Compliance Review: HCIDLA IT Commodity Procurement
2019 Hcidla
Compliance Review: Housing + Community Investment Department Los Angeles IT Commodity Procurement
Cover Letter
DATE: June 5, 2019 TO: Rushmore D. Cervantes, General Manager Housing and Community Investment Department Los Angeles FROM: Bob Wingenroth, Director of Auditing
Office of the Controller – Audit Services Division
SUBJECT: IT COMMODITY PROCUREMENT REVIEW
The Office of the Controller conducted a review of Information Technology (IT) commodity procurement at the Housing and Community Investment Department Los Angeles (HCIDLA) to ensure its IT commodity purchases are authorized, reasonable, and properly supported.
While management of each City department is responsible for designing, implementing, and maintaining its internal controls to provide reasonable assurance all IT commodity purchases are authorized, supported, and comply with established policies and regulations, the Office of the Controller assists management by performing periodic reviews of the effectiveness of these departmental internal controls. These reviews compliment, but do not in any way replace, management’s assurance responsibilities.
Our review identified a few opportunities where HCIDLA can enhance its internal controls related to IT commodity purchases, as detailed in the attached report.
We thank your management and staff for their cooperation and assistance during this review.
Background
An effective and efficient information technology (IT) procurement process is critical for the City of Los Angeles (City) to leverage technology to better serve Angelenos. City departments must have appropriate and effective fiscal controls to assure we are getting the best prices and commodity contracts are used only for intended purposes.
The Office of the Controller conducts periodic IT commodity procurement reviews at City departments to assess whether IT commodity purchases are authorized, reasonable, and properly supported.
Key Facts
Fact #1: HCIDLA’s Fiscal Year 2019 adopted budget is just over $88 million, with $12.5 million (14%) funded by the City’s General Fund and $75.5 million (86%) funded by Special Funds, which includes federal and State grant funding.
Fact #2: HCIDLA has over 700 employees who facilitate the financing and development of housing projects, oversee social services and housing programs to assist lowincome populations and special needs, and responds to City and State housing code complaints by conducting inspections and investigations.
Fact #3: The City’s Purchasing Agent (General Services Department) has established 39 IT commodity contracts for City departments to purchase IT commodities (software and hardware). Between July 2017 and February 2019, HCIDLA used six of these IT commodity contracts to purchase over $2 million in IT equipment.
Compliance Review Results
While HCIDLA has an impressive system to order and approve commodity purchases, based upon a sample of IT commodity purchases, certain control enhancements are necessary. Specifically:
Greater Separation of Duties
HCIDLA should enhance its written procurement procedures to provide guidance on obtaining quotes, ordering, approving, and receiving commodity purchases. We identified IT commodity purchases in which staff from HCIDLA’s Systems Division obtained quotes, ordered the commodities, and received the commodities. These duties need to be separated and HCIDLA’s Administrative Services Division staff should be involved to ensure these specific activities are not exclusively concentrated within HCIDLA’s Systems Division.
Items Purchased Before Needed
HCIDLA should ensure IT commodity purchases are made when operationally necessary. We identified certain IT commodity purchases occurring long before the items were needed.
Budget Transparency and Proper Approval for Reallocated Budgeted Funds
We identified that HCIDLA used its professional services budget line item to purchase IT commodities after its Office and Administrative budget line item had been exhausted. However, given the threshold of the dollar amounts involved (e.g., over $280,000), HCIDLA should have requested authority to transfer this amount to the appropriate line item through a Financial Status Report, which requires approval by the City Administrative Officer, the Mayor, and the City’s Budget and Finance Committee.
