Los Angeles Unified School District Office of the Inspector General Auditing Services Internal Audit Unit

Transcription

1 `t Los Angeles Unified School District Office of the Inspector General Auditing Services Internal Audit Unit Special Review Computer Inventory for Purchases Made Through Master Contracts with Vendors Arey Jones and Apple, Inc. OA July 29, 2014

2

3 About the Office of the Inspector General The Office of the Inspector General reports directly to the Board of Education. We conduct independent audits, reviews, and investigations of District operations, contracts, and vendors in order to: Find ways to improve processes, programs, functions and activities Provide information that supports effective decision making Identify real or potential misuse of District resources Prevent and detect waste, fraud and abuse within the District Through our work, we strive to encourage a culture of accountability, transparency, collaboration, and excellence and to assist the Board and the Superintendent in their efforts to provide a high quality education for the students and parents of the Los Angeles Unified School District.

4 Why did the OIG do this review? This Special Review was commissioned by the Inspector General to account for and verify the existence of computer devices purchased by the Los Angeles Unified School District (District) through master contracts with vendors Arey Jones and Apple, Inc. For the period from July 1, 2011 through June 30, 2013, the District purchased from Arey Jones and Apple, Inc. over 70,000 computer devices with an estimated combined value of $67 Million. What was the main objective? The objective of the review was to confirm, on a test basis, whether computers purchased through Arey Jones and Apple, Inc. master contracts, existed and were accounted for at the requesting school or office. How does this review support OIG goals? Find ways to improve processes, programs, functions, and activities. Provide information that supports effective decision-making. Identify real or potential misuse of District resources. Prevent and detect waste, fraud, and abuse within the District. What District key strategies does this review support? Transform teaching and learning so that we prepare all youth to graduate college and workforce ready. Operate an effective, efficient, and transparent organization in order to assure the public trust. Areas requiring attention and what the District should do next are discussed briefly in the Executive Summary of this report.

5 TABLE OF CONTENTS Executive Summary...1 Results of Review...7 Recommended Actions...26 Appendices A Summary of Questioned Costs Identified in this Review...29 B List of District Schools and Offices Selected for Testing...30 C Sampling Methodology...32 Annexes A Verbatim Comments...33 B Distribution...37 C Project Team...38

6 EXECUTIVE SUMMARY Introduction This report contains the results of our review of the Computer Inventory for Purchases Made Through Master Contracts with Vendors Arey Jones and Apple, Inc. The review was commissioned by the Inspector General. Computers and mobile devices are important tools for District students, teachers, staff, and employees. Today, many large organizations, including the District, are facing significant challenges in managing a complex inventory of mobile devices. The District has established various master contract agreements for Professional Services, Enrichment Activities, and Commodities. These agreements are used to support the procurement of computers and mobile devices for District schools and offices. This review focused on the District s computers and mobile devices purchased through master contracts with vendors Arey Jones and Apple, Inc for the two-year period from July 1, 2011 through June 30, The review was limited to the following types of computers and mobile devices: (i) ipads and netbooks, (ii) laptops, and (iii) desktops. For the period from July 1, 2011 through June 30, 2013, the District purchased from Arey Jones and Apple, Inc. over 70,000 computer devices with an estimated combined value of $67 Million. Accurate and reliable data are essential to an efficient and effective operating environment in the private sector as well as in the government sector. Therefore, decision makers need to know how much inventory exists and where inventory is located in order to make effective budgeting, operating, and financial decisions and to create a government that works better and costs less. 1 Objective The objective of the review was to verify, on a test basis, whether computers purchased through Arey Jones and Apple, Inc. master contracts, existed and were accounted for at the requesting school or office. 1 GAO G, Executive Guide - Best Practices in Achieving Consistent, Accurate Physical Counts of Inventory and Related Property, March 2002 issued by the United States General Accounting Office. 1

7 Summary of Results The District did not have a complete, adequate, and centralized inventory record of all of its computers. The lack of a centralized computer inventory system application resulted in a $2.1 Million 2 loss in the form of missing and unaccounted for devices. In addition, there was an increased potential for fraud, misuse and abuse of District resources. The District did not have a complete and adequate process to keep track of its computers and mobile devices. The District did not have a system in place to track the issuance of several types of devices, both computers and mobile devices, to school staff, teachers, and administrators. The management of computer and mobile devices is mostly decentralized giving schools and District administrators the ability and authority to order mobile devices and to allocate these to District employees, regardless of business needs. The District did not have formal policies and procedures concerning the recovery and reissuance of computer devices from closed or inactive schools, District offices, and retired, resigned, and relocated District employees. The District did not have an adequate process to match the business needs of employees with appropriate computers or mobile devices. This resulted in a number of computers and mobile devices that were not fully utilized and placed in storage. Additionally, ipads were provided to school office staff (such as school administrative assistants, custodians, and school police) regardless of business needs. This occurred because the District did not have a clear policy on who is entitled to have a District-owned and issued mobile device, such as an ipad. The following are the results of our verification testing for 15,077 computers and mobile devices across 64 selected sites: Purchases Made through Arey Jones Netbooks Laptops Desktops # of devices selected for review 1,554 1, Percent physically verified 3 22% 77% 85% Percent not physically verified 4 75% 16% 8% Percent of devices missing or 5 unaccounted for 3% 7% 7% 2 The $2.1 million loss includes 2,721 ipads that were unaccounted for (worth approximately $1.6 M) due to a lack of supporting documentation. During the review, ITD was unable to provide the current location and number of ipads distributed to each school after numerous requests were made over a five-month period. The remaining $0.5 M loss is due to: (1) devices that were reported as lost or stolen, (2) where the District did not have records to show the location or authorized user, and (3) where staff did not know where the device was located. 3 Physically verified signifies those computer devices that the OIG staff examined during the school or office visit. 4 Not physically verified signifies those computer devices that were not available for examination at the time of the visit but some form of documentation was provided (e.g. Check Out documentation reviewed, or teacher was off campus, or staff stated the device was left at home, or teacher was transferred to another location). 2

