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Financial Management: Procurement. Procurement Overview. Procurement Procedures Contract Administration and Awards Internal Controls and Documentation. Page 2. Procurement. Inventory management and disposition

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Financial Management: Procurement

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Financial management procurement

Financial Management:

Procurement


Procurement overview

ProcurementOverview

  • Procurement Procedures

  • Contract Administration and Awards

  • Internal Controls and Documentation

Page 2


Procurement

Procurement

  • Inventory management and disposition

  • Link to appropriate state and federal policies, statutes, and guidelines (e.g., competitive vs. non-competitive, conflict of interest)

Page 3


Procurement regulations

Procurement Regulations

  • EDGAR, CFR 34, Parts 74-86 and 97-99

9/12/2008

Page 4


Procurement definitions and terms

Procurement: Definitions and Terms

  • Competitive Sealed Bid – method of procurement where sealed bids are publicly solicited and a firm fixed price contract is awarded to the responsible bidder whose bid, conforming with all material terms and conditions of the invitation for bids is the lowest in price

9/12/2008

Page 5


Procurement definitions and terms1

Procurement: Definitions and Terms

  • Competitive Proposals – method of procurement where proposals are requested from a number of sources, is publicized, and either a fixed price or a cost reimbursement type contract is awarded

9/12/2008

Page 6


Procurement definitions and terms2

Procurement: Definitions and Terms

  • Conflicts of Interest – occur when the individuals responsible for determining bid/proposal responsiveness are over- ruled by other individuals within the organization or individuals responsible for determining responsiveness (or any members of his or her family) has any personal or corporate ties or any financial interest in any of the firms offering a bid/proposal

9/12/2008

Page 7


Procurement definitions and terms3

Procurement: Definitions and Terms

  • Cost Analysis – evaluating the separate cost elements that make up the total price

9/12/2008

Page 8


Procurement definitions and terms4

Procurement: Definitions and Terms

  • Cost Plus a Percentage of Cost or Cost Plus a Percentage of Income – an agreement in which the contractor/vendor is provided a specified percentage of profit over and above the actual costs of construction. This type of contract arrangement is not permitted because the contractor/vendor has little incentive to hold down costs

  • Equipment – tangible, non-expendable, personal property with a useful life of more than one year and having an acquisition cost of $5,000 or more per unit

9/12/2008

Page 9


Procurement definitions and terms5

Procurement: Definitions and Terms

  • Non-Competitive Proposals – procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is deemed inadequate

  • Price Analysis – evaluating the total price; comparing price quotes, market prices, and/or similar information

9/12/2008

Page 10


Procurement definitions and terms6

Procurement: Definitions and Terms

  • Procurement – process of obtaining goods and/or services in accordance with applicable rules and regulations

  • Small Purchase Procedures – simple, informal procurement procedures that are used to secure services, supplies, or other property that do not cost more than an established threshold

9/12/2008

Page 11


Procurement definitions and terms7

Procurement: Definitions and Terms

  • Small Purchase Threshold – threshold established to determine whether an informal or formal procedure should be used for securing services, supplies, or other property

  • Standards of Conduct – written code or standards of conduct governing the performance of officers, employees, or agents engaged in the awarding and administration of contracts

9/12/2008

Page 12


Procurement definitions and terms8

Procurement: Definitions and Terms

  • Supplies – all tangible personal property other than equipment

  • Suspension – either the: 1) temporary withdrawal of the authority to obligate grant funds pending corrective action by the grantee or subgrantee or a decision to terminate the grant or 2) action taken by a suspending official in accordance with agency regulations to immediately exclude a person from participating in grant transactions for a period, pending completion of an investigation

9/12/2008

Page 13


Procurement making sure you are in compliance

Procurement: Making Sure You are in Compliance

  • Ensuring purchases are necessary

  • Open competition

  • Procurement procedures

  • Vendor selection process

  • Inventory management

9/12/2008

Page 14


Procurement ensuring purchases are necessary

Procurement: Ensuring Purchases are Necessary

  • All costs have to be necessary for the performance or administration of the federal grant

9/12/2008

Page 15


Procurement ensuring purchases are necessary1

Procurement: Ensuring Purchases are Necessary

  • All proposed purchases must be reviewed to avoid unnecessary or duplicative items:

