PURCHASING
This chapter reviews the purchasing of the Rockwall Independent School District (RISD) in the following sections:
- A. Purchasing Policies, Procedures and Compliance
- B. Warehouse Operations
- C. Textbooks
A. PURCHASING POLICIES, PROCEDURES AND COMPLIANCE
Well-written and organized procedures:
- help ensure compliance with board policies and document the intent of those policies;
- protect the institutional knowledge of an organization so that, as experienced employees leave, new employees have the benefit of their predecessors' experience;
- provide the basis for training new employees; and
- offer a tool for evaluating employees based on their adherence to procedures.
RISD documents its requisition and purchase order processes in a purchasing procedures manual that the Purchasing Department distributes to all schools and departments through principal meetings.
RISD uses computerized software for entering purchase requisitions. Users enter the requisition in the system, then send a signed copy of the requisition to the Purchasing Department. Schools or departments cannot enter requisitions into the system if there are insufficient funds in the budget account.
After receiving the signed requisition, the purchasing assistant reviews each requisition to ensure the correct budget coding. The purchasing assistant prints a report of outstanding requisitions daily and compares them to the written requisitions received to verify school/department level approval.
Once the requisition meets all requirements, the purchasing assistant prints purchase orders, which encumbers the funds. After the director of Purchasing reviews the purchase orders for accurate budget codes and bidding requirements, the director and signs them. The purchasing assistant distributes colored copies of the purchase order in the following manner:
- white - vendor (mailed by business office);
- blue - central warehouse;
- goldenrod - central warehouse or school if the school is picking up the purchased good;
- pink - accounts payable files a copy with the invoice and check;
- green - accounts payable files in numeric order; and
- yellow - originator of purchase requisition.
FINDING
RISD purchases goods and services in a manner that does not comply with board policies, district purchasing procedures and TEC competitive bid requirements. Non-compliance with TEC competitive bid procedures could expose the district to litigation from vendors and the employees responsible for purchasing to criminal penalties under TEC Section 44.032 and Chapter 271 of the Texas Local Government Code.
RISD's 2001-02 annual financial report states that RISD did not submit many of its purchases of personal property through the procurement process. The audit states that the district did not appear to be in compliance with TEC procedures.
To test RISD's compliance with procurement laws and procedures, the review team obtained a list of expenditures by vendors for 2001-02. Because RISD's financial software system does not have the ability to group by category, the review team conducted this test by interviewing staff and reviewing purchases. The team reviewed vendor purchase amounts of more than $20,000. Of the 97 vendors reviewed, 33 of these purchases equaled or exceeded $25,000, but were not bid in compliance with Texas competitive procurement laws and RISD procedures. One of these procurements equaled or exceeded $10,000, but the district did not have evidence of formal written or telephone price quotes from at least three vendors.
Exhibit 7-5 presents a summary of the purchase for goods and services not procured through competitive procurement procedures. One non-competitively bid purchase for computers and computer supplies exceeded $1.4 million.
Exhibit 7-5 Source: RISD director of Purchasing and EDP financial report from RISD business manager.
