12-09 Colorado Springs Utilities Procurement Audit Report

8/13/2019 12-09 Colorado Springs Utilities Procurement Audit Report

1/16

May2012

1209ColoradoSpringsUtilities

ProcurementAuditReport

O

FFICE

OF

THE

CITY

AUDITO

R

C

O

LO

RADO

SPRIN

GS,

CO

LO

RADO


2/16

PurposeThepurposeofthisauditwastoevaluatewhethertheColoradoSprings

Utilitiesprocurementprocessprovidedreasonableassurancethatbest

valuewasobtainedforgoodsandservices,determinecompliancewith

ColoradoSpringsUtilitiespoliciesandprocedures,andreviewtheadequacy

ofinternal

controls.

ManagementResponseManagementwasgenerallyinagreementwithourrecommendations.

Responsescanbefoundintheattachedreport.

O FF ICE O F THE C I TY AUDITOR COLORADO S PR INGS , COLORADO

1209

Colorado

Springs

Utilities

ProcurementAuditMay2012

HighlightsOurauditperiodincludedpurchaseordersandcontractsexecutedfrom

January1throughDecember31, 2010. Weconcludedthatoverall,the

controlsintheprocurementprocessprovidedreasonableassurancethat

bestvaluewasobtainedforgoodsandservices,compliancewithinternal

policiesandprocedureswasachieved,andresourcesweresafeguarded.

ColoradoSpringsUtilitiesissuedapproximately$22.4millioninstandard

purchaseordersin2010andmaintainedapproximately$968millionin

standardcontracts.

Colorado

Springs

Utilities

issued

approximately

$223

millionpurchaseorderreleasesonthesecontracts. Procurementand

ContractServices,whichreportstotheFinancialServicesorganization,had

primaryresponsibilityforprocurementofgoodsandservices. Additionally,

someprocurementdutieswereperformedbyOperationspersonnelin

MaterialsManagement.EnergyServicesnegotiatedandenteredintofuel

contractsonbehalfofColoradoSpringsUtilities.

Ourmethodologyincludeddetailtestingofasampleofvarioustypesof

purchasesandcontractstodeterminecompliancewithpoliciesand

procedures,asfollows:

Reviewedasample

of

Contracts

and

Solicitations

to

ensure

bid

solicitationsfollowedpolicyandselectionofbestvaluewas

documented,(Continued on page 2)

Recommendations1. Contractsandamendments

exceedinggiventermsor

dollaramountsshould

requireapprovalbysenior

managementin

addition

to

theEnergyServicesOfficer.

2. WaterServicespersonnel

shouldreviewtheduties

assignedtotheinventory

specialistintheWater

ServicesDivision.

3. ColoradoSpringsUtilities

shouldreviewaccesslevels

toensurethatdollarlimits

areinaccordancewith

policyandconsistentwith

limitsassignedto

supervisors.

OpportunityforImprovement1. MaterialsManagement

shouldconsiderreinstating

theprocesstotrackvendor

performance. Procurement

andContractServices

shouldconsider

the

cost

benefitoftrackingvendor

performancedataina

standardizedformatfor

considerationinfuture

contractingdecisions.


3/16

1209ColoradoSpringsUtilitiesProcurementAudit

May2012

CityCouncilsOfficeoftheCityAuditor

CityHall 107NorthNevadaAvenue Suite200 MailCode1542

ColoradoSpringsCO809011575

Tel7193855991 Fax7193855699 ReportingHotline 7193852387

www.SpringsGov.com/OCA

Reviewedasampleofchangeorderstoensureproper

documentationandapproval,

Reviewedasampleofsolesourcejustificationsforproper

documentationandapproval,and

Testedtodeterminethatgoodsandserviceswererequisitioned

andapprovedinaccordancewithpolicy.

Ourtestingindicatedcompliancewithpoliciesandproceduresin

placerelatedtoprocurement.

Wenoted

that

Energy

Supply

contracts

did

not

require

review

and

approvaloutsidetheEnergyServicesDivision. Additionally,we

notedsegregationofdutiesrisksexistedforprocurementactivities

performedbyStoreroompersonnelintheWaterServicesDivision.

