TKW Contracting Audit - Final

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Performance Audit of PDC Contracting Activities for the Period July 1, 2003 through June 30, 2005 September 2005 4800 SW Macadam, Suite 400 Portland, Oregon 97239-3973 [phone] FAX [phone] E-Mail: [e-mail] September 2005 Portland Development Commission Board of Commissioners 222 NW Fifth Ave. Portland, OR 97209-3859 We have completed our performance audit of the Portland Development Commission’s contracting activities. This report contains our detailed analysis and conclusions based on our review. We wish to express our appreciation to PDC employees and managers and those persons from other organizations we spoke with, for their cooperation and assistance during this analysis. Talbot, Korvola & Warwick, LLP Table of Contents Page Report Summary i Introduction 1 Audit Purpose and Objectives 1 Project Purpose 1 Objectives 1 Project Approach and Methodology 2 Evaluation Criteria and Standards 2 Public Accountability Criteria 2 Efficiency, Effectiveness, and Economy Criteria 3 Legal Requirements 4 Prior Years’ Performance 4 Performance of Similar Organizations 4 Methodology 4 Audit Team Perspective 5 Scope Limitations 6 Standards 6 Compliance 6 PDC Contracting 8 The Contracting Process 9 Audit Results 12 Contract ...

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• Publié par: Adrie
• Nombre de lectures: 33
• Langue: English

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4800 SW Macadam, Suite 400 Portland, Oregon 97239-3973 [phone] FAX [phone] E-Mail: [e-mail]

 

                   

 

          Performance Audit of PDC Contracting Activities for the Period July 1, 2003 through June 30, 2005                                  

September 2005  

                  September 2005       Portland Development Commission Board of Commissioners 222 NW Fifth Ave. Portland, OR 97209-3859       We have completed our performance audit of the Portland Development Commissions contracting activities. This report contains our detailed analysis and conclusions based on our review.   We wish to express our appreciation to PDC employees and managers and those persons from other organizations we spoke with, for their cooperation and assistance during this analysis.               Talbot, Korvola & Warwick, LLP  

 

       

 

Table of Contents Report Summary   Introduction   Audit Purpose and Objectives  Project Purpose  Objectives Project Approach and Methodology  Evaluation Criteria and Standards  Public Accountability Criteria  Efficiency, Effectiveness, and Economy Criteria  Legal Requirements  Prior Years Performance  Performance of Similar Organizations  Methodology Audit Team Perspective Scope Limitations Standards Compliance   PDC Contracting   The Contracting Process   Audit Results   Contract Administration Practices Records Management Practices   Appendix A.   Other Entities B.   PDC Forms C.   PDC Response      

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  Performance Audit of Contracting Activities  

Report Summary

Report Summary

Performance Audit of Contractin Activities         REPORT SUMMARY   In response to questions concerning current contracting practices and the intent to identify any inefficiencies and opportunities for improvement, the Portland Development Commission (PDC) initiated a performance audit of its contracting practices. The audits objectives were developed based on the desire of PDC to review its contracting rules, procedures, and practices for the period July 1, 2003 through June 30, 2005.   OBJECTIVES To accomplish the stated intent of the audit, PDC, in conjunction with Talbot, Korvola & Warwick, LLP , developed the following objectives:  

     

1. Evaluate existing PDC policies and procedures related to contracting activities for efficiency and effectiveness including:    Comparison to best practices,    Recommending changes for improvements, and    Reporting on any internal controls weaknesses. 2.   PDC (non intergovernmental) contracting activities for the periodEvaluate July 1, 2003 through June 30, 2005 for compliance with:    State contracting rules and regulations,    PDC policies for contract solicitation, awarding, management, and payment existing at the time of the activity. 3.   Conduct a compliance review of a sample of all contracts, including:    Executed the specified period to the extent necessary to during have a 90% confidence that exceptions are found if any.    Amendedperiod to the extent necessary to during the specified have a 90% confidence that exceptions are found if any.    Completedduring the specified period to the extent necessary to have a 90% confidence that exceptions are found if any.    Awardedwhere an exemption to normal solicitation rules was authorized. 4.   Review a random sample of contracts to determine if service delivery and payments are being managed in accordance with the terms and conditions of the agreements and PDC policies. 5.   Provide a written report identifying conclusions and recommendations.