RISD Categories Purchased Without Competitive Procurement
2001-02
Category Bid Method Required Vendor Purchases Athletic supplies Competitive bids Plano Sports $32,289 Competitive bids Massey & Brown Sporting Goods $22,560 Competitive bids Mesquite Sports $27,303 Bus refurbishing Competitive bids Lear Siegler Services Mobility Ct. $70,503 Cell phones Competitive bids Cingular Wireless $28,672 Cheerleader uniforms Formal quotes Varsity $22,737 Computer wiring QISV* quotes or competitive bids Power Services, Inc. $40,326 Computers and
Computer suppliesQISV quotes or competitive bids Amherst, LLC $76,160 QISV quotes or competitive bids CDW Government $136,579 QISV quotes or competitive bids M & A Technology $1,443,823 Custodial supplies Competitive bids Cleancare Inc. $89,276 Competitive bids ZEP Manufacturing Co. $61,263 Duplicating paper, custodial Competitive bids Chaney Paper Products $147,359 Electrical contractor Competitive bids Electric, Inc. $92,160 Financial & student software Competitive bids EDP Enterprises, Inc. $52,445 Furniture Competitive bids Indeco Sales $38,043 Grounds and landscaping, including athletic fields Competitive bids Young's Landscape $65,687 Competitive bids Dalrock Construction $49,928 Competitive bids RKJC Enterprises, Inc. $125,892 Competitive bids Tex-Sand Sport Turf Specialty, Inc. $30,680 HVAC, plumbing, electric Competitive bids Lassiter, Inc. $48,250 Competitive bids Cohesive Automation $19,087 Instructional supplies Competitive bids School Specialty $24,314 Competitive bids Voyager Expanded Learning $77,760 Lease of portable building Competitive bids Ramtech Building Systems $63,352 Competitive bids Ramtech Leasing LTD $45,987 Library books Competitive bids Follett Library Resources $105,306 Maintenance supplies Competitive bids Graybar $28,009 Competitive bids Northeast Texas Distributors $23,621 Office supplies Competitive bids Rockwall Office Supply $29,738 Competitive bids Walmart Community BRC $55,790 Phone, alarm, security Materials/labor Competitive bids Master Sound Co., Inc. $70,072 Radios Competitive bids Inter-County Communications, Inc. $38,659 Transportation parts Competitive bids Southwest International Trucks, Inc. $26,253
* QISV-Qualified Information Systems Vendor.Although RISD's procedures manual includes a process for bidding categories of goods or services that exceed the $10,000 and $25,000 thresholds, the district did not follow them. RISD did competitively bid service contract awards, such as vending machines and audit services. RISD also competitively bid playground equipment and furniture for new schools. Without the consistent use of competitive bidding, however, RISD may not be obtaining the best prices for all goods and services purchased.
RISD board policy states that the board shall assume responsibility for debts incurred in the name of the district so long as those debts are for purchases made in accordance with adopted board policy and current administrative procedures. The board shall not be responsible for debts incurred by persons or organizations not directly under board control; persons making unauthorized purchases shall assume full responsibility for all such debts (RISD board policy CH (LOCAL)).
The TEA's Financial Accountability System Resource Guide (FASRG) states:
"The purpose and intent of competitive bidding is to help public schools secure the best work and materials at the lowest practical prices by stimulating competition. If a district advertises purchasing needs relating to large expenditures, then economies of scale-purchasing in large quantities-will probably result in lower costs either per unit item or in the aggregate. Another reason for competitive bidding is that it is an open process."
The purpose and intent of competitive bidding laws were defined in Sterrett v. Bell, 240 S.W.2c 516, 520 (Texas Civil Appellate-Dallas 1951) as follows:
- "Gives opportunity to bid...on the same undertaking...upon the same thing;"
- "Requires all bidders be placed upon the same plane of equality...each bid; upon the same terms and conditions;"
- "Stimulates competition and prevents favoritism;" and
- "Secures the best work and materials at the lowest practical price."
Killeen ISD (KISD) made its bid process more efficient by establishing an annual calendar that identifies when specific items should be bid during the year. The calendar, based on historical experience, allows the district to purchase items on an as-needed basis, as well as spread the bid process out over the full year, rather than trying to bid multiple items at the same time. Based on prior experience, the Purchasing Department worked with the other departments to develop the calendar.
Recommendation 44:
Establish a bid process that ensures compliance with state laws and board policies and hold individuals accountable for non-compliance.