(Highlights continued from page 1)


4/16

OFFICEOFTHECITYAUDITORPUBLICREPORT

CityCouncilsOfficeoftheCityAuditor

Date: May9,2012

To: PresidentHenteandPresidentProTemMartin,MembersofCityCouncil

Re: 1209ColoradoSpringsUtilitiesProcurement

WeconductedanauditofColoradoSpringsUtilitiesProcurementaspartofourregularcycleofaudits. Our

auditfocusedontheperiodfromJanuary1,2010throughDecember31,2010.

ThepurposeofthisauditwastoevaluatewhethertheColoradoSpringsUtilitiesprocurementprocess

providedreasonableassurancethatgoodsandserviceswereobtainedatbestvaluefortheorganization

whileadequatelysafeguardingresources. WealsoevaluatedwhetherColoradoSpringsUtilities

compliedwiththeinternalpoliciesandproceduresinplaceforacquiringgoodsandservices.

Weconcludethatoverall,procurementprocessesensure1)goodsandserviceswereacquiredatbest

valuefortheorganization,2)policiesandproceduresinplacewerefollowed,and3)controlswere

adequatetoensuresafeguardingofresources. Wemadethreeobservationsrelatedtosegregationof

dutiesandinternalcontrols. Wehavelistedourrecommendationsrelatedtotheseobservationsinthe

attachedreport.

WewouldliketothankColoradoSpringsUtilitiesProcurementandContractServicesfortheirtimeand

helpincompletingthisaudit.

Asalways,feelfreetocontactmeifyouhaveanyquestions.

Sincerely,

DennyNester,MBA,CPA,CIA,CGFM,CFE,CGAP

CityAuditor

Cc: JerryForte,ColoradoSpringsUtilitiesChiefExecutiveOfficer

GaryBostrom,ChiefWaterServicesOfficer

BillCherrier,ChiefPlanningandFinancialOfficer

Carl

Cruz,

Chief

Customer

and

Corporate

Services

Officer

BruceMcCormick,ChiefEnergyServicesOfficer

LeahAsh,GeneralManager,Distribution,CollectionandTreatment

DedeJones,GeneralManager,FinancialServices

GeorgeLuke,GeneralManager,EnergySupply

MasonParsaye,GeneralManager,EnergyConstruction,OperationsandMaintenance

DawnRoth,GeneralManager,InformationTechnologyServices






5/16

OfficeoftheCityAuditor

PublicReport

Cc(Continued):

MicheleFujimoto,Manager,FuelandMaterials

William

Lopez,

Jr.,

Manager,

Resource

Technology

Services

GregMitchell,Manager,EnergySupportServices

EliNovakovich,Manager,ProcurementandContractServices

DavidMaier,Manager,EnterpriseRiskManagementServices

PatriciaVanMeter,SeniorAnalyst,EnterpriseRiskManagement


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OFFICEOFTHECITYAUDITORPUBLICREPORT

ReportDetails................................................................................................................................................................1

Purpose......................................................................................................................................................................1

Scopeandmethodology............................................................................................................................................1

Background................................................................................................................................................................1

Conclusion.................................................................................................................................................................3

Observations,RecommendationsandResponses.........................................................................................................4

Observation1EnergySupplycontractsdidnotrequirereviewandapprovaloutsidetheEnergyServices

Division......................................................................................................................................................................

4

Observation2 SegregationofdutiesrisksexistedintheWaterServicesDivision..................................................5

Observation3Sixemployeeshadhighersystemrequisitionlimitsthantheirsupervisor.....................................7

Opportunityforimprovement.......................................................................................................................................8

Opportunity1Vendorperformancewasnottrackedandreported......................................................................8


7/16

ColoradoSpringsUtilities

Procurement


REPORT DETAILS

PURPOSE

WeperformedanauditofColoradoSpringsUtilitiesprocurementfunctionaspartofourregularcycle

audits. Thepurposeofthisauditwastoevaluatewhethertheprocurementprocessprovided

reasonableassurancethatbestvaluewasobtainedforgoodsandservices,anddeterminecompliance

withinternalpoliciesandprocedures. Wealsoreviewedtheadequacyofinternalcontrolsover

procurement.

SCOPEANDMETHODOLOGY

Thescopeoftheauditincludedreviewingtheprocessesusedin1)initiatingandapprovingpurchases

andcontracts,

2)

soliciting

bids

and

prices,

and

3)

processing

purchase

orders.

