Audit of Two Non-Construction Major Purchases · had exceptions: 35 of the forms ... we have...

Audit of

Two Non-Construction Major Purchases

February 12, 2014

Report #2014-01

E. Wayne Gent

Superintendent of Schools

School Board Members Audit Committee Members Chuck Shaw, Chair Noah Silver, CPA, Chair Frank A. Barbieri, Jr., Esq., Vice Chair Vacant, Vice Chair Marcia Andrews N. Ronald Bennett, CPA Karen M. Brill Michael Dixon, CPA Jennifer Prior Brown, Esq. Richard Roberts, CPA Michael Murgio David H. Talley Debra L. Robinson, M.D. Bill Thrasher Representatives Frank A. Barbieri, Jr., Esq., School Board Member E. Wayne Gent, Superintendent of Schools Sheryl Wood, Esq., General Counsel Linda Cartlidge, Principal Representative Debra Wilhelm, CTA President

MISSION STATEMENT

The School Board of Palm Beach County is committed to providing a world class education with excellence and equity to empower each student to reach his

or her highest potential with the most effective staff to foster the knowledge, skills, and ethics required for responsible citizenship and productive careers.

Audit of


Table of Contents

Page EXECUTIVE SUMMARY i PURPOSE AND AUTHORITY 1 SCOPE AND METHODOLOGY 1 BACKGROUND 2 CONCLUSIONS 1. Landscape Services Reports Not Timely/Properly Approved 2

2. Insufficient Documentation for Differences Between Contract Amounts and 4

Invoiced Amounts

3. Discrepancies Between Contract Amounts and Invoice Amounts 5

4. Quantity of Filters Installed and Billed Not Agreed With Technical Library 6

5. Filters Not Replaced According to Schedule 7

6. Technical Library Not Updated Annually 8

7. Information in Technical Library Accurate 9

APPENDIX Management’s Response 10

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Audit of


Executive Summary

Pursuant to the District’s Audit Plan, we have audited two Non-Construction Major Purchases, for the time period July 2011 through June 2012. These two purchases were Bid Contract #09C-1K Landscape Maintenance, and Bid Contract #11C-002T District-Wide Filter Replacement/Preventive Maintenance Air Handler Services. The primary objective of this audit was to determine if billings and deliverables were in compliance with the terms and conditions of the contracts. The audit produced the following major conclusions for each contract: Bid Contract #09C-1K: Landscape Maintenance Contract 1. Landscape Services Reports Not Timely or Properly Approved

The term-contract for landscape maintenance requires that vendor invoices be accompanied with Landscape Services Reports (Form 1747). This report is to be signed by the vendor and a District’s site administrator for documenting the work performed by the vendor. We reviewed 30 randomly selected invoices with a total dollar value of $305,411.96. The audit concluded that 50 (37%) of the 134 Form 1747 included in seven of the 30 sample invoices had exceptions: 35 of the forms were signed by Facilities Services staff rather than school staff, 13 were not signed at all, and two were not signed by staff until 15 to 36 working days after services were provided.

2. Insufficient Documentation for Differences Between Contract Amounts and Invoiced Amounts The term-contract provides certain firm contract prices. The review of the 30 randomly selected invoices ($305,411.96 in total expenditures) noted that 20 (67%) of them (totaling $198,983.96 or 65% of the invoices reviewed) did not agree with the amounts specified in the contract. Even though the additional charges on invoice might have been legitimate, three of them did not have any supporting documentation and 17 had insufficient documentation for the additional work performed by the contractors and approved by the District.

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Bid Contract #11C-002T: District-Wide Filter Replacement/Preventive Maintenance Air Handler Services Contract 3. Discrepancies Between Contract Amount and Invoice Amount

The review of 71 randomly selected invoices, which had a total value $134,600.50, found that some of the billing for filters did not agree with contract terms because the vendor was charging the retail prices instead of the contracted prices. This resulted in a net overbilling of $3,853.38 by the vendor for the sampled invoices. Moreover, the contract administrator also identified similar billing errors in January 2012. Subsequently, the District recouped $13,244.68 (which included the $3,853.38 identified in our samples) in overbilling from the vendor.