The procedures should include an annual bid calendar, a monthly review of purchases by the director of Purchasing that results in a report to the CFO stating which categories are approaching bidding thresholds and a vendor listing updated monthly that includes the process of purchasing from each vendor. Any individual found to have violated these policies and procedures should be held accountable for their actions.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The director of Purchasing prepares a list of goods and services purchased without complying with purchasing laws. June 2003 2. The director of Purchasing reviews budgets for 2003-04 to determine if bids or quotes will be needed for any goods or services. June 2003
and Annually3. The director of Purchasing submits a list of all goods or services requiring bids to the business manager, CFO and superintendent for approval. July 2003
and Ongoing4. The director of Purchasing prepares bids for the categories requiring the competitive bid process. July 2003
and Ongoing5. The director of Purchasing evaluates bids and prepares recommendation to the business manager and superintendent. September 2003
and Ongoing6. The board awards the bids. September 2003
and Ongoing
7. The director of Purchasing prepares a list by vendor and category of the bids awarded. September 2003 8. The director of Purchasing trains the district's staff on the vendor listing and updates the purchasing manual to include use of a vendor list for purchase requisitions. September 2003 9. The director of Purchasing develops a monthly process to evaluate the categories of goods or services that are approaching purchasing volumes that may require competitive bids or quotes. October 2003 10. The director of Purchasing implements the monthly process and submits monthly reports to the business manager indicating categories of goods or services that are approaching purchasing volumes that may require competitive bids or quotes. November 2003 and Monthly Thereafter 11. The director of Purchasing creates an annual calendar that identifies when specific items should be bid during the year. January 2004
and Annually12. The business manager reviews and monitors bid compliance and reports any non-compliance to the CFO and superintendent. January 2004
and Ongoing13. The superintendent reviews any bids not in compliance and enforces local board policy. January 2004
and AnnuallyFISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
RISD's use of payment authorizations circumvents its purchasing procedures by:
- committing funds without proper purchasing authorization;
- purchasing goods/services without using the purchase requisition process;
- issuing payment authorizations for items not on the approved list in the district's purchasing policy guidelines;
- issuing payment authorizations to request payment for merchandise or services already received rather than using the purchase order process; and
- violating competitive bidding requirements.
RISD's purchasing procedures state that the purchase order should be the primary method used for purchases. In October 2002, the district issued 351 purchase orders and 469 payment authorizations. Exhibit 7-6 compare the district's payment authorization process with its purchase requisition process.
Exhibit 7-6 Source: RISD purchasing manual and review of payment authorizations.
Comparison of Payment Authorization and
Purchase Requisition Process
Payment Authorization Purchase Requisition Step Person Responsible Step Person Responsible Supplies or services ordered by director. Department director Purchase requisition completed requesting supplies/services. Department director Supplies or services received/completed. Department director or warehouse Purchase requisition reviewed by Purchasing Department and approval is given after review of budget balance and bidding requirements. Director of Purchasing Payment authorization completed by director with invoice attached and submitted to Purchasing Department. Department director Purchase order issued to vendor and materials/services are ordered. Purchasing Department Director of Purchasing approves and sends to accounts payable for payment. Director of Purchasing Materials/services received by RISD and proper receiving information sent to accounts payable. Department director or warehouse Payment made. Accounts Payable Invoices received and processed for payment. Accounts payable Payment made. Accounts payable District procedures allow the use of payment authorizations to pay for membership dues, certification fees, conference workshops and tournament fees, sole source for goods/services required, contract labor, fundraiser fees, postage, parent refunds, field trip fees and utility bills. However, the district has used payment authorizations to purchase goods and services not included on this list. For example:
- the Child Nutrition director, who is responsible for all purchases in the Child Nutrition Department, forwards payment authorizations for the purchases of food items to the Accounts Payable Department;
- the executive director of Facilities Planning and Construction, who is responsible for construction payments, sends payment authorizations to the business manager for processing; and
- the director of Maintenance forwards payment authorizations to the Purchasing Department for approval.
Accounts payable clerks receive the paper copies of the payment authorizations and enter the information into the system. However, the paper copies must have appropriate documentation and signatures before they are entered by Accounts Payable, which becomes time-consuming. Conversely, schools and departments can enter purchase requisitions into the system, which saves time for the Accounts Payable clerks and ensures approval prior to the commitment of funds.
