilities Obtained a detail listing of purchasing card transactions issued for payment of utilities and scanned the detail to note whether any unusual or non-utility related purchases were made. There were no purchasing cards issued specifically for the payment of utilities.

18 Purchasing Card - Approval of Transactions Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section 12.1 of the West Virginia State Auditor s Purchasing Card Policies and Procedures Manual states that a monitoring system must be in place so that if the purchasing card coordinator is a cardholder, his or her direct supervisor reviews and approves all transactions appearing on the coordinator s purchasing card. Furthermore, an integral part of an entity s internal control structure is effective segregation of duties, which involves assigning responsibilities for authorizing transactions, recording transactions and maintaining custody of assets to different individuals, thus reducing the risk of errors, irregularities or defalcations occurring and not being detected. There is no supervisor review of specific purchases/transactions made by the purchasing card coordinator. The total number of purchasing card payments processed during the fiscal year ended June 30, 2003 was approximately 1,900 in the amount of approximately $400,000. The total purchases made by the purchasing card coordinator were approximately $112,000. The total non-payroll related expenditures for the fiscal year ended June 30, 2003 were approximately $3,000,000. Purchases that are not approved by the supervisor or department head cannot be effectively reviewed by the accounts payable coordinator for departmental use and appropriateness; therefore, a purchase may be made for other than official state business and not be detected. WVUP does not require a supervisor or department head review of specific purchases/transactions made by the purchasing card coordinator. We recommend that WVUP review the internal control structure and develop policies and procedures that require a supervisor or department head review of the purchasing card coordinators purchases. WVUP agrees with this recommendation. All transactions are approved by the departmental head or funds administrator as required. However, the Agency Card Coordinator is the funds administrator in the cases noted. In the future any charge made by the Agency Card Coordinator against purchasing department funds only, will be additionally approved by the Chief Financial Officer.

19 Purchasing Card - Potential Stringing Criteria: Condition: Context: Effect: Cause: Agency s Comments /Corrective Action: Section 6.1 of the West Virginia State Auditor s Office Purchasing Card Policies and Procedures states in part that: The purchasing card may be used to make payments for goods and designated services that do not exceed the current transaction limit. Furthermore, Section 6.3 of the West Virginia State Auditor s Office Purchasing Card Policies and Procedures defines stringing as, The intentional manipulation of the ordering, billing, or payment process in order to circumvent the transaction limit. Utilizing data extraction software, we reviewed all purchases during the fiscal year ended June 30, 2003 and noted one instance of a purchase made on the same day, with the same vendor, by the same cardholder with multiple purchases which appeared to allow the purchase to not exceed the cardholder s credit transaction limit. The total number of identified potential stringing instances were one out of a total number of purchasing card transactions of approximately 1,900 for the fiscal year ended June 30, In this instance the purchases, if combined would have exceeded the cardholder s credit transaction limit. Cardholders may be splitting transactions to bypass the credit transaction limit and internal control structure established by WVUP. The purchases were made by a cardholder at the WVUP Ripley campus located in Jackson County, West Virginia. Further, the cardholder credit transaction limits may not be sufficient to carry out the day-to-day purchases necessary for the cardholder. With the recent revision of the credit transaction limits by the West Virginia State Auditor s Office, we recommend that WVUP review the assigned credit transaction limits for reasonableness. Furthermore, periodic reviews should be conducted to determine the reasonableness of the credit transaction limits and to determine if cardholders are abusing the established limits. WVUP agrees with this recommendation. This issue has been examined and the cardholder has been re-educated. However, the result of a review of the cardholder s purchases does not warrant an increased card limit. This particular stringing event was an unusual incident.

20 20 OVERALL COMPLIANCE AND INTERNAL CONTROL RESPONSE Management has also provided the following overall response to the purchasing compliance and internal control comments. Of the 26 compliance procedures performed, 17 had no relevant exceptions noted. The exceptions that were noted are not significant; thus no material weaknesses were identified by the audit procedures. For each transaction type, multiple compliance tests were performed. However, findings and detailed information regarding test procedures only appear for the items in which exceptions were noted. The format of this report reflects only those few items which exceptions were noted and does not fully reflect the magnitude of the testing performed nor WVUP s successful demonstration of compliance with all applicable policies, procedures and regulations.

