059-2009 Review of Purchases Exceeding $25,000 for Fiscal Years 2007/2008 and 2008/2009MIAMI BEACH ~_~
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OFFICE OF (Ht CIIY MANAGER MEMORANDUM ~''
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fdo. 059-2009' ~ ~1t
TO: Edward L Tobin, Commissioner _-;, '.
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FROM: Jorge M. Gonzalez, City Manager ~ -- r;
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DATE: December 8, ZUU9
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SUBJEC;I': Review of Purchases Exceeding 325,000 for Fiscal Ycars 2007!2008 and 200812009
This memorandum is provided as afollow-up to your inquiries to me and your mooting with our
Chief Financial Officer and Procurement Director regarding the poliries, procedures and internal
controls on purchases within the $25,000 threshold established by the Miami Beach Cily Code.
As a result of your inquiry, we reviewed more than 32,000 transactions for Fiscal Year 2007108
and 29,000 transactions for Fiscal Year 2008!09. The review process consisted of the following:
1. Created various reports that identified all purchase order, p-card or direct payment
transactions in excess of S25,000;
2. Identified the purchasing authority for each transaction (i.e., City Commission approved
Resolution, Commission Memorandum for confract awards, or and City Manager
approval per City Code to utilize wntracts aevarded by other approved entities or
exemptions found in Florida Statute or City Code);
3. Ident~ed transactions that were less than $25,000, buf were subsequently increased
above $2.5,000.
The following describes the results o(this review.
Generally, adherence to established City Code and Administrative Polices and Procedures are
well established and followed by City employees. However, our review, of the approximately
2,600 transactions exceeding $25,000 dudng the two year period, identified approximately ten
instances where established policies were not followed. We also identified approximately fifteen
instances where we determined that previously accepted practices were no longer appropriate
and we have proposed new procedures (See item 4 below).
These 25 instances, which represent less than 1 % of all transactions exceeding $25,000 during
the two year period, generally involved the acquisition of goods or services without first obtaining
the proper purchasing authority, or exceeding the purchasing authority established by
Administrative Policy. Overall, they appear to be isolated to certain departments or individuals,
and do not appear to be prevalent within the organization.
In order to improve the controls and prevent further instances, the following steps have been
taken:
1. I?rocurpment_Diroctor Review: The Procurement Director was added to all approval
queues for direct payments prior to payment processing to insure that onlythose purchases that
arc within the "allowed Categories for Direct Payment" are made.
Direct payments should only be utilized for the paytnenl of goods or services that are unique in
nature (i.e., travel reimbursement, subscriptions, memberships), or for goods and services that
do not lend themselves to a competitive process and/or are specifically exempted by Florida
Statutes and our Cify Code (i.e., legal services, utilities}.
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2. DP~artme_nt "Training: Additional training on proper procurement processes was provided
to individuals or Departments on an as needed basis.
3. Purchasing Cards ("p-cards"1: As part of our annual p-card review, cardholders'
payment authority was reduced to rninimize the opportunity to circumvent proper purchasing
procedures.
A. Independent Contractor Agreements: In coordination with the City Attorney's Office,
independent contractor agreements were created to ensure that department heads utilized
proper agreements when selecting individuals io provide needed services, or work in a
temporary capacity unfit such time that vacant positions were filled. Additionally, such
agreements will require the review of fhe Wuman Resources Director and my approval, prior to
any individual being engaged to work in any department.
Also, the Human Resources Department worked with the City Attorney's Office and department
heads to develop a process to ensuro that independent contractors are selected and hired to
provide services only when vacant positions exist, or when the services are exempted by Florida
Statutes or our City Code (i.e., instnrctors, organizational development training).
Agenda Item R7F on the December 9, 2009 City Commission Agenda provides detailod
information on the process and applicability on the use of independent contractor agreements.
5. Employee Discipline: Information was provided to the appropriate supervisor/department
head for disciplinary action when individuals have acquired goods or services without following
proper procurement processes. Individuals violating procurement procedure have received
verbal and/ or written counseling from their supervisorldepartment head, remedial training and in
one case has had their duties reassigned. Additional disciplinary actions may include
suspension or removal of procurement rights including removal of authorized p-card and
additional progressive discipline up to and including termination.
Thank you for bringing this matter to our attention. As a result, we have been able to make
process improvements That will yield enhanced departmental compliance with procurement
policies and procedures and additionally will strengthen internal controls surrounding p-card and
direct payment transactions. I thank you for your interest in working with me to improve our
processes and hope that you are satisfied with the outcome.
Please feel free to call me should you have any questions or need additional information
C: Mayor and City Commissioners
Patricia D. Walker, Chief Financial Officer
Ramiro Inguanzo, Human Resources Uirector
Gus Lopez, Procurement Director
JMG/PDW/GL
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