8 Purchases Made through Apple, Inc. ipads and MacBook imac Apple mini ipads Laptops Desktops # of devices selected for review 9, Percent physically verified 29% 85% 91% Percent not physically verified 40% 7% 5% Percent of devices missing or unaccounted for 31% 8% 4% Conclusion: Currently, the District does not have adequate systems and processes in place to manage its computer and mobile device inventory. There are no mechanisms to provide assurance that computer and mobile devices that are purchased are recorded accurately, monitored properly, or secured physically to prevent waste, fraud and abuse related to these assets. Processes used by the District in the past are inadequate to rely upon for current inventory management purposes, given the volume and complexity of the devices that are currently being purchased and used by the District. Managing the acquisition, storage, and distribution of computers and mobile devices is critical to controlling costs, operational efficiency, and mission readiness. Until the District addresses the process and control gaps discussed in this report and implements an adequate inventory control and management system with asset management software, valuable resources will continue to be lost as a result of misappropriation and process deficiencies. What The District Should Do Next Recommended Actions We recommend the following: 1. The District is in need of a centralized asset management application for its computers and mobile devices. Currently, ITD uses Mobile Device Management (MDM) software run by Airwatch to track Common Core Technology devices. However, we believe that the District requires a centralized asset management application that has capabilities beyond those offered by the MDM software. Specifically, this system should have the capability to provide information about all additions to inventory levels, complete and accurate information about the location of all computer equipment and mobile devices, and complete and accurate information about the movement, whether through transfer or disposition, of any computer equipment and mobile devices. Therefore the District should undertake and complete an initiative designed to procure, configure and deploy an appropriate centralized asset management application for its computers and mobile devices. This initiative should consider the existing functionality offered by the MDM software in order to leverage its current capabilities. This should assist in the identification of the additional functionality that is 5 Missing or unaccounted for signifies those computer devices that were reported as stolen, missing, or those devices where school staff could not report the current location of the device(s). 3

9 required to achieve comprehensive computer and mobile device asset management. The initiative should have clearly defined goals, requirements, and budget. The initiative should also include a project timeline and milestones. The centralized asset management application should include the following at a minimum: a. Device serial number b. Assigned employee name (or custodian if the device is shared) c. Employee number d. Employee work location and any changes such as transfers to a new employee or to a new location e. Lost or stolen device, if applicable f. Vendor information and other related information such as purchase order number 2. The District should conduct a feasibility study on the use of a bar code scanning device (similar to the textbook inventory system) to track and monitor the computer inventory within the District. 3. The District should initiate a districtwide inventory count of all existing computers and mobile devices. This would require schools and offices to conduct a comprehensive inventory of all existing computers and mobile devices and account for all devices not assigned to an individual, missing or lost. All site administrators and division heads should update the site computer inventory database. Any devices that cannot be accounted for should be documented and reported to the appropriate law enforcement agency. 4. Site administrators and division heads should review the business needs of employees that have multiple devices for the purpose of assuring that the equipment possessed by these employees is appropriated based on their specific business needs. The results of this assessment should be documented and available for review. 5. Require all employees, contractors, and specialized groups (student body leadership, student clubs) that are provided with District owned computer and mobile devices to sign (electronically if possible) an acknowledgement receipt for each device assigned; and to update the record as necessary in case of employee transfers, resignations, terminations, and retirements. 6. To better manage and control the District s computer inventory system, PSD and ITD should adopt a District policy requiring all schools and offices to purchase computers and mobile devices through master contracts only. In addition, PSD should adopt a District policy to deny purchases of computers and mobile devices through other means, such as P-Card, Imprest Fund, or Low Dollar Value Purchase Order. Our recommendations to correct these conditions begin on page 26. 4