4. Quantity of Filters Installed and Billed Not Agreed With Technical Library The vendor and District staff walked through the District facilities and developed the site maps and a document called Technical Library. This Technical Library, which indicates the quantities and types of filters required for each location, was last updated on June 30, 2012, as part of the contract. The review of 71 sample invoices found that some filters listed on two December 20, 2011, invoices were not included in the June 30, 2009, and June 30, 2012, Technical Libraries.

5. Filters Not Replaced According to Schedule A review of the installation dates for filters for five sample schools for Fiscal Year 2011-12 found that six filter installations were performed beyond the contract maintenance schedule, with delays ranging from 25 to 45 days. According to staff, if the filters were replaced beyond the maintenance schedule, the HVAC coils could require more extensive cleaning.

6. Technical Library Not Updated Annually Bid Contract #11C-002T requires that the Technical Library be updated annually by the vendor. The Technical Library contains applicable air filter records such as the size, type, location, and other instructions recommended by the manufacturers. The Technical Library on file with the District as of April 24, 2013, was submitted by the vendor on September 12, 2012, for June 30, 2012. Therefore, there was no updated Technical Library for the years ended June 30, 2010 and June 30, 2011.

7. Information in Technical Library Accurate We compared the air filter information on the June 30, 2012, Technical Library with the air filters installed at five sample schools. We concluded that 99.9% of the filters agreed with the records in the Technical Library.

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M E M O R A N D U M TO: Honorable Chair and Members of the School Board E. Wayne Gent, Superintendent of Schools Chair and Members of the Audit Committee FROM: Lung Chiu, CPA, Inspector General DATE: February 12, 2014 SUBJECT: Audit of Two Non-Construction Major Purchases PURPOSE AND AUTHORITY Pursuant to the District’s Audit Plan, we have audited two Non-Construction Major Purchases, for the time period July 2011 through June 2012. These two purchases selected for this audit were Bid Contract #09C-1K Landscape Maintenance, and Bid Contract #11C-002T District-Wide Filter Replacement/Preventive Maintenance Air Handler Services. The primary objective of this audit was to determine if billings and deliverables were in compliance with terms of the contracts. SCOPE AND METHODOLOGY This audit was performed in accordance with Generally Accepted Government Auditing Standards promulgated by the Comptroller of the United States. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This audit was performed during the time period from March 19 through October 12, 2012, and included:

• Interviewing staff, • Reviewing sample invoices, and • Verifying filter quantities at school locations.

THE SCHOOL DISTRICT OF LUNG CHIU, CIG, CPA SCHOOL BOARD PALM BEACH COUNTY, FLORIDA INSPECTOR GENERAL CHUCK SHAW, CHAIRMAN FRANK A. BARBIERI, JR, ESQ., VICE CHAIRMAN OFFICE OF INSPECTOR GENERAL MARCIA ANDREWS 3318 FOREST HILL BLVD., C-306 KAREN M. BRILL WEST PALM BEACH, FL 33406 JENNIFER PRIOR BROWN, ESQ. MICHAEL MURGIO (561) 434-7335 FAX: (561) 434-8652 DEBRA L. ROBINSON, M.D. www.palmbeachschools.org E. WAYNE GENT, SUPERINTENDENT

