FINANCIAL MANAGEMENT
This chapter examines the financial management of the Christoval Independent School District (CISD) in eight sections:
- A. Fiscal Operations and Budgeting
- B. Fund Balance
- C. Payroll
- D. Risk Management
- E. Cash and Investments
- F. Fixed Assets
- G. Purchasing
G. PURCHASING
Efficient purchasing should ensure that supplies, equipment and services vital to a district's educational mission are purchased from the right source, in the right quantity, at the lowest prices and in accord with federal, state and local laws and policies.
In 1995, the Texas Education Code (TEC) was revised to expand school district purchasing options by adding three new methods of competitive procurement: design-build contracts, competitive sealed proposal and request for proposals for personal property and construction contracts. In 1997, the legislature included two additional methods: job order contacts and contracts using construction managers. In 2001, the legislature added yet another method of competitive procurement: reverse auction procedure. With these additions, school districts can select among nine methods for competitively purchasing goods valued at $25,000 or more (or multiple like items with a cumulative value of more than $25,000 in a twelve month period) (Exhibit 3-21).
Exhibit 3-21 Source: TEA Financial Accountability System Resource Guide and Legislative Briefing Book.
Competitive Procurement Methods
Purchasing Methods Method Description Competitive bidding Requires that bids be evaluated and awarded based solely upon bid specifications, terms and conditions contained in the request for bids, bid prices offered by suppliers and pertinent factors affecting contract performance. Forbids negotiation of prices of goods and services after proposal opening. Competitive sealed proposals Requires the same terms and conditions as competitive bidding, but allows changes in the nature of a proposal and prices after proposal opening. Request for proposals Generates competitive sealed proposals and involves several key elements, including newspaper advertisement, notice to proposers, standard terms and conditions, special terms and conditions, a scope-of-work statement, an acknowledgment form/response sheet, a felony conviction notice and a contract clause. Catalog purchase Provides an alternative to other procurement methods for the acquisition of computer equipment, software and services only. Interlocal contract Provides a mechanism for agreements with other local governments, the state or a state agency to perform governmental functions and services. Design/build contract Outlines a method of project delivery in which the school district contracts with a single entity for both the design and construction of a project. (The "single entity" is usually a team of firms including a general contractor, architect and sometimes an engineer. One firm almost never does both the design and the construction.) Job order contracts Provides for the use of a particular type of contract for jobs (manual labor work) for minor repairs and alterations. Construction management contracts Outlines the use of a contract to construct, rehabilitate, alter or repair facilities using a professional construction manager. Reverse Auction Procedure Outlines a bidding process that involves submission of bids by multiple suppliers, unknown to each other, in a manner that allows the suppliers to bid against each other. In 1999, the Office of the Attorney General issued an opinion (Op. JC-37) stating that school district procurement through an inter-local agreement or a cooperative purchasing arrangement satisfies competitive bidding requirements. Under an inter-local agreement, a district can contract or agree with another local government, including a nonprofit corporation that is created and operated to provide one or more governmental services, to purchase goods and any services reasonably required for the installation, operation or maintenance of the goods.
School districts must advertise bids worth more than $25,000 at least once a week for two weeks in any newspaper published in the county in which the district is located. Those between $10,000 and $25,000 must be advertised in two successive issues of any newspaper in the district's county. TEC requires advertisements to specify the categories of property to be purchased and to solicit vendors that are interested in supplying them.
CISD's bid process is in compliance with the bidding regulations laid out by TEA. The district places advertisements in the San Angelo Standard Times for the items that must be bid each year. With the significant expenditures involved with the middle school construction, the review team found the construction bids to be well organized and documented.
FINDING
The quality of the office supplies purchased through the Region 15 purchasing cooperative does not meet the district's standards. Therefore, CISD does not participate in the purchasing cooperative. The superintendent stated that the quality of the supplies was unacceptable. An example cited was transparency copy film that was constantly being destroyed in the copy machine because it was not heavy enough. The superintendent found that the district could make better purchases on its own than by using the Region 15 service. He believes that the district spends less because there is less wasted material.
COMMENDATION
CISD saves money on office supplies by purchasing top-quality products and by reducing waste that results from inferior products.
FINDING
The district's purchasing process is manual and time consuming. The business manager processes all purchase orders with the exception of Food Services. The superintendent approves all purchase requests prior to initiating a purchase order. The Food Services manager orders all food supplies.
Each time a purchase request is made, the supervisor contacts the business manager to determine if there are enough funds remaining in the budget to make the requested purchase. This step is added to the process because the supervisors are not given access to the most current budget. Once the business manager determines that the funds are available, the supervisor completes and forwards a requisition order to the central office where the superintendent again reviews the budget to ensure availability of funds. Once the superintendent verifies that funds are available, the business manager creates a purchase order.
Exhibit 3-21 illustrates the process that occurs when a teacher requests supplies be purchased.
Exhibit 3-21 Source: CISD Business Manager.
CISD Purchasing ProcessThere are certain times of the month when the business manager does not have time to deal with purchase requests, such as during the month-end closing of the general ledger. As a result, departments often have to wait longer than they would like to receive their purchases. All deliveries are made to the administration office and then distributed to the departments, adding additional time to the process. The purchasing process is too centralized and does not always meet the desired timeframe.
Spring ISD (SISD) implemented an online purchase order system. This system eliminated the need for the Purchasing Department to input order information by allowing each school and department to enter all types of purchase orders directly from their location. By using an online purchase order system, SISD reduces the processing time and provides more efficient service. The business manager at CISD enters all purchase orders into the RSCCC system as time allows.
Recommendation 23:
Enter requisitions On line directly into RSCCC and have deliveries made to each campus.
The district will have to contact Region 15 Service Center to set up three additional connections so that the principals and the athletic director can have access to the RSCCC system directly and enter purchase requisitions online. The system already contains this module and will not require additional cost. The budget control within the system will protect against over-spending of the departmental budget. Additionally, this will reduce the time required to receive supplies and will ensure that all purchases are encumbered in a timely fashion.
Rather than delivering all supplies to the administration office, the district should allow the deliveries to be made directly to the campuses. This will streamline the distribution process and increase the overall efficiency. Each campus secretary should be responsible for tracking the deliveries against the purchase order to ensure the district has received the proper merchandise.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The business manager contacts Region 15 to add the additional connections. October 2001 2. The business manager trains the principals to enter their own requisitions. November 2001 3. Principals begin entering requisitions each time they wish to order supplies. December 2001 4. The superintendent and business manager change the delivery procedure to allow deliveries at the campuses rather than the administration offices. December 2001 5. The campus secretary checks in all deliveries and forwards the completed purchase order to the administration office to be filed. December 2001 and Ongoing FISCAL IMPACT
Region 15 charges $800 per year for each additional connection. In order for CISD to add three connections, one for the elementary principal, one for the high school principal and one for the director of Athletics, the total annual cost would be $2,400 ($800 x 3).
Recommendation 2000-01 2001-02 2002-03 2003-04 2004-05 Enter requisitions On line directly into RSCCC and have deliveries made to each campus. ($2,400) ($2,400) ($2,400) ($2,400) ($2,400)
