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- Superior Court of California, County of Los Angeles
- Superior Court of California, County of Monterey
- Superior Court of California, County of Santa Barbara
- Superior Court of California, County of Santa Clara
Superior Court of California, County of Los Angeles
December 17, 2018
Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle:
Thank you for the opportunity to review the Bureau of State Audits 2018 Procurement Report. As outlined below, the Superior Court of California, County of Los Angeles (Court) does not agree with the audit findings.
Finding - Los Angeles Court could not provide documentation that it obtained the best value for the $253,000 in goods acquired under one contract in fiscal year 2017-18.
The Judicial Branch Contracting Manual (JBCM) does not impose a continuing obligation on Judicial Branch Entities to assess and/or document best value when issuing a Purchase Order (PO) from a Court contract that has been competitively bid by the Court. This is true even when multiple contracts are awarded through a single solicitation, as authorized by JBCM Chapter 4, Section 4.2.D. The procedure set forth in Section 4.2.D does not include a requirement that the Court indicate an additional method for selecting between the awarded vendors when ordering services off of the Court agreements.
The two agreements awarded in 2012 were the result of a full competitive procurement process that included analysis and consideration of pricing submitted by both vendors as part of their proposals and followed the protocol for making multiple awards through a single solicitation. The pricing submitted by each vendor was determined to be competitive during the solicitation evaluation process and was incorporated into the final agreement with each vendor. As an added precaution, the Court's contracts included a Most Favored Public Entity provision that requires the contractor to extend lower pricing to the Court if the same lower pricing is offered to another federal, state, county or municipality. This provision provides added protection to ensure that the Court continues to receive the best competitive pricing under these agreements.
In the context of competitive procurements, "best value" is a standard for awarding the initial contract and it necessarily includes criteria other than pricing. However, once the Court establishes a competitively bid contract, there is no JBCM requirement for a continued assessment (or documentation) of best value for each PO issued to an awarded vendor.
- Recommendation: The Los Angeles court should ensure it documents best value pricing in its procurement files when selecting vendors from master services agreements.
In full accordance with the JBCM, the Court does follow this practice in all situations where it is required per the JBCM.
Finding - Failure to report contracts as part of the semiannual reports as required by the JBCM.
All Court contracts that have POs associated with them are included by the Court in the judicial branch financial system {SAP) and should be automatically reported by the Judicial Council of California (JCC) as part of these reports.
During the audit onsite visit, the contracts outlined below were identified as possibly missing from the JCC semiannual report. The POs for these transactions were issued by the Court through the SAP system and should have been automatically included by the JCC in the semiannual report.
1. 2014-028-A2 - First 1year extension re Structured Cabling Master Agreement
2. 2015-053A1 - QC Services for Mental Health; Extension
Please include this response in your final 2018 Procurement Report. If you have questions or need additional information, please do not hesitate to contact me.
Sincerely,
Sherri R. Carter
c: Presiding Judge Daniel J. Buckley
Jeremy D. Cortez, Chief Deputy of Finance and Administration
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES
To provide clarity and perspective, we are commenting on the response to our audit report from the Superior Court of California, County of Los Angeles (Los Angeles court). The numbers below correspond to the numbers we placed in the margin of the Los Angeles court’s response.
We appreciate the Los Angeles court’s comments and have clarified our finding and recommendation to better reflect our position. We stand by our recommendation that the court should ensure its documents best value when selecting vendors from which it acquires goods and services under leveraged procurement agreements.
Based on additional information provided by the Los Angeles Court, we amended the text to state that the semiannual reports did not include one contract from the Los Angeles court’s Novatus system.
Superior Court of California, County of Monterey
December 17, 2018
Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
RE: Report Number 2018-301, Judicial Branch Procurement
Dear Ms. Howle,
The Superior Court of California, County of Monterey has reviewed the findings and recommendations contained in the California State Auditor’s draft report regarding judicial branch procurement. We have detailed below our responses to the two recommendations contained in the report, to both of which the court agrees. The court has already begun to take action in response to the recommendations and intends to have fully implemented all corrective actions by the end of February 2019.
Recommendation #1: The Monterey court should ensure it documents fair and reasonable pricing from vendors in its procurement files.
Response: The court agrees with the recommendation. The court will ensure its local contracting manual (LCM) supplements and contains all relevant sections of the Judicial Branch Contracting Manual that cover fair and reasonable pricing. In addition, in regard to leveraged purchase agreements, the court will revise its LCM to improve the court’s processes in determining and documenting that the appropriate steps have been taken when ascertaining whether the vendor's prices are fair and reasonable.
Planned implementation date: February 28, 2019
Recommendation #2: The Monterey court should revise its guidance regarding invoice approval limits to include a description of circumstances under which it will allow exceptions to such limits and inform court staff of the revisions.
Response: The court agrees with the recommendation. The court will update and revise its LCM to clarify general approval authority limits as well as specific categorical approval authority limits, and the process and procedures related to the granting of exceptions to those limits. The court’s Finance Division staff will also initiate regular annual trainings for all relevant court staff as well as as-needed trainings for new relevant court staff to communicate these revisions, as well as maintain staff awareness of these policies in the future. The court has already communicated to relevant court staff in November 2018 to remind them of the current invoice approval limits pending revision of the LCM.
Planned implementation date: February 28, 2019
We would also like to thank and recognize your staff – Rachel Hibbard, David Monnat, and Wren Greaney – for their professional and courteous demeanor when working with our court staff, both in-person and through correspondence, during the audit process.
