1. How To Prepare For A Procurement Audit Shabrel Hoyt-Davis Texas Comptroller of Public Accounts Procurement Review October 3, 2007

2. TOPICS The Procurement Review Staff Basic Procurement Audit Process Common Errors Important Websites Questions and Answers

3. MEET THE TEAM Martin V. Blair Program Manager (512)463-6194 martin.blair@cpa.state.tx.us Shabrel Hoyt-Davis Auditor (512)463-3246 shabrel.hoyt-davis@cpa.state.tx.us FAX – (512) 475-0711

4. PROCUREMENT AUDIT REVIEW Texas Government Code, Title 10, Subtitle D, Section 2155.325, and CPACPA Rule 34TAC 20.48Rule 34TAC 20.48, authorizes the TPASS to perform post-payment audits on documents submitted into the Uniform Statewide Accounting System (USAS)

5. PROCUREMENT REVIEW PROGRAM The post-payment procurement audits for the 2007-2008 biennium have begun. Make sure all of your procurement documentation is submitted. Audit documentation must be submitted to CPA Procurement Review ten (10) business days after the date of the audit request letter.

6. PROCUREMENT REVIEW PROGRAM Audits are conducted once a biennium Audit requirement – maximum of 160 procurement files per agency minimum of 30 procurement files per agency

7. RISK LEVELS FOR PROCUREMENT AUDITS Audit procedure assigns a risk level to each finding:  Significant Risk- A non-compliant action that results in a financial loss to the State or posses a threat to competition, open government, state or federal laws, or the professional integrity of the State of Texas (50% and above total audit errors)  Moderate Risk- A non-compliant action that results in a negative impact to business operations (26-50% total audit errors)  Minor Risk- A non-compliant action that results in a threat to an administrative process ( 0-25% total audit errors)

8. PROCUREMENT REVIEW PROGRAM Procurement Review is available to answer your procurement process questions or direct you to a person who can help you. If you have a question concerning the proper process for specific a purchase, contact Procurement Review during the process, not after the purchase has been made. Legal questions must be directed to your agency’s legal council.

9. PROCUREMENT REVIEW PROGRAM Procurement audits payments occur after award These procurements are coded as a Document type 2 with an appropriate PCC. Some common document type 2 PCCs are: PCC A for automated term contracts, PCC D for IT Commodity/Service Not Available Through DIR contracts PCC E Purchase Less Than $5,000 PCC K for direct publications

10. PURCHASE CATEGORY CODES ARE AUDITED FOR 1. The invoice amount must match the Purchase Order 2. Delivery terms and/or contract terms must be defined 3. NIGP Class-Item Codes must be listed on the Purchase Order 4. Informal bidding: requires a minimum of 3 bids with 2 HUBS from CMBL 5. Formal bidding: requires notification to all vendors listed on the CMBL in the applicable class/item code 6. All affirmations and applicable clauses included

11. PURCHASE CATEGORY CODES ARE AUDITED FOR (CONT’D) 7. The correct legal citation on exempt purchases must be documented on the purchase order. 8. Authorized purchasing signatures 9. Direct publication declaration on the direct publication purchase order 10. Emergency justification letter with authorized signatures 11. proprietary justification letter with authorized signatures

12. DETERMINE PROCUREMENT AND PAYMENT PROCEDURE APPLICABLE TO PURCHASE 1. Determine the estimated dollar amount of the purchase. 2. Establish the NIGP commodity class and item number. This number numerically classifies supplies, equipment, materials and services. The class and item code must be entered on all Purchase Orders. 3. Check purchasing procedures based on commodity class and item, relevant dollar threshold and procurement method. 4. Consult the TDCJ/Texas Correctional Industries (TCI) catalogue. The Texas Council for Purchasing from People with Disabilities (currently TIBH) catalogue [see Section 2.5 Special Purchase Section of the Procurement Manual ].