10 District Comments: The Information Technology Division and Procurement Services Division agreed with all of our recommendations and stated that they have taken some actions and plans to take further actions to ensure that our recommendations are implemented. In addition to ITD s responses to our recommended actions, ITD stated that at the time of the audit engagement, ITD s priority was on the deployment of the Common Core Technology Project (CCTP) Phase-1 mobile devices. Furthermore, ITD s limited staff resources prevented them from responding timely to the auditors requests to provide details on the physical location of the unaccounted for mobile devices noted during the review. The District s verbatim response is shown in Annex A of the report. ITD also provided a list of 7,718 mobile devices originally purchased for the Schools for the Future (SFF) project that later were reconfigured as CCTP devices by Apple, Inc. Inspector General Response: Management s response to our audit findings and recommendations indicate an understanding of the issues presented. We consider management s planned actions to be constructive steps towards improving the conditions reviewed in this report. After the Draft Report was issued by the OIG, ITD provided a list of 7,718 mobile devices indicating the physical location and the serial number of the mobile devices in question. We acknowledge ITD s efforts to provide the details of the unaccounted for mobile devices. However, OIG is not able to comment on the accuracy of the document or validate the locations of the devices since field work ended on April 15, Scope and Methodology This review was conducted in accordance with quality standards for reviews by the offices of Inspector General as described in the Principles and Standards for Offices of Inspectors General promulgated by the Association of Inspectors General. These quality standards are for the use of Offices of Inspectors General to guide the conduct of official duties in a professional manner. The review was conducted from January through April The review scope included computer and mobile devices purchased through Master Contracts with vendors Arey Jones and Apple, Inc. for the period from July 1, 2011 through June 30, In order to conduct this review, we performed certain procedures, which included, but were not limited to, the following: Reviewed and obtained District policies and procedures pertaining to the computer inventory process. Obtained from the Procurement Services Division a download of Purchase Orders made through the master contracts with vendors Arey Jones and Apple, Inc. for the period under review. 5

11 Used statistical sampling tool, E-Z Quant 6, to determine the sampling population and select applicable purchase orders for testing. Sampling methodology is discussed in detail in Appendix C. Procurement data were segregated and classified into one of three categories: (1) ipads or netbooks, (2) laptops, and (3) desktops. We did not include in our review items such as computer monitors, printers, software licenses, and computer accessories such as Apple TVs, ipad carts, access points, covers, and carrying cases. Visited 64 school sites and District offices and performed the following procedures: a) Notified and provided the selected school sites and District offices with a list of purchase orders and invoices included in the review. b) Physically verified and accounted for the total number of devices recorded in the selected invoice(s). c) Reviewed check out or Equipment Loan Authorization forms on file 7. d) On a test basis (one in every ten device), compared device serial numbers with the serial numbers recorded on the invoices; and completed Results of Verification form. Please refer to Appendix B on page 30 for the complete list of school sites and District offices included in the review. 6 EZ-Quant is Defense Contract Audit Agency s (DCAA) Statistical Analysis software for the Windows environment, giving the auditor the tools necessary to perform both attribute and variable sample selection and evaluation. 7 Check out documentation or Equipment Loan Authorization forms are completed by staff acknowledging receipt of a computer or mobile device from the District. The form documents the employee name, employee number, location, description of the device, serial number(s), and authorized signature from the school or District office. 6

12 RESULTS of REVIEW BACKGROUND The District s management of computer and mobile devices is mostly decentralized. Site administrators have the authority to order devices and to allocate these to District employees. In addition, ITD orders devices for specific schools and District offices. Depending on the school s operating budget, the school administrators can hire a computer specialist (IT staff) to manage and oversee the school s technology needs, including computer and mobile device inventory tracking. At smaller school sites, however, a teacher, any school staff, or program coordinators may be given the additional responsibility to manage the site s computer inventory. ITD Memorandum No. MEM , issued by the Chief Information Officer on August 7, 2012, entitled Site Computer Inventory, provides instructions on maintaining site and school level inventories of personal computers in a new districtwide computer inventory system. The memorandum indicated that the Board of Education has asked ITD to develop a strategic plan for the cost-effective acquisition and management of computers to ensure that students and staff have up-to-date instructional computing facilities. Since these assets are managed by each site, the assistance of site-level administrators is requested to collect computer asset information and enter into a District-wide computer inventory system. The memorandum further stated that ITD has developed an online database and an entry form to provide schools and offices a convenient way to maintain their computer inventory. The database for each site has been compiled with data from previous inventory counts as well as from purchases made since The Site Computer Inventory is automatically updated monthly by ITD with any new computers purchased and installed through the District s Integrator (Arey Jones). Each District site is responsible for updating the online form any time changes are made to the inventory. The schools and offices are required to update the database by October 1 of each year. Currently, schools and offices are maintaining the computer inventories in various formats. For the period from July 1, 2011 through June 30, 2013, the District awarded Arey Jones and Apple, Inc. multiple purchase orders comprised of more than 70,000 computers and mobile devices, with an estimated combined value of $67 million. 7

