Pitfalls of PurchasingMOASBO Spring Conference

Bill Sloan – Rockwood School Districtsloanwilliam@rockwood.k12.mo.us

636.733.2032Director of Purchasing and Transportation

What are the expectations for Purchasing? Are you staffed to meet those expectations? Do you know the BOE Purchasing Policies? Does District staff know the BOE Purchasing

Policies? Who is making purchasing decisions? Who are your vendors and how were they selected? How Important is Service after the sale? Do you know how much and what is being spent

with your major vendors? When is a vendor contract appropriate?

Things to Consider!

District size is not a factor! Organizational Structure Makes a Difference

◦ Centralized vs. Decentralized? Centralized = a few people making buying

decisions. Decentralized = multiple people and departments

making buying decisions. Centralized – more control but may not be as

responsive. Decentralized – mode is to enforce BOE policies, a

resource for others Which is Best??

District Purchasing Role

Lack of Price Protection? Commitment Contracts (one sided) Exclusivity Arrangements – Good or Bad? Automatic Renewals at end of term Insurance and Indemnity Clauses Termination Clauses

◦ Breach – Cure◦ Poor Performance◦ With or Without Cause

Independent Contractor Others?

Contract Pitfalls

Internal Controls – separation of functions Purchasing – bidding and approval limits

◦ How many bids and at what $ threshold?

Who can be a vendor?◦ Staff and their Relatives? ◦ BOE Members and the companies they work? ◦ District Residents?

Purchasing By and Solicitation of Staff◦ Personal Gifts and Donations!

Consultants/ Employment Procedures (State Audit) Contracts – who can sign? Construction Contracts and Awards – when to bid ($) and advertise Does your District have a position on:

◦ Coop Purchasing? ◦ Local Vendors?

Avoiding Pitfalls – Know and Follow your Policies

Establishes bidding requirements – ◦ Informal: Verbal, Telephone, Internet Bids,◦ Formal: Written bids in response to Bid Solicitation (RFP)

Establishes purchasing methods ◦ Purchase Orders, P-cards, Supplies Reimbursements

Process for hiring consultants Process for “Sole Source” Items Increased Construction Bid requirements PO Approval Levels

Purchasing Policies and Regulations – Basis of Audits!

Purchasing: Bid Limits and Exemptions clarified◦ Required to add bid info as part of requisition notes or attachments◦ Provide guidance to exempted departments (Self-funded)

Added a Convenience Purchase Option for Employee Reimbursement◦ Limit $100 Max per month per employee

Utilizing Consultants under $7500 ◦ CFO and HR approval◦ Consultant cannot be hired as an employee within 1 year of completing

consulting work

Increased Amount of Sealed Construction Bids to (minimum) $15K

Policy and Regulation Changes

Educate staff on policies and procedures

Ongoing Communication ◦ Seasonal Topics and Reminders ◦ Beginning School, Holidays, 2nd Semester, Spring Break◦ Staff Appreciation, Prom Season, Close of School Year

Monthly Topics

Training

Update Internal and External Websites

Communicating is Critical

Conduct periodic internal purchasing audits Position an Internal Audit as a learning Opportunity

– Both Ways! Were bids obtained? Was BOE approval obtained? Were PO’s issued before invoices received? Were items received? Were prices and quantities consistent with bid? Was an agreement signed by someone with

Authority? Retain records - 2 Years to 5 Years and Beyond! Were Policies Followed?

Conduct Your Own Internal Audit!

Monitor PO process Provide bid and contract templates Review New Vendors Establish PO Terms and Conditions Provide an independent perspective Encourage Vendor Negotiations Review vendor agreements – what is being

agreed to? Offer your services to other Departments

Role in a Decentralized Purchasing Structure:

P-cards are a great tool but must be closely managed!

Auditors – will look closely at P-Cards ◦ “a potential risk”

Establish card limits by job role◦ Document changes to limits

Establish effective p-card rules – “Employee contract”◦ Approvals consistent with BOE Policy

Enforce the rules consistently!

Monitor Employee movement – job change, leaving the District, moving to another school

Use Bank tools to manage transactions!

State Audit? – Who qualifies for a p-card?

P-Cards Gone Wild!

Can you determine how much and what is being spent by vendor?

Do requisition procedures generate reliable data?

Can you combine PO and P-card purchases by vendor?

Do you have a contract file?

Do others have access to this info?

Can bid info be identified for each purchase?◦ Bid Award Phase: Document why a vendor was selected!

Blanket PO’s are easy but provide little data or transparency!

Vendor Relations

Audits are beneficial – Attitude Sets the Tone! Auditors focus on Processes and Routines Auditors compare Activities to Policies

◦ Bidding Policies◦ Bid Procedures and Awards◦ BOE Approvals

Auditors look for risks – P-Card programs◦ Fuel for District vehicles and Buses

Vendors that are Employees Evergreen Contracts Construction Contracts

State Procedural Audits – A Pitfall?

Establish a Good Working Relationship◦ Meet in-person!◦ Educate your Auditor.

Ask Questions and get clarification!◦ P-Card Account Listing◦ Establish Rules (and justification) for a P-Card◦ Retain information for changes to P-Card limits

Change or Add BOE Policy and Regulations if necessary! ◦ Clear BOE Policy for Hiring Consultants

Retain Information for each purchase including: Bids, PO approvals, and Invoice Payments.

State Procedural Audit for Purchasing

“We did not find any resistance to our work at Rockwood.“

“I’m optimistic the matters we’ve identified in our audit report will be fixed,"

“…they agreed to implement 90 to 95 percent of the recommendations”, and “some, they already have been working on.“

“Rockwood would have been rated “Good” had it not been for the Construction Management issues.”

State Auditor’s Comments

Don’t allow short cuts when spending tax dollars!◦ Itemized PO’s = vendor data

BOE Policies are your guide! Educate staff on Policy Ask for more from your vendors! Don’t sign contracts unless there is a long term

benefit for your District. Don’t allow contract signatures from unauthorized

staff! Require Justification when adding new vendors!

◦ Avoid Vendors related to staff – Check Policy! Keep vendor relations on a Professional Basis!

Purchasing Pitfalls Actions

Q and A!

Pitfall – Open Discussion