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Additional follow-up fieldwork was performed during March and April 2013. Draft audit findings were sent to management for review and comments. Management response is included in the Appendix. The final draft, with management responses, was sent to the Office of General Counsel for review and input. We appreciate the courtesy and cooperation extended to us by District staff during the audit. The final draft report was presented to the Audit Committee at its February 12, 2014, meeting. BACKGROUND Bid Contract #09C-1K: Landscape Maintenance Contract. The purpose and intent of Bid Contract #09C-1K was to secure firm prices and establish a term-contract for regular landscape maintenance for District facilities and school campuses. This contract was awarded on October 3, 2008, to 12 vendors for two years from November 1, 2008 through October 31, 2010, with option to renew for three additional one-year periods. The first option to renew was exercised for November 1, 2010 to October 31, 2011. The second option to renew was for November 1, 2011 through October 31, 2012. The estimated annual cost for this contract was $2,750,000, funded by the Facilities Services budget. Total landscape maintenance expenditures for July 1, 2011 through June 30, 2012, were $2,329,733.79, paid to 11 vendors through 242 invoices. Bid Contract #11C-002T: District-Wide Filter Replacement/Preventive Maintenance Air Handler Services Contract. The purpose and intent of Request for Proposal RFP #11C-002T was to select a vendor who would install and properly dispose of filters in accordance with Environmental Protection Agency (EPA) requirements for heating, ventilation, air conditioning (HVAC) and provide preventive maintenance on air handlers. RFP #11C-002T was awarded on August 31, 2011, to Precision Air Systems Inc. for three years from September 8, 2011, through September 7, 2014, with option to renew for a two-year period. The estimated annual cost for this contract was $1,392,094, funded by the Facilities Services-Capital Maintenance Transfer budget. Filter replacements and air handler services expenditures for July 1, 2011, through June 30, 2012, were $1,045,346.61, through 1,243 invoices. The audit produced the following major conclusions. CONCLUSIONS Bid Contract #09C-1K: Landscape Maintenance Contract 1. Landscape Services Reports Not Timely/Properly Approved

The term-contract for landscape maintenance requires that vendor invoices be accompanied with Landscape Services Reports (Form 1747). The Specifications Section under Verification of Service states that the vendor must have the principal or representative sign Form 1747 (Forms) on the same day services are provided. We reviewed 30 randomly selected invoices with a total dollar value of $305,411.96. The audit noted that 50 (37%) of the 134 Forms from seven of the 30 sample invoices had exceptions: 35 Forms were signed by Facilities Services staff rather than school staff, 13 were not signed at all, and two were not signed by staff until 15 to 36 working days after services were provided.

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The table below shows the exceptions with the Services Reports for the selected samples:

Landscape Services Report (Form 1747) Exceptions

Invoice #

# of Locations Serviced

# of Form 1747 With Exceptions

Invoice Amount

Dollar Value of Forms with Exceptions Exception

8466 22 9 $16,360 $7,066 Landscape Services Report not signed.

7514 27 18 $14,279 $10,339 Landscape Services Report not signed by school staff.


1 $270 Landscape Services Report signed 36 working days after service.

1 $600 Landscape Services Report not signed.

6643 14 2 $12,250 $1,800 Landscape Services Report not signed.


620 12 1 $7,050 $1,100 Landscape Services Report signed 15 working days after service.

082011-1 4 1 $2,455 $1,100 Landscape Services Report not signed.

Total 134 50 $74,262 $29,090

Sources: Accounts Payable and Facilities Management Recommendation To ensure satisfactory services have been properly performed by contractors, Landscape Services Reports (Form 1747) should be signed by school staff on the same day services are performed. Moreover, if the property is not on a school site, the report should be signed by the appropriate staff or Facilities Services staff. Management’s Response: Management agrees that the contract requires that Landscape Services Report PBSD Form 1747 be signed by both the contractor and site administrator. However, it is not unusual that school staff is not available the day or the time the service is provided. Maintenance and Plant Operations (MPO) staff will ensure that vendors follow up with school administrators to obtain the required signature. The Landscape Site inspectors will sign-off for any site that does not have a school based administrator. (Please see page 11.)

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2. Insufficient Documentation for Differences Between Contract Amounts and Invoiced Amounts The term-contract provides certain firm contract prices. However, the review of 30 randomly selected invoices (totaling $305,411.96 in expenditures) noted that 20 (67%) of them (totaled $198,983.96 or 65%, of the invoices reviewed) did not agree with the amounts specified in the contract. The discrepancies were mainly due to (1) a school changing from the status of construction in-progress to finished, (2) additional schools or properties added, which were not on the original bid contract, and (3) new items added to properties, such as hedges or swale areas. Even though the additional charges on invoice and the amounts might have been legitimate, the lack of documentation for work performed by contractors and approved by the District should be based on the approved rates. The table below shows the invoices which had exceptions:

Landscaping Invoices with Exceptions

Invoice # Invoice Amount

Contract Amount Discrepancies Reasons for Discrepancies

070111 $13,920 $12,470 $1,450 Insufficient documentation for increases or additions for three schools by $700, $600, and $150, totaling $1,450.