We

assessed

controls

in

placeintheResourceManagementSystem(RMS)aswellassegregationofdutiesrelatedto

procurementwithintheorganization. Ourauditincludedpurchaseordersandcontractsexecutedfrom

January1throughDecember31,2010.

Ourmethodologyincludeddetailtestingofasampleofvarioustypesofpurchasesandcontractsto

determinecompliancewithpoliciesandprocedures. Weobtainedanunderstandingoftheinternal

controlstructurebyreviewingprocurementpoliciesandconductinginterviewswithmanagement. Our

testsincludedreviewsforcompliancewithpolicyandproceduresasfollows:

ReviewedasampleofContractsandPurchaseOrderstoensurebidsolicitationsfollowedpolicyand

selection

of

best

value

bid

or

proposal

to

the

organization

was

properly

documented,

Reviewedasampleofchangeorderstoensureproperdocumentationandapproval, Reviewedasampleofsolesourcejustificationsforproperdocumentationandapproval,and Testedtodeterminethatgoodsandserviceswererequisitionedandapprovedinaccordance

withpolicy.

Ourtestingindicatedcompliancewithpoliciesandproceduresinplacerelatedtoprocurement.

InadditiontoprocurementactivitiesprocessedbytheProcurementandContractServicessection,we

inquiredofColoradoSpringsUtilitiesmanagersthroughouttheorganizationtoidentifyanysignificant

procurementactivities

conducted

by

other

groups

in

the

organization

and

included

these

in

our

scope.

BACKGROUND

TheOfficeoftheCityAuditorpreviouslyperformedanauditofColoradoSpringsUtilitiesprocurement

forthesixmonthsendedJanuary1toJune30,2007,whichwasissuedNovember12,2008. Some

issueshadbeenresolvedwhenweperformedfollowupproceduresin2009. Threerecommendations

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Procurement


weretobeimplementedwhentheprocurementsoftwarewasupgraded. TheCityAuditorsOffice

notedtheserecommendationshadbeenimplementedwhenfollowupwasperformedin2010.

Procurementand

Contract

Services

(PCS),

which

reports

to

the

Financial

Services

organization,

had

primaryresponsibilitytoprocuregoodsandservicesonbehalfofColoradoSpringsUtilities.

Additionally,theMaterialsManagementgroupswithintheEnergyServicesDivisionhadtheauthorityto

procuregoodsandservicesunderstandard(nonblanket)purchaseordersupto$50,000. Storeroom

personnelintheDistribution,CollectionandTreatmentDepartmentwithintheWaterDivisionalsohad

theauthoritytocreateandapprovepurchaseordersforgoodsandservicesupto$50,000.

FuelandMaterialsManagementpersonnelwithintheEnergyServicesDivisionnegotiatedandentered

intoshortandlongtermcontractsforcoalandoilonbehalfoftheorganization. ThePortfolio

ManagementDepartmentwithinEnergyServicesnegotiatedandexecutedcontractsfornaturalgas

suppliesforColoradoSpringsUtilities.

Underpolicyandproceduresinplace,goodsandservicescouldbeobtainedonaonetimebasisorby

issuingareleaseagainstablanketorderforgoodsorservices. Contracttermsweregenerallyforthree

years,withtwooneyearrenewaloptions. Contractsorblanketorderscouldberenewedforan

additionaltermifrequestedbytheColoradoSpringsUtilitiesbusinessunitandapprovedby

ProcurementandContractServices.

Quotationswererequiredforpurchasesover$10,000notcoveredunderblanketpurchaseordersor

contracts. ColoradoSpringsUtilitiespolicyrequiredthattherequestordocumentandobtainapproval

forinstancesinwhichbidsorquotationswouldnotbeobtainedforpurchasesofgoodsorservices,

knownassolesourcepurchases. Accordingtopolicy,solesourcepurchaseswereallowedwhenonly

onesource

for

the

product

or

service

existed,

or

conditions

such

as

abusiness

need

to

standardize

equipment,orwhenreplacementpartswereavailableonlyfromtheoriginalequipmentmanufacturer.

ThesesolesourcepurchasesweresummarizedinamonthlyreporttoColoradoSpringsUtilitiesOfficers.

ColoradoSpringsUtilitiesissuedapproximately$22.4millioninstandardpurchaseordersin2010and

maintainedapproximately$968millioninactivecontracts. CSUissuedcloseto$223millionpurchase

orderreleasesonthesecontracts.

