Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.
City of Palo Alto
Office of the City Auditor (OCA)
Policy & Services Committee Meeting
Procurement Process Audit, June 6, 2024
Presenter: Mike Chimera, Manager
September 23, 2024
2 Objectives
1. Determine whether needs assessment, budgeting,
solicitation, and vendor selection processes are efficient, effective, and transparent to ensure value for money and fair competition.
2. Determine whether the procurement process is valid
through proper approvals, adequate segregation of
duties, and compliance with applicable laws, regulations, and the City's policies.
3. Determine whether technology is used appropriately and effectively to enhance integrity, efficiency, transparency of the procurement process and ensure consistency and
validity of the relevant information and data.
4. Identify the opportunities to improve the efficiency and effectiveness in the procurement process.
3 Fifty Contracts Sampled from FY22 and FY23
CONTRACT TESTING METHODOLOGY
• Contract terms & conditions align with relevant solicitation type in the Purchasing Manual
• Documentation is appropriately maintained
• Appropriate Contract Solicitation and Award limits are followed • Appropriate segregation of duties
• Competitive bidding process followed as outlined in City’s Municipal Code • Vendor selection, evaluation, and approval are reasonable based on analysis of supporting documentation
Criteria
4 Finding 1: Supporting Documentation for Contract Award Finding Recommendation
Six of the 50 contracts sampled had
compliance deficiencies per the City’s
Purchasing Manual and Chapter 2.30 of
the Palo Alto Municipal Code:
• 4 contracts lacked the Solicitation
Plan Checklist or Appendix G.
• 2 contracts lacked the Exemption
From Competitive Solicitation Request
Form or Appendix E.
We recommended that the City
establishes and incorporates a formal
checklist that identifies necessary
documents for retention for contract
awards.
5 Finding 1: Supporting Documentation for Contract Award Additional Support re: Competitive Bidding Process
Upon request from the Policy & Services Committee, the City Auditor assessed 11 of the 50 sampled contracts specifically for competitive bidding procedures • 3 of 11 contracts - exempt from competitive bid process sole vendor • 6 of the 11 contracts received multiple bids
• 3 selected the lowest bidder
• 3 selected the Best Value
• 2 contracts failed testing (as noted in Finding 1)
6 Finding 2: Purchasing Manual
Finding Recommendation
The Purchasing Manual has several
inconsistencies:
• No table of contents
• Outdated chapters
• Inconsistently labeled chapters
• Chapter revisions from different years
• Missing appendices
We recommend that the City considers
adding the following to the Purchasing
Manual:
• Table of contents
• Documented review of chapters
• Accurate and appropriate chapter
titles
• Inclusion of all relevant appendices
7 Finding 3: Needs Assessment and Market Analysis
Finding Recommendation
The City lacks a formalized needs
assessment process in its Purchasing
Manual
• While City departments conduct their own
needs assessments and market analyses
before submitting budget requests, the
Purchasing Division does not collect or
review these assessments and analyses
We recommend incorporating a formal
needs assessments and market analyses
processes in the City’s Purchasing Manual.
Procedures to include a process for the
collection and review of assessments and
analyses by Purchasing Division.
8 Finding 4: Vendor Record Creation
Finding Recommendation
There were 28 duplicate vendors in the
City’s approved vendor listing.
Compensating control: City personnel
check for vendor titles prior to creation
of vendor.
We recommend the City:
• Implements application controls that
help the City avoid creating duplicate
vendor records unintentionally
• Frequently validates and monitors
vendor lists
• Removes duplicate vendors that are in
SAP currently, as well as old vendors
that are no longer in-use
9 ASD Management Response
SUPPLEMENTAL INFORMATION
• 105 formal solicitations
• 3 solicitations (3%) receive no bid
• 27 solicitations (26%) received only 1 bid
Vendor feedback on solicitations receiving 1 or no bids • Vendors were not available to take on the City project • Vendors did not have the requested products and/or expertise Contract solicitations between July 2023 and July 2024
Questions?
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms. The name Baker Tilly and its associated logo is used under license from Baker Tilly International limited. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. © 2024 Baker Tilly Advisory Group, LP 11 Appendix A: Audit Methodology
• Assessed the pertinent laws, policies, and guidelines related to Procurement including the City’s Purchasing Manual and City of Palo Alto Municipal Code
• Interviewed the City Employees to understand the roles and responsibilities, processes, and controls related to Procurement activities.
• Selected a sample of contracts during the audit period, FY21 to FY23. Then stratified the population into smaller groupings by contract type. The percentages of counts for each contract type were multiplied by the sample size of 50 to select a representative number of contracts for each contract type for testing. The sample selected ultimately accounted for $244,409,100.22, or 61% of total contract value.
• Assessed supporting documents for controls performed and approvals for the selected contracts and solicitations.
• Used State and Local Government Procurement” A Practical Guide by National Association of State Procurement Officials (NASPO), California Public Contract Code (PCC), and Auditing Procurement in the Public Sector by the Institute of Internal Auditors (IIA) as best practices.