Page 8 - The Edge - Winter 2017

BY GARY BARKMAN, CPPB

How Much Due Diligence Is Enough?

Over the past couple of months, I still keep
getting asked, “How much due diligence do I
need for the auditors?”
It’s a great question, but not one that
individuals should be asking other districts.
at decision is better answered by the utilizing
district and here’s why.
If we look at the Fraud Alert – Purchasing
Cooperatives from the O ce of the Auditor
General, May, 2011, we’ll see that it simply
indicates: “When purchasing through
a cooperative agreement, adequate due
diligence is critical to ensure the cooperative is
complying with applicable laws and regulations,
and conducts business in an ethical manner.”
Not much help, unless you de ne the term
“adequate” as it’s used here.
However, It also goes on to highlight some
other key points for due diligence, as listed
below.
• Inquire with the cooperative to determine if an independent performed on their contract, as a cooperative that continually
review of its purchasing practices has been performed and examine has numerous findings. Furthermore, if a cooperative
any noted findings and evaluate whether the cooperative is continually has significant findings, it may be time to look at
adequately following applicable laws and regulations. another cooperative.
• Examine the cooperative’s negotiated vendor contracts and Last but not least, we can always turn to our trusty Uniform
evaluate whether the contracts comply with laws and regulations. System of Financial Records (USFR) for Arizona School Districts,
• Ensure that the goods and services you’re purchasing are on the VI-G-13 for reiterating many of the points addressed above, but
vendor’s contract and examine the contract for potential discounts. ends with probably the most important point of all.
( is should be done as the bare minimum). “Districts must use their judgment in determining the
• Examine the excluded parties’ lists that can now be found on appropriate amount and complexity of due diligence required for
the System for Award Management website or https://www.sam. each procuring entity with which they participate.”
gov/portal/SAM/#content. I’ve yet to come across an article, rule, etc., that indicates
So far, so good, right? Let’s go to another article, (June 2007 the speci c amount of due diligence that absolutely needs to
Newsletter) from the O ce of the Auditor General. is article be performed. So as a best practice, I believe it’s fair to say that
lends itself to the rst bullet point above. when performing due diligence, one should look at the amount of
“A cooperative or lead district that has had such a review within cooperatives being utilized by their district, develop a formula for
the past year may not warrant the same amount or complexity of the amount of due diligence needed for each of those cooperatives
due diligence as an entity that has not undergone such a review. and perform a good representation or sampling of contracts that
Further, an entity that had no ndings as a result of its review would justify their existence as a viable cooperative in Arizona.
may need little or no additional due diligence beyond obtaining I hope this helps to give a better understanding of how to
the results of the review. However, an entity that had signi cant approach the amount of due diligence needed and why we need
ndings would require a greater amount and complexity of due it to begin with. I’m always available for questions and discussion
diligence.” regarding this topic and any other, for that matter.
O.K., so we can surmise by this paragraph that if a cooperative
can prove by its independent review that they know what they’re Gary Barkman, Procurement Specialist Supervisor, Mesa Uni ed
doing, that cooperative wouldn’t need as much due diligence School District, can be reached at: gabarkman@mpsaz.org.

8 THE EDGE WINTER 2017
THE EDGE |