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! To County Council Date September 24, 198n
COLORADO From Board of County Commissioners
Subject: Reports issued September 18. 1980
In response to the reports issued on September 18, 1980 concerning
Personnel , Purchasing, and Receiving the Board would like to offer the
following:
PERSONNEL
No response required since favorable report.
PURCHASING
"Central Purchasing is established under the direct control of the
Department of Finance and Administration. This, is to say the
least, unusual in that Accounting, Data Processing, and Personnel
all report directly to the Director of Finance and Administration. "
Response - The Department of Finance, Central Purchasing, and Personnel
are organized in accordance with Section 4-2 of the Home Rule Charter
which specifies that these functions will be under the Director of
Finance.
"Purchasing is ostensibly accomplished by the County Purchasing
agent; however, in practice this is not so. The Central Purchasing
office of Weld County is , in effect, an administrative processing
area for purchase requests and purchase orders. Arrangements for
purchasing are normally made by the Department involved by contact
with the Vendor and subsequent purchase requisition to Purchasing
indicating item, quantity, quality, and price. Purchase requisi-
tions are supposed to list three recommended vendors ; however, they
often indicate 'sole source' . "
Response - The above statement describes the exception of today and not
the rule. Prior to the centralization of Purchasing, the above descrip-
tion was normal practice. Even the exception of today is becoming
less frequent as Central Purchasing' s controls are more rigidly enforced
and the concept of centralized purchasing is more generally accepted by
County Departments. The attached procedures and policy describe the
rule in the County environment today, and the above describes the
exception.
"Purchasing is not properly segregated from accounting and inven-
tory. "
8O0 55 0
County Council
September 24, 191
Page two
Response - Purchasing and Accounting are only related in their reporting
relationship to the Director of Finance and Administration, per Section
4-2 of the Home Rule Charter. "Inventory" is maintained by Purchasing
in accordance with Section 4-2, part A(4) which states that Central
Purchasing shall : "establish, maintain and operate the Central Pur-
chasing Office for the County. Responsibilities of the Purchasing
Office shall include the purchase, storage and distribution of supplies ,
materials, property, equipment and inventory, pursuant to the policies
and procedures established by the Board in accordance with the Charter
and the laws of the State."
"There are many instances of purchase before the fact, often the
Purchasing Department, will receive purchase requisitions accom-
panied by the vendors voucher. "
Response - In response to this criticism, it is the policy of the County
not to require requisitions in specific cases as outlined on page 10 of
the Purchasing Policies and Procedures, entitled "Expenditures Not
Requiring Requisitions". (See copy attached. ) Furthermore, items under
$50 also do not require requisitions. The under $50 requisitions exist
to help departments in expediting the procurement of small amounts of
materials and equipment, save administrative time and cut paperwork in
the County, and frees the Central Purchasing staff up for larger and
more complicated buying. This procedure and policy has been a conscious
decision in an effort to balance the cost and benefits of certain pur-
chasing procedures.
"The bid system on items and equipment in excess of $2,000.00 is
inadequate for the protection of the County."
Response - The procedure for "the bid system" for items over $2,000.00
is attached. With the general nature of the comment, it is difficult to
respond to the specific inadequacies inferred above. We would be happy
to respond to any specific concerns and consider any specific recom-
mendations the Council or the investigator might have.
"Purchase Order forms are not pre-numbered or controlled. As
purchase orders are in effect money order documents it is essential
that they be pre-numbered and accounted for as control documents ."
Response - Purchase Orders for over $50 are not pre-numbered because
they are serially numbered, as issued, for control and administrative
purposes. The County takes issue with the statement that they are not
controlled. All are under the control of Central Purchasing and issued
only when numbered for a specific transaction. Furthermore, Purchase
Orders are not in effect "money order dcrt:ments" in that they are not
considered negotiable in any manner or p'—ctice.
The only unissued Purchase Orders ever outside the control of Purchasing
are those for under $50, and they are pre-numbered and assigned by block
numbers to specific departments in the County.
County —Jr..
September 24, 19C"-
Page three
"Central Purchasing does not maintain a list of approved bonafide
vendors and suppliers. There is no current County policy specify-
ing the requirements necessary for a firm to do business with Weld
County. "
Response - A vendor listing is maintained by Accounting and Purchasing.