In July 2001, RISD's Maintenance Department contracted with a vendor to connect electrical service to portable buildings for $32,200 without formally bidding the project. RISD paid the invoice, which was dated July 31, 2001, in December 2001 through the payment authorization process. The director of Purchasing signed the payment authorization in December 2001. Since Accounts Payable did not receive the invoice until December 2001, the invoice was not properly recorded in the district's financial records for the fiscal year ending August 2001.
The Maintenance Department also issued a payment authorization dated March 2002 for repair work invoices dating back to September 2001. The total amount of this payment authorization was $9,262. On March 27, 2002, the Maintenance Department issued an $8,500 payment authorization for a March 25, 2002 invoice to fill and grade an eroded area.
RISD purchased student and fixed assets software applications and upgrades from a vendor for $96,640 in August 2001. The purchase included 11 file servers, battery backups, student/teacher grade book and attendance programs, a fixed assets system, training and the installation of the systems. However, a purchase order was never issued to the vendor for this equipment and software and the district has no documentation showing who approved the order. The documentation attached to the check is a payment authorization dated August 9, 2001. The payment authorization for the equipment and software purchase did not have a signature of an employee authorized to make purchases for the district. Only the director of Technology/Information Systems' signature appears on the payment authorization. The business office issued a check on August 20, 2001 with no purchasing approval. The superintendent and assistant business manager signed the check.
TEA's FASRG has a process for issuing blanket purchase orders as an alternative to numerous payment authorizations. A district issues a blanket purchase order to a pre-approved vendor authorizing purchases from that vendor over a period of time. Blanket purchase orders allow the purchase of items quickly and usually reduce paperwork and related processing costs. However, blanket purchase orders must follow certain criteria: pre-qualification of vendors, limitation on the maximum amount for purchases (usually up to $500 per month per vendor), a specific time frame for purchases covered by the blanket purchase order (usually one month) and identification of authorized purchasers.
Districts use blanket purchase orders to make supplies, materials or services available "as needed" by user departments. For example, blanket purchase orders may be requested on a regular basis by the Child Nutrition Department for perishable items. Larger districts commonly use these purchase orders to eliminate numerous individual purchase orders for small dollar-value items. User departments request blanket purchase orders and, if central purchase approves them, they are issued to vendors. The user department must issue a new requisition if items are requested beyond the specified time period.
Smithville ISD (SISD) does not allow schools/departments to use payment authorizations. SISD uses monthly blanket purchase orders for maintenance, transportation and food service. SISD uses the purchase requisition system for workshop registrations to ensure that budgeted funds are available before approval of workshop attendance.
Bastrop ISD (BISD) issues construction purchase orders at the time of the award of a construction contract for the total amount of the contract. This purchase order is copied when a payment request is received. After construction and purchasing approval, it is processed for payment by accounts payable.
Recommendation 45:
Eliminate the use of payment authorizations and implement the use of blanket purchase orders.
RISD should implement use of blanket purchase orders. RISD's Child Nutrition Department should issue monthly blanket purchase orders to vendors with a maximum amount at the beginning of each month. Construction projects should have purchase orders issued at the beginning of the project for the total amount and then copied each time a payment is made to be included as documentation with the payment.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The director of Purchasing and the business manager update RISD's purchasing manual to eliminate payment authorizations and implement blanket purchase orders. June 2003 2. The business manager presents the changes to the purchasing manual to the CFO and superintendent for review and approval. July 2003 3. The director of Purchasing and the business manger train all departments on the procedures for the elimination of payment authorizations and use of blanket purchase orders. August 2003 4. The director of Purchasing informs the business manager of any purchases that do not follow RISD guidelines. Ongoing FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
The RISD Technology Department does not follow FASRG guidelines for technology purchases. As a result, RISD may be paying more for these items.
While RISD used vendors on the Texas Building and Procurement Commission's (TBPC's) approved QISV list for the purchases, the district did not provide documentation that showed it used the FASRG catalog purchasing process. The FASRG includes guidelines for the purchase of computer hardware, software and services from the QISV. These guidelines require that at least three QISV vendors be selected to provide quotes.
