CITY COUNCIL STAFF REPORT
Meeting: April 19, 2022
Subject
Internal Audit – Procurement Operational Review Final Report
Recommended Action
Consider accepting the Procurement Operational Review Final Report
Discussion
Background
In Fiscal Year (FY) 2019-20, the City began an internal audit program and issued a Request for Proposal ( RFP). After reviewing the proposals, the evaluation committee selected Moss Adams as the City’s internal auditor. Moss Adams reports to the City Council’s Audit Committee, who oversees the work and approves the annual internal audit plan.
Enterprise Risk Assessment
In 2020, Moss Adams conducted an Enterprise Risk Assessment (ERA) and identified procurement (purchasing and contracting) as an area of overall high risk due to the inherent vulnerability of the function, high level of decentralization, and the potential consequences of risk occurrences.
Internal Audit Work Plan
In 2021, Moss Adams developed an internal audit work plan to guide activities for FY 2021-22. The Audit Committee and City Council approved the FY 2021-22 internal audit work plan, which included the following projects:
• Procurement Operational Review,
• Policy Inventory and Plan,
• Capital Program Effectiveness Study, and
• Fraud, Waste, and Abuse Program.
The work plan began with a consultative procurement operational review to identify opportunities for improvement in service delivery, internal controls, organization, operations, and process efficiency. A s internal auditors, Moss Adams was tasked with assessing the quality of the City’s procurement framework and its procurement processes for adequacy in design and operations.
Procurement Operational Review
The Procurement Operational Review assessed the City’s procurement operations , including their alignment with:
• City goals, policies, and business plans,
• Industry best practices, and
• Applicable laws and regulations.
For this engagement, Moss Adams focused on the structure, function, and role of procurement people, processes, and systems.
As part of the assessment, Moss Adams conducted planning, data collection, and analysis to understand the existing environment, identify opportunities for improvement, and provide practical recommendations.
Procurement Operational Review Observations and Recommendations The City’s procurement model is currently highly decentralized, with department heads and their staff primarily responsi ble for conducting and managing purchasing and contracting activity with support from the Finance Division and the City Attorney’s Office (CAO).
This decentralized procurement structure is the primary driver behind many of the report’s observations and recommendations. Moss Adams noted several opportunities to improve the efficiency and coordination of procurement activities. Therefore, their primary recommendation is to consider a centralized procurement model. T he attached report lists all ten recommendations.
Next Steps
Following the approval of the Procurement Operational Review, staff will develop an implementation plan, including timelines, to implement the report’s recommendations.
On a regular basis, staff will report to the Audit Committee on the status of the implementation. The implementation pl an and status reports will be available on the City’s website at cupertino.org/budget under Internal Audit.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact. The City’s Internal Audit contract is included in the contracts category of the Accounting program on pages 331-332 of the FY 2021-22 Adopted Budget.
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Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Jim Throop, City Manager
Attachments:
A – Procurement Operational Review