O FFICE O F T HE C ITY A UDITOR

C OLORADO S PRINGS, C OLORADO

1209 ColoradoSpringsUtilities ProcurementAudit Report

May2012

O FFICE O F T HE C ITY A UDITOR

C OLORADO S PRINGS, C OLORADO

1209ColoradoSpringsUtilities ProcurementAudit
May2012 Purpose
ThepurposeofthisauditwastoevaluatewhethertheColoradoSprings Utilitiesprocurementprocessprovidedreasonableassurancethatbest valuewasobtainedforgoodsandservices,determinecompliancewith ColoradoSpringsUtilitiespoliciesandprocedures,andreviewtheadequacy ofinternalcontrols.

Recommendations
1. Contractsandamendments exceedinggiventermsor dollaramountsshould requireapprovalbysenior managementinadditionto theEnergyServicesOfficer. 2. WaterServicespersonnel shouldreviewtheduties assignedtotheinventory specialistintheWater ServicesDivision. 3. ColoradoSpringsUtilities shouldreviewaccesslevels toensurethatdollarlimits areinaccordancewith policyandconsistentwith limitsassignedto supervisors.

Highlights
Ourauditperiodincludedpurchaseordersandcontractsexecutedfrom January1throughDecember31,2010.Weconcludedthatoverall,the controlsintheprocurementprocessprovidedreasonableassurancethat bestvaluewasobtainedforgoodsandservices,compliancewithinternal policiesandprocedureswasachieved,andresourcesweresafeguarded. ColoradoSpringsUtilitiesissuedapproximately$22.4millioninstandard purchaseordersin2010andmaintainedapproximately$968millionin standardcontracts.ColoradoSpringsUtilitiesissuedapproximately$223 millionpurchaseorderreleasesonthesecontracts.Procurementand ContractServices,whichreportstotheFinancialServicesorganization,had primaryresponsibilityforprocurementofgoodsandservices.Additionally, someprocurementdutieswereperformedbyOperationspersonnelin MaterialsManagement.EnergyServicesnegotiatedandenteredintofuel contractsonbehalfofColoradoSpringsUtilities. Ourmethodologyincludeddetailtestingofasampleofvarioustypesof purchasesandcontractstodeterminecompliancewithpoliciesand procedures,asfollows: ReviewedasampleofContractsandSolicitationstoensurebid solicitationsfollowedpolicyandselectionofbestvaluewas documented,
(Continued on page 2)

Opportunityfor Improvement
1. MaterialsManagement shouldconsiderreinstating theprocesstotrackvendor performance.Procurement andContractServices shouldconsiderthecost benefitoftrackingvendor performancedataina standardizedformatfor considerationinfuture contractingdecisions.

ManagementResponse
Managementwasgenerallyinagreementwithourrecommendations. Responsescanbefoundintheattachedreport.

1209ColoradoSpringsUtilities ProcurementAudit
May2012
(Highlights continued from page 1)

Reviewedasampleofchangeorderstoensureproper documentationandapproval, Reviewedasampleofsolesourcejustificationsforproper documentationandapproval,and Testedtodeterminethatgoodsandserviceswererequisitioned andapprovedinaccordancewithpolicy.

Ourtestingindicatedcompliancewithpoliciesandproceduresin placerelatedtoprocurement. WenotedthatEnergySupplycontractsdidnotrequirereviewand approvaloutsidetheEnergyServicesDivision.Additionally,we notedsegregationofdutiesrisksexistedforprocurementactivities performedbyStoreroompersonnelintheWaterServicesDivision.