RISD did not have documentation of receiving cost quotes for technology equipment to show that the purchases followed the catalog purchasing process. In 2001-02, RISD purchased more than $1.4 million from a single vendor (Exhibit 7-7). RISD purchases included computers, laptops, parts, printers, scanners and installation of computers and networks.
Exhibit 7-7 Source: RISD director of Technology/Information Systems and EDP financial report from RISD business manager.
RISD Computer Equipment and Contracted Services
Purchased Through QISV Vendors
2001-02
Vendor Purchases Power Services, Inc $40,326 Amherst, LLC $76,160 CDW Government $136,579 M & A Technology $1,443,823 In August 2001, RISD purchased $33,770 of computer equipment through a vendor when purchasing new software. The vendor actually purchased this equipment from another vendor and then resold it to the district. The vendor explained in a letter that its purchase of the servers enabled staff to install the software on the servers prior to implementation at the district. The vendor said considerable savings in manpower were achieved by working on the servers for extended hours in its own environment. Those savings, according to the vendor, were reflected in the final quote given to RISD. The vendor sold the servers to the district at a cost below the price the vendor paid for the servers, but equal to the pricing of another vendor.
RISD did not produce documentation to show that the price paid for the servers was equal to the price RISD would have paid if the district had followed recommended guidelines for purchasing through the state catalog system or through competitive bids.
The director of Technology/Information Services said that RISD received three quotes on all purchases last year, but could not produce any documentation to verify this. The Technology Department said it discarded all quotes except the ones attached to the purchase orders of the vendors awarded. According to the Texas State Library and Archives Commission, informal bid records, such as quotes and estimates, must be retained for one year.
RISD purchased computers for two schools through a Telecommunications Infrastructure Fund (TIF) grant in December 2001. The director of Technology/Information Services produced documentation of three quotes received from vendors in January 2001 when the director was working on the grant application. However, the director of Technology/Information Services ordered the computers in December 2001. RISD received a new quote from one of the three vendors in November 2001. The original quotes from January 2001 were used from the other two vendors.
In another instance, RISD issued a purchase order to this same vendor for $391,676 for a fiber project/electronic phase two server rebuild. The district did not follow a formal bid process for this purchase. A memorandum shows that the district obtained quotes from four vendors, but only documented the awarded vendor's quote. No other documentation supports the memorandum. The director of Technology/Information Services only compared the catalog pricing for the major equipment included in this project. However, the quotes came from vendor catalogs, not by contacting the vendors. The successful vendor quoted $89,633, yet the purchase order was awarded for $391,677. The purchase order included other equipment and costs for installation and labor. These costs were not compared through price quotes. The Purchasing Department processed and approved the purchase order.
Round Rock ISD uses the following thresholds for QISV purchases:
- under $1,000 - no bid required
- $1,000 to $10,000 - three quotes from QISVs
- $10,000 or over - formal offers from QISVs (sometimes quotes or offers, sometimes requests for proposals)
The FASRG contains the following model for the competitive procurement process for catalog purchases:
- plan/market analysis for best value;
- evaluate information technology purchasing needs;
- contact general services commission for rules and copies of catalogues;
- develop specifications for items or scope of services;
- identify potential vendors (minimum of three);
- distribute specifications or scope of work to identified vendors;
- evaluate vendor responses;
- negotiate prices;
- negotiate optional enhancements to items or services;
- evaluate offers;
- select vendor providing best value;
- obtain final offer or proposal in writing;
- issue purchase order; and
- evaluate vendor performance.
The catalog purchasing guidelines in FASRG are to be used in a general fashion to facilitate objectivity in the purchasing process and to ensure the best value is obtained for the district. FASRG states the purpose and intent of competitive bidding is to help public schools secure the best work and materials at the lowest practical prices by stimulating competition.
Recommendation 46:
Establish procedures for the purchase of computer hardware, software and services.
