budget and finance committee november 7, 2017 purchasing
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Administrative and Fiscal Services 336-506-4410
FAX 336-578-3964 1247 Jimmie Kerr Road
P.O. Box 8000 Graham, NC 27253-8000
www.alamancecc.edu
Budget and Finance Committee
November 7, 2017
“Purchasing Compliance Review Summary and Action Plan” Guiding Regulation
North Carolina Administrative Code, Title 1, Chapter 5, Section .1605, requires the Division of Purchase and Contract to conduct compliance reviews on purchase practices at all agencies every five to ten years.
The current review period covered the period February 1, 2106 through January 31, 2017. The College’s last review was performed in April 2010, seven years ago. Reviews cover the annual period preceding the date of review and do not coincide with the fiscal year.
Objective and Scope
Review objectives are to: o Determine that the College’s purchasing staff understands and adheres to NCGS. o Determine that the College’s internal policies, procedures, and processes accurately
reflect the requirements of NCGS and the Administrative Code. o Exchange ideas of how the State of North Carolina can become more efficient and cost
effective. o Communicate and offer training opportunities via the Division of the Purchase and
Contract to better educate and in turn, increase productivity of purchasing personnel o Develop a mutually beneficial working relationship between the College and the Division of
Purchasing and Contract.
There were three populations tested: o 1. Purchase Orders: Usually the College’s larger purchases or items that have a useful
life for more than one year such as equipment and computers; selected 78 of 219 o 2. Direct Pays: Usually, just basic invoices for services or consumable products,
examples are software renewals, utility bills, etc.; selected 119 of 3,327 o 3. P-Card Purchases: Instructional supplies for the classroom or supplies for live projects
where price is under $2,500; selected 120 of 4,034 o Total population of the above pay types 7,490 and sample size was 317
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Findings and Responses:
The compliance review process allows the College to respond to findings, giving reason for treatment of certain transactions. For each of the five findings, the College could support its position or the College could document a simple solution and action plan. The College considers each of the five findings minor.
Finding 1: The College did not break out shipping from the item cost for 16 of the 78
purchase orders reviewed in the state purchasing system, i.e. the equipment cost should have been one commodity code and the shipping price should have been a different commodity code. Action Plan: The Purchasing Specialist will break out shipping/freight for items purchased rather than posting to the commodity code relative to the item purchased as was the past practice. The Purchasing Specialist and Assistant Director of Administrative Services have both received further training on how to properly perform the breakout in the state purchasing system.
Finding 2: Of the 119 direct pay files reviewed, 4 (3%) did not utilize available Statewide
Term Contracts. Of the 120 P-card transactions reviewed, eight (8) did not utilize available Statewide Term Contracts. We are required to purchase what is on state contract because the State has negotiated pricing. However, community colleges have flexibility (per NCGS 115D-58.14) to not use Statewide Term Contracts if the College can find a lower price for the same product or if a pressing need is evident. The College could demonstrate in its response for each of the findings a lower price, a pressing need, and/or that a specific item could not be located on state contract. Action Plan: Training was offered and well attended by faculty and staff on August 18th during professional development. Regular training will continue to be offered twice annually. Attendance at annual training is required in order to have an activated P-Card. Faculty and staff are trained to research items ordered to determine if the item is available on state contract.
Finding 3: Of the 78 purchase orders reviewed, only 2 (2%) were purchased without
required competition and lacked sufficient documentation to justify non-competition. However, the College could successfully support its position with follow-up documents for one of the issues. For the second issue, the bids were included in the file, however, the winning bid was multi-year and had recently expired. Action Plan: The Purchasing Specialist will make sure bids are clearly documented and properly reviewed by Administration to facilitate easier file evaluation. In addition, the Purchasing Specialist will implement a tracking system to ensure multi-year bids are tracked to ensure bids are re-bid before expiration.
Finding 4: In April 2015, the federal government enacted the Iran Divestment Act of
2015. The goal of the act was that agencies would not do business with any company
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entering commerce with 12 debarred Iran companies. Due to the act, the College was required to have every vendor with a purchase of $1,000 or greater sign a vendor certification stating that they did not engage in business with the debarred Iran companies. This was considered a tedious and low-risk task to have vendors complete and many community colleges did not even attempt to complete. Also note that the completion of the Iran Divestment Act of 2015 stopped being a requirement by an act of the General Assembly in 2017. The College made every effort to have each vendor sign the act, however, we did miss some transactions. Even though the certification was not signed, we believe the vendors were not engaged in commerce with the debarred Iran companies. Thus, a minor finding. Action Plan: The vendor certification requirement under the Iran Divestment Act has been eliminated, effective October 1, 2017. Governor Cooper signed legislation into law on Thursday, July 27th, 2017 repealing the statute requiring that every State contract, and the contracts with any of its sub-units or with local government entities, include a contractor certification that the contractor is not on the list of entities doing business with Iran that is maintained by the Office of the State Treasurer. The prohibition itself, however, remains in effect. We have also re-reviewed the files noted without the required Iran Divestment Act Certification signed and believe that the vendor’s do not warrant a risk.
