UCSB Audit and Advisory Services Internal Audit Report. Intercollegiate Athletics and Department of Recreation Procurement and Contracting

Transcription

1 Internal Audit Reprt Prcurement and Cntracting January 4, 2017 Perfrmed by: Antni Mañas-Melendez, Principal Auditr Apprved by: Jessie Masek, Acting Directr Reprt N

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3 University f Califrnia, Santa Barbara BERKELEY DAVIS IRVINE LOS ANGELES MERCED RIVERSIDE SAN DIEGO SAN FRANCISCO SANTA BARBARA SANTA CRUZ January 4, 2017 AUDIT AND ADVISORY SERVICES SANTA BARBARA, CALIFORNIA Tel: (805) Fax: (805) T: Jhn McCutchen, Directr Intercllegiate Athletics Jeff Huskey, Directr Department f Recreatin Distributin Re: - Prcurement and Cntracting Audit N As part f the annual audit services plan, Audit and Advisry Services has cmpleted a crss-department purchasing audit including bth Intercllegiate Athletics and Department f Recreatin. Enclsed is the reprt detailing the results f ur review. The purpse f this review was t determine whether Intercllegiate Athletics and Department f Recreatin have adequate cmpliance assurance measures in place ver their prcurement and cntracting activities. The scpe f this audit was limited t Intercllegiate Athletics and Department f Recreatin. Our wrk fund required imprvement in prcurement and cntracting prcesses fr Intercllegiate Athletics and the Department f Recreatin t help ensure cmpliance with UC and UCSB plicies and prcedures and best practices. Required enhancements in bth departments include limiting the use f Frm-5, imprving supprting dcumentatin f prcurement transactins, and implementing prcesses fr accunting f lw value gds. We als fund pprtunities t imprve the management f nn-prcurement cntracts in Intercllegiate Athletics. Detailed bservatins and management crrective actins are included in the fllwing sectins f the reprt. The management crrective actins prvided indicate that each audit bservatin was given thughtful cnsideratin, and psitive measures have been taken r planned in rder t implement the management crrective actins. We sincerely appreciate the cperatin and assistance prvided by bth Intercllegiate Athletics and the Department f Recreatin persnnel during the review. If yu have any questins, please feel free t cntact me. Respectfully submitted, Jessie Masek Acting Directr Audit and Advisry Services

4 Prcurement and Cntracting January 4, 2017 Page 2 Enclsure Distributin: Finance and Resurce Management Acting Assistant Chancellr Chuck Haines Student Affairs Vice Chancellr fr Student Affairs Margaret Klawunn Andrea Carr, Assciate Directr, Business and Finance, Department f Recreatin Intercllegiate f Athletics Tm Hastings, Deputy Athletics Directr Renee McLean, Business Manager cc: Chancellr Henry Yang Vice Chancellr Administrative Services Marc Fisher UCSB Audit Cmmittee Interim Senir Vice President and Chief Cmpliance and Audit Officer Jhn Lhse

5 Prcurement and Cntracting Audit Reprt N PURPOSE The purpse f this review was t determine whether Intercllegiate Athletics and the Department f Recreatin practices fr prcurement and cntracting activities are in place and are cnsistent with University f Califrnia (UC) and University f Califrnia, Santa Barbara (UCSB) plicies, prcedures, and best practices. This audit is part f the fiscal year audit services plan f. SCOPE, OBJECTIVES AND METHODOLOGY The scpe f this audit included a crss-department purchasing and cntracting audit in Intercllegiate Athletics and in the Department f Recreatin. We selected samples f transactins frm the perid July 1, 2014, thrugh June 30, 2016, fr detailed review and testing. The bjectives f ur review were t determine whether: The use f Frm-5 fr prcurement cmplied with established prcesses and cntrls. Purchases f gds were prperly received and accunted fr. Nn-prcurement cntracting practices were in accrdance with UC and UCSB plicies and signature authrity delegatin and revenues were prperly recrded. Strategic Surcing prcurement agreements were apprpriately used. T accmplish ur bjectives, we: Reviewed previus, related UCSB Audit and Advisry wrk (see Table 1). Reviewed UC and UCSB plicies, best practices, and ther guidance cncerning infrmatin security, including: Business and Finance Bulletin BUS-43, Materiel Management. Business and Finance Bulletin BUS-28, Travel Regulatins. Business and Finance Bulletin BUS-77, Independent Cntractr Guidelines. Business and Finance Bulletin BUS-79, Expenditures fr Business Meetings. Business and Finance Bulletin BUS-G-43, University Membership in Organizatins. University f Califrnia Accunting Manual Sectin D , Disbursements Apprvals UC Santa Barbara Student-Athlete Handbk, an Intercllegiate Athletics guideline. UC Santa Barbara Intercllegiate Athletics Department Plicy and Prcedures Manual, Intercllegiate Athletics manual. Prcurement Services manuals, guidelines published n Business and Financial Services website. Interviews with the Assistant Chancellr and with persnnel frm Intercllegiate Athletics, Department f Recreatin, and Business and Financial Services, t btain a better understanding f the prcesses and internal cntrls in place and t identify areas f cncern. 1