13 Table 1 below describes the population of items included in the review in brief. Table 1 Details of Purchase Orders made through Master Contracts Vendors Arey Jones and Apple, Inc. For the period from July 1, 2011 through June 30, 2013 Source: IFS Data download by the Procurement Services Division Item Category *ipads; Netbooks MacBook Air/Pro; Laptops imac / Desktops Grand Total Estimated Number and Estimated Total Cost of Devices Ordered 8 APPLE, INC. AREY JONES Estimated # of Devices Total Estimated Cost ($M) # of Devices Total Estimated Cost ($M) Total # of Devices Total Estimated Cost 25,844 $ ,256 $ ,100 $ M 7, , ,171 $ M 4, , ,916 $ M 38,191 $ ,996 $ ,187 $ M 8 An estimated total quantity of items ordered is reported because the data downloaded from the District s IFS system did not clearly indicate the exact number of quantities ordered. Procurement Services Division and ITD could not provide an itemize count of the total items ordered. 8

14 DISCUSSION This section discusses the following areas: Inventory Control of Computer Purchases through Master Contracts A. Purchases made through Vendor Arey Jones. B. Purchases made through Vendor Apple, Inc. Issues and Observations Recommended Actions The following terms are used in the Discussion section and are defined as follows: Physically verified signifies those computer devices that the OIG staff examined during the school or office visit. Not physically verified signifies those computer devices that were not available for examination at the time of the visit, but some form of documentation was provided (e.g. Check Out documentation reviewed, or teacher was off campus, or staff stated the device was left at home, or teacher was transferred to another location). Missing or unaccounted for signifies those computer devices that were reported as stolen, missing, or those devices where school staff could not report the current location of the device(s). Inventory Control of Computer Purchases through Master Contracts A. Test Results, Purchases made through Vendor Arey Jones 1. The following Netbooks procured from vendor Arey Jones were included in the review: 1,554 devices selected for review 343 devices were physically verified (22%) 1,162 devices were not physically verified (75%). Some devices were not physically verified due to the following: netbooks were not present at the school site or District office, but check out documentation 9 was provided to the review team netbooks were allegedly left at home at the time of testing netbooks were transferred to other school sites due to teacher transfers. 9 Check out documentation or Equipment Loan Authorization forms are completed by staff acknowledging receipt from the District computer or mobile device. The form documents employee name, employee number, location, description of the device, serial number (s) and authorized signature from the school or District office. 9

15 - 71 netbooks were returned back to the originating division; however, the school could not provide proof of the transfer or any supporting documentation. A total of 49 devices were stolen, missing or could not be accounted for (3%). - 3 netbooks were reported stolen or missing by Chase EL, Division of Special Education, and Roosevelt SH netbooks could not be accounted for at the following school sites. Location Name Number of Devices Cowan EL 24 Hamilton SH 10 Olive Vista MS 6 Taft SH 3 Huntington SH 2 Stevenson MS 1 The netbooks included in the review were part of the 4,000 units ordered by the Division of Special Education. Portions of the 4,000 netbooks were distributed directly to the District s special education teachers during training, and other mobile devices were distributed to various District special education centers. We found that most of the special education teachers that received the netbooks brought the devices with them when transferred to another location. In some cases, special education teachers who retired or resigned failed to return the devices back to the District. Because the netbooks were given directly to the special education teachers, schools had no record of the mobile devices and, therefore, the devices were not included in the school inventory. Figure 1 below describes the test results of Netbooks purchased from vendor Arey Jones. Figure 1 Inventory Control Netbooks Vendor: Arey Jones Review Period: July 1, 2011 June 30,

16 2. The following Laptops procured from vendor Arey Jones were included in the review: 1,865 devices selected for review 1,434 devices were physically verified (77%) 297 devices were not physically verified (16%). Some devices were not physically verified due to the following: laptops were not present at the school site or District office, but check out documentation (see Footnote 9) was provided to the review team laptops were allegedly left at home at the time of testing laptops were transferred to other school sites due to teacher transfers, closure of schools and reorganization of local District offices into Educational Service Centers (i) 49 laptops procured by Augustus Hawkins Senior High School were taken by several teachers that were temporarily housed at the school. In 2012, several teachers from another school were temporarily housed at Augustus Hawkins SH and each of the teacher s laptop computers was confiscated for investigation purposes. Augustus Hawkins SH procured several laptop computers and provided them to the temporarily housed teachers. After the investigation was concluded, 49 of the temporarily housed teachers took the new laptops with them to their newly assigned schools. (ii) 75 laptops from the Local District 7 office were allegedly transferred to an Educational Service Center (ESC) when the eight local district offices were reconfigured to four ESCs. An inventory list did not provide the exact physical location of the 75 laptops or a list of authorized users. As a result, we were not able to verify the existence of the devices. (iii) One laptop at Celerity Octavia Charter School was allegedly out for repair, but no supporting document was provided. In addition, one laptop at Washington Prep SH was left at home. A total of 134 devices were stolen, missing or could not be accounted for (7%) - One laptop was reported stolen at Celerity Octavia Charter School laptops could not be accounted for at the following school sites: Location Name Number of Device Bell Education Center (inactive) Full Circle LC (inactive charter school) Markham MS 5 Bellingham PC 3 Muir MS 2 Various Schools As of this writing, we did not hear from ESC staff concerning the whereabouts of the computer devices from this school site. 11 According to the Charter School Division (CSD) and ITD, the 30 laptops were re-purposed to Apple Academy Charter School. OIG attempted to verify the information with Apple Academy Management, which denied ever receiving the devices from District. Neither CSD nor ITD could provide documentation to corroborate the recovery and reissuance of the devices. 12 One device each at Banning SH, Hamilton SH, and Evans Adult Center. 11