Finding 5: Of the 119 direct pay files reviewed, 3 should have been processed using the
NC E-Procurement System. This finding relates to one vendor the College uses for five different departments. The College has found it more efficient to use the P-Card system rather that the NC E-Procurement System to keep these invoices paid in a timely manner. Dividing these invoices by the five departments multiple times during the year using the NC E-Procurement System is inefficient, leads to late invoice payment, and incorrect department charges. Again, a minor finding for an immaterial dollar amount. Action Plan: The College will work directly with the State to have purchasing cards integrated with the Purchase Order System once the State makes this option available for the Community Colleges.
April 12, 2017
Candy Harmon
Purchasing Technician
Alamance Community College
1247 Jimmie Kerr Road
Graham, NC 27253-8000
Dear Ms. Harmon:
The Compliance Review for Alamance Community College has been completed. The review was a
routine/scheduled review. The final Compliance Review Report, including a summary of the findings and
recommendations, is attached.
I would like to thank you for your cooperation and assistance during the Compliance Review process. The
Division of Purchase and Contract shares the goals of all purchasing personnel to implement the most
professional, productive, and efficient purchasing processes possible.
If I can be of any assistance to you, please do not hesitate to call me at 919-807-4546 or email me at
Sincerely,
Chuck Clements Chuck Clements
Compliance Officer
Attachment
cc: Beth Wood, State Auditor
Charles Perusse, State Budget Director
Angie Dunaway, Interim State Purchasing Officer
Dr. Algie Gatewood, President
Matthew Banko, Controller
Sharon Rosado, NC Community Colleges, Director, Administrative and Facilities Services
ALAMANCE COMMUNITY COLLEGE
Compliance Review
APRIL 2017
Prepared by:
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASE AND CONTRACT
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1 Pages have been intentionally left blank to conform to double-sided print format.
TABLE OF CONTENTS
Page
Objectives, Scope and Methodology ........................................................................................... 1
Findings and Recommendations Summary2 ............................................................................. 2
Appendices:
Appendix A: Administrative Code ........................................................................................ A-1
Appendix B: Agency Response ............................................................................................. B-1
2 A finding sheet for each individual finding or grouped similar findings was provided to the agency.
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OBJECTIVES, SCOPE AND METHODOLOGY
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North Carolina Administrative Code, Title 1, Chapter 5, Section .1605, requires the Division of
Purchase and Contract to conduct compliance reviews on purchasing practices at all agencies. The
purpose of the compliance review is to determine if an agency is complying with North Carolina's
purchasing laws and regulations and whether the agency should continue having the same
delegation amount, have it reduced, or increased (See Appendix A for Administrative Code).
The compliance review objectives are to:
1. Determine that Alamance Community College’s purchasing staff understands and adheres
to North Carolina General Statute Article 3 of Chapter 143 and Administrative Code Title
1, Chapter 5.
2. Determine that Alamance Community College’s internal policies, procedures, and
processes accurately reflect the applicable requirements of North Carolina General Statutes
and the Administrative Code.
3. Exchange ideas of how the State of North Carolina can become more efficient and cost
effective.
4. Communicate and offer training opportunities via the Division of Purchase and Contract
or in conjunction with professional organizations (i.e. CAGP, NIGP, etc.) to better educate
and, in turn, increase productivity of purchasing personnel.
5. Develop a mutually beneficial working relationship between Alamance Community
College and the Division of Purchase and Contract.
The scope and methodology of this review included3:
Review of the purchasing organization.
Analysis of current policies, procedures, and processes.
Interview, via questionnaire, of the Purchasing Officer.
Examination of a sample of purchasing transactions.
Review of direct payments.
Review of procurement card transactions.