CityCouncilsOfficeoftheCityAuditor CityHall107NorthNevadaAvenueSuite200MailCode1542 ColoradoSpringsCO809011575 Tel7193855991Fax7193855699ReportingHotline7193852387 www.SpringsGov.com/OCA

OFFICEOFTHECITYAUDITOR PUBLICREPORT

Date: May9,2012 To: Re: PresidentHenteandPresidentProTemMartin,MembersofCityCouncil 1209ColoradoSpringsUtilitiesProcurement

WeconductedanauditofColoradoSpringsUtilitiesProcurementaspartofourregularcycleofaudits.Our auditfocusedontheperiodfromJanuary1,2010throughDecember31,2010. ThepurposeofthisauditwastoevaluatewhethertheColoradoSpringsUtilitiesprocurementprocess providedreasonableassurancethatgoodsandserviceswereobtainedatbestvaluefortheorganization whileadequatelysafeguardingresources.WealsoevaluatedwhetherColoradoSpringsUtilities compliedwiththeinternalpoliciesandproceduresinplaceforacquiringgoodsandservices. Weconcludethatoverall,procurementprocessesensure1)goodsandserviceswereacquiredatbest valuefortheorganization,2)policiesandproceduresinplacewerefollowed,and3)controlswere adequatetoensuresafeguardingofresources.Wemadethreeobservationsrelatedtosegregationof dutiesandinternalcontrols.Wehavelistedourrecommendationsrelatedtotheseobservationsinthe attachedreport. WewouldliketothankColoradoSpringsUtilitiesProcurementandContractServicesfortheirtimeand helpincompletingthisaudit. Asalways,feelfreetocontactmeifyouhaveanyquestions. Sincerely,

DennyNester,MBA,CPA,CIA,CGFM,CFE,CGAP CityAuditor Cc: JerryForte,ColoradoSpringsUtilitiesChiefExecutiveOfficer GaryBostrom,ChiefWaterServicesOfficer BillCherrier,ChiefPlanningandFinancialOfficer CarlCruz,ChiefCustomerandCorporateServicesOfficer BruceMcCormick,ChiefEnergyServicesOfficer LeahAsh,GeneralManager,Distribution,CollectionandTreatment DedeJones,GeneralManager,FinancialServices GeorgeLuke,GeneralManager,EnergySupply MasonParsaye,GeneralManager,EnergyConstruction,OperationsandMaintenance DawnRoth,GeneralManager,InformationTechnologyServices
CityCouncilsOfficeoftheCityAuditor CityHall107NorthNevadaAvenueSuite200MailCode1542 ColoradoSpringsCO809011575 Tel7193855991Fax7193855699ReportingHotline7193852387 www.SpringsGov.com/OCA

OfficeoftheCityAuditor PublicReport

Cc(Continued): MicheleFujimoto,Manager,FuelandMaterials WilliamLopez,Jr.,Manager,ResourceTechnologyServices GregMitchell,Manager,EnergySupportServices EliNovakovich,Manager,ProcurementandContractServices DavidMaier,Manager,EnterpriseRiskManagementServices PatriciaVanMeter,SeniorAnalyst,EnterpriseRiskManagement

OFFICEOFTHECITYAUDITOR PUBLICREPORT

ReportDetails................................................................................................................................................................ 1 Purpose...................................................................................................................................................................... 1 Scopeandmethodology............................................................................................................................................ 1 Background................................................................................................................................................................ 1 Conclusion................................................................................................................................................................. 3 Observations,RecommendationsandResponses......................................................................................................... 4 Observation1EnergySupplycontractsdidnotrequirereviewandapprovaloutsidetheEnergyServices Division...................................................................................................................................................................... 4 Observation2SegregationofdutiesrisksexistedintheWaterServicesDivision.................................................. 5 Observation3Sixemployeeshadhighersystemrequisitionlimitsthantheirsupervisor..................................... 7 Opportunityforimprovement....................................................................................................................................... 8 Opportunity1Vendorperformancewasnottrackedandreported...................................................................... 8

ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

REPORT DETAILS PURPOSE WeperformedanauditofColoradoSpringsUtilitiesprocurementfunctionaspartofourregularcycle audits.Thepurposeofthisauditwastoevaluatewhethertheprocurementprocessprovided reasonableassurancethatbestvaluewasobtainedforgoodsandservices,anddeterminecompliance withinternalpoliciesandprocedures.Wealsoreviewedtheadequacyofinternalcontrolsover procurement. SCOPE AND METHODOLOGY Thescopeoftheauditincludedreviewingtheprocessesusedin1)initiatingandapprovingpurchases andcontracts,2)solicitingbidsandprices,and3)processingpurchaseorders.Weassessedcontrolsin placeintheResourceManagementSystem(RMS)aswellassegregationofdutiesrelatedto procurementwithintheorganization.Ourauditincludedpurchaseordersandcontractsexecutedfrom January1throughDecember31,2010. Ourmethodologyincludeddetailtestingofasampleofvarioustypesofpurchasesandcontractsto determinecompliancewithpoliciesandprocedures.Weobtainedanunderstandingoftheinternal controlstructurebyreviewingprocurementpoliciesandconductinginterviewswithmanagement.Our testsincludedreviewsforcompliancewithpolicyandproceduresasfollows: ReviewedasampleofContractsandPurchaseOrderstoensurebidsolicitationsfollowedpolicy andselectionofbestvaluebidorproposaltotheorganizationwasproperlydocumented, Reviewedasampleofchangeorderstoensureproperdocumentationandapproval, Reviewedasampleofsolesourcejustificationsforproperdocumentationandapproval,and Testedtodeterminethatgoodsandserviceswererequisitionedandapprovedinaccordance withpolicy.

Ourtestingindicatedcompliancewithpoliciesandproceduresinplacerelatedtoprocurement. InadditiontoprocurementactivitiesprocessedbytheProcurementandContractServicessection,we inquiredofColoradoSpringsUtilitiesmanagersthroughouttheorganizationtoidentifyanysignificant procurementactivitiesconductedbyothergroupsintheorganizationandincludedtheseinourscope. BACKGROUND TheOfficeoftheCityAuditorpreviouslyperformedanauditofColoradoSpringsUtilitiesprocurement forthesixmonthsendedJanuary1toJune30,2007,whichwasissuedNovember12,2008.Some issueshadbeenresolvedwhenweperformedfollowupproceduresin2009.Threerecommendations

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

weretobeimplementedwhentheprocurementsoftwarewasupgraded.TheCityAuditorsOffice notedtheserecommendationshadbeenimplementedwhenfollowupwasperformedin2010. ProcurementandContractServices(PCS),whichreportstotheFinancialServicesorganization,had primaryresponsibilitytoprocuregoodsandservicesonbehalfofColoradoSpringsUtilities. Additionally,theMaterialsManagementgroupswithintheEnergyServicesDivisionhadtheauthorityto procuregoodsandservicesunderstandard(nonblanket)purchaseordersupto$50,000.Storeroom personnelintheDistribution,CollectionandTreatmentDepartmentwithintheWaterDivisionalsohad theauthoritytocreateandapprovepurchaseordersforgoodsandservicesupto$50,000. FuelandMaterialsManagementpersonnelwithintheEnergyServicesDivisionnegotiatedandentered intoshortandlongtermcontractsforcoalandoilonbehalfoftheorganization.ThePortfolio ManagementDepartmentwithinEnergyServicesnegotiatedandexecutedcontractsfornaturalgas suppliesforColoradoSpringsUtilities. Underpolicyandproceduresinplace,goodsandservicescouldbeobtainedonaonetimebasisorby issuingareleaseagainstablanketorderforgoodsorservices.Contracttermsweregenerallyforthree years,withtwooneyearrenewaloptions.Contractsorblanketorderscouldberenewedforan additionaltermifrequestedbytheColoradoSpringsUtilitiesbusinessunitandapprovedby ProcurementandContractServices. Quotationswererequiredforpurchasesover$10,000notcoveredunderblanketpurchaseordersor contracts.ColoradoSpringsUtilitiespolicyrequiredthattherequestordocumentandobtainapproval forinstancesinwhichbidsorquotationswouldnotbeobtainedforpurchasesofgoodsorservices, knownassolesourcepurchases.Accordingtopolicy,solesourcepurchaseswereallowedwhenonly onesourcefortheproductorserviceexisted,orconditionssuchasabusinessneedtostandardize equipment,orwhenreplacementpartswereavailableonlyfromtheoriginalequipmentmanufacturer. ThesesolesourcepurchasesweresummarizedinamonthlyreporttoColoradoSpringsUtilitiesOfficers. ColoradoSpringsUtilitiesissuedapproximately$22.4millioninstandardpurchaseordersin2010and maintainedapproximately$968millioninactivecontracts.CSUissuedcloseto$223millionpurchase orderreleasesonthesecontracts. Asstatedinthepurposesectionofthereport,thisauditwasperformedasaregularcycleauditofmajor businessprocesses.TheCityAuditorsOfficealsoperformsongoingauditsofprocurementactivities relatedtotheSouthernDeliverySystemConstructionProject.PleaserefertoReport1122SDS Project Monitoring Report forprocurementrelatedobservations,whichwerenotincludedhere.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