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Report Summary

Performance Audit of Contractin Activities         BACKGROUND   The Portland Development Commission spends millions of dollars for goods and services annually through the use of contracts. For the period July 1, 2003 through June 30, 2005, over 550 contracts were initiated with a value over $22.5 million. PDC relies on contractors to provide numerous products and services including capital improvements, graphic design services, feasibility studies, temporary staffing, and training.   PDCs stated philosophy to purchasing and contracting is “to promote open and fair public competition for PDC business through standardized solicitation processes.” To achieve this objective, PDC has established specific contracting rules based on the State of Oregons public contracting statutes and adopted asPDC Local Contract Review Board Administrative Rules.    These rules define how contracting is to be performed and are updated periodically based on changes to either state statutes or PDC policy. In addition, PDC has developed specific forms to assure its contract process is adhering to these rules - the Solicitation & Contract Award Authorization Formand theContract Compliance Form.   To determine compliance with PDC forms, rules, and contract clauses, we identified specific attributes. These attributes were classified as administrative and policy. Administrative attributes included requirements that focused primarily on assuring certain forms were completed, reviewer signatures and dates were obtained, and required exhibits were attached. Policy attributes focused on major requirements such as appropriate contract signatures and dates, documentation of scope of work, insurance requirements, EEO certification, and approved exemptions from competitive solicitation (if applicable).   AUDIT RESULTS Our performance audit of contracting activities found that PDC was not consistently adhering to its established requirements. Although we found many forms and contracts meeting most of the agencys specific rules, our analysis found over 38.4% of more than 1,440 administrative attributes missing or incomplete. In respect to the more substantive policy attributes, over 34.5% were found to be missing or incomplete. Some contracts were found to have been initiated   Talbot, Korvola & Warwick, LLP    ii  

Report Summary

Performance Audit of Contractin Activities         without documentation of all required insurance coverage, documentation of EEO certification and City of Portland business licenses, and justified exemptions from competitive solicitation. In addition, approximately 44% of the contract files reviewed did not contain any documentation of contract monitoring or deliverables.   PDCs decentralized contracting model appears to be a primary cause of the inconsistency in contracting practices. Although current contracting rules have been established for the procurement of goods and services, no oversight body has been established to assure they are followed. No centralized accountability for overall contract administration exists. In addition, a lack of established guidelines and directives regarding appropriate contract administration and records management has resulted in the limited ability to determine whether all contract requirements and deliverables are being met.   PDC should establish a centralized procurement function that has more formal authority and responsibility for coordinating/facilitating the contracting process to help assure that all established requirements are understood and met. Because of the value and number of contracts initiated by PDC, greater oversight is warranted. Individuals possessing the expertise and knowledge in procurement and contracting should be assigned the responsibility and accountability to assure all purchasing is in accordance with PDC policies and rules and achieves the objective of promoting “open and fair public competition for PDC business through standardized solicitation processes.”   PDC should also develop specific criteria to assure all contracts are adequately monitored throughout their term. Specific performance standards and criteria should be established for each project detailing progress reporting, phase completion dates, meeting dates, deliverables, etc. In addition, the applicable project manager should document the existence of each in the contract file.   A central finding of our audit was the lack of documentation or multiple locations of files and various information. Our analysis of compliance with PDC rules and requirements was based on   Talbot, Korvola & Warwick, LLP   