Written procedures should include thresholds for purchasing through a QISV, written documentation of quotes, forms for receiving quotes from vendors and retention of documentation.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The CFO, business manager, director of Purchasing and director of Technology/Information Services review and update the process of purchasing from QISV vendors that includes written procedures for determining the use of the catalog purchase method or competitive bids for technology purchases and the retention of documentation for quotes. June 2003 2. The superintendent reviews and approves technology purchasing procedures. July 2003 3. The business manager and CFO monitor compliance with technology purchasing procedures. July 2003 and Ongoing FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
RISD does not obtain board approval for all purchases valued at $50,000 or more, which violates RISD board policy CH (LOCAL). As a result, the district may be making unauthorized purchases and circumventing internal financial controls.
RISD board policy CH (LOCAL) delegates to the superintendent or designee the authority to determine the method of purchasing, in accordance with legal policy and to make budgeted purchases. However, any purchase that costs or aggregates to $50,000 or more requires board approval.
RISD requires manual signatures by the superintendent and business manager for all checks that total more than $50,000. The district signs other checks with an automatic check signer.
The review team examined purchases from 97 vendors and found three purchases exceeding the $50,000 limit that did not have board approval (Exhibit 7-8). Several of the purchases that did not meet competitive bidding guidelines also did not have board approval.
Exhibit 7-8 Source: RISD business manager.
RISD Purchases Exceeding $50,000 Threshold
Without Board Approval
2001-02
Vendor Description of Purchase Amount M & A Technology Computer equipment $54,447 M & A Technology Computer equipment and installation of fiber project $391,677 EDP Enterprises, Inc. Software application upgrade and equipment $96,640 As one of the fastest growing districts in north Texas, RISD has experienced a 31 percent growth rate since 1998-99. Five years ago, its internal control system of a $50,000 board-approval threshold may have been sufficient because the volume of purchases was small enough for administrators to manage and maintain control. However, the substantial population growth and corresponding purchasing volume growth, combined with the same level of oversight, greatly increases the district's risks of purchasing violations and unsound fiscal practices.
Laredo ISD's local purchasing policy sets a $25,000 threshold. Any purchase that costs or aggregates to a cost of $25,000 or more requires board approval before a transaction may take place.
Recommendation 47:
Revise local purchasing policy to lower the board's approval limit from $50,000 to $25,000 and establish a written procedure to implement this policy.
Lowering the threshold to $25,000 establishes the limit at TEC bidding guidelines.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The superintendent prepares an update to local policy CH (LOCAL) lowering the limit to $25,000. June 2003 2. The superintendent presents the new policy to the board for approval. July 2003 3. The business manager and CFO write a procedure for the implementation of this policy. July 2003 4. The superintendent reviews and approves the procedure. August 2003 5. The business manager trains the director of Purchasing and staff in the use of these procedures. August 2003 6. The Purchasing Department implements the procedure. September 2003 7. The business manager and CFO monitor compliance with this procedure. September 2003
and OngoingFISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
RISD does not have written purchasing procedures for sole source purchases. Without a written procedure, there are no measures for ensuring that the district has made a determination of the validity of sole source exemption purchases.
A sole source purchase is exempt from state purchasing and competitive bidding requirements because the good or service is not available from any other source. RISD policy CH (H) allows sole source purchases in accordance with state purchasing laws.
RISD has relied on verbal representations from vendors in making sole source determinations, rather than making the determinations in accordance with applicable state requirements independently. According to the RISD's director of Purchasing, the district requires no written documentation verifying that a purchase meets all aspects of the sole source requirements under state guidelines.
RISD did not use due diligence in applying its legal policy covering sole source purchases. This resulted in possible state purchasing and bidding compliance violations. These purchases included software support from a vendor for $25,357 and software applications, installation and training for $62,870 from another vendor.
RISD made a decision to purchase student, fixed asset and financial accounting software and support without obtaining competitive bids based on a sole source determination. The vendor provided a letter stating that its software was sole source. The district received an email from TEA stating that sole source must by determined by the district. The district did not receive a legal opinion on this purchase decision.
According to FASRG, it is incumbent upon the district to obtain and retain documentation from the vendor that clearly delineates the reasons that the district is making the purchase on a sole source basis.