Asstatedinthepurposesectionofthereport,thisauditwasperformedasaregularcycleauditofmajor

businessprocesses. TheCityAuditorsOfficealsoperformsongoingauditsofprocurementactivities

relatedtotheSouthernDeliverySystemConstructionProject. PleaserefertoReport1122SDS Project

Monitoring Reportforprocurement

related

observations,

which

were

not

included

here.

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http://www.springsgov.com/units/cityauditor/files/2011/11_22%20SDS%20FINAL%20REPORT.pdfhttp://www.springsgov.com/units/cityauditor/files/2011/11_22%20SDS%20FINAL%20REPORT.pdfhttp://www.springsgov.com/units/cityauditor/files/2011/11_22%20SDS%20FINAL%20REPORT.pdfhttp://www.springsgov.com/units/cityauditor/files/2011/11_22%20SDS%20FINAL%20REPORT.pdf


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Procurement


CONCLUSION

Weconcludethatoverall, thecontrolsintheprocurementprocessprovided reasonableassurancethat

1)best

value

was

obtained

for

goods

and

services,

2)

compliance

with

internal

policies

and

procedures

wasachieved,and3)resourcesweresafeguarded. However,duringthecourseofouraudit,we

identifiedareaswhereimprovementscouldbemadetofurtherstrengthencontrols. Theseareasare

detailedonthepagesthatfollow.

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Procurement


OBSERVATIONS, RECOMMENDATIONS ANDRESPONSES

OBSERVATION

1

ENERGY

SUPPLY

CONTRACTS

DID

NOT

REQUIRE

REVIEW

AND

APPROVAL

OUTSIDETHEENERGY SERVICESDIVISION

TheFuelandMaterialsManagementDepartmentwithintheEnergyServicesDivisionnegotiatedand

enteredintolongtermcoalcontractsonbehalfofColoradoSpringsUtilities. Duringourauditperiod,

theEnergySupplyGeneralManagerwasauthorizedtoenterintoanycontracthavingatermoftwo

yearsorless. ContractswithtermsovertwoyearscouldbeapprovedbytheEnergyServicesOfficer.

WeunderstandthatmanagementoutsideoftheEnergyServicesDivisionwasawareofsignificant

contractingactivitiesthroughinformalprocesses;however,additionalapprovalsforcontractsexceeding

agivendollaramountortermwerenotrequired. ProcurementandContractServicesdidnot

participatein

the

solicitation

or

negotiation

process

for

long

term

fuel

contracts.

RequiringreviewsandapprovalsofmanagementoutsidetheEnergyServicesDivisionforsignificant

contractsandamendmentswouldhelpensureindependentandobjectiveevaluationthatfullyconsiders

potentialrisksandbenefitstotheorganization.

AUDITORSRECOMMENDATION ContractsandamendmentsexceedingtermsordollaramountstobespecifiedbyColoradoSprings

UtilitiesmanagementshouldrequireapprovalbyseniormanagementinadditiontotheEnergyServices

Officer.

COLORADO SPRINGSUTILITIESRESPONSE

ColoradoSpringsUtilities,specificallyEnterpriseRiskManagementandProcurementandContract

Services,agreeswiththisrecommendation.However,anEnterprisewidepolicyiscurrentlynotinplace

forhighvaluecontracts,whichwouldincludecoalcontracts.Anewpolicyiscurrentlyunder

developmentthatincludesprovisionsrelatingtoauthorizationlevelsandexecutionresponsibilities.This

policyisexpectedtobeapprovedandinplaceduring2012.Untilthenewpolicyisfinalized,wecannot

requireindividualDivisionswithhighvaluecontractstocomplywiththeCityAuditors

recommendation. Intheinterim,theEnergyServicesDivisionwillcontinuetocomplywiththeexisting

RiskManagementPolicy,whichwasdevelopedandapprovedbytheOfficerteam.ColoradoSprings

Utilitiesacknowledgestherisksassociatedwithenergycommoditiespurchases,andtheEnergyServices

Divisionhasdevelopedadditionalpoliciesandprocedurestomitigatesuchrisks.However,providing

additionaltransparencyonlargervaluecontractswillensureobligationspotentiallyimpactingother

areasoftheorganizationareidentifiedandunderstood.