21 21 PERFORMANCE AUDIT To satisfy the performance audit objective noted above, we performed the following procedures: 1. Compare Procedures to Identified Best Practices Procedures - Obtained and reviewed the purchasing procedures of the institution of higher education and compared these procedures to other institutions of higher education in West Virginia and best practice procedures as defined by the National Association of Educational Buyers, Center for Advanced Purchasing Services, and the National Institute of Governmental Purchasing, Inc. Four items noted, see through Compare Staffing Levels to Benchmarks Procedures - Reviewed the staffing levels and other key benchmarks for the purchasing program at the institution of higher education and compared these benchmarks to other Institution s of Higher Education in West Virginia and information available from the Center for Advanced Purchasing Services. Two items noted, see and Review Procedures for Efficiency and Accountability Procedures - Reviewed the purchasing function processes and procedures to make recommendations regarding potential improvements in efficiency and accountability at the institution of higher education level and at the systemwide level. Three items noted, see , , and Review for Factors Inhibiting Performance Procedures - Reviewed the purchasing function processes and procedures to identify factors that may inhibit satisfactory performance of the purchasing program. Three items noted, see , and

22 22 5. Review Procedures, Laws, and Regulations to Identify Additional Flexibility Procedures - Reviewed the purchasing function policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, West Virginia State Code, etc., to identify additional flexibility in purchasing rules, policies, procedures and state law that could potentially improve efficiency and execution of the purchasing program. One item noted, see

23 Procurement - Utilization of Alternate Purchasing Methods Benchmark/Criteria Condition: Context: Cause: West Virginia State Code Section 18B-5-9(3) states that the emergency rule issued shall, provide for institutions individually or cooperatively to maximize their use of any of the following purchasing practices that are determined to provide a financial advantage: (1) Bulk purchasing; (2) Reverse bidding; (3) Electronic marketplaces; and Electronic remitting. The institutions of higher education are not taking full advantage of alternate purchasing methods as provided for under West Virginia State Code. Furthermore, information such as quantities of items purchased are not readily available to determine the purchasing power that the consortium of institutions of higher education can utilize with alternative purchasing methods. The institutions of higher education represent a combined purchasing power of approximately $95,000,000. Although a large portion of these purchases may not qualify for an alternate purchasing method, a 10 percent savings on a small amount of this purchasing power could still result in a substantial reduction of cost. Surveys conducted by the Center for Advanced Purchasing Services have identified the potential for measurable direct cost reductions of purchased goods and services in the range of 10 to 20 percent. In addition, the U.S. General Services Administration has noted that several federal agencies have experienced savings of 12 to 48 percent. Until recently there appears to have been insufficient coordination on the part of the institutions of higher education throughout West Virginia to ensure the maximization of purchasing power. Furthermore, budget constraints, training and investment in technology by the State of West Virginia has been limited in the procurement area. We recommend the institutions of higher education work with the central office and devote the necessary resources to the new Implementation Task Force to review the potential for alternate purchasing methods. Alternate purchasing methods of key importance include bulk purchasing, reverse bidding, and e-procurement through a centralized purchasing function (shopping cart) process. This task force should be sufficiently funded, and should develop a strategic plan for the implementation and use of alternate purchasing methods. Furthermore, this task force should draft policy to be approved by the West Virginia Higher Education Policy Commission to ensure full utilization and cooperation from all the State s institutions of higher education.

24 Procurement - Utilization of Alternate Purchasing Methods (Continued) Agency s Comments: WVUP agrees with this recommendation. However, it should be noted that the authority to purchase using these alternate methods was passed on March 8, The enabling legislation required an emergency rule to be filed outlining policies and procedures related to these purchasing methods. The rule was filed on July 11, Because the emergency rule was not filed until after the completion of the 2003 fiscal year, these purchasing methods could not be utilized during the audited period. WVUP is actively working with other public higher education institutions and the HEPC staff to develop the authorized purchasing methods. Committees are working to formulate processes for bulk purchasing and reverse bidding. In addition, specific commodities are being considered for procurement using these alternate methods. Implementation should be the domain of the respective institution's Board of Governors.

25 Procurement - Central Website Benchmark/Criteria Condition/Context: West Virginia State Code Section 18B-5-9(3)(f) states: Each institution shall establish a consortium with at least one institution in the most costefficient manner feasible, to consolidate the following operations and student services: (7) Any other operation or service appropriate for consolidation as determined by the commission. Currently, the various institutions of higher education maintain individual websites with a variety of information related to the procurement process. Information that varies by website includes purchasing policies and procedures, current contracts available, statewide contracts available, resource links to additional purchasing resources, etc. The total cost and time of maintaining each individual website is currently not available. The establishment of a central website could enhance the procurement process users ability to access procurement related information at one location. Furthermore, centralizing the maintenance of the majority of the website content will reduce time and effort as duplicated processes will be minimized. In addition, more current and up-to-date information can be made available in a timely manner. We recommend that the institutions of higher education work with the central office and consider establishing one centralized website for all higher education procurement functions in the State. At a minimum, the website should include the procurement policies and procedures, standardized forms, statewide contracts available, higher education contracts available, and links to additional resources. In addition, the website could be utilized to post bid notices and awards which could reduce the time and cost of mailing information to potential users. Further, if established, this website should be maintained daily and all users of the procurement function should be informed of the benefits and how to use the site. Agency s Comments: WVUP does not agree with this recommendation. WVUP will develop a procurement website that can be linked to the HEPC.