13. DETERMINE PROCUREMENT AND PAYMENT PROCEDURE APPLICABLE TO PURCHASE (CONT’D) 5. State Term Contracts (see Term Contracts Section of the Procurement Manual). 6. Non-Competitive Purchases - Purchases less than $5,000 7. If AIS (Automated Information Systems)/Telecom related purchases, see Section 2.12 AIS/Telecom commodities and services purchase. 8. If blanket or other DIR (Department of Information Resources) exemptions apply, use new procedure under 34TAC §20.391

14. SUBMITTING PROCUREMENT FILE TO PROCUREMENT REVIEW The agency must supply the complete procurement file applicable to each PCC. Document Type 9 does not require a PCC Code but must include the legal citation exempting the purchase from competitive bidding or the review authority of the Texas Comptroller of Public Accounts. The legal citation must be referenced on the Purchase Order.

15. PROCUREMENT PLAN Texas Government Code, Title 10, Subtitle D, Section 2155.132 authorizes CPA to require each agency to formulate a procurement plan identifying that agency's management controls and purchasing oversight authority in accordance with the policy guidance contained in the CPA Procurement Manual. Procurement Plans submittals are due to the Procurement Review office by November 30 th of each year.

16. CONTENTS OF THE PROCUREMENT PLAN  Organizational Chart of Purchasing Division/Office. Credit Card Internal Procedures if participating in the Procurement Card Program. Protest Procedures. List and sample of signatures authorized to approve or sign a proprietary justification letter. List and sample of signatures authorized to approve agency membership fees. Internal purchasing procedures for EPLS (Excluded Parties List System).

17. CONTENTS OF THE PROCUREMENT PLAN  The training and certification status of the purchasing employees.  List of purchasers authorized to purchase on behalf of the State.  Invitation for Bid (IFB) form.  Internal purchasing procedures for agency.  Conflict of Interest Statements (annually signed statement for each purchaser or a memo stating one is in the purchaser’s personnel file).

18. THE PROCUREMENT MANUAL  Section 3 of the Procurement Manual contains all of the procedural information concerning Procurement Review: 3.0General Audit Procedures 3.2Post-Procurement & Payment Audit Compliance audits compare documentation to the Texas Government Code, the State of Texas Procurement Manual, the State of Texas Purchase Voucher Guide, and USAS User Manual for each type of payment.

19. COMMON PROCUREMENT AUDIT FINDINGS - Incorrect PCC or Document Type utilized - No EPLS dated printout provided - NIGP Class-Item Codes not listed - No Purchase Order provided - No justification for non-use of term contracts

20. COMMON PROCUREMENT AUDIT FINDINGS (CONT’D) - No legal citation documented or missing - Flawed solicitation process - No term contract purchase order on file - CCG/TCI/TIBH not considered - Price on the invoice does not match purchase order - No direct publication statement

21. PROCUREMENT REVIEW BROWN BAG LUNCH SERIES Brown Bag Lunch Series are held on the 1 st Wednesday of each month with varied purchasing-related topics. Earn 1 hour of continuing education credit For information on upcoming Brown Bags as well as previous presentations visit http://www.window.state.tx.us/procure ment/prog/review/ http://www.window.state.tx.us/procure ment/prog/review/ Contact us with any ideas or suggestions for future brown bag lunches.

22. PROCUREMENT REVIEW BROWN BAG LUNCH SERIES FUTURE SESSIONS: November: DIR Legislative Updates December: TPASS Legislative Updates

23. WEBSITES Texas Comptroller of Public Accounts Texas Procurement and Support Services (TPASS) http://www.window.state.tx.us/procurement/ State of Texas Procurement Manual http://www.window.state.tx.us/procurement/p ub/manual/ Excluded Parties List System http://epls.arnet.gov/

24. WEBSITES Council on Competitive Government www.ccg.state.tx.us TIBH Catalog www.tibh.com TCI Catalog www.tci.tdcj.state.tx.us

25. THANK YOU FOR COMING!