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Procurement


OBSERVATION2 SEGREGATIONOF DUTIES RISKS EXISTED IN THEWATERSERVICES

DIVISION

Segregationof

duties

involves

separating

certain

areas

of

responsibility

and

duties

in

an

effort

to

reduce

thepossibilityoffraudandunintendedmistakes. Managementshouldestablishprocedurestoseparate

dutiesandresponsibilitiesofpersonnelwhocreatepurchaseorders,performareceivingfunctionfor

goodsorservices,andauthorizepayment.

Aspartofouraudit,weexaminedtheprocessesforrequisitioning,ordering,receiving,andprocessing

paymentsforgoodsandservices. Managementshouldbeawarethatthelackofsegregationofduties

increasestheriskthatemployeescouldpurchasegoodsorservicesforpersonaluse.

IntheDistributionandCollectionTreatmentDepartmentwithintheWaterServicesDivision,wenoted

thattheprocurementassociatehadtheabilitytocreateandapprovearequisitionforstockornonstock

goods,create

and

approve

releases

against

blanket

orders,

or

create

and

approve

standard

(non

blanket)purchaseordersupto$50,000,andhadtheabilitytoreceivetheseitemsinthesystemand

issuematerials. Thisemployeecouldperformcyclecounts,butcouldnotmakeinventoryadjustments.

WeunderstandthatstaffislimitedintheWaterServicesDivisionStoreroomandsomesystemaccess

wasassignedtotheProcurementAssociatetoallowbackupintheeventtheMaterialsTechnicianwas

notavailable. However,theemployeehadtheabilitytorequisition,procure,receive,andissue

materialswithoutinvolvementfromasecondperson.

AUDITORSRECOMMENDATION Water

Services

Group

Management

should

review

the

duties

assigned

to

the

procurement

associate

in

theWaterServicesDivision. Segregationofdutieswouldbeimprovedifanotheremployeewas

requiredtoapproverequisitions,approvepurchaseorders,oracknowledgereceiptofgoodsorservices

orderedbytheProcurementAssociateSpecialist. Managementshouldevaluatethenecessityof

allowingtheProcurementAssociatetocreateandapprovestandardpurchaseorders.

COLORADOSPRINGSUTILITIESRESPONSE

ColoradoSpringsUtilitiesagreeswiththisrecommendation.TheobservationsarerelatedtotheLas

VegasWarehousefacilitywhichprovidesstoreroomservicesfortheDistribution,Collectionand

Treatment

Department.

The

following

system

security

authorizations

and

procedures

were

changed

as

ofJanuary12,2012.

1. TheProcurementAssociatecannolongerreceivematerials.ThisauthorizationwasgrantedseveralyearsagotocovertheMaterialsTechniciansdutieswhenoutofoffice.Theprocedural

changewillbetotrainPlannerAnalyststoperformreceivingdutieswhenevertheMaterials

Technicianisoutofofficeforaweekormore.

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Procurement


2. TheProcurementAssociatewillnotbeallowedtoperformcyclecounts;however,thisindividualwillmaketheinventorybalanceadjustments.TheMaterialsTechnicianwillcontinuetoperform

thecyclecounts,butwillnolongermakeinventorybalanceadjustments.

3. TheLasVegasWarehouseProcurementAssociatessecurityauthorizationwithintheMaximosystemforstandardpurchaseordersnowmatchesotherProcurementAssociatesacrossthe

organization.

4. TheLasVegasWarehouseSupervisorsMaximosecurityauthorizationsnowmatchtheotherWarehouseSupervisorsacrosstheorganization.Theproceduralchangewillrequirethatwhen

theWarehouseSupervisorisoutofoffice,theGeneralManageroftheDistribution,Collection

andTreatmentDepartmentwillbethenextresponsibleapproverasneeded.Ifapprovalsare

requiredbytheGeneralManager,itwillrequireasecurityauthorizationchangerequesttothe

Maximosecurityworkgroup.