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Report Summary

Performance Audit of Contractin Activities         a review of available information. In many instances, no documentation could be obtained corresponding to many of the missing or incomplete attributes reviewed. Certain forms may have been completed, information validated, and documents obtained. However, this information was not filed or readily available and, as a result, was considered to be an exception.   Without a comprehensive records management program in place to assure all activities are documented and readily available, it is difficult to prove that they have occurred. Records management requirements should be developed to assure contract files contain a complete history of each purchase.   RECOMMENDATIONS Certain modifications to PDCs current contracting practices will provide for greater accountability, increased compliance, enhanced internal controls, and improved overall efficiency. The following are recommendations we believe will assist PDC in improving current contracting practices:   RECOMMENDATION #1   We recommend the Portland Development Commission establish a centralized procurement function that has more formal authority and responsibility for coordinating/facilitating the contracting process.     RECOMMENDATION #2   We recommend the Portland Development Commission develop specific performance standards and criteria for each project.  

 

RECOMMENDATION #3  We recommend the Portland Development Commission institute a comprehensive records management policy and develop specific guidelines and rules requiring all contract information to be combined and centrally located.    

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  Performance Audit of Contracting Activities  

Introduction

Introduction

Performance Audit of Contractin Activities         INTRODUCTION   Talbot, Korvola & Warwick, LLP  (TKW), under contract to the Portland Development Commission (PDC) conducted a performance audit of PDCs contracting activities for the period July 1, 2003 through June 30, 2005. This report outlines the analysis and conclusions based on our work.   AUDIT PURPOSE AND OBJECTIVES   Project Purpose   The Portland Development Commission (PDC), in response to questions raised by various media reports concerning certain contracts as well as the intent of the Commission to identify any inefficiencies and opportunities for improvement, initiated a performance audit of its contracting practices. The audits objectives were developed based on the desire of PDC to review its contracting rules, procedures, and practices for the period July 1, 2003 through June 30, 2005.   Objectives To accomplish the stated intent of the project, PDC, in conjunction with TKW, developed the following objectives:

 

1. Evaluate existing PDC policies and procedures related to contracting activities for efficiency and effectiveness including:    Comparison to best practices, Recommending changes for improvements, and      Reporting on any internal controls weaknesses. 2.   Evaluate PDC (non intergovernmental) contracting activities for the period July 1, 2003 through June 30, 2005 for compliance with:   State contracting rules and regulations,     PDC policies for contract solicitation, awarding, management, and payment existing at the time of the activity. 3.   Conduct a compliance review of a sample of all contracts, including:    Executed during the specified period to the extent necessary to have a 90% confidence that exceptions are found if any.    Amendedperiod to the extent necessary to the specified  during have a 90% confidence that exceptions are found if any.

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Performance Audit of Contractin Activities  

Introduction

 Completedduring the specified period to the extent necessary to  have a 90% confidence that exceptions are found if any.    Awardedwhere an exemption to normal solicitation rules was authorized. 4.   Review a random sample of contracts to determine if service delivery and payments are being managed in accordance with the terms and conditions of the agreements and PDC policies. 5.   Provide a written report identifying conclusions and recommendations.

  PROJECT APPROACH AND METHODOLOGY Evaluation Criteria and Standards   Conceptually, the best way to determine the efficiency and effectiveness of an organization and its functions is to compare actual practices with both agreed upon standards and specific criteria. However, in many entities, no specific standards exist to allow for meaningful comparison. In those situations, the performance audit team determines specific criteria on which to base efficiency and effectiveness. Criteria that typically apply include:  

Public Accountability Criteria  A primary criterion for the responsiveness of a governmental organization to its mission is public accountability. This responsibility has been expressed completely yet succinctly by the Comptroller General, US General Accounting Office, in the Government Auditing Standards, the "Yellow Book," which sets forth public sector evaluation criteria familiar to all federal, state, and local government auditors. This public accountability criterion, an underlying premise of our study approach, states:  

Our system of managing public programs today rests on an elaborate structure of relationships among all levels of government. Officials and employees who manage these programs need to render an account of their activities to the public. While not always specified by law, this accountability concept is inherent in the governing process of this nation.   The need for accountability has caused a demand for more information about government programs and services. Public officials, legislators, and citizens want and need to know whether government funds are handled properly and in

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