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HomeMy WebLinkAbout03.a. Follow-up to questions asked at the October 23, 2018 meeting regarding check and procurement card expenditures Page 1 of 4 Item 3.a. CENTRAL CONTRACENTRAL COSTA SANITARY DISTRICT November 20, 2018 TO: FINANCE COMMITTEE FROM: STEPHANIE KING, PURCHASING AND MATERIALS SERVICES MANAGER REVIEWED BY: PHILIP LEI BER, DIRECTOR OF FINANCE AND ADMINISTRATION ANN SASAKI, DEPUTY GENERAL MANAGER ROGER S. BAILEY GENERAL MANAGER SUBJECT: FOLLOW-UP TO QUESTIONS ASKED AT THE OCTOBER 23, 2018 MEETING REGARDING CHECK AND PROCUREMENT CARD EXPENDITURES At the October 23, 2018 Finance Committee meeting, questions were raised regarding the following Procurement Card (Pcard)expenditures. This memo presents a summary of the status of these inquiries. Luis Hernandez,Antioch Building Material Concern: Why wasn't a vendor used that was closer to the District? Staff indicated that County Quarry was out of service that day, so they had to go to Antioch Building Materials (ABM)to get the cutback. The order was placed in person. The credit card information was given to the vendor for the purchase, they do not keep it on file. After they loaded the cutback to his truck, he didn't know that the cost would be over$1,000. He said that he can't take it but ABM told him that they can split it for two days so they charge his card two consecutive days. He was aware after the fact that it is wrong to do split transactions. Employee notified supervisor of the split purchase situation on that day. Staff noted that they always try to use County Quarry products first, when available. James Ramirez, Pape M ach inert/ Concern: Why multiple purchases on the same day? Parts were initially ordered for a preventative maintenance service. During the service, it was discovered that more parts were needed for additional repairs. The orders were placed by phone and Pape ships the parts to the District, so staff did not make multiple trips to the vendor's location. Fernando Dominguez and James Ramirez, Lehmer's Concord Buick GMC Concern: Why multiple charges from the same vendor on the same day? The parts that were purchased are typical for maintaining a fleet. The District's fleet is standardized on Chevy/GMC and there isn't a warehouse big enough onsite to stock all the different parts needed to November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 3 of 159 Page 2 of 4 maintain a fleet of vehicles. Parts required for completing a repair are typically identified during the initial inspection. However, occasionally additional parts may be identified after work begins, thus the need for ordering additional parts for the same vehicle, on the same day, from the same vendor. There are also several jobs a day where parts are ordered on an as-needed basis. More than one vehicle may require parts from Lehmers, resulting in more than one order on any given day. Orders are placed by phone and Lehmers may make multiple deliveries in aday to CSO. Bernard Martinez, Pittsburg Winnelson Concern: Multiple purchases on same day and multiple days close together. This was a big job at pump stations that ended up being bigger than expected. Staff started with one style of fitting (threaded)that did not work out, so staff ended up going with welded fittings. Jon Nicholaus, DM I* Dell Corp Bus Concern: Why multiple charges for$1,650.15 on the same day? These were all fraudulent charges that were not made by this employee. The fraud was identified in a timely manner, staff followed correct protocol in reporting the fraud and the bank rectified by crediting all fraudulent charges to the account. This account was closed and a new account was opened for this employee. Blanket Purchase Order (PO)versus Procurement Card (PCard) Expenditures The Committee inquired about the use of Blanket PO's (open accounts) instead of using Pcards for small dollar as-needed purchases. In2016, a review was done of open Blanket PO's. It was found that some Blanket PO's were being over used, or used for higher dollar purchases that should have been competitively bid. This resulted in larger dollar amounts needing to be added more frequently to these accounts than anticipated as well as inconsistent practices with getting competitive quotations. We also found that some invoices were not getting paid timely because a contact person wasn't listed on the invoice. As a result, a large amount of staff time would be spent sending invoices via interoffice mail to several staff before getting to the correct person to verify receipt and authorize payment, as well as Accounts Payables staff time spent issuing a large number of small dollar checks. As a result of this review, Purchasing worked with staff at all levels, including executive staff and managers, to close many of the existing Blanket PO's where staff could use their Pcards instead. Staff continues to recommend the use of Pcards over Blanket PO's (open accounts) because there are more controls in place and they are much easier to monitor. It is much more difficult to monitor the usage on Blanket PO's, such as checking for split orders to get around bidding thresholds, orders that exceed the allowed amount specified on the Blanket PO, and ensuring only authorized staff are using them. The Pcard's online system, Access Online, has an automated auditing tool that sends Purchasing notifications when there appears to be split transactions. Also, staff are unable to make a purchase over the amount they have been authorized because their card will be declined. And when staff leave the District, a process is in place to collect their Pcards so they may no longer order on behalf of the District. On an open account, a vendor may not be aware that a person is no longer employed by the District and could still honor their orders and bill the District. I n addition, the Pcard program provides the District with a quarterly rebate check based on spend as well as other factors. November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 4 of 159 Page 3 of 4 Amazon Purchases The Committee inquired about trends of spending over the course of the year. The charts below outline the spend with Amazon by month for the past three years, displaying the percentage of annual spend by month. The data does not show a significantly discernable trend by month--if expenditures were spread evenly by month, each calendar month would have about 8% of the annual spend. For any given month, over the three years, spending was typically not consistently above or below the 8% level. Only two months had slightly higher spending over the three-year period, February at 9%,10%,13%, and September at 8%, 11%, 11%. ansactions i2 Monm '-;-pend --Nov 2017- Oct 2018 7F 3% 14%, $6e .� 1 s'onoo 9% 8% $4pOOO.00 6% p �'�J OMW $1' .CK)_ ' q 4 e 0 Percentages of annual spend Amazon Pca rd Transactions 12 Month Spend - Nov 2016- Oct 2017 57r 15 56tOOO.00 55'r000.00 1 11 . 7% $3.eOW,00 , 5% 52r - 3 3 1 � NIP .N� � jA JA %1 %1 FA r : clp 4.0 Percentages of annual spend Amazon Pc a rd Tra n sactions 12 Month 5R end s Nov 2 015-Oct 2 01 14 4' .00 12% 12 10 11 53rw.00 2r _00 6 6 r r r r + x %4) Percentages of annual spend November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 5 of 159 Page 4 of 4 Strategic Plan Tie-In GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage costs November 20, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 6 of 159