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Procurement


OBSERVATION3 SI XEMPLOYEES HADHIGHER SYSTEM REQUISITION LIMITSTHAN THEIR

SUPERVISOR

Sixinstanceswerenotedduringourauditinwhichanemployeesmanagerhadlowerrequisitionlimits

thanoneoftheemployeesreportingtothemanager. Thenumberofemployeeswithhigherlimitsthan

theirmanagerhadimprovedsincetheprioraudit,where21instanceswerereported. Requisitions

wouldbesubjecttosupervisoryapproval,regardlessofthemanagersapprovallimits.Althoughthe

numberofinstanceswasnotsignificantincomparisontotheuserpopulation,theseinstancesindicated

thatrequisitionlimitsmaynotbesubjecttoreviewonaregularbasis.

AUDITORSRECOMMENDATION

ColoradoSprings

Utilities

should

put

in

place

areview

of

access

levels

to

ensure

that

requisition

dollar

limitsareinaccordancewithpolicyandareconsistentwithlimitsassignedtosupervisors. Additionally,

ColoradoSpringsUtilitiesshouldensurethatrequisitionlimitsarereviewedforappropriatenessand

consistencywiththesupervisorslimitswhenanemployeechangespositionswithintheorganization.

Thisassurancecouldbeaccomplishedbyaddingrequisitiondollarlimitstostandarddocumentssuchas

checklistscompletedforpositionchanges.

COLORADOSPRINGSUTILITIES RESPONSE

ColoradoSpringsUtilitiesagreeswiththisrecommendation.InformationTechnology(IT)has

implementedaquarterlyreviewprocesstoverifythesystemprocurementlevelsfor

appropriateness.Exceptionreportsdevelopedwillidentifyapprovallimitanomaliesbetweenemployee

andsupervisorlevels.AuthorizedITpersonnelwillmakeanycorrectionsorupdatesneeded,basedon

theestablishedprocurementlimitswhicharedefinedbyposition/role.Thesereportswillbeexecuted

onorbeforethe15thdaypriortothelastdayofeachquarter.InformationTechnologyhasalso

implementedamodificationtothePersonnelActionprocess,whichnowrequiresITpersonnelto

evaluateandmodifytheprocurementlimitsasdefinedbytheemployeesnewrole.ThePersonnel

ActionprocessisacomponentoftheautomatedHumanResourcesnotificationsystemforpersonnel

changes.Occasionallyuniquecircumstancesmayrequireadeviationfromtheestablishedprocurement

limits;however,anoversightprocessisinplacetoaddressthesesituationsasdocumentedinQBD

#12928,

Change

Individual

Purchase

Requisition

or

Release

PO

Limits.

Expected

date

for

completion

is

June30,2012.

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Procurement


OPPORTUNITY FORIMPROVEMENT

OPPORTUNITY

1

VENDOR

PERFORMANCE

WAS

NOT

TRACKED

AND

REPORTED

Asnotedinthebackgroundtothisreport,mostprocurementactivitiesfortheorganizationare

performedbyProcurementandContractServices. TheMaterialsManagementfunctionwithinEnergy

ServicesmaintainsstoreroomsandalsoperformssomeprocurementactivitiesfortheEnergyServices

Division.

MaterialsManagementpreviouslyhadaprocessinplacetocapturevendorperformancedatarelatedto

stockandnonstockitemsfortenvendorsfromwhichthemostpurchasesweremade. Datatracked

includedtimelinessofdelivery,errors,andcustomerserviceissues. Thisdatawasutilizedin

performanceimprovement

discussions

with

vendors.

At

the

time

of

our

review,

Materials

Management

hadnotbeengatheringvendorperformancedataforapproximatelyoneyearduetoapositionvacancy.

VendorperformanceiscurrentlynotdocumentedortrackedonanongoingbasisbytheProcurement

andContractServicesDepartmentwithinColoradoSpringsUtilities. ProcurementandContractServices

enteredanyreportsreceivedofvendorperformanceissuesintoadatabase. However,otherthanthe

MaterialsManagementtrackingnotedabove,theorganizationdidnothaveaprocesstoobtainvendor

performancedatafromendusersinastandardformatforuseinfutureprocurementdecisions.

AUDITORSRECOMMENDATION TheMaterialsManagementgroupwithinEnergyServicesshouldconsiderreinstatingtheprevious

processtotrackvendorperformance. ProcurementandContractServicesshouldconsiderthecost

benefitofobtainingvendorperformancedatainastandardizedformatsothatperformancecanbe

appropriatelyconsideredinfuturecontractingdecisions.