    • Surplus property

    • Structure procurement to obtain most economical purchase

    • Intergovernmental agreement for common goods or services

    • Lease vs. purchase

9/12/2008

Page 16


Procurement open and full competition

Procurement: Open and Full Competition

  • All procurement transactions shall be conducted in a manner to provide full and open competition to the maximum extent possible:

    • Entity involved in drafting solicitation may not compete for procurement

9/12/2008

Page 17


Procurement open and full competition1

Procurement: Open and Full Competition

  • Solicitations shall clearly establish all requirements the bidder must fulfill in order for the bid to be evaluated

9/12/2008

Page 18


Procurement open and full competition2

Procurement: Open and Full Competition

  • Awards must be made to the bidder or offeror whose bid is responsive and most advantageous to the recipient, price, quality, and other factors considered

9/12/2008

Page 19


Procurement open and full competition3

Procurement: Open and Full Competition

  • Internal controls require that districts operate within state and federal laws

  • Don’t skip the rules

    • Unreasonable requirements on vendors to qualify to do business

      • Pre-qualified lists should not limit competition

9/12/2008

Page 20


Procurement open and full competition4

Procurement: Open and Full Competition

  • Requiring unnecessary experience or excessive bonding

  • Noncompetitive pricing practices

  • Noncompetitive awards to consultants on retainer

  • Organizational conflicts of interest

  • Specifying a brand name

  • In-state or local preferences

9/12/2008

Page 21


Procurement conflict of interest

Procurement: Conflict of Interest

  • Shall have written standards of conduct governing the performance of employees engaged in the award and administration of contracts – standards must include sanctions for violations

9/12/2008

Page 22


Procurement conflict of interest1

Procurement: Conflict of Interest

  • Conflict situations:

    • Financial interest

    • Acceptance of items of monetary value from contractors (can accept unsolicited gifts of nominal value)

9/12/2008

Page 23


Procurement written procurement procedures

Procurement: Written Procurement Procedures

  • Shall have written procedures that include (at a minimum):

    • Measures for avoiding the purchase of unnecessary items

    • Measures to compare lease vs. purchase (where appropriate)

9/12/2008

Page 24


Procurement written procurement procedures1

Procurement: Written Procurement Procedures

  • When developing solicitations, the Requests for Proposals (RFPs) should include all of the information a bidder needs to respond to the solicitation

9/12/2008

Page 25


Procurement written procurement procedures2

Procurement: Written Procurement Procedures

  • Draft solicitations should include:

    • A clear and accurate description of technical requirements

    • Evaluation factors

      • Functions to be performed

    • Features of brand names that bidder must meet (when applicable)

9/12/2008

Page 26


Procurement written procurement procedures3

Procurement: Written Procurement Procedures

  • Acceptance of any products/services in metric system of measurement

  • Preference for products that conserve natural resources (as feasible)

  • Positive efforts for minority-owned/ women businesses (as feasible)

9/12/2008

Page 27


Procurement cost price analysis

Procurement: Cost/Price Analysis

  • Shall perform a cost or price analysis in connection with every procurement action:

    • Price analysis generally means evaluating the total price – compare price quotes, market prices, or similar information

9/12/2008

Page 28


Procurement cost price analysis1

Procurement: Cost/Price Analysis

  • Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit)

  • Goal is to determine reasonableness

  • 9/12/2008

    Page 29


    Procurement type of procurement instruments

    Procurement: Type of Procurement Instruments

    • The type of procurement instrument used is determined by the recipient, but must be:

      • Appropriate for the particular procurement; and

      • Promote the best interest of the program

        Remember: Cannot use “Cost Plus” Contracts!

    9/12/2008

    Page 30


    Procurement noncompetitive contracts

    Procurement: Noncompetitive Contracts

    • As a practical matter, non-competitive contract raises “red flags”

      • Ensure that documentation of the contract justifies non-competition (sole source justification)

      • Role of cost/price analysis even more important

    9/12/2008

    Page 31


    Procurement noncompetitive contracts1

    Procurement: Noncompetitive Contracts

    • Generally, noncompetitive proposals appropriate only when:

      • The good or service is available only from a single source (sole source)

      • There is a public emergency

      • The awarding agency (MDE) authorizes

      • After soliciting a number of sources, competition is deemed inadequate

    9/12/2008

    Page 32


    Procurement awards

    Procurement: Awards

    • Awards must be made to the bidder whose bid is:

      • Responsive to the solicitation; and

      • Is most advantageous to the recipient considering price, quality, and other factors