6 Assessment f risks in selected areas based n the results f interviews, visibility f prcurement and cntracting activities, cncentratin f vendr usage, ptential cnflict f interest, and prir audit results. Based n ur risk assessment, we cnducted detailed testing f a sample f prcurement transactins fr cmpliance in the fllwing areas: Cmpliance with Frm-5. Receiving and accunting fr gds and services. Nn-prcurement cntracting practices. Use f strategic surcing. This audit was cnducted in cnfrmance with the Internatinal Standards fr the Prfessinal Practice f Internal Auditing. BACKGROUND Intercllegiate Athletics The primary missin f UCSB Intercllegiate Athletics (ICA) is t prvide an pprtunity fr widespread participatin in intercllegiate athletics and t enhance the student-athlete s educatin thrugh cmpetitin at the Divisin I intercllegiate level. As part f its missin, ICA administers several sprts camps and clinics fr middle t high schl-aged athletes that prvide specialized instructin in a particular sprt, mstly held ver the summer. The campus als welcmes camps rganized by UCSB caches r ther prmtinal partners. All f these camps are hsted at the University; bth institutinal and nninstitutinal camps rent facilities frm the University s Department f Recreatin, with sme als prviding vernight accmmdatins thrugh a cntract with a nearby nn-university residence facility. The classificatin f a camp r clinic as institutinal r nn-institutinal is determined by NCAA regulatins. The NCAA defines an institutinal sprts camp r instructinal clinic as any camp r clinic that is wned r perated by a member institutin r an emplyee f the member institutin s athletic department, either n r ff its campus, and in which prspective student athletes participate. As part f the fiscal year annual audit services plan, Audit and Advisry Services perfrmed an audit f ICA Camps and Clinics t assess whether they were perating cnsistently with regulatins, plicies, and prcedures applicable t their peratins. Our reprt fr that audit, issued December 16, 2014, highlighted pprtunities fr imprvement in written camps and clinics prcedures t ensure that risks assciated with the peratin f camps and clinics are adequately managed. Department f Recreatin The Department f Recreatin at UC Santa Barbara is cmmitted t creating a healthy and welcming campus envirnment fr all students, faculty, staff and cmmunity members. The department seeks t prmte an active, balanced lifestyle that cntributes t the develpment f the scial, emtinal, and physical skills essential t lng-term health and well-being. Quality and innvatin are guiding principles in all prgramming and student develpment effrts. They als strive t be an industry leader in envirnmental cnservatin and sustainability. Department facilities include the Recreatin Center and Aquatics Cmplex, Events Center, Rbertsn Gymnasium, tennis curts (20), Strk Field, sand vlleyball curts (2), Recreatin 2

7 Center fields, Lacrsse Pit, Campus Pl, Santa Barbara Harbr Sailing Facility, Sftball Field, Caesar Uyesaka Baseball Stadium, Cachuma Lake Rwing Facility and Harder Stadium. Table 1 Relevant Previus Wrk by Reprt Name Date Type ICA Camps & Clinics Cmpliance Assistance - ( ) May 2015 Advisry Intercllegiate Athletics Camps and Clinics - ( ) December 2014 Audit University Center Internal Cntrl Review - ( ) March 2015 Audit Integratin and Cntrl f Auxiliaries Audit - Phase 2 Final Reprt - ( ) September 2014 Audit Intercllegiate Athletics Field Audit Fllw up - ( ) March 2013 Audit Delegated Prcurement Authrities - ( ) Octber 2015 Audit Prcurement and Cntracting - ( ) January 2013 Audit Intercllegiate Athletics - Audit - ( ) Octber 2010 Audit Department f Recreatin - ( ) Octber 2010 Advisry Intercllegiate Athletics - Department Visitatin - ( ) March 2009 Audit Surce: Auditr analysis. SUMMARY OPINION Our wrk fund required imprvement in prcurement and cntracting prcesses fr Intercllegiate Athletics and the Department f Recreatin t help ensure cmpliance with UC and UCSB plicies and prcedures and best practices. Required enhancements in bth departments include limiting the use f Frm-5, imprving supprting dcumentatin f prcurement transactins, and implementing prcesses fr accunting f lw value gds. We als fund pprtunities t imprve the management f nn-prcurement cntracts in Intercllegiate Athletics. Audit bservatins and management crrective actins are detailed in the remainder f the audit reprt. 3