CONCLUSION Weconcludethatoverall,thecontrolsintheprocurementprocessprovidedreasonableassurancethat 1)bestvaluewasobtainedforgoodsandservices,2)compliancewithinternalpoliciesandprocedures wasachieved,and3)resourcesweresafeguarded.However,duringthecourseofouraudit,we identifiedareaswhereimprovementscouldbemadetofurtherstrengthencontrols.Theseareasare detailedonthepagesthatfollow.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

OBSERVATIONS, RECOMMENDATIONS AND RESPONSES OBSERVATION 1 ENERGY SUPPLY CONTRACTS DID NOT REQUIRE REVIEW AND APPROVAL OUTSIDE THE ENERGY SERVICES DIVISION TheFuelandMaterialsManagementDepartmentwithintheEnergyServicesDivisionnegotiatedand enteredintolongtermcoalcontractsonbehalfofColoradoSpringsUtilities.Duringourauditperiod, theEnergySupplyGeneralManagerwasauthorizedtoenterintoanycontracthavingatermoftwo yearsorless.ContractswithtermsovertwoyearscouldbeapprovedbytheEnergyServicesOfficer. WeunderstandthatmanagementoutsideoftheEnergyServicesDivisionwasawareofsignificant contractingactivitiesthroughinformalprocesses;however,additionalapprovalsforcontractsexceeding agivendollaramountortermwerenotrequired.ProcurementandContractServicesdidnot participateinthesolicitationornegotiationprocessforlongtermfuelcontracts. RequiringreviewsandapprovalsofmanagementoutsidetheEnergyServicesDivisionforsignificant contractsandamendmentswouldhelpensureindependentandobjectiveevaluationthatfullyconsiders potentialrisksandbenefitstotheorganization. AUDITORS RECOMMENDATION ContractsandamendmentsexceedingtermsordollaramountstobespecifiedbyColoradoSprings UtilitiesmanagementshouldrequireapprovalbyseniormanagementinadditiontotheEnergyServices Officer. COLORADO SPRINGS UTILITIES RESPONSE ColoradoSpringsUtilities,specificallyEnterpriseRiskManagementandProcurementandContract Services,agreeswiththisrecommendation.However,anEnterprisewidepolicyiscurrentlynotinplace forhighvaluecontracts,whichwouldincludecoalcontracts.Anewpolicyiscurrentlyunder developmentthatincludesprovisionsrelatingtoauthorizationlevelsandexecutionresponsibilities.This policyisexpectedtobeapprovedandinplaceduring2012.Untilthenewpolicyisfinalized,wecannot requireindividualDivisionswithhighvaluecontractstocomplywiththeCityAuditors recommendation.Intheinterim,theEnergyServicesDivisionwillcontinuetocomplywiththeexisting RiskManagementPolicy,whichwasdevelopedandapprovedbytheOfficerteam.ColoradoSprings Utilitiesacknowledgestherisksassociatedwithenergycommoditiespurchases,andtheEnergyServices Divisionhasdevelopedadditionalpoliciesandprocedurestomitigatesuchrisks.However,providing additionaltransparencyonlargervaluecontractswillensureobligationspotentiallyimpactingother areasoftheorganizationareidentifiedandunderstood.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