17 Figure 2 below describes the inventory results of Laptops purchased from vendor Arey Jones. Figure 2 Inventory Control Laptops Vendor: Arey Jones Review Period: July 1, 2011 June 30, The following Desktops procured from vendor Arey Jones were included in the review: 449 devices selected for review 383 devices were physically verified (85%) A total of 34 devices were not physically verified (8%). Some devices were not physically verified due to the following: - 4 desktops were not present at the school site or District office, but check out documentation was provided to review team desktops were locked inside the classrooms and the assigned classroom teacher was off campus at time of visit desktops were transferred to other school sites due to the closure of schools and reorganization of local district offices. 32 devices were stolen, missing or could not be accounted for (7%). Some devices were not accounted for due to the following: - 8 desktops were reported stolen or missing at Dymally HS or formerly South Region HS#5. During the period under review, four newly established District schools were located on the same campus. One of the four schools ceased 12

18 operations and turned over the school s assets to Dymally HS. There was a reported break-in on campus, and a number of school equipment and computer devices were stolen. However, according to the current school administrator, the former administrator did not provide a copy of the police report or inventory of devices stolen desktops at Bell Education Center (inactive). To date, ESC staff have not located the computer devices from this school site. - 3 desktops at Full Circle LC (inactive charter school). According to the Charter School Division and ITD, the three desktops were re-purposed to Apple Academy Charter School. However, the school administrator denied receiving any computer devices from the District. Neither division was able to provide documentation for the transfer of equipment. - 3 desktops in Markham MS and one device each at Roosevelt SH and Woodland Hills Academy. Figure 3 below describes the inventory results of Desktops purchased from vendor Arey Jones. Figure 3 Inventory Control Desktops Vendor: Arey Jones Review Period: July 1, 2011 June 30,

19 B. Test Results, Purchases made through Vendor Apple, Inc. 1. Several ipads and Mini ipads were purchased in the two-year period prior to the start of the Common Core Technology Project. The following ipads and Mini ipads procured from vendor Apple, Inc. were included in the review: 9,910 devices selected for review 2,908 devices were physically verified (29%) 3,963 devices were not physically verified (40%). Some devices were not physically verified due to the following: ipads were not present at the school site or District office, but check out documentation was provided to review team ipads were allegedly left at home at the time of testing. - In April 2013, a total of 3,464 ipads were delivered to various senior high schools as follows 13 : Location Name # of ipads Chavez LA- Artes 465 Diego Rivera SRHS#2 - Green Design 426 Diego Rivera Communication 442 Diego Rivera -Public Service 444 Roosevelt HS 423 Valley Academy of Arts & Sciences 1,264 During the summer break, ITD staff collected these specific devices and stored them at the ITD Soto Warehouse for safekeeping. No documentation was provided to schools when the ipads were removed. According to school administrators, in September 2013, the schools received new Common Core devices instead of the original devices. - A group of teachers from Jefferson SH organized a new learning center, named Early College Academy, and the teachers brought with them 40 ipads originally purchased by Jefferson SH. - 4 devices were transferred to another location due to teachers reassignments and 2 devices were with the former school administrator. 13 Rancho Dominguez got 1,244 ipads but was not included in our sample school for review. 14

20 3,039 devices were reported stolen, missing or could not be accounted for (31%). Details are provided below: ipads were stolen or missing at the following locations: Number of Location Name Reported Stolen or Missing ipads Carver MS 120 Sotomayor LA LARS 16 Cowan EL 10 Sherman Oaks EL 5 Huntington Park SH 2 Beyond the Bell Youth Services Center, South 2 Information and Technology Division (ITD) 2 Various schools ,878 ipads could not be accounted for at the following locations: Number of Location Name Unaccounted For ipads Information and Technology Division (ITD) 2,721 Carver Middle School 41 Food Services Division 33 Youth Services - South 26 Huntington Park H 19 Frank Del Olmo EL 9 Harte Prep EL 9 Roosevelt SH 6 Markham MS 4 Local District 7 Office (inactive) 4 Various schools 5 According to ITD, the 2,721 ipads were sent back to Apple, Inc. to be reconfigured as CCTP (Common Core) devices. Upon receipt from Apple, Inc., ITD provisioned the ipads to various elementary schools and now have become part of the pre-phase-1 CCTP project. In spite of repeated requests, ITD did not provide the list of elementary schools and the number of ipads provisioned to each school. Since we did not receive any documentation to corroborate the accuracy of the above statements to verify the location of the 2,721 ipads, these devices are classified as unaccounted for. 14 One device each at Banning SH, Hamilton SH, Lizarraga EL, and Division of Special Education. 15

