The Department of General Services Contract Administration Follow up Report

Transcription

1 The Department of General Services Contract Administration Follow up Report June 2015 Office of the Auditor Audit Services Division City and County of Denver Dennis J. Gallagher Auditor

2 The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the proper and efficient use of City resources and providing other audit services and information to City Council, the Mayor and the public to improve all aspects of Denver s government. He also chairs the City s Audit Committee. The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee assists the Auditor in his oversight responsibilities of the integrity of the City s finances and operations, including the integrity of the City s financial statements. The Audit Committee is structured in a manner that ensures the independent oversight of City operations, thereby enhancing citizen confidence and avoiding any appearance of a conflict of interest. Audit Committee Dennis Gallagher, Chair Maurice Goodgaine Leslie Mitchell Rudolfo Payan Robert Bishop Jeffrey Hart Timothy O Brien, Vice Chair Audit Management Kip Memmott, Director, MA, CGAP, CRMA John Carlson, Deputy Director, JD, MBA, CIA, CGAP, CRMA Audit Staff Anna Hansen, Lead Auditor Carl Halvorson, Senior Auditor You can obtain copies of this report by contacting us at: Office of the Auditor 201 West Colfax Avenue, Department 705 Denver CO, (720) Fax (720) Or download and view an electronic copy by visiting our website at: Report number A

3 City and County of Denver 201 West Colfax Avenue, Department 705 Denver, Colorado FAX Dennis J. Gallagher Auditor June 15, 2015 Ms. Adrienne Benavidez, Executive Director Department of General Services City and County of Denver Re: Audit Follow Up Report Dear Ms. Benavidez: In keeping with professional auditing standards and the Audit Services Division s policy, as authorized by D.R.M.C , our Division has a responsibility to monitor and follow up on audit recommendations to ensure audit findings are being addressed and to aid us in planning future audits. This report is to inform you that we have completed our follow up effort for the Department of General Services Contract Administration audit issued August 15, Our review determined that General Services has not fully implemented any of the recommendations made in the audit report. Specifically, General Services disagreed with two of the five audit recommendations and agreed with the remaining three recommendations. Despite the Department s efforts, auditors determined that the risk associated with the audit team s initial findings has not been fully mitigated. As a result, the Division may revisit these risk areas in future audits to ensure appropriate corrective action is taken. For your reference, this report includes a Highlights page that provides background and summary information on the original audit and the completed follow up effort. Following the Highlights page is a detailed implementation status update for each recommendation. Although we did not update the status of recommendations that the Department disagreed with, these recommendations are included in the status update section as a reference. This concludes audit follow up work related to this audit. I would like to express our sincere appreciation to you and to Department personnel who assisted us throughout the audit and follow up process. If you have any questions, please feel free to contact me at or Dawn Wiseman, Internal Audit Supervisor, at Sincerely, KRM/cth Kip Memmott, MA, CGAP, CRMA Director of Audit Services To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.

4 cc: Honorable Michael Hancock, Mayor Honorable Members of City Council Members of Audit Committee Ms. Cary Kennedy, Deputy Mayor, Chief Financial Officer Ms. Janice Sinden, Chief of Staff Mr. David P. Edinger, Chief Performance Officer Ms. Beth Machann, Controller Mr. Scott Martinez, City Attorney Ms. Janna Young, City Council Executive Staff Director Mr. L. Michael Henry, Executive Director, Board of Ethics To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people. We will monitor and report on recommendations and progress towards their implementation.

5 City and County of Denver Office of the Auditor Audit Services Division REPORT HIGHLIGHTS The Department of General Services Contract Administration Follow up Report: June 2015 The Department of General Services has implemented zero out of five recommendations made in the August 2014 audit report. Background The Department of General Services aims to provide quality, efficient, and value added support services to entities within the City and County of Denver (the City). Four main divisions enable General Services to function in this capacity: Administration, Purchasing, Facilities Management, and Strategic Initiatives. Administrative activities include policy development, and fiscal management while the Strategic Initiatives program works to reduce energy use and demand across the City. Facilities Management staff work to deliver Citywide facility operations and management services; Purchasing staff use a centralized model to procure goods and services for the City. Purpose The purpose of the audit was to assess General Services contract monitoring practices by reviewing the degree to which the Department ensures vendors follow the contract scope of work and comparing General Services policies and procedures for monitoring contracts to best practices. Highlights from Original Audit The audit had two findings; Finding 1 found that the Department of General Services (General Services) has failed to effectively oversee Citywide service contracts. This impairs the City s ability to consistently monitor vendor performance and ensure the City receives all services required by the contract. Not only is there no policy guidance for General Services and other staff regarding monitoring requirements and expectations, but the Department has not created a centralized monitoring position responsible for overseeing the monitoring process. Additionally, the limited monitoring that has occurred has been fragmented, inconsistent, and not communicated back to or tracked by General Services. Without a monitoring framework that includes policy guidance and a centralized monitoring position, General Services cannot enforce contract compliance and ensure that taxpayer money is spent only on the quality and quantity of services for which the City contracted. Finding 2 determined that General Services current use of a single vendor for some Citywide service contracts may limit the City s leverage to acquire quality services at the best price and may reduce the City s support of minority and women owned businesses (M/WBE). Specifically, if the sole vendor can no longer provide needed services, the City may be unable to provide certain services such as building security without other available vendors. In addition, small businesses such as M/WBEs are often unable to compete against large vendors for these Citywide service contracts. Findings at Follow up General Services is still in the process of implementing a formal contract monitoring policy that will address the audit recommendations that were agreed to. Steps taken include developing key components to a contract monitoring framework, establishing responsible parties to oversee contract monitoring activities, and plans to conduct a regular survey of use agencies. For a complete copy of this report, visit Audit Contact Person: Dawn Wiseman dawn.wiseman@denvergov.org