8 DETAILED OBSERVATIONS AND MANAGEMENT CORRECTIVE ACTIONS A. Intercllegiate Athletics The results f ur interviews, review f dcumentatin, and detailed testing f prcurement activity and cntracting practices in Intercllegiate Athletics identified areas f nn-cmpliance with University plicies and Prcurement Services prcedures. Our results are summarized in Table Cmpliance with Established Prcesses using Frm-5 Our test f a sample f five purchases using Frm-5 highlighted that Intercllegiate Athletics has limited the use f Frm-5 t purchase nly services, as is required by Business and Financial Services. Hwever, we fund the fllwing issues: Intercllegiate Athletics apprved three 1 f five purchases tested fr amunts ver the limit authrized fr a campus department withut delegated prcurement authrity. These payments als were fr independent cntractr services and paid using Frm-5 2. Hwever, these type f cntracts must be prcessed using purchase rders and they apprved by Prcurement Services. Tw f five purchases tested did nt include sufficient supprt dcumentatin t ensure that quantities were cnsistent with invices. Fr example: One sprt event did nt include a frmal invice and a calendar f the event t validate that the number f paid referees matched with the number played games. One travel expense did nt include the list f passengers. All purchases f ur sample were apprved by business persnnel. University plicies d nt require that purchases be apprved by business and functinal persnnel. Hwever, a dual apprval prcess wuld imprve the versight f the prcurement prcess. Intercllegiate Athletics is updating their prcesses t include a dual apprval prcess. 2. Receiving and Tracking Gds We verified that all purchases f ur sample were received by either business r functinal persnnel f Intercllegiate Athletics. Hwever, we determined that there are pprtunities fr imprving the receiving and asset tracking prcesses f gds in the department. Fr example: There is n dual signature requirement in the receiving prcess in rder t include business and functinal versight. University plicies d nt require a dual signature in the receiving prcess f gds. Hwever, a dual receiving prcess fr this department wuld imprve the versight f the receiving prcess. The department is instituting a receiving prcess with dual signatures. There are n updated inventries f the department s lw value items. These inventries shuld include lgs fr the distributin f apparel equipment t intercllegiate sprt teams. The department is currently updating these inventries. 1 Three purchases fr value f $167,000 ttal. 2 Frm-5 allws purchases withut the participatin f Prcurement Services. 4

9 There are n frmal peridic physical reviews f lw value items. We did bserve hwever, that items in ur sample were lcated. 3. Nn-Prcurement Cntracts We tested nly ne nn-prcurement cntract during the audit perid. We determined that: The purpse f the cntract was reasnable. The pricing and ther terms f the cntract appeared reasnable. The cntract was apprved and signed by an authrized apprver. We culd nt cnduct testing t determine if revenues were prperly recrded in general ledger revenue accunts because supprting dcumentatin culd nt be btained during the audit perid. We recmmend that Intercllegiate Athletics cnsult with Prcurement Services t develp and implement prcurement prcesses that fully cmply with University plicies, including: Limiting the use f Frm-5 and encuraging the use f Gateway. Imprving supprt dcumentatin t validate that quantities are cnsistent with invices. Implementing a cnsistent dual apprval prcess, including business and functinal apprvals. Implementing a cnsistent dual receiving prcess, including business and functinal receiving. Cnsulting Prcurement Services abut managing cmplex cntractual agreements. The department shuld request peridic reprting frm vendrs that are prviding services t the department. We als recmmend imprving the accunting fr the gds by implementing an inventry f lw value items and a lg f distributin f equipment t intercllegiate athletics teams. Management Crrective Actins Intercllegiate Athletics will cnsult Prcurement Services t develp and implement prcurement prcesses that fully cmply with University plicies, including the fllwing areas: The use f Gateway and Frm-5. Apprval prcess. Supprting dcumentatin. Receiving prcess. Frmatin and management f cntractual agreements. We will cntinue imprving and updating ur inventries f lw value items, and we will implement a lgging prcess t distribute equipment t intercllegiate athletics teams. Audit and Advisry Services will fllw up n the status f these issues by April 30,