COLORADOSPRINGSUTILITIES RESPONSE

ColoradoSpringsUtilitiespartiallyagreeswiththisrecommendation.ManagementoftheEnergy

Construction,OperationsandMaintenanceDepartment(ECOM)isinagreementwiththeCityAuditor's

recommendationconcerningvendorperformancetracking.ECOM'sMaterialsManagementemployees

willreinstatethepreviousprocesstotrackvendorperformancebeginninginJuly2012.Thisprocesswill

beperformed

on

our

top

eight

to

ten

suppliers

by

the

end

of

2012,

and

repeated

with

each

supplier

severaltimesduring2013. Datathatwillbetrackedandsharedwiththesekeysupplierswillinclude

timelinessofdelivery,errors,customerserviceissues,anddiscussionsconcerninghowtheycanimprove

theirservicesandprocesses. ECOM'sMaterialsManagementwillalsorequestinputfromthese

suppliersonhowColoradoSpringsUtilitiescanimproveourcommunications,forecastingandresponses

totheirquestionsorneeds.

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Procurement


Page9of8

ProcurementandContractServices(PCS)doesnotbelievetherewouldbeabenefitinadoptinganew

processusingastandardizedformatformanagingvendorperformance.Theadministrativeburden

wouldbesignificantforProjectManagers,aswellasContractingAgents.Asacontractingdepartment,

PCSmanagesperformancecontemporaneouslyvianumeroustoolsincluding:curenotices,terminations

(bothforperformanceandforconvenience),suspensions,disqualifications,bidderprequalificationand

lawsuits allofwhichwereusedin2011.Furthermore,vendorpastperformancemaybeconsideredin

thesolicitationprocess. Uniquejobs(workscopes)requiredofvendorsmakesimplestandardization

difficult.Ifresourcesbecomeavailable,PCSwillconsideradoptingaperformancemanagementtoolas

recommendedbytheCityAuditor.


16/16

AboutourOffice

ThemissionoftheOfficeoftheCityAuditoristoprovideCityCouncilwithanindependent,

objectiveandcomprehensiveauditingprogramforoperationsoftheCity. Ourauditing

programincludes:

Evaluatingtheadequacyoffinancialcontrols,recordsandoperations

Evaluatingtheeffectivenessandefficiencyoforganizationaloperations

ProvidingCouncil,managementandemployeesobjectiveanalysis,appraisals,and

recommendationsforimprovingsystemsandactivities

TheOfficeoftheCityAuditorisresponsibleforauditingthesystemsusedbytheCityof

ColoradoSprings

and

its

enterprises,

including

Colorado

Springs

Utilities

and

Memorial

Health

System. Weperformavarietyofauditsfortheseentities,includingfinancialaudits,

performanceaudits,contractaudits,constructionaudits,andinformationsystemaudits. We

alsoperformfollowuponaperiodicbasistomonitorandensuremanagementactionshave

beeneffectivelyimplemented.

AuthorizationandOrganizationalPlacement

OurauditsareconductedundertheauthorityofChapter1,Article2,Part7oftheColorado

SpringsCityCode,andmorespecificallyparts703,705and706oftheCode. TheOfficeofthe

CityAuditorisstructuredinamannertoprovideorganizationalindependencefromthe

entitiesitaudits. ThisindependenceisaccomplishedbytheCityAuditorbeingappointedby

andreporting

directly

to

the

City

Council.

AuditStandards

TheauditwasconductedinamannerthatmeetsorexceedstheInternationalStandardsfor

theProfessionalPracticeofInternalAuditing,apartoftheProfessionalPracticesFramework

promulgatedbytheInstituteofInternalAuditors,withtheexceptionoftherequirements

understandards1312and1321toobtainanexternalqualityassurancereviewonceeveryfive

years. Wedonotbelievethisnoncomplianceimpactedthequalityofouraudit.

Theauditincludedinterviewswithappropriatepersonnelandincludedsuchtestsofrecords

andothersupportingdocumentationasdeemednecessaryinthecircumstances. We

reviewedthe

internal

control

structure

and

compliance

tests

were

performed.

Sufficient

competentevidentialmatterwasgatheredtosupportourconclusions.





C I TY COUNC I L S O FF I CE O F THE C I TY AUDITOR COLORADO S PR INGS , COLORADO

12-09 Colorado Springs Utilities Procurement Audit Report

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