13160 $7,710 $7,105 $605 No documentation for additions in two schools by $275 and $330, totaling $605.



082011-1 $2,455 $2,025 $430 Insufficient documentation for increase from $375 to $805.




15128 $7,948 $7,848 $100 Insufficient documentation for increase from $925 to $1,025.


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Invoice # Invoice Amount

Contract Amount Discrepancies Reasons for Discrepancies


7525 $14,354 $14,279 $75 Insufficient documentation for increase from $300 to $375.






Total $198,983 $188,898 $10,085

Sources: Accounts Payable and Facilities Management Recommendation The rates for additional work should have been approved by an addendum to the contract. Any changes should be reviewed and approved by Facilities Services and the Purchasing Departments as an addendum, and contract change through the proper procedures. Management’s Response: Since the contract allows the District to add or delete locations as required, MPO staff will secure quotes from the awarded vendors and include a detailed explanation to ensure costs are reasonable for changes in the scope of work. The quotes and explanation will be submitted to the Purchasing Department and attached to the purchase order. (Please see page 11.)

Bid Contract #11C-002T: District-Wide Filter Replacement/Preventive Maintenance Air Handler Services Contract 3. Discrepancies between Contract Amounts and Invoice Amounts

The review of 71 randomly selected HVAC invoices, with a total billing of $134,600.50, found that prices for some filters on the invoices did not agree with contract terms because the vendor was charging the retail prices instead of the contracted prices. This resulted in a net overbilling of $3,853.38 by the vendor for the sampled invoices. Moreover, the District’s contract administrator also identified similar errors in January 2012, with $13,244.68 (which included the $3,853.38 identified in our samples) in overbillings in 415 invoices, which had a total billings of $623,281.95. Subsequently, the District recouped the $13,244.68 in overbilling from the vendor.

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Recommendation To ensure that contract terms and conditions are understood and enforced by responsible District staff, the contract administrator should conduct ongoing contract reviews. The contract administrator should also ensure contract managers properly monitor all contract terms and conditions. Management’s Response: The contract administrator noted price discrepancies at the start of the contract after reviewing a sample of invoices. To eliminate the possibility of price variations in the future, a line item purchase order was issued. A line item purchase order, fixes the price in PeopleSoft by line item, in this case type of filter. Once the filter is received in the system by the maintenance department, only the line item amount entered by the purchasing agent will be paid. Subsequent to the implementation of the line item purchase order, all invoices previously paid were reviewed and the amount overbilled was collected from the vendor. The internal review of the contract took several months and involved significant time from the contract administrator, purchasing department and the vendor. Contract reviews are conducted with contract managers when a new contract is awarded as well as when a renewal occurs. The focus of these contract reviews is to provide the information necessary for contract managers to properly monitor the contract terms and conditions. The contract administrator and purchasing agent currently review contracts greater than or equal to $250,000.00 with the contract managers. In addition, the purchasing manager and purchasing agent hold contract reviews with the appropriate contract managers for contracts less than $250,000.00. (Please see page 11.)

4. Quantity of Filters Installed and Billed Not Agreed With Technical Library The vendor and District staff walked through the School District and school campuses to develop the site maps and a document called Technical Library. The Technical Library indicates the quantities and types of filters needed at each location and was last updated on June 30, 2012, as part of the contract. The review of the 71 sample invoices found that:

• The vendor billed the District for one 1” filter ($11.95 value) for Poinciana Elementary with invoice #55034, on December 20, 2011. This 1” filter was not on the June 30, 2009, or the June 30, 2012 Technical Library. The vendor said they were advised to delete the filter from the Technical Library on May 16, 2012; however the District does not have any documentation showing the filter being installed between June 30, 2009 and May 16, 2012.

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• The vendor billed the District for two 4” filters ($32.46 value) for Spanish River High Invoice #55037, on December 20, 2011. These items were not on the June 30, 2009, and the June 30, 2012, Technical Libraries. The vendor said it was requested by a teacher to replace the two 4” filters in the ceramics room. Subsequently, the purchasing agent advised the vendor on June 5, 2012, that the company should not respond to undocumented request for changes.