21 Figure 4 below describes the inventory results of ipads purchased from vendor Apple, Inc. Figure 4 Inventory Control ipads Vendor: Apple, Inc. Review Period: July 1, 2011 June 30, The following MacBook Laptops procured vendor from Apple, Inc. were included in the review: 808 devices selected for review 687 devices were physically verified (85%) 59 devices were not physically verified (7%). Some devices were not physically verified due to the following: - 13 laptops were not present at the school site or District office, but check out documentation was provided to review team. - 1 laptop was allegedly left at home at the time of testing laptops were transferred to other school sites. Specifically, (i) 40 MacBook laptops from Jefferson SH were transferred to a new school, Early College Academy (ii) 5 from Crenshaw HS were transferred to Crenshaw Arts and Tech. 16

22 62 devices were stolen, missing or could not be accounted for (8%) MacBook laptops were stolen or missing at the following locations: Number of Location Name Reported Stolen or Missing Laptops Sotomayor LA LARS 40 Dymally HS (SR HS #12) 10 Augustus Hawkins SH (So LA New SH #3) 1 Stevenson MS 1-10 MacBook laptops could not be accounted for at the following locations: Location Name Number of Unaccounted For Laptops Washington Prep SH 5 Carver MS 2 Hamilton SH 1 Roosevelt SH 1 Sotomayor HS Arts LAB 1 Figure 5 below describes the inventory results of Laptops purchased from vendor Apple, Inc. Figure 5 Inventory Control MacBook Laptops Vendor: Apple, Inc. Review Period: July 1, 2011 June 30,

23 3. The following imac Apple Desktops procured from vendor Apple, Inc. were included in the review: 491 devices selected for review 449 devices were physically verified (91%) 23 devices were not physically verified (5%) due to transfers of devices within multiple school campuses located at one location. A total of 19 devices were stolen, missing or could not be accounted for (4%) at the following locations: Location Name Number of Desktops Remarks Eagle Rock HS 2 Stolen Dymally HS 2 Stolen Stevenson MS 1 Missing Roosevelt SH 14 Unaccounted For Figure 6 below describes the inventory results of Desktops purchased from vendor Apple, Inc. Figure 6 Inventory Control imac Desktops Vendor: Apple, Inc. Review Period: July 1, 2011 June 30,

24 Issues and Observations A. The District did not have a complete, accurate, and centralized inventory record of all of its computers. We were unable to determine the exact number of computers and mobile devices purchased through the master contracts for the period under review because the information needed was incomplete, inaccurate, or unavailable. However, we estimated that the District purchased more than 70,000 computers and mobile devices with an estimated total cost of over $67 Million for the period reviewed. Noteworthy items: The Information Technology Division (ITD) could not fully account for the District s ipads, laptop computers, and desktop computers. District schools and offices have no automated computer inventory tool, and therefore, were struggling to keep an accurate and complete inventory record of the computer and mobile devices. No District office monitored compliance of schools and offices adherence to the District s Site Computer Inventory system policy We reviewed the District s Site Computer Inventory website, and found that most of the District schools computer inventory records were not updated as required in ITD Memorandum No. MEM Some District employees and site administrators were not even aware of ITD s Site Computer Inventory memorandum. During our review, we noted some schools and District offices did not have a uniform inventory control process. Some of the inconsistencies are noted as follows: - Computer and mobile devices were not always assigned to employees; Instead, they often were assigned under the names of the administrators, computer specialist, room or building number, or program code. - There was no indication as to the name of the actual user and the location of the devices in the inventory system. - The computer inventory list maintained by the schools or offices was not continually updated. Records we inspected at times included the names of former District employees. - Schools and offices used a variety of check-out forms to document the receipt of computer and mobile devices assigned to District employees. In some cases, forms were not completely filled out with required information such as serial number or item description. - We noted that some schools and offices did not even implement the use of check-out forms. 15 ITD Memorandum No. MEM dated August 2013, issued by the Chief Information Officer. 19