OBSERVATION 2 SEGREGATION OF DUTIES RISKS EXISTED IN THE WATER SERVICES DIVISION Segregationofdutiesinvolvesseparatingcertainareasofresponsibilityanddutiesinanefforttoreduce thepossibilityoffraudandunintendedmistakes.Managementshouldestablishprocedurestoseparate dutiesandresponsibilitiesofpersonnelwhocreatepurchaseorders,performareceivingfunctionfor goodsorservices,andauthorizepayment. Aspartofouraudit,weexaminedtheprocessesforrequisitioning,ordering,receiving,andprocessing paymentsforgoodsandservices.Managementshouldbeawarethatthelackofsegregationofduties increasestheriskthatemployeescouldpurchasegoodsorservicesforpersonaluse. IntheDistributionandCollectionTreatmentDepartmentwithintheWaterServicesDivision,wenoted thattheprocurementassociatehadtheabilitytocreateandapprovearequisitionforstockornonstock goods,createandapprovereleasesagainstblanketorders,orcreateandapprovestandard(non blanket)purchaseordersupto$50,000,andhadtheabilitytoreceivetheseitemsinthesystemand issuematerials.Thisemployeecouldperformcyclecounts,butcouldnotmakeinventoryadjustments. WeunderstandthatstaffislimitedintheWaterServicesDivisionStoreroomandsomesystemaccess wasassignedtotheProcurementAssociatetoallowbackupintheeventtheMaterialsTechnicianwas notavailable.However,theemployeehadtheabilitytorequisition,procure,receive,andissue materialswithoutinvolvementfromasecondperson. AUDITORS RECOMMENDATION WaterServicesGroupManagementshouldreviewthedutiesassignedtotheprocurementassociatein theWaterServicesDivision.Segregationofdutieswouldbeimprovedifanotheremployeewas requiredtoapproverequisitions,approvepurchaseorders,oracknowledgereceiptofgoodsorservices orderedbytheProcurementAssociateSpecialist.Managementshouldevaluatethenecessityof allowingtheProcurementAssociatetocreateandapprovestandardpurchaseorders. COLORADO SPRINGS UTILITIES RESPONSE ColoradoSpringsUtilitiesagreeswiththisrecommendation.TheobservationsarerelatedtotheLas VegasWarehousefacilitywhichprovidesstoreroomservicesfortheDistribution,Collectionand TreatmentDepartment.Thefollowingsystemsecurityauthorizationsandprocedureswerechangedas ofJanuary12,2012. 1. TheProcurementAssociatecannolongerreceivematerials.Thisauthorizationwasgranted severalyearsagotocovertheMaterialsTechniciansdutieswhenoutofoffice.Theprocedural changewillbetotrainPlannerAnalyststoperformreceivingdutieswhenevertheMaterials Technicianisoutofofficeforaweekormore.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

2. TheProcurementAssociatewillnotbeallowedtoperformcyclecounts;however,thisindividual willmaketheinventorybalanceadjustments.TheMaterialsTechnicianwillcontinuetoperform thecyclecounts,butwillnolongermakeinventorybalanceadjustments. 3. TheLasVegasWarehouseProcurementAssociatessecurityauthorizationwithintheMaximo systemforstandardpurchaseordersnowmatchesotherProcurementAssociatesacrossthe organization. 4. TheLasVegasWarehouseSupervisorsMaximosecurityauthorizationsnowmatchtheother WarehouseSupervisorsacrosstheorganization.Theproceduralchangewillrequirethatwhen theWarehouseSupervisorisoutofoffice,theGeneralManageroftheDistribution,Collection andTreatmentDepartmentwillbethenextresponsibleapproverasneeded.Ifapprovalsare requiredbytheGeneralManager,itwillrequireasecurityauthorizationchangerequesttothe Maximosecurityworkgroup.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

