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An Audit Report on Contract Management at the Department of Motor Vehicles

July 2012

Report Number 12-043

Overall Conclusion

The Department of Motor Vehicles (Department) demonstrated inconsistency in the procurement of contracted goods and services in accordance with applicable state laws, rules, and Department policies. For example, for 9 non-solicited requested purchases, totaling $86,641, the Department did not have adequate documentation to show that it used the correct procurement method. Also, the Department did not consistently obtain the minimum number of informal bids required by the State of Texas Procurement Manual. In addition, the Department should strengthen its monitoring processes and controls to help ensure that (1) contractors perform according to their contracts and (2) payments are made in accordance with state laws and regulations. From September 2010 through February 2012, the Department made $52,850,628 in payments to non-governmental entities for procured goods and services.

It is important to note that the Department, which became operational in November 2009, is making efforts to improve its procurement function by implementing the use of a standard purchase request form and a purchaser peer review process. In addition, the Department involved its project managers in the request for proposal (RFP) development process. The Department should continue to strengthen its contract management by:

- Developing and maintaining a comprehensive list of contracts awarded.

- Developing and implementing purchasing policies and procedures.

- Performing a needs assessment for all contracts whose value exceeds a threshold established by the Department.

- Keeping all evaluation scoring sheets in accordance with the State's record retention schedule.

- Providing evaluators additional guidance on completing evaluation scoring sheets.

- Considering price when scoring proposals.

- Consistently using the appropriate procurement method as required by the State of Texas Procurement Manual.

Auditors performed tests to determine whether (1) vendors' invoices supported payment amounts, (2) rates in vendors' invoices were consistent with rates authorized by purchase orders, (3) invoices were approved prior to payment, and (4) the Department inventoried capital and controlled assets. Auditors determined the following:

- Vendors' invoices supported all 23 formal solicitation procurement payments tested and all 60 payments tested for non-solicited requested purchases.

- The Department verified that it received all contracted deliverables prior to making payments. However, for one contract tested, auditors noted that the first deliverable the Department received, at a cost of $91,000, made references to a state agency other than the Department, indicating that the deliverable was not originally created for the Department. - For 55 (92 percent) of the 60 non-solicited requested purchase payments tested, the purchase order supported the invoice. However:

- - For 3 payments totaling $26,261, auditors could not confirm that the invoiced rates were accurate because either a purchase order did not exist or the purchase order included a not-to-exceed amount without a specific billing rate.

- - For 2 payments, the invoiced rate exceeded the rate established in the purchase order, resulting in total overpayments of $187.

- The Department did not tag and record in the State Property Accounting system 1,463 printers and computers worth a total of $922,860 at the time of acquisition.

Contact the SAO about this report.

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