25 B. The District did not have an adequate process to match the business needs of employees with appropriate computers or mobile devices. Unnecessary mobile devices - Some District employees had mobile devices without having a business need for one. For example: at one school, mobile devices were provided to (i) two high school custodians, (ii) most of the school s non-teaching staff, and (iii) school police. However, during the school visit, the majority of the school staff previously mentioned did not have their assigned mobile device physically at the school. Most of the staff said the device was at home, indicating no business need for each device. C. The District did not have an effective system in place to track the issuance of several types of devices, both computers and mobile devices to school staff, teachers, and administrators. We found multiple unused and unassigned devices kept in storage cabinets and in administrators offices districtwide. Some of the devices were still in their original boxes unopened. Most of the classroom teachers and administrators had multiple devices. Teaching staff were allowed to bring home mobile devices for lesson plan preparation; however, we found some teachers had excessive multiple devices. For example, we found instances where a teacher simultaneously had (i) a miniipad, (ii) a regular ipad, (iii) one or two laptops, (iv) a desktop in the classroom, and (v) the latest Common Core ipad. The Division of Special Education provided netbooks to all special education teachers. The netbooks were given directly to the special education teachers in a training program. We found that most of the schools did not have a record of the device in their computer inventory. D. The District did not have formal policies and procedures concerning the recovery and reissuance of computer devices from closed or inactive schools, District offices, and retired, resigned, and relocated District employees. Specific conditions noted in the review of a closed Charter school - Full Circle Learning Academy (inactive charter school) The Charter School Division (CSD) could not account for 33 devices (30 laptops and 3 desktops) selected for testing. According to the Charter School Division and ITD, the devices were re-purposed to another charter school named Apple Academy. OIG attempted to verify the information with Apple Academy management. However, Apple Academy management denied ever receiving the devices from the District. Neither the CSD nor ITD could provide documentation to corroborate the recovery and reissuance of the devices. Specific conditions noted in the review of closed District schools and offices - Bell Education Center (inactive occupational center) 106 devices (90 laptops and 16 desktops) could not be accounted for. To date, the ESC could not provide information about the whereabouts of the computer devices from Bell Education Center. 20

26 - Dymally HS (SRHS #12) Multiple school sites are located on the same campus. There was no documentation to establish accountability for equipment inventory turnover when District schools merged. As a result, current and former administrators refused to take responsibility for missing computer devices. - Former Local District 7 Office (now known as an ESC) 82 devices (75 laptops, 3 desktops, and 4 ipads) could not be accounted for. The ESC was only able to provide the auditors with a spreadsheet of serial numbers for the 75 laptops. To date, the ESC could not determine the physical location of the 82 devices. Conditions noted in the review of Resigned, Retired, and Relocated Teachers and Administrators of the District - District schools and office administrators lacked supporting documentation over computer devices transferred from one school to another. There was no formal process in place to notify the receiving school regarding the transfer of devices. - District schools and offices were not consistent in managing the process of transferring devices by teachers and staff to another location. Some schools required teachers and staff to return the computer and mobile devices provisioned to them, while some schools allowed teachers and staff to take the computer devices provisioned to them to the new assigned location. - Most of the District schools and offices computer inventory record still showed the names of resigned, retired or transferred staff. Below is a sample transaction that highlights the lack of accountability and unclear roles and responsibilities in managing the District s computer inventory system. 1. Two purchase orders (PO) 16 originated from ITD for a combined total of 7,429 ipads. Apple, Inc. shipped the devices to Arey Jones (District Integrator) for delivery to intended District schools. 2. Arey Jones delivered the 4,731 ipads to seven high schools in April 2013, and the remaining 2,721 to ITD in August Sometime in the summer of 2013, ITD removed all the mobile devices from seven high schools for safekeeping and added security. 3. We visited six of the seven high schools and at the time of our fieldwork, we were informed by the school administrators that the schools never received the original ipads from ITD. However, in September 2013 the schools received new Common Core Technology ipads instead. Furthermore, all school administrators stated that ITD did not provide any written record of the device removal. 4. ITD management corroborated the information provided to the auditors by the school administrators. In addition, ITD stated that all ipads covered by the two purchase orders 16 Purchase Order PG#ITD for 6,165 ipads and PG#ITD for 1,264 ipads. 21

27 were sent back to Apple, Inc. for reconfiguration and were later redeployed to various elementary schools included in Phase 1 of the Common Core Technology Project. 5. We requested from ITD documentation on the redeployment of the 7,429 devices. In spite of repeated requests, we did not receive any record or details from ITD detailing devices and their current location. We could not verify with the various elementary schools the redeployment of the devices because ITD did not give the auditors the requested documentation. Please refer to Figure 7 on the next page for a detailed illustration of the process flow of the above transactions. 22

