An Audit Report on Contract and Financial Management Processes at the General Land Office
Report Number 15-037
Due to significant weaknesses in its processes, the General Land Office (Office) did not always plan, procure, form, and monitor the three contracts audited in accordance with state requirements and the Office's policies and procedures.
The Office did not adequately plan, procure, or form its contract with Grant Thornton, LLP (Grant Thornton) for oil and gas royalty audit services, and it did not adequately plan or form its contract with IDEA Integration Corporation (IDEA) for information technology services. For example:
- The Office did not identify and address a conflict of interest involving the Grant Thornton contract during the procurement for that contract.
- The Office prepared an incomplete statement of work and underestimated the total cost during its planning for the IDEA contract. In addition, the Office did not include a statement of work or the total cost in its contract with IDEA. As a result, the State's Quality Assurance Team was not involved at any point prior to or during the term of that contract. The contract expenditures eventually totaled $1,919,559, which exceeded the $1 million threshold for a required review by the Quality Assurance Team.
The Office generally complied with planning, procurement, and contract formation requirements for the third contract audited with Apollo Environmental Strategies, Inc. (Apollo) for the construction of a berm. The Office used the appropriate procurement method by issuing a request for proposal, and it involved the appropriate sponsors and staff in the planning and procurement.
Although the Office monitored all three contracts audited, auditors identified certain weaknesses in the monitoring of those contracts. For example, the Office did not have certain monitoring documentation for all three contracts audited.
The Office also should address certain systemic issues in its overall procurement and contracting processes. For example:
- The Office last updated its procurement manual in 2011, and that manual does not address the procurement system the Office implemented in 2012. In addition, the Office's procurement and contracting policies and procedures do not always align with the requirements of the State of Texas Contract Management Guide, or do not exist for certain processes.
- The Office's BuySpeed procurement system and its Contract Management System (CMS) contained errors due to manual data entry and the lack of a reconciliation process. To provide auditors with a complete record of its procurement transactions, the Office had to manually extract, merge, and reconcile data from at least two systems.
- The Office's record retention schedule does not clearly define the contract documentation that the State of Texas Contract Management Guide specifies agencies should retain. The Office also does not always maintain its contract administration documentation in a centralized file. As a result, the Office does not consistently retain all applicable procurement and contract records in accordance with the State of Texas Contract Management Guide.
- The contract managers the Office assigned to the contracts audited have not obtained statutorily required contract management training.
In addition, the Office's procurement of the Grant Thornton contract demonstrated that program areas within the Office have the ability to bypass review by the Office's legal services division by issuing a purchase order directly through the Office of the Comptroller of Public Accounts' Texas Multiple Award Schedule (TXMAS) program. That risk also exists for contracts that can be procured by issuing a purchase order through the Department of Information Resources' Cooperative Contracts Program for deliverables-based information technology services. The purchase orders serve as legal, binding contracts between the Office and the vendors, with no other documentation required.
The Office should strengthen its procurement and contracting processes. The lack of an adequate control structure for procurement and contracting impaired the Office's ability to consistently and adequately plan, procure, form, and monitor the contracts audited.
Auditors communicated other, less significant issues regarding the three contracts audited to the Office separately in writing.