Sincerely,
Hon. Lydia M. Villarreal
Presiding Judge
Chris Ruhl
Court Executive Officer
Superior Court of California, County of Santa Barbara
December 12, 2018
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 94815
RE: Report No. 2018-301
Dear Ms. Howle:
The Santa Barbara Superior Court reviewed the draft audit report, Judicial Branch Procurement, Report 2018-301. We agree with the recommendations contained within the report, and are including the courts strategies and timelines to attain compliance below.
Recommendation # 1 – Santa Barbara court should ensure they document their justifications and approvals for using noncompetitive procurements.
Santa Barbara agrees that the justification and approvals for using noncompetitive procurements must be clearly documented in all contract files. An additional procurement specialist is now assisting with the workload to allow for more time and focus on each individual procurement. Additionally, procurement presently utilizes a contract summary at the inception of the procurement which serves as a check-list to ensure that no steps are over-looked, and all required documentation is accounted for in each procurement file.
Estimated completion date: March 31, 2019
Recommendation # 2 – Santa Barbara court could better document the receipt of goods and services. The Santa Barbara court should reinstate its previous requirement that staff submit packing slips or receipts before payment of invoices.
The court agrees that better documentation should be used for the receipt of goods and services. Santa Barbara Court will reinstate the previous requirement that staff submit packing slips or receipts prior to the payment of invoices. We agree that this will further assure that payments are appropriate. The court is currently revising the forms and procedures to include in an updated local contracting manual, and posted to the court intranet. Training on the updated policies and procedures will be provided to court staff to ensure compliance.
Estimated completion date: March 31, 2019
Recommendation # 3 – Santa Barbara court should document their alternative purchase card procedures regarding transaction limits in their local manuals.
Santa Barbara agrees that alternative procedures should be documented in the local contracting manual. The court began revising its local contracting manual earlier this fiscal year. If we determine that it is necessary to maintain alternate limits on any of the court credit cards, those limits will be documented in the manual.
Estimated completion date: March 31, 2019
Thank you for your time and communication with us throughout the process. We appreciate the recommendations made, and will utilize the opportunity to further improve our practices.
Sincerely,
Patricia Kelly, Presiding Judge
Superior Court of California, County of Santa Barbara
Cc: Darrel E. Parker, Superior Court Executive Officer
Superior Court of California, County of Santa Clara
December 18, 2018
Elaine Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Re: Santa Clara Superior Court Response to State Audit
Dear Ms. Howle:
Key Points Response pertaining to procurement practices related to contracting
- The Court is aware of and agrees with the findings identified by the state auditors regarding lack of a proper solicitation process or sole-source justification relating to certain contracts. The Procurement Department will include in their contracting and procurement procedures reference to State contracting guidelines. The Court will also conduct scheduled price checks on existing contracts to ensure that the Court continues to receive the best pricing. If the Court chooses not to go through a solicitation process, a sole-source justification will be included in the contract in place of the solicitation.
- The Procurement Department has formulated its procedures and operated on the understanding that Leveraged Procured Agreements (LPA’s) did not have to go through a solicitation process and that our Court can participate in these agreements without having to do anything further under the solicitation process. The Court now has a clear understanding of the requirements relating to such agreements.
- Going forward, the Procurement Department will scrutinize all future LPA’s from government entities as well as LPA’s with piggybacking clauses to determine requirements for any participating Court, to check to ensure that current pricing is fair and reasonable.
- The Procurement department will also try to ensure that either a solicitation or price check is first conducted prior to the Court extending any LPA’s once the initial term has ended.
Key Points Response pertaining to separation of duties and documentation/approval of goods receipts
- The Court recognizes the deficiency in clear separation of duties with Court staff in the approval of invoices and posting of invoices. These incidences occurred due to a lack of staffing in Finance. Staff from other departments such as Procurement and Law Library are assisting Finance in processing these invoices until Finance can go back to adequate staffing numbers.
- Going forward, the Court will prioritize clear separation of duties between invoice approvals and the posting of invoices in SAP.
- Procurement will emphasize in their annual training the necessity for Court approvers to approve only within their designated approval amounts. Training for managers and supervisors will also emphasize that the responsibility is theirs to verify delivery of goods and services before processing invoices for payment. The Procurement Department is reviewing its invoice approval procedures and will be revising them to state clear procedures and guidelines on invoice approval limits and exceptions to the amount limits. Those procedures also will be revised to allow only managers and supervisors to approve receipts and invoices prior to processing them for payments.
Key Points Response pertaining to purchase card practices
- The Court recognizes that the use of the Court purchase cards exceeded the daily amount limit and transactional amount limit. These instances are not the normal practice of the Procurement Department. In instances where the amounts were exceeded, the vendor did not accept purchase orders and the time constraints of the project did not allow for cutting a check.
- The Court follows the State’s procurement guidelines for finding the lowest/best price for goods and services. Best pricing for goods is often sourced out from vendors such as Amazon, which do not accept purchase orders. In these cases, purchase cards are the only accepted form of payment.
- The Court’s Procurement Department will limit the use of the Court purchase card and will ensure the Court stays within the purchase card’s daily amount limits and transaction limits.
- The Court will review the Court’s purchase card limits and match it to the Judicial Council’s amount limits for purchase cards. The Court will also ensure through training and reinforcement that the staff abide by the Judicial Council’s purchase card limits. The Court will investigate alternative transaction limits and will revise its procedures as necessary.
Very truly yours,
Honorable Patricia M. Lucas
Presiding Judge
cc: Rebecca Fleming, Court Executive Officer
Walter Eissmann, Finance Director