OBSERVATION 3 SIX EMPLOYEES HAD HIGHER SYSTEM REQUISITION LIMITS THAN THEIR SUPERVISOR Sixinstanceswerenotedduringourauditinwhichanemployeesmanagerhadlowerrequisitionlimits thanoneoftheemployeesreportingtothemanager.Thenumberofemployeeswithhigherlimitsthan theirmanagerhadimprovedsincetheprioraudit,where21instanceswerereported.Requisitions wouldbesubjecttosupervisoryapproval,regardlessofthemanagersapprovallimits.Althoughthe numberofinstanceswasnotsignificantincomparisontotheuserpopulation,theseinstancesindicated thatrequisitionlimitsmaynotbesubjecttoreviewonaregularbasis. AUDITORS RECOMMENDATION ColoradoSpringsUtilitiesshouldputinplaceareviewofaccesslevelstoensurethatrequisitiondollar limitsareinaccordancewithpolicyandareconsistentwithlimitsassignedtosupervisors.Additionally, ColoradoSpringsUtilitiesshouldensurethatrequisitionlimitsarereviewedforappropriatenessand consistencywiththesupervisorslimitswhenanemployeechangespositionswithintheorganization. Thisassurancecouldbeaccomplishedbyaddingrequisitiondollarlimitstostandarddocumentssuchas checklistscompletedforpositionchanges. COLORADO SPRINGS UTILITIES RESPONSE ColoradoSpringsUtilitiesagreeswiththisrecommendation.InformationTechnology(IT)has implementedaquarterlyreviewprocesstoverifythesystemprocurementlevelsfor appropriateness.Exceptionreportsdevelopedwillidentifyapprovallimitanomaliesbetweenemployee andsupervisorlevels.AuthorizedITpersonnelwillmakeanycorrectionsorupdatesneeded,basedon theestablishedprocurementlimitswhicharedefinedbyposition/role.Thesereportswillbeexecuted onorbeforethe15thdaypriortothelastdayofeachquarter.InformationTechnologyhasalso implementedamodificationtothePersonnelActionprocess,whichnowrequiresITpersonnelto evaluateandmodifytheprocurementlimitsasdefinedbytheemployeesnewrole.ThePersonnel ActionprocessisacomponentoftheautomatedHumanResourcesnotificationsystemforpersonnel changes.Occasionallyuniquecircumstancesmayrequireadeviationfromtheestablishedprocurement limits;however,anoversightprocessisinplacetoaddressthesesituationsasdocumentedinQBD #12928,ChangeIndividualPurchaseRequisitionorReleasePOLimits.Expecteddateforcompletionis June30,2012.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

OPPORTUNITY FOR IMPROVEMENT OPPORTUNITY 1 VENDOR PERFORMANCE WAS NOT TRACKED AND REPORTED Asnotedinthebackgroundtothisreport,mostprocurementactivitiesfortheorganizationare performedbyProcurementandContractServices.TheMaterialsManagementfunctionwithinEnergy ServicesmaintainsstoreroomsandalsoperformssomeprocurementactivitiesfortheEnergyServices Division. MaterialsManagementpreviouslyhadaprocessinplacetocapturevendorperformancedatarelatedto stockandnonstockitemsfortenvendorsfromwhichthemostpurchasesweremade.Datatracked includedtimelinessofdelivery,errors,andcustomerserviceissues.Thisdatawasutilizedin performanceimprovementdiscussionswithvendors.Atthetimeofourreview,MaterialsManagement hadnotbeengatheringvendorperformancedataforapproximatelyoneyearduetoapositionvacancy. VendorperformanceiscurrentlynotdocumentedortrackedonanongoingbasisbytheProcurement andContractServicesDepartmentwithinColoradoSpringsUtilities.ProcurementandContractServices enteredanyreportsreceivedofvendorperformanceissuesintoadatabase.However,otherthanthe MaterialsManagementtrackingnotedabove,theorganizationdidnothaveaprocesstoobtainvendor performancedatafromendusersinastandardformatforuseinfutureprocurementdecisions. AUDITORS RECOMMENDATION TheMaterialsManagementgroupwithinEnergyServicesshouldconsiderreinstatingtheprevious processtotrackvendorperformance.ProcurementandContractServicesshouldconsiderthecost benefitofobtainingvendorperformancedatainastandardizedformatsothatperformancecanbe appropriatelyconsideredinfuturecontractingdecisions. COLORADO SPRINGS UTILITIES RESPONSE ColoradoSpringsUtilitiespartiallyagreeswiththisrecommendation.ManagementoftheEnergy Construction,OperationsandMaintenanceDepartment(ECOM)isinagreementwiththeCityAuditor's recommendationconcerningvendorperformancetracking.ECOM'sMaterialsManagementemployees willreinstatethepreviousprocesstotrackvendorperformancebeginninginJuly2012.Thisprocesswill beperformedonourtopeighttotensuppliersbytheendof2012,andrepeatedwitheachsupplier severaltimesduring2013.Datathatwillbetrackedandsharedwiththesekeysupplierswillinclude timelinessofdelivery,errors,customerserviceissues,anddiscussionsconcerninghowtheycanimprove theirservicesandprocesses.ECOM'sMaterialsManagementwillalsorequestinputfromthese suppliersonhowColoradoSpringsUtilitiescanimproveourcommunications,forecastingandresponses totheirquestionsorneeds.

