A Performance Audit
An Audit Report on Financial Processes at the Military Department
December 2017
Summary Analysis
The Military Department (Department) had significant weaknesses in its contracting processes and lacked key controls to ensure that it consistently performed required activities related to contract planning, procurement, and formation.
In addition, the Department had processes in place to help it manage assets and process payments that were allowable, properly supported, and approved. However, it should strengthen those processes to ensure that it reports all assets as required and makes payments in a timely manner.
Between September 1, 2016, and May 31, 2017, the Department had significant weaknesses in its contracting processes and lacked key controls to ensure that it consistently performed required activities related to contract planning, procurement, and formation.
By not having sufficient contracting processes, the Department:
• Did not complete non-disclosure or conflict of interest statements for the contracts that auditors reviewed.
• Did not document the justification for its selection of a vendor for a specific project for the three architectural and engineering contracts that auditors reviewed.
• Did not consistently include (1) an abandonment or default clause, (2) a buy Texas clause, and (3) a technology access clause in contracts as the State of Texas Contract Management Guide required.
• Did not include terms and conditions or specific pricing information in the purchase order for a $2.2 million emergency procurement that auditors reviewed.
The Department had some asset management processes in place, and it ensured that it assigned assets identification numbers. However, it did not report all acquired assets to the State Property Accounting (SPA) system as required. Auditors identified 181 assets totaling $9.2 million that the Department purchased from September 1, 2016, through May 31, 2017, that it had not entered in SPA.
The Department processed payments that were allowable, properly supported, and approved; however, it did not consistently pay vendor invoices within 30 days of receipt of the invoice or the goods/service. As a result of making late payments, the Department paid $22,845 in interest to vendors from September 1, 2016, through May 31, 2017.
The Department did not have a process in place to ensure that it resolved transaction differences between CAPPS and USAS. The Comptroller’s Office’s month-end closing/reconciliation procedures require state agencies to reconcile their internal accounting systems to USAS on a monthly basis. However, as of July 2017, the Department had not reconciled 2,985 transactions between the two systems. As a result, the Department cannot rely on the financial information in CAPPS.
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