6 Recommendations: Status of Implementation Recommendation Auditee Action Status Finding 1: The Department of General Services Failure To Effectively Oversee Citywide Service Contracts Exposes the City to Significant Risks 1.1 The Executive Director of the Department of General Services should develop a contracting monitoring framework for Citywide service contracts that includes, at minimum, a monitoring policy that identifies monitoring roles and responsibilities for all users of Citywide services as well as the baseline type and frequency of monitoring that should occur, a communication strategy to communicate performance issues to General Services management, regular training for all contract compliance staff in General Services and user agencies, and performance measurement, documentation, and tracking tools. As necessary, General Services should establish a Service Level Agreement (SLA) or other formal agreement with user agencies to codify enforceable monitoring responsibilities. General Services has developed and established the Contract Administration Plan structure for its contracts. The initial documents and forms which will be utilized by General Services for citywide contract administration and planning activities are as follows: Contract Administration Roles & Responsibilities for Multi Agency Service Contracts and Master Purchase Orders for Services; Contract Administration Checklist Multi Agency Contract or Master Purchase Orders for Services; Contract Management Checklist; Pre Performance Conference with the Awarded Vendor for City wide Service Contract or Master Purchase Order; Vendor Deficiency Form; Contract Closeout Checklist Form; and Contract Closeout Procedures for Multi Agency Service Contract or Master Purchase Order at Expiration. General Services has also initiated the comprehensive review of our agency contract administration policy and of the Purchasing Policy manual. General Services plans to finalize revisions by June 1, Agree/Not Implemented Page 1 Office of the Auditor

7 Recommendations: Status of Implementation Recommendation Auditee Action Status 1.2 The Department of General Services Executive Director should ensure the Department has a Contract Compliance Coordinator or contract manager whose responsibility is to oversee monitoring activities and act as a central point of contact for user agencies receiving services and to oversee the monitoring process. 1.3 The Department of General Services Executive Director should conduct a regular survey of user agencies receiving services through Citywide service contracts to identify potential problems or areas in need of improvement. The identified contracts and Master Purchase Orders will have administration plans implemented by the end of Each plan will include a communication plan with the vendor and with the user agencies. Part of the contract administration plan includes regular reviews with the contractor. This is a good forum for providing performance feedback to the contractors. A vendor deficiency form has been created and, along with user journals, provides the basis of feedback for issues with contractors. Additionally, the buyer, prior to a contract renewal, will survey all user agencies for input and will review the deficiency reports and any other identified concerns. Agree/Not Implemented Agree/Not Implemented Finding 2: The Department of General Services Use of a Single Vendor for Some Citywide Service Contracts Could Reduce the City s Bargaining Power and Support of Minority and Women Owned Business 2.1 The Department of General Services Executive Director should conduct an assessment to document and quantify the efficiencies gained through the use of a single vendor for Citywide services and identify any potential limitations that should be addressed. No action taken. Disagree City and County of Denver Page 2

8 Recommendations: Status of Implementation Recommendation Auditee Action Status 2.2 The Department of General Services Executive Director should quantify the Department s current usage of minority and womenowned businesses and determine the degree to which General Services use of a single vendor for Citywide service contracts negatively impacts the Department s support of minorityor women owned businesses. No action taken. Disagree Page 3 Office of the Auditor

9 Conclusion While the Department has made some progress towards implementing some recommendations made in the Department of General Services Contract Administration audit report, none of the recommendations have been fully implemented at this time. The Department is working on a formal contract administration plan that includes many of the elements outlined in the recommendations; however, the plan has not been formally implemented as of this report s publication. Despite General Services efforts, auditors determined that the risk associated with the audit team s initial findings has not been fully mitigated. For example, the proposed contract administration plan does not address contract compliance training for staff and user agencies. As a result, the Audit Services Division may revisit these risk areas in future audits to ensure appropriate corrective action is taken. On behalf of the citizens of the City and County of Denver, we thank staff and leadership from the Department of General Services for their cooperation during our follow up effort and their dedicated public service. City and County of Denver Page 4