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ColoradoSpringsUtilities Procurement OfficeoftheCityAuditor

ProcurementandContractServices(PCS)doesnotbelievetherewouldbeabenefitinadoptinganew processusingastandardizedformatformanagingvendorperformance.Theadministrativeburden wouldbesignificantforProjectManagers,aswellasContractingAgents.Asacontractingdepartment, PCSmanagesperformancecontemporaneouslyvianumeroustoolsincluding:curenotices,terminations (bothforperformanceandforconvenience),suspensions,disqualifications,bidderprequalificationand lawsuitsallofwhichwereusedin2011.Furthermore,vendorpastperformancemaybeconsideredin thesolicitationprocess.Uniquejobs(workscopes)requiredofvendorsmakesimplestandardization difficult.Ifresourcesbecomeavailable,PCSwillconsideradoptingaperformancemanagementtoolas recommendedbytheCityAuditor.

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C ITY C OUNCIL S O FFICE O F T HE C ITY A UDITOR

C OLORADO S PRINGS, C OLORADO
AboutourOffice ThemissionoftheOfficeoftheCityAuditoristoprovideCityCouncilwithanindependent, objectiveandcomprehensiveauditingprogramforoperationsoftheCity.Ourauditing programincludes:

Evaluatingtheadequacyoffinancialcontrols,recordsandoperations Evaluatingtheeffectivenessandefficiencyoforganizationaloperations ProvidingCouncil,managementandemployeesobjectiveanalysis,appraisals,and recommendationsforimprovingsystemsandactivities

TheOfficeoftheCityAuditorisresponsibleforauditingthesystemsusedbytheCityof ColoradoSpringsanditsenterprises,includingColoradoSpringsUtilitiesandMemorialHealth System.Weperformavarietyofauditsfortheseentities,includingfinancialaudits, performanceaudits,contractaudits,constructionaudits,andinformationsystemaudits.We alsoperformfollowuponaperiodicbasistomonitorandensuremanagementactionshave beeneffectivelyimplemented. AuthorizationandOrganizationalPlacement OurauditsareconductedundertheauthorityofChapter1,Article2,Part7oftheColorado SpringsCityCode,andmorespecificallyparts703,705and706oftheCode.TheOfficeofthe CityAuditorisstructuredinamannertoprovideorganizationalindependencefromthe entitiesitaudits.ThisindependenceisaccomplishedbytheCityAuditorbeingappointedby andreportingdirectlytotheCityCouncil. AuditStandards TheauditwasconductedinamannerthatmeetsorexceedstheInternationalStandardsfor theProfessionalPracticeofInternalAuditing,apartoftheProfessionalPracticesFramework promulgatedbytheInstituteofInternalAuditors,withtheexceptionoftherequirements understandards1312and1321toobtainanexternalqualityassurancereviewonceeveryfive years.Wedonotbelievethisnoncomplianceimpactedthequalityofouraudit. Theauditincludedinterviewswithappropriatepersonnelandincludedsuchtestsofrecords andothersupportingdocumentationasdeemednecessaryinthecircumstances.We reviewedtheinternalcontrolstructureandcompliancetestswereperformed.Sufficient competentevidentialmatterwasgatheredtosupportourconclusions.

CityHall107NorthNevadaAvenueSuite200MailCode1542 ColoradoSpringsCO809011575 Tel7193855991Fax7193855699ReportingHotline7193852387 www.SpringsGov.com/OCA