26 Procurement - Notification of Available Contracts Benchmark/Criteria Condition: Context: Effect: Cause: Agency s Comments: West Virginia State Code Section 18B-5-9(3)(f) states: Each institution shall establish a consortium with at least one institution in the most costefficient manner feasible, to consolidate the following operations and student services: (6) Standard and bulk purchasing; and (7) Any other operation or service appropriate for consolidation as determined by the commission. There is no coordinated notification process being utilized to notify the other West Virginia institutions of higher education of available purchasing contracts and other procurement related information. Notification of new statewide contracts and/or other contracts available to the institutions of higher education could minimize duplication of effort and provide users with more informative data regarding the use of the procurement process. The establishment of a notification method could enhance the various institutions of higher education use of the procurement function and reduce duplicated effort. In addition, more current and up-to-date information can be made available in a more timely manner. There is no centralized method in use for notifying other institutions of higher education of available purchasing contracts and other procurement related information. We recommend that notice of all new contracts be sent to other institutions of higher education via . This could be accomplished through the use of a centralized website as noted previously. If properly developed, individual departments within other institutions of higher education could register to receive automatic updates regarding the contracts posted to the website that may be useful for the department. WVUP will list all contracts on the website. Also, WVUP will notify all faculty, staff and administrators via GroupWise of all contracts as they become available to the institution.

27 Surplus Property - Internet Surplus Auctions Benchmark/Criteria Condition/Context: Section 10.1 of the West Virginia Higher Education Purchasing Procedures Manual establishes the policies and procedures as prescribed by West Virginia State Code Section 18B-5-7. Specifically Section 18B-5-7(a) states: (a) The commission and the governing boards shall dispose of obsolete and unusable equipment, surplus supplies and other unneeded materials, either by transfer to other government agencies or institutions, by exchange or trade, or by sale as junk or otherwise. Currently, most surplus property is disposed of either through a public auction and/or through the State of West Virginia Surplus Property Division. WVUP should consider using alternatives such as internet auctions for certain types of disposals. Data accumulated by the Center for Advanced Purchasing Studies indicates that internet auctions for retail related items typically sell for higher dollars than other methods of disposals. Furthermore, various third-party companies can administer the internet auction such as U.S. General Services Administration, E-Bay, or Yahoo to name a few. We recommend that WVUP work with the central office and consider piloting an internet surplus auction. Agency s Comments: WVUP will consider this recommendation.

28 Procurement - Comparison to Benchmarks Benchmark/Criteria Condition/Context: Cause: Agency s Comments: West Virginia State Code Section 18B-5-9(l)(1) requires that the Commission, conduct a performance audit of the policies, procedures and results of the procurement of goods and services by the state institutions of higher education. A common useful component of a performance audit is the comparison of performance information to established industry benchmarks. We reviewed various industry benchmarks available, including information provided by the Center for Advanced Purchasing Studies; however, none of the comparisons appear to not provide useful information. Due to the size of the institution of higher education being reviewed and the data accumulated, the benchmarking comparisons were not considered useful. We recommend that the institution of higher education work with the central office in an effort to develop benchmarks for institutions of higher education in West Virginia. Specifically, the benchmarks should include the average institution budget per professional purchasing employee, the average purchase dollars per professional purchasing employee, the total professional purchasing employee headcount as a percent of the total institution employee head count, the total institution purchase dollars as a percent of the total institution budget, and the average purchase order cycle time. WVUP agrees with this recommendation.

29 Procurement - Training Hours and Budget Benchmark/Criteria Condition: Context: Cause: The Center for Advanced Purchasing Studies (CAPS) data indicates that for institutions of higher education, the average training hours per professional purchasing employee should be 39 hours per year. WVUP does not have a formal training program including a budget established for professional purchasing employees. Furthermore, the number of training hours per professional purchasing employee was less than the average benchmark per CAPS. WVUP indicated that there was no budget for training and that very little training hours were provided for each professional purchasing employee. These individuals are responsible for oversight of procurement purchases of approximately $1,400,000. Management indicated that due to reductions in funding, professional purchasing employees have been unable to receive adequate and sufficient training to meet the CAPS benchmark. Correctly administered training of professional procurement employees is an investment in the future of the procurement department. Properly trained employees are often more aware of current policies and procedures, more efficient in their day-to-day responsibilities, are more aware of current technology enhancements in the procurement process, and may generate additional efficiencies and quality enhancements to the overall procurement process. We recommend that WVUP establish a formal training plan and training budget for all professional purchasing employees. This plan should be tailored to the various employees and their specialty areas to ensure maximum utilization of the training budget. Agency s Comments: WVUP training hours would have been higher and closer to the CAPS benchmark if our semi-annual CPO/CFO conferences had been added. In hindsight, the conferences are actually procurement training.