The majority of vendors are local , and local reputation is relied upon
in all transactions. In cases where vendors are unsatisfactory for any
reason, they are eliminated from the vendor list. When vendors are
other than local firms, or have not been previously active as a Weld
County vendor, they are referred to and references confirmed through the
National Purchasing Association, which provides this service free. It
has been suggested that a Dunn-Bradstreet rating system be utilized,
however, it would be more costly since the same reference checks can be
made through the National Purchasing Association without cost.
"There are no provisions for the accounting department or internal
auditor to periodically review prices paid for items to determine
that such prices are not in excess of current market prices for
like items."
"Purchasing controls (limited) are not reviewed on a periodic basis
by internal auditors or other persons independent of the Purchasing
Division, and/or the Finance Department."
Response - As part of the annual financial and compliance audit, one of
the checks for internal controls is the sampling of all purchasing
transactions in accordance with generally accepted auditing standards as
codified in AICPA Statements on Auditing Standards 1 to 21 . It is
suggested that the Council request a statement from Anderson & Whitney
explaining their specific tests of purchasing procedures and transactions.
"In general the Central Purchasing Division by rule of charter
under the direct control of the Chief Accounting Officer is for all
intents and purposes an administrative division. Central Purchasing
is not, in fact, the purchasing agent for Weld County. The pur-
chasing system as presently designed is easily circumvented parti-
cularly for purchases of less than $2,000.00 per purchase. "
Response - A response to this general statement will be made in the
summary of this report.
RECEIVING
Comments relating to receiving are the same as those staff discussed
with Mr. Sandy of Stanley Security and the county auditors. To alleviate
problems cited under the receiving section of the Council ' s report would
require the employment of at least one, and perhaps two, receiving
clerks in Weld County. When the risk exposure is balanced with other
funding priorities in the county, a more prudent approach is to find
other compensating controls in the purchasing procedures, which we have
attempted to do in the attached policies and procedures.
County Council
September 24, 19P
Page four
GENERAL COMMENTS/SUMMARY
The report does comment on the progress made in the last few months in
Weld County. However, it should be pointed out that undisclosed in the
report was the fact that Mrs. Rhoden, Purchasing Agent, has contributed
substantially more than anyone to the progress of creating a Central
Purchasing Department in Weld County for over three years. To create a
central purchasing environment from a former environment of total de-
centralized purchasing and lack of central control takes much time and
effort, which Mrs. Rhoden has contributed since the initial creation of
the department.
The controls developed to date provide reasonable, but not absolute,
assurance regarding the acquisition and safeguarding of assets against
loss from unauthorized use or disposition in a county environment.
However, the concept of reasonable assurance recognizes the cost of a
control should not exceed the benefits likely to be derived, and the
evaluation of cost and benefit requires estimates and judgements by
management.
All internal control evaluations and purchasing policies and procedures
occur within the above framework. In summary, although the report warns
of loss exposure (the comments are appreciated from that perspective) ,
it overemphasizes redesign of the systems and procedures to eliminate
such exposures without consideration of cost of the control exceeding
the benefits derived. In addition as discussed above, some of the
criticisms are a result of misunderstandings or misinformation con-
cerning the precise procedures and policies in Weld County. The Board
of County Commissioners and county staff share the concerns that the
Council and the Council ' s investigator have raised in this report and
will continue to work to reduce loss exposures and to implement all cost
effective controls to prevent future losses within the framework des-
cribed.
If the Council has any additional questions regarding the report or the
response, please feel free to contact Mr. Don Warden and/or Mrs. Bette
Rhoden, Purchasing Agent.
cc: Don Warden
Bette Rhoden
Dick Barrett
Anderson & Whitney
Stanley Security
(11-111 mtmo An®urri
To County Council Date September 24. 1980
COLORADO From Board of County Commissioners
Subject: Possible leaking of information on criminal investigations
In response to the above named report issued September 18, 1980, the
Board would only comment that as indicated in the body of the text the
Personnel Department, under Mr. Barrett' s instruction, has initiated a
program for the clearance for all employees in the Communications center
with the Sheriff's Department to insure that all individuals permitted
access to confidential information are not a risk to Weld County based
upon a background investigation. In addition to the Communications
Center, this same policy has been implemented for the Data Processing
Center for the same reasons.
It is the Board's impression that the actions taken by the Personnel
Department satisfy the concerns raised in the report. If this is not
the case, please do not hesitate to contact the Board immediately.
cc: Harold Andrews
Don Warden
Dick Barrett
Elmer "Bud" Reynolds
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