The review of purchasing transactions was for the period February 1, 2016 through January 31,
2017. A random sample4 of 78 purchase orders was selected from a population of 219 E-
Procurement purchase orders. A random sample of 119 direct payments was selected from a
population of 3,237 direct pay payment files. A random sample of 120 P-Card purchases was
selected from a population of 4,034 P-card purchase files. The random sample is intended to
provide a diverse selection of transactions for review including; contracts (term, agency specific,
service), requisitions, approvals, purchase orders, file documentation, the receiving process,
invoices, retention, etc.
3 Disclaimer: A Compliance Review is limited in scope and will not disclose all exposures in a purchasing practice.
4 Statistical sample was drawn from the E-Procurement order system and Works to test purchasing expenditures. The
sample was drawn to achieve a 90% confidence level with a +/- 3% upper error limit with an expected error rate of
3%.
FINDINGS AND RECOMMENDATIONS SUMMARY
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Finding 1: Incorrect Commodity Codes
Of the 78 purchase orders reviewed, 21% (16) contained incorrect commodity codes.
The North Carolina Procurement Manual, Section 2.3, requires the use of appropriate commodity
codes. Utilizing the correct commodity code enables the Division of Purchase and Contract; as
well as, the College, to analyze spend data to determine what goods and/or services should be
considered for Statewide Term Contract or Agency Specific Contract. This data is used for
leverage buying and strategic sourcing to help save money for the College and the State of North
Carolina.
Recommendation: Alamance Community College must input correct commodity codes into the E-
Procurement System.
Finding 2: Not Purchasing from Statewide Term Contract—Repeat Finding
Of the 119 direct pay files reviewed, 3% (4) did not utilize available Statewide Term Contracts
and did not show evidence that pricing received was less than offered by Statewide Term Contract
vendors.
Of the 120 P-card transactions reviewed, 7% (8) did not utilize available Statewide Term Contracts
and did not show evidence that pricing received was less than offered by Statewide Term Contract
vendors.
Alamance Community College did not utilize Statewide Term Contracts in accordance with the
North Carolina Administrative Code, 01 NCAC 5B.1101(b), to purchase items available from
Statewide Term Contracts when required. This finding was also discovered during the College’s
previous compliance review, February, 2011.
The North Carolina Administrative Code, 01 NCAC 5B.1101(b), requires all State Agencies,
Community Colleges and Universities to purchase from available Statewide Term Contracts.
Community Colleges and Universities have been granted purchasing flexibility but must provide
appropriate documentation when exercising the flexibility option.
Not utilizing Statewide Term Contracts impacts business decisions regarding term contract spend;
as well as, strategic sourcing and leverage buying. In addition to not purchasing from Statewide
Term Contract there was not sufficient documentation in the files reviewed onsite as to why the
item on term contract did not meet the College’s requirement as required by the North Carolina
Administrative Code, 01 NCAC 05B.1105, nor was there documentation related to exercising
purchasing flexibility as allowed by North Carolina General Statutes, § 115D-58.14. If purchasing
flexibility is being utilized, the file must be documented showing that the cost was less and the
items are the same or substantially similar in quality, service, and performance as items available
under Statewide Term Contracts.
Recommendation: Alamance Community College must comply with North Carolina General
Statutes and the North Carolina Administrative Code by utilizing Statewide Term Contracts or,
when authorized, adequately documenting the reason for deviating from this requirement in the
respective file.
FINDINGS AND RECOMMENDATIONS SUMMARY
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Finding 3: Not Seeking Competition for Purchases Over $5,000
Of the 78 purchase orders reviewed, 3% (2) were purchased without required competition and
lacked sufficient documentation to justify non-competition.
The North Carolina Administrative Code, 01 NCAC 5B.0301(2), requires competition to be sought
for all purchases that exceed $5,000, not covered by Statewide Term Contract. Per the North
Carolina Administrative Code, 01 NCAC 5B.1401, when waiver of competition is deemed
necessary, adequate documentation must be maintained in the purchase order file to support not
obtaining competition. Also, the North Carolina Administrative Code, 01 NCAC 5B.1401,
requires that any waiver of competition that exceeds the College’s delegation be submitted to the
State Purchasing Officer for prior review. North Carolina General Statutes, § 143-53.(a)(5),
requires prior review by the State Purchasing Officer of any waiver of competition if the
expenditure exceeds $10,000 regardless of the College’s delegation amount. Additionally, not
obtaining quotes on the state’s solicitation form for purchases over $5,000 is a violation of the
North Carolina Administrative Code, 01 NCAC 5B.1402.
Recommendation: Alamance Community College must solicit competition for purchases
involving an expenditure of public funds over $5,000, or appropriately document justification for
a waiver of competition.
Finding 4: No Vendor Certification as Required by the Iran Divestment Act of 2015
Of the 78 purchase orders reviewed, 36% (28) did not have certification from the vendor as
required by the Iran Divestment Act.
North Carolina General Statutes, § 143C-6A-5.(a), dictates that a State Agency shall require a
person that attempts to contract with the State or political subdivision of the State, including a
contract renewal or assumption, to certify, at the time the bid is submitted or the contract is entered
into, renewed, or assigned, that the person or the assignee is not identified on a list created by the
State Treasurer pursuant to G.S. § 143C-6A-4. A State agency shall include certification
information in the procurement record. Any purchase greater than $1,000, without regard to
method of payment, is, in essence, a contract and is, therefore subject to this requirement. The
Division of Purchase and Contract required vendors awarded Statewide Term Contracts to fulfill
the certification requirement at the time the contract was awarded, as a result it is not necessary to
obtain certification when purchasing from Statewide Term Contracts. All other purchases greater
than $1,000 made by the College require the certification be obtained and maintained in the
procurement file.
Recommendation: Alamance Community College must comply with the requirement of North
Carolina General Statutes, § 143C-6A-5.(a), and obtain vendor certification when making any
purchase or awarding any contract greater than $1,000.
FINDINGS AND RECOMMENDATIONS SUMMARY
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Finding 5: Direct Payments Are Being Utilized Instead of Issuing Purchase Orders Through
the North Carolina E-Procurement System
Of the 119 direct pay files reviewed, 3% (3) should have been processed using the NC E-
Procurement System.
North Carolina General Statutes, § 143-48.3, directs the Division of Purchase and Contract to
develop and maintain the NC E-Procurement System and authorizes the Division to establish rules
governing its use. The North Carolina Procurement Manual, Section 3.4.1(7), establishes the NC
E-Procurement System as the methodology to issue purchase orders to properly document
purchases; as required by the North Carolina Administrative Code, 01 NCAC 05B.1903.
The use of direct payments for purchases covered by the North Carolina General Statutes, Chapter
143, Article 3, lacks the necessary transparency required in public procurement. Properly
documented and maintained purchase files are an essential tool in maintaining the trust of the
State’s taxpayers. All purchases, without regard to value, must be properly documented to ensure
that the government’s activities are transparent and above reproach. Additionally, using the NC
E-Procurement System allows the Division of Purchase and Contract to gather accurate spend data,
enabling the Division to establish the most effective and efficient Statewide Term Contracts.
Recommendation: Alamance Community College must minimize the use of direct payments and
maximize, to the fullest extent possible, the use of the NC E-Procurement System.
APPENDIX A
ADMINISTRATIVE CODE
A-1
Chapter 5 – PURCHASE AND CONTRACT
.1605 COMPLIANCE REVIEWS
(a) The Division of Purchase and Contract shall conduct compliance reviews on purchasing
practices at all agencies. The purpose of the compliance review shall be for determining
if an agency is complying with North Carolina’s purchasing statutes and rules adopted
thereunder, and whether it should continue having the same level of delegation, have it
reduced, or if it qualifies for an increase. A copy of the compliance report shall be
provided to the agency’s executive officer, the State Auditor, the State Budget Officer, the
local school administrative unit’s Board, any of which are applicable.
(b) The Division’s staff may enter the premises and obtain an agency’s purchasing records for
the purpose of the compliance review. The agency shall cooperate with the Division’s
staff, providing them with requested records, adequate office space for conducting the
review, and agency purchasing staff for discussion of purchase transactions. The Division
shall not unnecessarily require of the agency any more than is needed to complete the
review.
(c) The SPO may lower, or raise if requested, an agency’s (excluding the universities) general
delegation, if the results of a compliance review by the compliance staff of the Division
merit such action as determined by the SPO. The SPO may lower the delegation to any
level, including the complete removal of the delegation, depending on the nature of any
violations found. The SPO shall report to the University’s Board of Governors the results
of any compliance review conducted at any of the universities, and shall provide to them
the SPO’s recommendation, based on those results, on what that university’s benchmark
should be.
(d) The SPO shall provide to each agency, upon request, the Division’s assistance in
educational training for the agency’s staff, to better acquaint them with the purchasing
statutes and rules.
History Note: Authority G.S. §143-54;
Eff. April 1, 1999.
APPENDIX B
AGENCY RESPONSE
B-1
APPENDIX B
AGENCY RESPONSE
B-2
APPENDIX B
AGENCY RESPONSE
B-3
APPENDIX B
AGENCY RESPONSE
B-4