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Receive the Auditor-Controller’s Internal Audit Division’s Internal Control Review of the County-Wide Contracting Process
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Auditor-Controller’s Office (ACO) recommends the Board of Supervisors receive the Internal Control Review of the County-Wide Contracting Process and require the Department of General Services and the County Administrator to take action on the recommendations.
SUMMARY:
In accordance with the ACO Internal Audit Division’s FY2023/24 Audit Plan, the ACO conducted an internal control review of the County-Wide Contracting Process. The scope of our review focused on determining whether contracts which started below the threshold requiring competitive bidding increased to amounts above the threshold without completing the competitive bid process.
Based on the ACO review, the ACO identified two areas for improvement over the County-wide contracting process:
1) The County’s Purchasing and Contracting Policy (“Contracting Policy”) includes a broad exception for expert and professional services.
2) The County does not have a centralized repository of contracts.
Management has acknowledged the findings noted herein and their response is attached (Attachment B). The ACO Internal Audit Division will perform a follow-up review to determine if the deficiencies have been adequately addressed.
FINANCIAL IMPACT:
The acceptance of the report has no financial impact.
DISCUSSION:
The ACO requested that each department provide a list of contracts for FY2022/23. From this list we selected a sample of 47 contracts and requested the contract files from the respective departments and evidence that the contract qualified as a sole source purchase or complied with the competitive bidding process. The ACO conducted this review in conformance with the International Standards for the Professional Practice of Internal Auditing as developed by the Institute of Internal Auditors.
Thirteen (13) of the 47 sampled contracts (28%) began under the competitive bidding threshold of $50,000. Eight (8) of the 13 increased to amounts over the competitive bidding threshold (e.g., from $4,800 to $791,400), and one (1) of the eight (8) contracts underwent the competitive bidding process. The remaining seven (7) contracts appear to meet one of the exceptions to the competitive bidding process.
The County’s Purchasing and Contracting Policy allows for exceptions to the bidding process for expert and professional services, which are defined as “those that involve extended analysis, the exercise of discretion and independent judgement in their performance, and an advanced, specialized type of knowledge, expertise, or training customarily acquired either by prolonged course of study or equivalent experience”. This exception can be interpreted broadly to include nearly all contracts. As a result, contracts can bypass the competitive bidding process, and in turn, prevent other local business from competing to fulfill the contract at a potentially lower cost or higher quality.
In performing the review, the ACO attempted to obtain a complete list of contracts for FY2022/23. The ACO was unable to ensure the list obtained was complete and accurate. Under current conditions each department uses their own method and format to track contracts.
Managements’ responses are included as Attachment B.
ALTERNATIVES:
The Board of Supervisors could elect not to accept the report. This alternative is not consistent with sound public policy and is therefore not recommended.
OTHER AGENCY INVOLVEMENT:
The Department of General Services and the County Administrator have reviewed and accepted the report.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION