financial management: procurement
DESCRIPTION
Financial Management: Procurement. Procurement Overview. Procurement Procedures Contract Administration and Awards Internal Controls and Documentation. Page 2. Procurement. - PowerPoint PPT PresentationTRANSCRIPT
11/21/2008 Page 1
Financial Management:
Procurement
11/21/2008 Page 2Page 2
ProcurementOverview
Procurement Procedures
Contract Administration and Awards
Internal Controls and Documentation
11/21/2008 Page 3Page 3
Procurement
Link to appropriate state and federal policies, statutes, and guidelines (e.g., competitive vs. non-competitive, conflict of interest)
Inventory, management, and disposition
11/21/2008 Page 49/12/2008 Page 4
Procurement Regulations
EDGAR, CFR 34, Parts 74-86 and 97-99
11/21/2008 Page 59/12/2008 Page 5
Procurement: Definitions and Terms
Competitive Sealed Bid – method of procurement where sealed bids are publicly solicited and a firm fixed price contract is awarded to the responsible bidder whose bid, conforming with all material terms and conditions of the invitation for bids is the lowest in price
11/21/2008 Page 69/12/2008 Page 6
Procurement: Definitions and Terms
Competitive Proposals – method of procurement where proposals are requested from a number of sources, is publicized, and either a fixed price or a cost reimbursement type contract is awarded
11/21/2008 Page 79/12/2008 Page 7
Procurement: Definitions and Terms
Conflicts of Interest – occur when the individuals responsible for determining bid/proposal responsiveness are over- ruled by other individuals within the organization or individuals responsible for determining responsiveness (or any members of his or her family) has any personal or corporate ties or any financial interest in any of the firms offering a bid/proposal
11/21/2008 Page 89/12/2008 Page 8
Procurement: Definitions and Terms
Cost Analysis – evaluating the separate cost elements that make up the total price
11/21/2008 Page 99/12/2008 Page 9
Procurement: Definitions and Terms
Cost Plus a Percentage of Cost or Cost Plus a Percentage of Income – an agreement in which the contractor/vendor is provided a specified percentage of profit over and above the actual costs of construction. This type of contract arrangement is not permitted because the contractor/vendor has little incentive to hold down costs
Equipment – tangible, non-expendable, personal property with a useful life of more than one year and having an acquisition cost of $5,000 or more per unit
11/21/2008 Page 109/12/2008 Page 10
Procurement: Definitions and Terms
Non-Competitive Proposals – procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is deemed inadequate
Price Analysis – evaluating the total price; comparing price quotes, market prices, and/or similar information
11/21/2008 Page 119/12/2008 Page 11
Procurement: Definitions and Terms
Procurement – process of obtaining goods and/or services in accordance with applicable rules and regulations
Small Purchase Procedures – simple, informal procurement procedures that are used to secure services, supplies, or other property that do not cost more than an established threshold
11/21/2008 Page 129/12/2008 Page 12
Procurement: Definitions and Terms
Small Purchase Threshold – threshold established to determine whether an informal or formal procedure should be used for securing services, supplies, or other property
Standards of Conduct – written code or standards of conduct governing the performance of officers, employees, or agents engaged in the awarding and administration of contracts
11/21/2008 Page 139/12/2008 Page 13
Procurement: Definitions and Terms
Supplies – all tangible personal property other than equipment
Suspension – either the: 1) temporary withdrawal of the authority to obligate grant funds pending correction action by the grantee or subgrantee or a decision to terminate the grant or 2) action taken by a suspending official in accordance with agency regulations to immediately exclude a person from participating in grant transactions for a period, pending completion of an investigation
11/21/2008 Page 149/12/2008 Page 14
Procurement: Making Sure You are in Compliance
Ensuring purchases are necessary
Open competition
Procurement procedures
Vendor selection process
Inventory management
11/21/2008 Page 159/12/2008 Page 15
Procurement: Ensuring Purchases are Necessary
All costs have to be necessary for the performance or administration of the federal grant
11/21/2008 Page 169/12/2008 Page 16
Procurement: Ensuring Purchases are Necessary
All proposed purchases must be reviewed to avoid unnecessary or duplicative items:
• Surplus property• Structure procurement to obtain most
economical purchase• Intergovernmental agreement for
common goods or services• Lease vs. purchase
11/21/2008 Page 179/12/2008 Page 17
Procurement: Open and Full Competition
All procurement transactions shall be conducted in a manner to provide full and open competition to the maximum extent possible:
• Entity involved in drafting solicitation may not compete for procurement
11/21/2008 Page 189/12/2008 Page 18
Procurement: Open and Full Competition
Solicitations shall clearly establish all requirements the bidder must fulfill in order for the bid to be evaluated
11/21/2008 Page 199/12/2008 Page 19
Procurement: Open and Full Competition
Awards must be made to the bidder or offeror whose bid is responsive and most advantageous to the recipient, price, quality, and other factors considered
11/21/2008 Page 209/12/2008 Page 20
Procurement: Open and Full Competition
Internal controls require that districts operate within state and federal laws
Don’t skip the rules
• Unreasonable requirements on vendors to qualify to do business Pre-qualified lists should not limit
competition
11/21/2008 Page 219/12/2008 Page 21
Procurement: Open and Full Competition
Requiring unnecessary experience or excessive bonding
Noncompetitive pricing practices
Noncompetitive awards to consultants on retainer
Organizational conflicts of interest
Specifying a brand name
In-state or local preferences
11/21/2008 Page 229/12/2008 Page 22
Procurement: Conflict of Interest
Shall have written standards of conduct governing the performance of employees engaged in the award and administration of contracts – standards must include sanctions for violations
11/21/2008 Page 239/12/2008 Page 23
Procurement: Conflict of Interest
Conflict situations:
• Financial interest
• Acceptance of items of monetary value from contractors (can accept unsolicited gifts of nominal value)
11/21/2008 Page 249/12/2008 Page 24
Procurement: Written Procurement Procedures Shall have written procedures that
include (at a minimum):
• Measures for avoiding the purchase of unnecessary items
• Measures to compare lease vs. purchase (where appropriate)
11/21/2008 Page 259/12/2008 Page 25
Procurement: Written Procurement Procedures
When developing solicitations, the Requests for Proposals (RFPs) should include all of the information a bidder needs to respond to the solicitation
11/21/2008 Page 269/12/2008 Page 26
Procurement: Written Procurement Procedures Draft solicitations should include:
• A clear and accurate description of technical requirements
• Evaluation factors Functions to be performed
• Features of brand names that bidder must meet (when applicable)
11/21/2008 Page 279/12/2008 Page 27
Procurement: Written Procurement Procedures Acceptance of any products/services
in metric system of measurement
Preference for products that conserve natural resources (as feasible)
Positive efforts for minority-owned/ women businesses (as feasible)
11/21/2008 Page 289/12/2008 Page 28
Procurement: Cost/Price Analysis
Shall perform a cost or price analysis in connection with every procurement action:
• Price analysis generally means evaluating the total price – compare price quotes, market prices, or similar information
11/21/2008 Page 299/12/2008 Page 29
Procurement: Cost/Price Analysis
• Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit)
Goal is to determine reasonableness
11/21/2008 Page 309/12/2008 Page 30
Procurement: Type of Procurement Instruments
The type of procurement instrument used is determined by the recipient, but must be:
• Appropriate for the particular procurement; and
• Promote the best interest of the program
Remember: Cannot use “Cost Plus” Contracts!
11/21/2008 Page 319/12/2008 Page 31
Procurement: Noncompetitive Contracts
As a practical matter, non-competitive contract raises “red flags”
• Ensure that documentation of the contract justifies non-competition (sole source justification)
• Role of cost/price analysis even more important
11/21/2008 Page 329/12/2008 Page 32
Procurement: Noncompetitive Contracts
Generally, noncompetitive proposals appropriate only when:
• The good or service is available only from a single source (sole source)
• There is a public emergency
• The awarding agency (MDE) authorizes
• After soliciting a number of sources, competition is deemed inadequate
11/21/2008 Page 339/12/2008 Page 33
Procurement: Awards
Awards must be made to the bidder whose bid is:
• Responsive to the solicitation; and
• Is most advantageous to the recipient considering price, quality, and other factors
11/21/2008 Page 349/12/2008 Page 34
Procurement: Awards
Awards must be made to responsible contractors who possess the potential ability to perform successfully:
• Contractor integrity
• Past performance
• Financial and technical resources
11/21/2008 Page 359/12/2008 Page 35
Procurement:Suspension/Debarment
Cannot contract with vendor who has been suspended or debarred
Must verify if contract is $25,000 or more
• https://www.epls.gov/
11/21/2008 Page 369/12/2008 Page 36
Procurement: Inventory Management
Different rules for equipment and supplies
Equipment
• Federal definition of equipment Tangible personal property
Useful life of more than one year
Acquisition cost of $5,000 or more
11/21/2008 Page 379/12/2008 Page 37
Procurement: Inventory Management
• State and federal programs may use an expanded definition, as long as it includes all property described
previously
Supplies
• Everything else
11/21/2008 Page 389/12/2008 Page 38
Procurement: Use of Equipment
Must use for the program for which it was acquired – even after federal funding for program ceases
• May use for other programs if such use is incidental and does not interfere with the original program
11/21/2008 Page 399/12/2008 Page 39
Procurement: Use of Equipment
If no longer needed:
• First transfer to another federal program
• Disposition instructions from U.S. Department of Education EDGAR, CFR 34, Part 80.32
11/21/2008 Page 409/12/2008 Page 40
Procurement: Tracking Equipment
Property records
• Description, serial number, or other identification, source of the equipment (specify federal grant award), title information, use and condition, and ultimate disposition
11/21/2008 Page 419/12/2008 Page 41
Procurement: Tracking Equipment
Physical inventory
• At least every two years
• All discrepancies must be investigated
Control system to prevent loss, damage, theft
• All incidents must be investigated
11/21/2008 Page 429/12/2008 Page 42
Procurement: Supplies
Must use for the program for which it was acquired
If no longer needed, and if residual value of unused supplies is more than $5,000 (aggregate value):
• First transfer to another program
• Compensate U.S. Department of Education for its share
11/21/2008 Page 439/12/2008 Page 43
Procurement: Tracking Supplies
EDGAR does not set out any specific tracking requirements
But, as a practical matter, US Department of ED expects subgrantees to track all property purchased with federal funds in order to prove there has been an allocable benefit to the program
11/21/2008 Page 449/12/2008 Page 44
Procurement: Allowable Costs
Costs need to have been incurred during the grant period in the grant approval letter
Costs need to be eligible under the terms of the funding source and programs listed in the approved application
11/21/2008 Page 459/12/2008 Page 45
Procurement: Allowable Costs
Funding sources must be identified separately in the accounting records by project and grant fiscal year
11/21/2008 Page 469/12/2008 Page 46
Procurement: Critical Elements
Necessary Purchases
Competition
Conflict of Interest
Written Procedures
Competitive vs. Noncompetitive Contracts
Awarding
11/21/2008 Page 479/12/2008 Page 47
Procurement: Critical Elements
Suspension/Debarment
Contract Administration
Documentation
Inventory Management
Tracking of Equipment & Supplies – Retention & Disposal
Internal Control(s)
11/21/2008 Page 489/12/2008 Page 48
Procurement: FAQs
What is the difference between competitive and noncompetitive bidding?
What is a small purchase threshold?
11/21/2008 Page 499/12/2008 Page 49
Procurement: FAQs
What are allowable costs?
What are potential conflicts of interest?
What are Standards of Conduct?
11/21/2008 Page 509/12/2008 Page 50
Procurement: Other Resources
Excluded Parties List System (suspension and debarment): https://www.epls.gov
EDGAR §80 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments
11/21/2008 Page 519/12/2008 Page 51
Procurement: More Information
Contacts
• MDE: Specific Program Office
• ISD:
11/21/2008 Page 52
LEA Fiscal
Review Tool
11/21/2008 Page 53
LEA Fiscal Review Tool
Developed by MDE staff responsible for federal and state fund management
Lists major elements reviewed during an audit performed by MDE state auditors
11/21/2008 Page 54
LEA Fiscal Review Tool
Lists all items contained within the FMS Self-Assessment Survey and reflected in the Professional Development modules
Purpose
• To assist an LEA in the development of its own plan for improvement of its FMS
11/21/2008 Page 55
Resources
11/21/2008 Page 56
ResourcesAll resources identified in this Professional
Development module are available on:
Michigan LearnPort
www.learnport.org
Collaboration Center
Community Room
LEA Financial Management Resources
11/21/2008 Page 57
Committee
Membership
11/21/2008 Page 58
MDE/MAISA Monitoring and Compliance Committee
Becky Rocho, Calhoun ISD, (269) 781-5141 [email protected]
Patty Cantú, MDE, Office of Career and Technical Education, (517) 373-3373
[email protected] Mary Ann Chartrand, MDE, Grants Coordination and
School Support, (517) 373-8862 [email protected]
Terri Lynn Giannola, MDE, Office of Career and Technical Education, (517) 373-4670 [email protected]
11/21/2008 Page 59
Procurement Subcommittee Tom Bean, ISD Chair
Calhoun ISD
(269)789-2476; [email protected] Dan Hanrahan – MDE Chair
MDE – State Aid and School Finance
(517) 335-0521; [email protected] Gus Bishop
Charlevoix-Emmet Intermediate School District
(231) 547-9947; [email protected] Steve Ezikian
Wayne RESA
(734) 334-1451; [email protected] Cheryl Schubel
MDE- Grants Coordination and School Support
(517) 241-2597; [email protected]