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HomeMy WebLinkAboutStaff Report 2304-13772 1 0 5 Policy & Services Committee Staff Report From: City Auditor Report Type: ACTION ITEMS Lead Department: City Auditor Meeting Date: May 9, 2023 Report #:2304-1377 TITLE Approval of Office of City Auditor Task Order Change - 4.20 Procurement RECOMMENDATION The City Auditor recommends that the Policy & Services Committee recommend City Council approve the change to the Task Order 4.20 Procurement Process Review. Discussion The Office of the City Auditor (OCA) presented Task Order 4.20 – Procurement Process Review and the task order was approved by the Policy and Services Committee on February 28, 2023 and accepted by the City Council during the City Council meeting on March 13, 2023. During the Policy and Services Committee meeting on February 28, 2023, the Policy and Services Committee (Committee) wanted to make sure the concerns in the following areas are covered by the Procurement Process Review proposed by the OCA: •Efficiency of the procurement process •Competition in the bidding process •Gifts and gratuities from the vendors •Information provided to the City Council in the contract approval process The Committee approved the motion to reevaluate if there is sufficient budget to address these areas for Task Order 4.20. The approved Task Order 4.20 listed the following preliminary audit objectives: 1. Determine whether adequate controls are in place and working effectively to ensure that the appropriate vendors are selected properly to achieve desired objectives. 2 1 0 5 2. Identify the opportunities to improve the efficiency and effectiveness of the procurement process. The OCA updated the preliminary objectives to clarify them to address the Committee’s specific concerns. The updated objectives that are included in the modified Task Order 4.20 are as follows: 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 to ensure consistency and validity of the relevant information and data. 4. Identify the opportunities to improve the efficiency and effectiveness in the procurement process. The OCA estimated that the audit procedures to achieve the updated audit objectives would take additional 100 hours and $19,350. The total revised audit hours and budget are 450 hours and $80,900, respectively. The additional budget of $19,350 will be supplemented from the budgets for one of the remaining audits, Long Range Planning, listed in the approved FY23 Audit Plan. Due to the fiscal year-end schedule of the Procurement team in June 2023, the OCA’s fieldwork phase of this audit will need to start in July 2023 although the planning phase can start in June 2023. Therefore, the period of performance is to be changed to start in June 2023 and end in December 2023. The updated information is included in the attached modified Task Order 4.20. FISCAL/RESOURCE IMPACT The change is within both the approved scope and compensation of the contract with Baker Tilly and funding levels in the FY 2023 Operating Budget for the Office of the City Auditor. ATTACHMENTS Attachment A: TASK ORDER FY23-4.20 Procurement Process Review (Modified) 2 1 0 5 APPROVED BY: Adriane D. McCoy, City Auditor PROFESSIONAL SERVICES TASK ORDER TASK ORDER FY23-4.20 Procurement Process Review Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below. CONTRACT NO. C21179340 OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE) 1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY23-4.20 2. CONSULTANT NAME: Baker Tilly US, LLP 3. PERIOD OF PERFORMANCE: START: March 1, 2023 June 1, 2023 COMPLETION: September 30, 2023 December 31, 2023 4 TOTAL TASK ORDER PRICE: $61,550 80,900 BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD 5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________ 6. CITY PROJECT MANAGER’S NAME & DEPARTMENT: Greg Tanaka, Chair of the City Council’s Policy and Services Committee 7. DESCRIPTION OF SCOPE OF SERVICES (Attachment A) MUST INCLUDE: ▪SERVICES AND DELIVERABLES TO BE PROVIDED ▪SCHEDULE OF PERFORMANCE ▪MAXIMUM COMPENSATION AMOUNT AND RATE SCHEDULE (as applicable) ▪REIMBURSABLE EXPENSES, if any (with “not to exceed” amount) 8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work described in this Task Order. APPROVED: CITY OF PALO ALTO BY:____________________________________ Name __________________________________ Title___________________________________ Date ___________________________________ I hereby acknowledge receipt and acceptance of this Task Order and warrant that I have authority to sign on behalf of Consultant. APPROVED: COMPANY NAME: ______________________ BY:____________________________________ Name __________________________________ Title___________________________________ Date ___________________________________ Attachment A DESCRIPTION OF SCOPE OF SERVICES Introduction Attachment A, the Description of Scope of Services, contains the following four (4) elements: •Services and Deliverables To Be Provided •Schedule of Performance •Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables Baker Tilly’s approach to conducting an internal audit of Procurement Process involves three (3) primary steps: •Step 1: Audit Planning •Step 2: Control Review and Testing •Step 3: Reporting Step 1 – Audit Planning This step consists of the tasks performed to adequately plan the work necessary to address the overall audit objective and to solidify mutual understanding of the audit scope, objectives, audit process, and timing between stakeholders and auditors. Tasks include: •Gather information to understand the environment under review o Understand the organizational structure and objectives o Review the City code, regulations, and other standards and expectations o Review prior audit results, as applicable o Review additional documentation and conduct interviews as necessary •Assess the audit risk •Write an audit planning memo and audit program o Refine audit objectives and scope o Identify the audit procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the audit and conduct kick-off meeting with key stakeholders o Discuss audit objectives, scope, audit process, timing, resources, and expectations o Discuss documentation and interview requests for the audit Step 2 – Control Review and Testing This step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the audit objectives. The preliminary audit objective is to: (1) Determine whether adequate controls are in place and working effectively to ensure that the appropriate vendors are selected properly to achieve desired objectives. 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) (2) Identify the opportunities to improve the efficiency and effectiveness of the procurement process. Procedures include, but not limited to: •Interview the appropriate individuals to gain an understanding of the organizational structure, processes, and controls related to procurement processes from the need assessment and market analysis to contract awarding and administration. •Review policies and procedures, including Code of Conduct, as well as the legislative and regulatory requirements to identify the criteria to be used for evaluation of control design and effectiveness. •Review the documents (such as contracts and related procurement files, staff reports to the City Council, and performance reviews) for the selected contracts. •Analyze the data and information related to procurement, as appropriate. •Compare the process and controls against the best practices. Step 3 – Reporting In Step 3, the project team will perform tasks necessary to finalize audit working papers, prepare and review a draft report with the stakeholders, and submit a final audit report. Tasks include: •Develop findings, conclusions, and recommendations based on the supporting evidence gathered •Validate findings with the appropriate individuals and discuss the root cause of the identified findings •Complete supervisory review of working papers and a draft audit report •Distribute a draft audit report and conduct a closing meeting with key stakeholders o Discuss the audit results, finings, conclusions, and recommendations o Discuss management responses •Obtain written management responses and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables: The following deliverable will be prepared as part of this engagement: •Audit Report Schedule of Performance Anticipated Start Date: March 1, 2023 June 1, 2023 Anticipated End Date: September 30, 2023 December 31, 2023 Maximum Compensation Amount and Rate Schedule The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $80,900 61,550. The not-to-exceed budget is based on an estimate of 350 450 total project hours, of which 20 are estimated to be completed by the City Auditor. Reimbursable Expenses We plan to complete all work remote including all interviews and documentation review. If at any point the City and Baker Tilly mutually determine it will be beneficial to perform a portion of the work on-site, we will submit an estimate of our reimbursable expenses for the City’s approval prior to traveling to Palo Alto.