10 Table 2 Purchasing and Cntracting Cmpliance ICA Recreatin Established Prcesses / Cntrls 1. Use f Frm-5 appeared reasnable Partial 2. Csts were relevant t the department activity 3. Cst amunt agreed with supprting dcumentatin Partial 4. The type f cst fully agreed with any available supprting dcumentatin 5. The payment methd was apprpriately dcumented Partial Partial 6. Rates and prices were reasnable 7. Quantities were cnsistent with the invices r ther surce dcuments 8. Services and gds were received/signed fr 9. Apprval prcess Partial 10. N cnflict f interest Receiving and Tracking Gds 1. Gds were received/signed fr 2. Accunting fr the gds Partial Partial 3. Physically accunt fr the gds Partial Partial Nn-Prcurement Cntracting 1. The purpse f the cntracts was reasnable 2. The pricing and ther terms f the cntract appeared reasnable 3. The cntract was apprved and signed by an authrized apprver 4. Revenues were prperly recrded in the prper revenue accunts in the general ledger Use f Strategic Surcing 1. Strategic surcing cntracts bypassed Surce: Auditr analysis. : Full cmpliance. Partial: Meets sme f the cmpliance requirements r there are cmpensatry cntrls. : N cmpliance r very limited cmpliance. 6

11 B. Department f Recreatin The results f ur interviews, review f dcumentatin, and detailed testing f prcurement activity and cntracting practices indicated that the Department f Recreatin verall cmplies with University plicies and Prcurement Services requirements in prcurement and cntracting activities. Hwever, we fund pprtunities t imprve the use f Frm-5, supprting dcumentatin, and accunting f lw value gds. Our results are summarized in Table Cmpliance with Established Prcesses using Frm-5 Our test f a sample f five purchases using Frm-5 highlighted that the Department f Recreatin has nt cmpletely restricted the use f Frm-5 t purchase services, as is required by Prcurement Services. We fund: Tw f five transactins tested were purchases f gds fr $5,000. Prcurement Services des nt allw t use Frm-5 t purchase gds. These expenses shuld have been prcesses in Gateway. One f the purchases mentined in the prir issue was a reimbursement fr sprt equipment t a University emplyee. This purchase was made by a University emplyee. The department reimbursed this emplyee using a Frm-5 tw years after the purchase date. We cnfirmed that the sprt equipment was physically lcated at the Department f Recreatin. All purchases f ur sample were apprved either by business r by functinal persnnel. University plicies d nt require that purchases be apprved by business and functinal persnnel. Hwever, a dual apprval prcess wuld imprve the versight f the prcurement prcess. 2. Receiving and Tracking Gds We verified that all purchases f ur sample were received by either business r functinal persnnel f the Department f Recreatin. Hwever, we determined that there are pprtunities fr imprving the receiving and asset tracking prcesses f gds in the department. Fr example: There is n dual signature requirement in the receiving prcess in rder t include business and functinal versight. University plicies d nt require a dual signature in the receiving prcess f gds. Hwever, a dual receiving prcess fr this department wuld imprve the versight f the receiving prcess. There are n updated inventries f the department s lw value items. These inventries shuld include lgs fr the distributin f apparel equipment t sprt clubs. There are n peridic physical reviews f lw value gds. We perfrmed a physical review f all items in ur sample and we lcated all f them. 3. Nn-Prcurement Cntracts We tested five nn-prcurement cntracts. We determined that: The purpse f these cntracts was reasnable. The pricing and ther terms f the cntracts appeared reasnable. 7

12 Cntracts were apprved and signed by an authrized apprver. Revenues were prperly recrded in the prper revenue accunts in the general ledger. We recmmend that the Department f Recreatin cnsult with Prcurement Services t develp and implement prcurement prcesses that fully cmply with University plicies, including: Limiting the use f Frm-5 fr services and encuraging the use f Gateway. Implementing a cnsistent dual receiving prcess, which includes business and functinal persnnel in the receiving prcess. We als recmmend imprving the accunting fr the gds by implementing an inventry f lw value items and a lg f distributin f equipment t sprt clubs. Management Crrective Actins The Department f Recreatin will cnsult with Prcurement Services t develp and implement prcurement prcesses that fully cmply with University plicies, including the fllwing areas: The use f Gateway and Frm-5. Receiving prcess. We will cntinue imprving and updating ur inventries f lw value items and we will implement a lgging prcess t dcument the distributin f equipment t sprt clubs. Audit and Advisry Services will fllw up n the status f these issues by April 30, Strategic Surcing Selectin f strategic surcing vendrs fr prcurement is nt mandated by UC r UCSB plicy. The use f strategic surcing vendrs is nly recmmended, therefre prcuring departments d nt have t justify why nn-strategic surcing vendr are selected when a strategic surcing vendr is als available. We were infrmed that Intercllegiate Athletics and the Department f Recreatin seek t use strategic surcing vendrs if they are available fr their business needs. 8