Recommendation District staff should confirm the quantities of filters billed are accurate. Management’s Response: District staff has reconfirmed with the vendor that any requests for changes must be approved by maintenance staff before work is performed. District maintenance staff is documenting any changes authorized and is receiving updated site sheets and maps from the vendor. (Please see page 11.)

5. Filters Not Replaced According to Schedule

The contract for filter replacements and preventive air handler service requires the vendor to replace the filters at District locations on a 45-day cycle for 1” filters and a 90-day cycle for 2” and 4” filters. A review of the installation dates for filters at five sample schools for Fiscal Year 2011-12 found that six installation visits by the vendor were not done in accordance with the maintenance schedule. The table below shows the schools, invoice numbers, the number of days between filter changes and the number of days delay, i.e., beyond the contract date.

Number of Days between Filter Changes

Number of Days Between Changes (Number of Days Beyond Contract)

Installation Visits

Invoice Number Schools

1”Filter (Be Replaced

Every 45 Days)

2” Filter (Be Replaced

Every 90 Days)

4” Filter (Be Replaced

Every 90 Days) 1 57320 Crestwood Middle 130 (40) 2 58422 Crestwood Middle 70 (25) 124 (34) 124 (34) 3 58438 Whispering Pines

Elementary 120 (20)

4 59298 Eagles Landings Middle 90 (45) 5 59341 Verde Elementary 121 (31) 6 59353 Palm Beach Lakes High 70 (25) 121 (31)

Source: Vendor Invoices According to Facilities Services staff, if the HVAC filters were replaced beyond the schedule date, the coils could require more extensive cleaning. As indicated by District staff, the reason for the longer time span for five of the six invoices was due to year-end rollover. No work was permitted until the Purchase Orders for Fiscal Year 2012-13 were issued. There

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was no explanation for the 40 days beyond the contract date for invoice number 57320 at Crestwood Middle. Recommendation To ensure air quality at schools meets EPA standards and protect the health and welfare of students and staff, Facilities Services staff should monitor that all filters are being replaced according to the maintenance schedule. The District should consider imposing penalties for long delays in replacing the air filters. Management’s Response: Filters were not replaced according to schedule because approval of the contract was delayed until September 11, 2011, which resulted in a significant amount of time between the end of the previous contract and the start of the new contract. Vendors are not authorized to provide services without a board approved contract and purchase order. (Please see page 11.)

6. Technical Library Not Updated Annually Bid Contract #11C-002T requires that the vendor be responsible for updating information for the Technical Library, which contains applicable air filter records such as filter size, type, location, and recommended manufacturer’s instructions. The process used to update, maintain, and distribute this information is subject to the District’s approval. A copy of this spreadsheet or report is to be forwarded to District facilities support staff on a yearly basis. The Technical Library on file with the District as of April 24, 2013, was submitted by the vendor on September 12, 2012, which was for June 30, 2012. Therefore, there was no updated Technical Library provided for the years ended June 30, 2010, and June 30, 2011. Recommendation Facilities Services staff should enforce the contract provision that the vendor submits the Technical Library for air filters annually. Also, any change to the filters location, type, quantity, or size during the year should be documented and verified through the next Technical Library update. Management’s Response: Technical Library updates are performed throughout the year as district approved changes occur. There have been four updates received from the vendor since September 12, 2012. Staff will ensure a complete revised Technical Library is received annually. (Please see page 12.)

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7. Information in Technical Library Accurate We compared the filters information June 30, 2012, Technical Library with the existing air filters found onsite at five sample schools and we noted that 99.9% of them agreed with each other.

Technical Library Comparison

Number of Filters

Schools

June 30, 2012 Technical Library(1) Found Onsite Difference Last Visited

Crestwood Middle 222 222 0 October 12, 2012 Palm Beach Lakes High 347 347 0 October 12, 2012 Verde Elementary 163 163 0 October 5, 2012 Eagles Landings Middle 167 166 1 October 12, 2012 Whispering Pines Elementary 159 159 0 October 12, 2012

Total 1 (1) Vendor Technical Library Management’s Response: Technical Library updates are performed throughout the year as district approved changes occur. (Please see page 12.)

– End of Report –

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Appendix Management’s Response

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Audit of Two Non-Construction Major Purchases · had exceptions: 35 of the forms ... we have...

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