(CN) – California’s Judicial Council risks overspending on multiple contracts and paying more than necessary for services, the state auditor says in a report released Tuesday.
In her audit, California State Auditor Elaine Howle says the council’s staff generally complied with the judicial contracting manual, but some discrepancies show that the rulemaking body for California’s courts may not be getting the best value out of its spending.
“We reviewed 60 procurements from fiscal years 2015–16 and 2016–17 and identified five instances where the Judicial Council did not follow policies outlined in the judicial contracting manual,” Howle wrote in her introductory letter. “We also reviewed 60 payments for fiscal years 2015–16 and 2016–17 and found three that did not comply with the judicial contracting manual. The Judicial Council processed two payments without proof it had received the goods or services, and one for services rendered prior to the creation of a corresponding purchase order.”
She added, “When the Judicial Council does not follow established policies, it risks that it will not receive the best value for the goods and services it purchases. Finally, the Judicial Council risks making inappropriate payments because its guidance to staff for reviewing invoices does not adequately describe the process they should follow to review invoices prior to payment.”
For example, Howle said, staff ignored judicial branch policy when it signed off on two of four purchase orders without getting permission from management. In another case, a supervisor who was only authorized at the time to approve purchases up to $50,000 signed a purchase order for $345,000 for “networking equipment.”
“According to the procurement manager, the supervisor’s position should have had a higher approval limit, and the Judicial Council later changed its policies to give that position the authority to sign purchase orders up to $500,000,” Howle said.
The council also didn’t adequately account for why it spent $8,000 on office supplies that it could have bought for less, according to the audit, highlighting Howle’s concern about sole-source procurements.
“When the Judicial Council neglects the competitive process, it risks not receiving the best value for its procurements and paying more than necessary for goods and services,” Howle wrote.
Her audit also uncovered a similar problem with a parking contract.
“The procurement manager stated that although the two parking garages are different vendors, they are both sole‑source because they are the two least expensive out of the three options nearby that meet the Judicial Council’s needs,” she wrote. “However, whether a sole‑source procurement is appropriate should not depend on assumptions about prices but rather on whether only one vendor is able to provide the services.”
Finally, the council could have saved money if it had a more detailed definition of contract splitting in its contracting manual, the auditor found.
In its review of the council’s contracts and purchase orders of less than $5,000 from July 2015 through June 2016, Howle’s office found the council awarded a single vendor more than 20 contracts totaling roughly $50,000 for captioning services at its business meetings.
“All but two of the contracts were exempt from competitive bidding because they were each less than $5,000. For the two contracts that each totaled more than $5,000, the Judicial Council noted in noncompetitive bid justifications that the vendor’s prices were reasonable, based on price comparisons from prior quotes. However, by itself, this explanation does not identify why the procurement could not be competitive,” Howle wrote.
Howle said the council could have saved $10,000 had it combined the services into one contract from the beginning instead of dividing it into 20, noting the council finally did obtain a master services agreement with the vendor in July 2017 with an hourly rate that was lower than what it had paid in the 20 contracts.
Howle recommended the council train its staff to better comply with the contracting manual to make sure payments are issued with proper authorization, properly document its justification for non-competitive purchases, and not rule out potential vendors based on price assumptions.
In his response, the council’s administrative director Martin Hoshino wrote the council’s staff agrees with that recommendation and will enforce its policies with additional training. He added the “limited errors identified by the auditors represent rare instances when policies were not strictly followed and is otherwise indicative of a generally strong and well-functioning procurement process.”
Hoshino said he agrees in principle with the auditor’s recommendation on getting the best value on contracts, but disagreed with Howle’s findings in the case of a vendor excluded from the bidding process on a software contract because the council’s staff thought his prices too expensive.
He said the staff’s program manager saw that the vendor had changed its service model to a cloud-based system that would require a yearly subscription fee, and additional user fees.
“The program manager wanted to continue with a non-cloud based solution (and one-time purchase of hardware/software),” Hoshino said, noting all of the other vendors provided these types of products.
Howle also recommended that the council update its contracting manual to better define contract-splitting and sole-source procurements, which Hoshino said will have to be approved by the Judicial Council.