School District Invites Procurement Audit
By Darin Matthews, CPPO, C.P.M.
The idea of an external audit of our district’s contracting and procurement processes should not have been surprising. Other local agencies had been scrutinized recently for their procurement practices, so why not the largest school district in the region?
After the local media had featured stories about a fire department official who awarded several contracts to his son’s construction company, and a state agency that conducted a competitive quote process after award of a contract, Portland area agencies prepared for more scrutiny.
In a step to reinforce public faith and confidence, Portland Public Schools took the unusual step of requesting a formal audit from the city and county auditors. Superintendent Vicki Phillips and the Board of Education asked the district to open its contract files for a full inspection.
For several weeks, a team of three auditors was onsite reviewing solicitation and contract documents. Working primarily with Procurement, Information Technology and Facilities Management, the auditors looked at 68 contract files for various services. Also reviewed was the district contracts database that included nearly 1,100 contracts totaling $155 million during fiscal year 2005.
The audit team used the district’s contracting and procurement rules as a baseline for reviewing our contracts, as well as the Oregon Attorney General’s Model Public Contract Rules. Our practices were also compared to National State Auditors Association standards.
Procurement and program staff was interviewed by the audit team, which included scheduled sessions as well as follow up questions on a “drop in” basis. Full cooperation was given to the visiting auditors as the project was given top priority by senior management. As department director, I met with my staff early on and conveyed the importance of their participation and assistance.
As usual, our professional procurement team came through admirably. In a verbal briefing to the board’s finance committee, auditors expressed appreciation for this cooperation.
Findings and Recommendations
When one of the first document requests from the auditors revealed that out of ten contracts questioned, only six yielded competitive RFPs, I got a little nervous. When I delivered the procurement files we had, I did so with an explanation of the remaining sole source contracts. I believe the opportunity to speak candidly to the auditors, along with providing them documents, was extremely helpful in “telling our story”.
The findings and recommendations offered by the auditors of Multnomah County and the City of Portland were as follows:
- The contracting processes at Portland Public Schools had improved in recent years. The improvements included centralized control of service contracts, development of a contracts database, training and certification of procurement staff, and strengthened language in standard contracts;
- The district entered into multiple contracts with the same vendor. A better job could be done using more firms on pre-qualified lists;
- In cases where contracts were sole sourced due to unique expertise, the documentation was not adequate. These decisions may have been sound, but the file did not include adequate justification. Better justification should be employed for future contracts.
- Contracts were increased substantially from their original value. Through the use of contract amendments, these agreements doubled and tripled in value. Proper rationale was not available for these increases.
- Contract monitoring activities, including budget oversight, did not appear to be strong. Additional efforts should be made in the future for administering contracts, including training of departmental staff.
The complete audit and management response are available online at www.govinfo.bz/5966-299.
Were any of the findings a surprise? Not really. Any procurement professional struggles with cost overruns in contracts and too many sole sources, right? The auditors did a good job of discovering (and essentially validating) the very challenges we had been working with for the last three years. We felt we had made progress and were glad that the auditors saw these improvements and noted them in their report.
When Portland’s daily newspaper, The Oregonian, reported on our procurement audit, the headline read, “Auditors give Portland schools a passing grade”.
After seeing so many other agencies take significant hits in the media, we were pretty happy with our news. It is with pride that I share copies of this news article with my procurement colleagues.
As part of the management response to the audit, our superintendent acknowledged the efforts of our procurement office. She also accepted the auditor’s recommendations and pledged to address the areas of improvement right away. Included in the response was the fact that our Procurement Department was a two-time recipient of the Achievement of Excellence in Procurement Award from the National Purchasing Institute. Our past efforts in earning this award truly paid off for us.
Several months after experiencing a contract and procurement audit, a few suggestions I would offer are:
- Don’t be fearful of an audit. If you are employing sound procurement processes that comply with your rules and statutes, then you shouldn’t be afraid to say “bring it on”.
- Fully cooperate with your auditor. This includes open access to all files, full attention to their document requests, and being honest when problems are found.
- Communicate openly and effectively. Share the scope and intent of the audit with your internal team and let them know the importance of it. Also, keep senior management informed of the process and progress.
- Learn from your mistakes. We all have areas we can improve upon so use the auditor’s findings to identify the areas for improvement.
- Share with your colleagues. Don’t hesitate to share your successes and your failures with your procurement colleagues. We can all learn from each other.
Well, that’s my story on surviving a procurement audit. It wasn’t a grueling experience at all. Ultimately, the audit confirmed the things we were doing right as an organization. It also noted specific areas for improvement. Portland Public Schools came out fine and are better for it. You will be too.
About the Author
Darin Matthews is the Director of Procurement and Distribution for Portland Public Schools and has been in the field of purchasing and supply management for nearly twenty years. He holds a Bachelor’s degree in Political Science and a Master’s certificate in Acquisition Management. Darin is the President of the National Institute of Governmental Purchasing (NIGP).