An Audit Report on Information and Communications Technology Cooperative Contracts at the Health and Human Services Commission
December 2013
Report Number 14-013
Overall Conclusion
The Health and Human Services Commission (Commission) has processes designed to help ensure that purchases for information-technology-related goods and services (computers, computer devices, software, telecommunication devices, staffing services, and maintenance services) comply with applicable state purchasing laws, rules, and the Department of Information Resources' Information and Communications Technology Cooperative Contracts Program (Program) requirements.
From September 2011 through February 2013, the Commission reported that it made $367.3 million in total payments for information-technology-related purchases, and it made $147.3 million (40.1 percent) of those payments through the Program.
Opportunities exist for the Commission to strengthen its contract management processes to help ensure that (1) Program purchases provide best value in terms of the price paid for a Program good or service, (2) Program purchases are free from real or apparent conflicts of interest, and (3) monitoring of Program contracts helps to ensure the quality of goods and services delivered. Specifically:
- Best Value. The Commission should strengthen its processes to ensure that goods and services purchased through the Program provide best value. Texas Government Code, Section 2157.003, defines best value as the lowest overall cost for a Program good or service. The Commission did not maintain consistent documentation to support noncompetitive purchases for Program goods, services, and deliverables-based information services. In addition, while the Commission generally ensured that it paid for Program staffing services at rates that did not exceed the not-to-exceed rates established by the Department of Information Resources, it did not ensure that the rates paid for purchased Program goods and services included either the Department of Information Resources' negotiated discount rate or a higher discount rate.
- Conflicts of Interest. The Commission should strengthen existing processes to help ensure that Program purchases are free from real or apparent conflicts of interest. The Commission did not have consistent documentation to support that procurement staff disclosed potential conflicts of interest or confirmed that none existed.
- Vendor Performance. The Commission should improve its monitoring and reporting of the quality of the Program goods and services delivered. Specifically:
- The Commission should establish standard agencywide monitoring processes for evaluating the quality of Program staffing services that contract workers provide. The Commission limited its monitoring to reviewing and approving only the contract workers' timesheets to verify the appropriateness of vendor payments.
- The Commission should report to the Office of the Comptroller of Public Accounts (Comptroller's Office) information on the performance of Program vendors from which it purchases goods and services. Title 34, Texas Administrative Code, Section 20.108, requires state agencies to report a vendor's performance on any purchase of $25,000 or more to the Comptroller's Office. However, the Commission did not comply with that requirement for the Program purchases tested.
- The Commission should ensure that its contract managers for Program contracts for deliverables-based information technology services complete the training that Texas Government Code, Section 2262.053, requires.
The Commission also should ensure that it (1) consistently processes a purchase order for its Program purchases and (2) records the purchase order or contract in its accounting system when processing payments for Program purchases. In addition to the $147.3 million in payments the Commission reported making on purchases through the Program from September 2011 through February 2013, auditors identified $19.2 million in payments for information-technology-related goods and services purchases for which the Commission did not record corresponding purchase orders in its accounting system. Auditors tested a sample of 29 payments that totaled $9.4 million and determined the following:
- The Commission did not record in its accounting system the associated purchase order or contract for 21 (72 percent) of 29 payments. Those 21 payments totaled $9.0 million. Six (29 percent) of those 21 payments resulted in overpayments (payments that exceeded the authorized purchase amounts) totaling $33,641.
- The Commission did not process a purchase order for 6 (21 percent) payments that it made totaling $49,297.
- Two transactions totaling $373,820 that initially appeared to be payments were not payments to vendors; instead, they were correcting accounting entries the Commission made in its accounting system.
Not recording the purchase order in its accounting system when processing payments increases the risk that the Commission may make payments on purchases that were not properly authorized or process overpayments (such as the six instances noted above).
The Commission has processes to identify and report new major information resources projects to the State's Quality Assurance Team in accordance with statute.
Auditors communicated other, less significant issues regarding the contract management process separately in writing to the Commission. Those issues were related to procurement and payment practices, compliance with certain administrative policies and procedures, and reporting practices for certain contracts and conflicts of interest.