10-28-08 corp yd pos audit update

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Office of the City Manager INFORMATION CALENDAR October 28, 2008 To: Honorable Mayor and Members of the City Council From: Phil Kamlarz, City Manager Submitted by: Claudette Ford, Director, Public Works Subject: Audit Update: Purchase Order Audit – Select Public Works Divisions at the Corporation Yard (CF12-05) INTRODUCTION The City Auditor conducted a performance audit of purchases made using purchase orders (POs) during FY 2004 in the Equipment Maintenance and Streets & Utilities Divisions of Public Works, which are located at the City’s Corporation Yard. The audit was conducted to determine whether purchasing and payment activities in these Divisions of Public Works were in compliance with written policies and procedures, and had an adequate internal control structure. The Auditor’s report was submitted to Council on March 15, 2005. The full audit, including the text of all findings and recommendations, can be found on the City’s website at: http://www.cityofberkeley.info/uploadedFiles/Auditor/Level_3_-_General/PurchasingFinalRpt71.pdf. An update on the recommendations was provided to the Council on December 6, 2005, and this audit was also included as part of the Citywide Response to Outstanding Audit Recommendations, submitted to Council on May 16, 2006. The original audit report contains 23 audit recommendations, and three were not fully implemented before now. Two outstanding recommendations are the responsibility of the Finance Department ...

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Informations

• Publié par: Phoiv
• Nombre de lectures: 30
• Langue: English

Extrait

Office of the City Manager

2180 Milvia Street, Berkeley, CA 94704 ● Tel: [phone] ● TDD: [phone] ● Fax: [phone]

E-Mail:

[e-mail]

Website:

http://www.ci.berkeley.ca.us/manager

INFORMATION CALENDAR

October 28, 2008

To:

Honorable Mayor and Members of the City Council

From:

Phil Kamlarz, City Manager

Submitted by: Claudette Ford, Director, Public Works

Subject:

Audit Update: Purchase Order Audit – Select Public Works Divisions at the

Corporation Yard (CF12-05)

INTRODUCTION

The City Auditor conducted a performance audit of purchases made using purchase

orders (POs) during FY 2004 in the Equipment Maintenance and Streets & Utilities

Divisions of Public Works, which are located at the City’s Corporation Yard. The audit

was conducted to determine whether purchasing and payment activities in these

Divisions of Public Works were in compliance with written policies and procedures, and

had an adequate internal control structure. The Auditor’s report was submitted to

Council on March 15, 2005.

The full audit, including the text of all findings and recommendations, can be found on

the City’s website at:

http://www.cityofberkeley.info/uploadedFiles/Auditor/Level_3_-

_General/PurchasingFinalRpt71.pdf

. An update on the recommendations was provided

to the Council on December 6, 2005, and this audit was also included as part of the

Citywide Response to Outstanding Audit Recommendations, submitted to Council on

May 16, 2006. The original audit report contains 23 audit recommendations, and three

were not fully implemented before now. Two outstanding recommendations are the

responsibility of the Finance Department, and they are both now fully implemented. The

one recommendation for Public Works has alternatives partially implemented, and the

next status report on further implementation will come to Council in October 2009.

CURRENT SITUATION AND ITS EFFECTS

Finance: The two outstanding recommendations for Finance are both from Finding 1:

The City’s Purchasing Manual Is Very Outdated.

Recommendation 1.1: Fully update, finalize, and distribute the Purchasing Manual to all

departments within six months of the date this audit report is presented to City Council.

Establish and implement policies and procedures in Finance for the updating of the

Purchasing Manual at least annually.

Audit Update: Purchase Order Audit – Select Public Works Divisions

INFORMATION CALENDAR

at the Corporation Yard (CF12-05)

October 28, 2008

Page 2

City Manager Response: Implemented. The City Attorney completed review of the draft

updated Purchasing Manual, which has been in Groupware since January 2005. The

final version of the Purchasing Manual is complete and is posted to Groupware.

Recommendation 1.3: Update the City’s on-line contract manual to incorporate the

definition for a service purchase as established in recommendation 1.2. Also update the

on-line contract manual to include procedural changes associated with the new service

purchase definition

City Manager Response: Implemented. Contracts Online was comprehensively revised,

with new forms and an entire subsection for Professional Services Contracts, in 2007.

Contracts Online will be revised on an on-going basis, as the need arises.

Public Works: The outstanding recommendation for Public Works is for Finding 4: No

Reconciliation is Performed to Identify Parts Purchases that are Neither on Hand in

Inventory Nor Recorded in the Fleet Management Module as Used for a Repair.

Recommendation 4.0: At least quarterly, parts and outside service expenditures

recorded in the FUND$ general ledger should be reconciled to the cost of these parts

and services charged to jobs in the Fleet Management Module, and the change in the

value of the in-house parts inventory. An employee who does not have significant

involvement with the activity being reconciled should perform the reconciliation and this

reconciliation should be documented in writing and retained. The cause of significant

differences should be researched, identified, and corrected. This procedure should be

part of the divisions’ written policies and procedures.

City Manager Response: Alternatives Partially Implemented. A Parts Technician was

hired in 2005 and has been working with the Equipment Maintenance parts inventory

since then. After several attempts and continued problems, the FUND$ module for Fleet

Management is not being used to track parts with the Purchasing & Inventory module.

In addition, the Electrical and Janitorial Inventory modules were closed out by Public

Works as of May 2008, and use of all other Inventory modules in the FUND$ system

has been discontinued. An annual inventory of all parts on hand is conducted to

determine the value of parts on hand for year-end closing. While written inventory and

reconciliation policies are not currently in place, these procedures are in development.

Public Works and IT staff will review available inventory and reconciliation software to

determine if any such applications meet our needs.

BACKGROUND

Citywide Procurement and Contract responsibilities are in Finance – General Services.

Revising and updating the City’s Purchasing Manual has been a major task. The

Contract Administrator was hired in 2006, and the position was subsequently vacated

and filled by the present incumbent in 2007. Extensive improvements have been made

to the content and materials in Contracts Online, published on the City’s intranet.

Audit Update: Purchase Order Audit – Select Public Works Divisions

INFORMATION CALENDAR

at the Corporation Yard (CF12-05)

October 28, 2008

Page 3

Public Works Divisions for Equipment Maintenance, and Streets and Utilities are located

at the City’s Corporation Yard. Equipment Maintenance also has a facility at the Solid

Waste Management Transfer Station. Equipment Maintenance is responsible for the

repair, maintenance and acquisition of City of Berkeley fleet vehicles and heavy

equipment; Streets and Utilities is responsible for maintenance and cleanliness of the

City’s roads and sewer systems.

POSSIBLE FUTURE ACTION

Public Works and Information Technology staff will continue to investigate and test

software applications for possible solutions to assist with inventory and reconciliation.

Public Works is also considering selection of an outside vendor to serve on-site for the

procurement and distribution of auto parts for Equipment Maintenance. The next status

report on this recommendation will be submitted to Council in October 2009.

FISCAL IMPACTS OF POSSIBLE FUTURE ACTION

The cost of purchasing and implementation of new software is presently unknown.

Fiscal and other impacts from contracting with an outside vendor for auto parts would

have to be explored if this option is given further consideration.

CONTACT PERSON

Andrew Clough, Deputy Director, Public Works, 510-981-6661

Sharon Thygesen, General Services Manager, Finance, 510-981-7329