30 Procurement - Performance Measures Benchmark/Criteria Condition: Context: Effect: Cause: Agency s Comments: West Virginia State Code Section 18B-5-9(l)(1) requires that the Commission, conduct a performance audit of the policies, procedures and results of the procurement of goods and services by the state institutions of higher education. Currently, WVUP does not accumulate certain data for measuring the performance of the purchasing process. Some information that could be maintained and tracked include, but is not limited to: Average purchase order processing time Average change order processing time Total purchasing dollars per employee Average purchase cycle time Average training hours per professional purchasing employee Total purchase orders processed (by type) per employee Performance measures, when properly developed and maintained, can strengthen the employee evaluation process, increase efficiency and effectiveness, and provide WVUP with a useful management tool. By monitoring purchasing performance, trends can be identified that could improve the effectiveness of the purchasing function. Information necessary to monitor the performance measures is not readily available and may not be tracked in the current information systems. We recommend that WVUP develop policies and procedures for developing and tracking at a minimum the various performance measurements identified above. WVUP will consider this recommendation.

31 Purchasing Card - Travel Related Expenses Benchmark/Criteria Condition: Context: Effect: Cause: Agency s Comments: Section 6.6 of the West Virginia State Auditor s Office Purchasing Card Policies and Procedures Manual states that: Payment for the following items may not be made using the purchasing card: Travel Related Expenses The West Virginia State Auditor s Office is responsible for establishing the general purchasing card policies and procedures as allowed for in West Virginia Code; however, employees are required to use a separate card for travel related expenses. The current procedures list travel related expenses as restricted items, thus a separate card must be obtained for travel related expenses. If controls with the purchasing card are properly established, the use of one card could be more effective than requiring multiple cards and/or a manual travel expense reimbursement process. Under current state laws and rules the West Virginia State Auditors Office established policies and procedures as they relate to purchasing cards. We recommend that WVUP work with the West Virginia State Auditor s Office in an effort to review whether travel related expenses should be an allowable purchase utilizing the purchasing card. WVUP agrees with this recommendation. However, it should be noted that the authority to use the procurement card for selected travel expenses was passed on March 8, Because policies and procedures for this use have not been developed, this authority could not be exercised during the audit period.

32 Procurement - State Purchasing Encumbrance Benchmark/Criteria Condition/Context: Cause: Agency s Comments: West Virginia State Code requires each institution of higher education purchase order greater than $15,000 to be encumbered by the West Virginia State Purchasing Division. Currently, the institutions of higher education are required to encumber all purchase orders greater than $15,000 through the West Virginia State Purchasing Division. Furthermore, purchasing documents are required to be filed in hard copy and electronic copy with the West Virginia State Purchasing Department. Management has indicated that the average purchase order cycle is increased by two to three days and there is no value to the added process. Legislation currently requires WVUP to encumber all purchase orders greater than $15,000 through the West Virginia State Purchasing Division. We recommend that WVUP work with the central office, the West Virginia State Purchasing Division and the West Virginia Legislature to determine the cost/benefit of the encumbrance requirement. Furthermore, we recommend that WVUP work with the West Virginia State Purchasing Division to determine the value of filing both electronic and hard copy purchase order documents. Revised legislation has been drafted to address this issue.

33 33 EXHIBIT A USER SURVEY RESULTS West Virginia University Parkersburg Summary of Purchasing Performance Benchmarking Questionnaire Responses A total of 19 questionnaires were ed to various departments with a response rate of 11 or 58%. Each respondent was asked to rate the purchasing function within WVUP on the following criteria using a scale of 1 to 7 where 1 = poor or disagree strongly and 7 = excellent or agree strongly. Below is a summary of the average ratings received by criteria: Questionnaire Response Summary Service How happy are you with the range of services provided by your Purchasing Department? How happy are you with the methods you can use to access these services? Website Do you find the website helpful? N/A Confidence Is the website easy to use? Do you find it useful for information on suppliers? Do you find it useful for information on products? Do you find it useful for general purchasing advice? Are you confident in the qualifications, knowledge, experience and abilities of Purchasing staff? Responsiveness Do you believe Purchasing staff are aware of your needs? Do you believe Purchasing staff respond to your needs in an acceptable timescale? Do you believe Purchasing staff put themselves out to meet your requirements? Would you like one of the Purchasing managers to contact you to discuss this or any other issues you have raised? Responses appear to be favorable in all areas N/A N/A N/A N/A No