Emergency Purchases Business Operations

Transcription

1 Emergency Purchases Business Operations Brian Busby, Chief Operating Officer Rene Barajas, Chief Financial Officer Cc: Mr. Richard Carranza, Superintendent Board of Education Issue Date: 12/18/2017

2 Final Emergency Purchases HISD# To: Re: Mr. Brian Busby, Chief Operating Officer, Houston Independent School District Mr. Rene Barajas, Chief Financial Officer, Houston Independent School District FINAL - Audit Report prepared by Whitley Penn re: Emergency Purchases Date: December 18, 2017 From: Debi Fincher, Ethics & Compliance Officer In September 2017, we received information related to possible inappropriate purchase of emergency vehicles and ceiling tiles by Facilities Services. As a result, we requested that an external audit be performed by Whitley Penn. You will find attached the final audit report submitted to us on November 28, On this same date, I asked that you share the report with your subordinates to prepare a response to our office by Wednesday, November 15, We have incorporated your responses to the report, and they are listed below and in additional attachments. Observations Purchase of 4 vehicles from Beck and Masten Buick GMC: 1. Vehicle purchase not permissible as emergency purchases under Texas Education Code. 2. Lack of diligence around sourcing vehicles. We recommend that: 1. Going forward, purchases that do not qualify as an exception under Texas Education Code Section subchapter (h) should be purchased in accordance to the procurement requirements as outlined in the Texas Education Code Section (44.031). 1. Implement as proposed Responsible Party: Rene Barajas/Brian Busby 2. Implement alternative plan 3. Take no action (management accepts the risks) 12/13/2017.

3 Comments: Dr. Rene Barajas, CFO - See attached memo: Response to External Audit Report prepared by Whitley Penn re: Emergency Purchases Comments: Brian Busby, COO - Management acknowledges that the language of Texas Education Code Section (h) appears to limit the emergency purchase of vehicles to circumstances where the vehicles purchased are replacing vehicles damaged by the catastrophic event. However, in the chaotic immediate aftermath of the initial flooding, an administrator reviewing the Board Resolution, without the benefit of legal guidance on the underlying statutory authority, could reasonably conclude that the Resolution allowed for the purchase of emergency vehicles necessary to protect the health and safety of HISD staff. The Resolution recites that the emergency purchase of goods and services, including emergency vehicles, would be necessary not only to restore and repair damages facilities, but also to protect the health and safety of HISD students and staff. Additionally, the Resolution authorizes the administration to execute contracts for goods that are necessary to either mitigate, prevent restore and repair damages facilities, or protect the health and safety of HISD students and staff. Emergency vehicles of a certain clearance height and 4-wheel drive capability were needed to safely access, evaluate and mitigate numerous flooded campuses. The purchases were approved in advance by personnel acting under the good faith belief that the purchases were lawful. Management acknowledges that, in the future, the department responsible for authorizing emergency purchases should be required to seek guidance from legal counsel for proper interpretation and application of Texas law prior to authorizing emergency purchases. 2. Going forward, even in the case of an emergency, HISD should document why items were not competitively procured and retain proof of attempts to obtain quotes or any quotes obtained. 1. Implement as proposed Responsible Party: Rene Barajas/Brian Busby 2. Implement alternative plan 3. Take no action (management accepts the risks) 12/13/2017 Comments: Dr. Rene Barajas, CFO - See attached memo: Proposed Procedure for Emergency Procurements Comments: Brian Busby, COO - As it relates to due diligence, it should be noted that Texas law does not require the District to obtain multiple quotes or sourcing options under an emergency purchasing situation. However, from a best practices standpoint, Management agrees that, to the extent feasible under the circumstances, it will attempt to do so in future emergency situations, and will document such attempts.

4 Observations Purchase of Ceiling Tile from Preston Banks Construction Company: 1. Use of unapproved Vendor 2. Receipt and Use of Ceiling Tiles We recommend that: 1. Going forward, even in the case of an emergency, HISD should document why items were not competitively procured and retain proof of attempts to obtain quotes or any quotes obtained. Additionally, the District should obtain and retain proof of receipt of goods and document how the goods were used as part of hurricane recovery efforts. 1. Implement as proposed Responsible Party: Brian Busby 2. Implement alternative plan 3. Take no action (management accepts the risks) 12/14/2017 Comments: In response to 1 and 2 - Management disagrees with the characterization of Preston Banks Construction as an unapproved vendor. Both the selection of this vendor and the purchase of the ceiling tile was authorized under the Board s emergency resolution and was proper under Texas law governing emergency purchases. Additionally, nothing in Texas law requires that a school district look first to its existing vendor pool or a cooperative vendor pool when purchasing goods or services in emergency situations. However, from a best practices standpoint, Management agrees that, to the extent feasible under the circumstances, it will attempt to do so in future emergency situations, and will document such attempts. 2. Going forward, even in the case of an emergency, HISD should document why items were not competitively procured and retain proof of attempts to obtain quotes or any quotes obtained. Additionally, the District should obtain and retain proof of receipt of goods and document how the goods were used as part of hurricane recovery efforts. 1. Implement as proposed Responsible Party: Brian Busby 2. Implement alternative plan 3. Take no action (management accepts the risks) 12/14/2017

5 Your assistance in this matter has been very much appreciated. Please contact me if you have any additional questions. Sincerely, Debra S. Debi Fincher Ethics & Compliance Officer Office of Ethics & Compliance cc: Ms. Wanda Adams, Board President Ms. Anna Eastman, Chairman Audit Committee Mr. Richard Carranza, Superintendent Mr. Garland Blackwell, Chief Audit Executive Dr. Sam Sarabia, Deputy Superintendent Dr. Cynthia Wilson, Chief of Staff Sherrie Robinson, Controller Rick Gay, Procurement Officer