A Performance Audit
An Audit Report on a Selected Contract at the Department of State Health Services
June 2016
Summary Analysis
The Department did not sufficiently manage and monitor the pharmaceutical wholesaler contract to verify that Morris & Dickson Company performed according to the terms of the contract. The Department verified that it received the goods that it purchased before it paid for those goods; however, the Department should improve its review of certain contract deliverables and consistently verify that prices and discounts are accurate.
The Department and the Health and Human Services Commission (Commission) generally planned, procured, and formed the Department’s contract with Morris & Dickson Company in accordance with applicable requirements. However, the Commission did not ensure that all appropriate personnel completed the required disclosure and nondisclosure statements. The Department’s nondisclosure form also did not include all assertions required by the State of Texas Contract Management Guide.
The Department of State Health Services (Department) did not sufficiently manage and monitor its pharmaceutical wholesaler contract with Morris & Dickson Company to verify that the contractor performed according to the terms of the contract.
The Department should sufficiently design payment processing controls for payments to Morris & Dickson Company for the contract audited.
The Department did not make payments within the time lines set by the contract or pay interest, and it paid service charges that were not included in the contract as a result of those late payments.
The Department did not have a contract manager assigned to the Morris & Dickson Company contract to oversee compliance with contract terms, and it did not always conduct and document certain monitoring activities.
The Department did not have documented contract management policies and procedures for governing certain aspects of vendor contracts that are primarily for goods.
Both the Health and Human Services Commission (Commission) and the Department established contracting policies and procedures that provide a standard entity-wide contracting process. Additionally, the Commission ensured that purchasers involved with the Morris & Dickson Company contract complied with training and certification requirements.
However, the Department did not perform a preliminary risk assessment, as required by the State of Texas Contract Management Guide, to determine the level, type, and amount of management, oversight, and resources needed to plan and implement the contract.
The Commission generally procured and formed the Morris & Dickson Company contract in accordance with applicable statutes, rules, Comptroller’s Office requirements (requirements), and Commission policies and procedures. However, the Commission should ensure that vendor proposals include all required documentation, appropriate personnel complete required disclosure and non-disclosure forms, and proposal evaluations are accurate and complete.
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