Round Rock ISD's Financial Information Resource Manual requires documentation for sole source purchases. When the district cannot obtain competitive pricing, sole source purchases must be documented. Acceptable documentation includes a signed statement on company letterhead from the vendor attesting to the fact that the items(s) requested are only available from that vendor and documentation concerning previous attempts to obtain competition. Round Rock has five reasons for using a sole source purchase:
- There is no competitive product. The good/service is a one-of-a-kind or patented product, a copyrighted publication available from only one source or a unique item such as an artwork.
- The product is only available from a regulated or a natural monopoly. For example, utilities, gravel from the only pit in the area or some similar situation.
- The product is a component of an existing system, which is only available from one supplier. The replacement of a component or a repair part may only be available from the original supplier.
- Non-profit corporations using handicapped workers produce the item. State or local governments often use products made by the blind or otherwise handicapped workers.
- Prison workers produce the item. The state benefits from the sale of these items.
Recommendation 48:
Develop written procedures for sole source purchasing that follow the guidelines of the Financial Accountability System Resource Guide.
Written procedures should include formal documentation from vendors and documentation of attempts to find competition.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The director of Purchasing and CFO review the sole source purchasing procedures of other districts and the guidelines of FASRG. June 2003 2. The director of Purchasing develops a sole source purchasing procedure that follows FASRG guidelines. June 2003 3. The director of Purchasing reviews the sole source purchasing procedure with the CFO. July 2003 4. The director of Purchasing communicates the new procedures to RISD users and closely monitors compliance. September 2003 FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
RISD does not maximize its cooperative purchasing agreements. A written procedure for cooperative purchasing and a vendor listing of qualified vendors is not included in RISD's purchasing manual. Use of cooperative purchasing can save money, while meeting the state's competitive bidding requirements.
While RISD received cooperative pricing on office supplies of $123,845 and for maintenance supplies of $64,411 from vendors, it did not receive cooperative pricing for duplicating paper, custodial supplies and instructional supplies. Copier paper, which is a large volume district purchase, is available through cooperative purchase, at discounted pricing (Exhibit 7-9).
Exhibit 7-9 Source: RISD invoice, and vendor quote, February 2003.
Cost Comparison of Duplicating Paper for 2001-02
RISD Vendor and Cooperative Vendor
Goods Purchased Cost from RISD Vendor Cost from Cooperative Vendor Difference 8 1/2 x 11 20 lb duplicating paper $65,800 $58,520 $7,280 Cooperative purchasing agreements are useful because they offer some advantages over individual buying. Benefits of cooperative purchasing may be realized by districts of all sizes. A cooperative purchasing arrangement can increase the buying power of a single district through volume discounts A cooperative may provide districts the opportunity to buy a greater variety of products and services. The district chooses what is best for its needs at lower costs.
Cooperative purchasing can also reduce administrative costs related to performing the purchasing function. Cost savings can include major areas, such as salaries and benefits, supplies, office equipment and contracted services. A cooperative can result in the elimination of redundant costs that may be associated with individual districts performing their own purchasing functions. Although purchasing cooperatives may charge annual fees for overhead costs, many districts can realize savings on both products and administration.
In 2000, Kingsville ISD (KISD) made 57 percent, or approximately $1.7 million of its purchases, through cooperative purchasing agreements with the state of Texas and its regional education service center. The cooperatives provide the district with catalogs of items. Each school orders items using a purchase order form. Orders made through the cooperatives are clearly marked on the purchase order form to ensure proper coding in the financial system.
Recommendation 49:
Revise purchasing procedures to include a process to maximize cooperative purchasing.
Purchasing from cooperatives should save RISD time and money.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The director of Purchasing revises procedures to include purchasing from cooperatives. July 2003 2. The director of Purchasing establishes a listing of vendors, the supplies or equipment available and the process for using each cooperative. July 2003 3. The director of Purchasing trains all applicable staff on the methods for purchasing from each cooperative. August 2003 FISCAL IMPACT
This recommendation can be implemented with existing resources.