IG finds problems remain with city purchasing, payment procedures

A follow-up review from the Office of Inspector General found that the city has implemented just three of seven corrective actions it promised in relation to purchasing and accounts payable internal controls.

The OIG issued an audit report in May on the city’s internal controls related to budgeting, bids, purchasing, contracts, disbursements and wire-transfer processes and found several issues with those procedures.

The OIG said the city should re-evaluate employees’ access levels for software packages and remove some employees’ duties related to inputting and authorization of purchases. The report also recommended replacing the city’s financial system infrastructure with an Enterprise Resource Planning system.

An ERP is a system used to integrate internal and external management of information across an entire organization. The follow-up report found that the city has not put an ERP in place due to a lack of funding.

Controls put in place to separate ordering and receiving processes were not functioning since 84 percent of the purchases the OIG tested only had one person placing and receiving the order. City policy requires more than one person within a department to participate in the ordering and payment process.

While the OIG suggested that the city put in place a process to determine if vendors were delinquent in paying city taxes before they were paid for services, the city did not make any progress toward making that determination. The ERP would have helped to fix that problem, the OIG report noted.

The initial OIG report also found that vendors who registered with the city did not go through a verification process to determine if they were valid vendors or that their tax ID number was valid.

The OIG suggested that the city create a policy to manage the vendor master file by determining the company’s existence through the Secretary of State’s Office and obtaining federal tax ID numbers from the IRS.

“Although a new information system is needed badly, the city could make some of these changes now,” Quatrevaux said.

However, Deputy Mayor Andy Kopplin countered that the city has put every recommendation into place that it can right now.

“Some of the recommendations, although they had merit, were impractical to implement without an Enterprise Resource Planning system, which the city has not had the financial resources to obtain to date,” Kopplin said in a prepared statement.

Kopplin added that the city is working to develop a financial plan to bring an ERP online and that it “remains a high city priority given the age and lack of capabilities of the existing set of separate financial systems that the city relies on.”

Meanwhile, Kopplin said, the city has safeguards in place to prevent individuals from purchasing items on his or her own.

“The city requires that more than one person in each department is involved in the approval for an order and that more than one person is involved in each department in the approval of a payment,” he said.

While the OIG found that the city’s financial system did not provide an adequate audit trail for auditors, the city did find a way to make that possible. The city also began to amend contracts only after it reviewed if changes would not be better than rebidding the contract. And while the city previously was not required to verify that vendors were current on tax payments, the city implemented corrective actions and got tax compliance certificates for all contracts, including amended contracts.

No other reports will be issued on this matter, the OIG said, but all recommendations will be listed on the office’s website until the city show they have been put into place.