Page 12 - The Edge - Spring 2018

VENDOR/BUYER CONFERENCE

BY DON HARRIS

Auditor Recommends Documentation and Full

Disclosure of Potential Con icts of Interest

Jennifer Shields
One of the best ways to avoid a negative nding by an auditor involves the amount needed during the year is uncertain, estimate cumulative
full disclosure of possible con icts of interest. purchases, she said.
In a breakout session at AASBO’s Vendor-Buyer Conference, an Small dollar purchases are procurements with values below the
auditor/CPA talked about rules and roles and stressed the importance formal competitive procurement threshold. “While these purchases do
of transparency of potential con icts of interest involving school district not require formal competitive procurement, small dollar purchases
employees and even Governing Board members. represent signi cant amounts of school district and taxpayer dollars,”
“Nobody wants an audit exception,” said Jennifer Shields, with Shields said. “ ey should be made with reasonable care and diligence.
Heinfeld and Meech. “An audit should be like an open book test. We’re Be careful – make sure you’re not being pulled over the coals.”
not coming out there to give you a gotcha moment.” School districts must maintain written standards of conduct covering
e purchasing process, which could involve as many as a dozen con icts of interest with respect to employees engaged in the selection,
steps, starts with who identi es a need, who identi es the vendor, who award, and administration of contracts, including disciplinary actions
creates a purchase order, who receives the goods, down to who signs the for violations, Shields said. e de nition of supplies has been revised to
payment check. include computer equipment with an acquisition cost of less than $5,000.
“For vendors, it’s important to know there are so many di erent Shields described P-cards as credit cards that can be limited to speci c
parties involved,” Shields said. vendor types using Merchant Category Codes and o er more control of
Focusing on a key area, Shields said it’s an employee’s duty to disclose card limits. But, she said, P-card use can be challenging. Purchasing o en
any con ict of interest, either with a family member or a vendor. “It’s doesn’t know about a purchase until a er the fact. Some P-cards need a
employee driven,” she said. PO for every purchase. “It can be a lot of work,” she said.
Districts should have a single le on con icts of interest, preferably Shields raised several questions regarding compliance. Were the
with Human Resources. at’s where information is gathered when a responsibilities of expenditure processing, including voucher preparation,
new hire goes through employee orientation. recordkeeping, and authorization, separated among employees or, if this
On the question of whether school districts can make purchases from was not possible due to the district’s limited sta size, were management
an employee, the answer is yes. It doesn’t matter how much the bid is for. review procedures in place to compensate for employees performing
“All purchases of goods or services from district employees – regardless incompatible functions? Before authorizing expenditures, did the district
of the amount, including equipment, material, supplies or services – ensure that su cient cash was available in cash-controlled funds and
must have competitive bids,” she said. “Quotes are not su cient.” budget capacity was available in budget controlled funds?
is rule includes student activities, tax credits, gi s and donations Commenting again on a review of all purchases from employees and
– if the district has a policy covering such transactions. “You can’t have Governing Board members, Shields raised this question: If a Governing
di erent rules for di erent buckets of money,” Shields said. “You have to Board member, o cer, or employee had a substantial interest in any
go through Procurement. It has to be bid.” contract, sale, purchase, or service, did the individual submit a con ict-
On the question of determining a sole source, Shields said even in of-interest statement and refrain from voting upon or otherwise
rural areas it is in the best interest of a district to bid that item, even if participating in any manner as an o cer or employee in such contract,
other vendors might not be in the same geographic area. “You might get sale, or purchase?
only one response – from the local vendor,” she said. “What if a vendor On a compliance issue, an auditor wants to know if the district
250 miles away was responsive? It protects you more to go through the retained and disposed of records in accordance with the General
process.” Retention Schedules for Education K-12 published by the Arizona State
Likewise, it’s OK to purchase from a Governing Board member Library, Archives and Public Records.
under certain circumstances. e board must have an adopted policy “It’s an audit test we have to perform,” Shields said. “Districts hire
authorizing such purchases. Shields recommends having Governing shredding companies that give you certi cation of what was destroyed.
Board members ll out a con ict-of-interest form. She noted that board We can’t audit a process that is not documented somewhere.”
members are elected o cials and should be held to a high standard. Emphasizing the importance of documentation, Shields said, “ e
Shields sees a lot more purchases from school employees than from best thing that we can do is document what we did, when we did it, and
board members. why we did it. I don’t remember what I ate for dinner last night, but as
Regarding cumulative purchases, Shields said, an analysis should be an auditor I’m going to come in and ask what you did nine months ago
based on like items rather than vendors. When determining the level – and I’m going to expect an answer.
of competitive purchasing required, such as quotations or sealed bids
or proposals, consider the dollar amount of the current purchase and Jennifer Shields, CPA, CGFM, Heinfeld Meech, can be reached at
the total dollar amount of all like item purchases that might occur. If jennifer.shields@heinfeldmeech.com or cell number (602)881-1424.

12 THE EDGE SPRING 2018

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