Summary of Report 98-044

June 1998

Report Number 98-044

Overall Conclusion

The three largest health and human services agencies generally have established adequate controls over their procurement expenditures. While the Departments of Health, Human Services, and Mental Health and Mental Retardation have established adequate controls, they could save between $376,000 and $1.6 million annually in long distance charges. The savings and improvements in this report are not exhaustive. Additional areas of potential savings are identified in the "Issues for Further Study" section. Although these and other identified savings represent a small percentage of these agencies' annual procurement expenditures of $540 million, they are important in that they improve the State's ability to provide more services using fewer resources.

Key Facts and Findings

• Savings can be obtained by actively looking for cost-saving strategies directly related to types of items. As noted above, the three agencies could save between $376,000 and $1.6 million annually in long distance charges by handling some long distance calls differently. Also, we identified specific cost-saving strategies for supplies and materials, information technology, and fleet. For example, the Department of Human Services and the Department of Mental Health and Mental Retardation (MHMR) reduced their inventory holding costs by changing the way they order and ship supplies.
• MHMR uses more transactions and procurement employees than others to purchase the same dollar amount of expenditures. Although it will take some time, MHMR should be able to reduce its number of transactions. This should, in turn, allow it to reduce administrative costs, lower item costs, and reduce staff.
• Some of the problems identified were not under the control of the purchasing department. For example, some Texas Department of Health (TDH) programs ordered and received goods and services without going through established purchasing procedures. This decreased the likelihood that TDH got the best value for these purchases.

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