28 Figure 7 Process Flow of the 7,429 Mobile Devices Transferred to ITD ITD Issued and Approved PO # PGITD (6,165 ipads) and PGITD (1,264 ipads) According to ITD, all 7,429 ipads were shipped back to Apple, Inc. to be reconfigured as Common Core ipads VARIOUS HIGH SCHOOLS AND ITD Apple, Inc. shipped to Arey Jones PO#13605 for 6,165 and PO#13458 for 1,264 ipads Arey Jones shipped 7,429 ipads to the following locations in April and August 2013: 1). Roosevelt HS 423 2). Diego Rivera Chavez LA HS 465 3). Diego Rivera Green Design HS 426 4). Diego River Public Service 444 5). Rancho Dominguez HS 1,244 6). Chavez LA Artes ). Valley Acad of Arts and Science 1,264 8). ITD 2,721 Apple, Inc. delivered the ipads to ITD. Auditors were not provided with any documentation to verify this transaction. AREY JONES (Integrator) received 7,429 ipads from Apple, Inc. for integration and delivery to District schools and ITD According to school administrators, in the summer of 2013, ITD picked up all 7,429 ipads from various District schools for safekeeping and added security during the summer break. However, the 7 high schools did not receive the same ipad removed by ITD. Instead in the Fall of 2013, the schools received the new Common Core ipad. ITD Received from Apple, Inc. the reconfigured ipads and were deployed to various elementary schools Note: No documentation could be provided by ITD to support this transaction VARIOUS ELEMENTARY SCHOOLS In spite of repeated requests, ITD did not provide the auditors with a detailed list of elementary schools that received the reconfigured ipads. 23

29 What Were the Reasons for the Cited Issues? The above-mentioned issues and observations occurred due to numerous reasons. The following details some of the larger causes for the previously mentioned control weaknesses: 1. Lack of effective automated inventory tools to support a complex inventory management system o The District did not have automated inventory tools to assist District employees in handling the computer and mobile device inventory. o Current processes are not adequate to manage the volume and complexity of computers and mobile devices in the District. In addition, the District did not have a tracking mechanism in place to monitor purchases, transfers, and disposals of computers and mobile devices. o School staff commented that a similar tracking device used in textbook inventory management (scanner) could help strengthen the inventory controls for computers and mobile devices. 2. Policy not followed o Memorandum No. Mem , issued by ITD, was developed for site administrators to manage site computer inventories more effectively. However, most school administrators were not following the policy and some were not even aware of the memorandum. o ITD did not monitor compliance with Mem by schools and site administrators. As a result, ITD did not follow through with any actions to encourage compliance. o The Site Computer Inventory database was not continuously updated. Computer devices as far back as 2004 and the names of some retired and resigned District employees were still showing in the database. 3. Unclear roles o There was no clear policy on who was entitled to have a District owned and issued mobile device such as an ipad, netbook, or laptop. o Likewise, it is unclear who is responsible for inventory management and updating changes to user information at the school or office level. o Management did not clarify who was responsible for inventory management and monitoring the transfer, relocation, and redeployment of mobile devices, especially at the time of a school closure or office reorganization. For example, ITD and the Charter Schools Division passed on the responsibility between each other in dealing with charter school closures. 4. Lack of Monitoring o The management of computer and mobile devices is mostly decentralized. Schools and District offices have the authority to order devices. In addition, ITD orders devices on behalf of other schools. 24

30 o Management did not designate an alternate employee to manage the computer inventory record when employees resigned, were bumped, or left District employment. Many of the staff interviewed stated that they had just assumed the responsibility of managing the computer inventory record and had not been provided with copies of the computer inventory spreadsheet or employees checked out forms. o There were no written guidelines specifying the maximum number and types of computers and mobile devices a District employee is entitled to. In addition, the District did not have a mechanism in place to monitor and prevent multiple issuances of mobile devices to school staff. o School and site administrators did not proactively monitor the inventory level of computers and mobile devices at their sites. A computer inventory report generated annually could help administrators make informed decisions and create awareness of the existence of excess and unused devices. Our recommendations to correct these conditions begin on page

31 RECOMMENDED ACTIONS We recommend that the District implement the following: Recommendation 1: The District is in need of a centralized asset management application for its computers and mobile devices. Currently, ITD uses Mobile Device Management (MDM) software run by Airwatch to track Common Core Technology devices. However, we believe that the District requires a centralized asset management application that has capabilities beyond those offered by the MDM software. Specifically, this system should have the capability to provide information about all additions to inventory levels, complete and accurate information about the location of all computer equipment and mobile devices, and complete and accurate information about the movement, whether through transfer or disposition, of any computer equipment and mobile devices. Therefore the District should undertake and complete an initiative designed to procure, configure and deploy an appropriate centralized asset management application for its computers and mobile devices. This initiative should consider the existing functionality offered by the MDM software in order to leverage its current capabilities. This should assist in the identification of the additional functionality that is required to achieve comprehensive computer and mobile device asset management. The initiative should have clearly defined goals, requirements, and budget. The initiative should also include a project timeline and milestones. The centralized asset management application should include the following at a minimum: a. Device serial number b. Assigned employee name (or custodian if the device is shared) c. Employee number d. Employee work location and any changes such as transfers to a new employee or to a new location e. Lost or stolen device, if applicable f. Vendor information and other related information such as purchase order number ITD Comments: ITD agrees with this recommendation and stated that it is in a process of creating a roadmap for IT Asset Management that would strategically manage and track the physical, financial, hardware and software licensing, and contractual aspects of IT assets through their asset life. Target Date of Implementation: Roadmap is scheduled to be completed in September