    9/12/2008

    Page 33


    Procurement awards1

    Procurement: Awards

    • Awards must be made to responsible contractors who possess the potential ability to perform successfully:

      • Contractor integrity

      • Past performance

      • Financial and technical resources

    9/12/2008

    Page 34


    Procurement suspension debarment

    Procurement:Suspension/Debarment

    • Cannot contract with vendor who has been suspended or debarred

    • Must verify if contract is $25,000 or more

      • https://www.epls.gov/

    9/12/2008

    Page 35


    Procurement inventory management

    Procurement: Inventory Management

    • Different rules for equipment and supplies

    • Equipment

      • Federal definition of equipment

        • Tangible personal property

        • Useful life of more than one year

        • Acquisition cost of $5,000 or more

    9/12/2008

    Page 36


    Procurement inventory management1

    Procurement: Inventory Management

    • State and federal programs may use an expanded definition, as long as it

      • includes all property described previously

  • Supplies

    • Everything else

  • 9/12/2008

    Page 37


    Procurement use of equipment

    Procurement: Use of Equipment

    • Must use for the program for which it was acquired – even after federal funding for program ceases

      • May use for other programs if such use is incidental and does not interfere with the original program

    9/12/2008

    Page 38


    Procurement use of equipment1

    Procurement: Use of Equipment

    If no longer needed:

    • First transfer to another federal program

    • Disposition instructions from U.S. Department of Education

      • EDGAR, CFR 34, Part 80.32

    9/12/2008

    Page 39


    Procurement tracking equipment

    Procurement: Tracking Equipment

    • Property records

      • Description, serial number, or other identification, source of the equipment (specify federal grant award), title information, use and condition, and ultimate disposition

    9/12/2008

    Page 40


    Procurement tracking equipment1

    Procurement: Tracking Equipment

    • Physical inventory

      • At least every two years

      • All discrepancies must be investigated

    • Control system to prevent loss, damage, theft

      • All incidents must be investigated

    9/12/2008

    Page 41


    Procurement supplies

    Procurement: Supplies

    • Must use for the program for which it was acquired

    • If no longer needed, and if residual value of unused supplies is more than $5,000 (aggregate value):

      • First transfer to another program

      • Compensate U.S. Department of Education for its share

    9/12/2008

    Page 42


    Procurement tracking supplies

    Procurement: Tracking Supplies

    • EDGAR does not set out any specific tracking requirements

    • But, as a practical matter, US Department of ED expects subgrantees to track all property purchased with federal funds in order to prove there has been an allocable benefit to the program

    9/12/2008

    Page 43


    Procurement allowable costs

    Procurement: Allowable Costs

    • Costs need to have been incurred during the grant period in the grant approval letter

    • Costs need to be eligible under the terms of the funding source and programs listed in the approved application

    9/12/2008

    Page 44


    Procurement allowable costs1

    Procurement: Allowable Costs

    • Funding sources must be identified separately in the accounting records by project and grant fiscal year

    9/12/2008

    Page 45


    Procurement critical elements

    Procurement: Critical Elements

    • Necessary Purchases

    • Competition

    • Conflict of Interest

    • Written Procedures

    • Competitive vs. Noncompetitive Contracts

    • Awarding

    9/12/2008

    Page 46


    Procurement critical elements1

    Procurement: Critical Elements

    • Suspension/Debarment

    • Contract Administration

    • Documentation

    • Inventory Management

    • Tracking of Equipment & Supplies – Retention & Disposal

    • Internal Control(s)

    9/12/2008

    Page 47


    Procurement faqs

    Procurement: FAQs

    • What is the difference between competitive and noncompetitive bidding?

    • What is a small purchase threshold?

    9/12/2008

    Page 48


    Procurement faqs1

    Procurement: FAQs

    • What are allowable costs?

    • What are potential conflicts of interest?

    • What are Standards of Conduct?

    9/12/2008

    Page 49


    Procurement other resources

    Procurement: Other Resources

    • Excluded Parties List System (suspension and debarment): https://www.epls.gov

    • EDGAR §80 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments

    9/12/2008

    Page 50


    Procurement more information

    Procurement: More Information

    • Contacts

      • MDE: Specific Program Office

      • ISD:

    9/12/2008

    Page 51


    Financial management procurement

    LEA Fiscal

    Review Tool


    Lea fiscal review tool

    LEA Fiscal Review Tool

    • Developed by MDE staff responsible for federal and state fund management

    • Lists major elements reviewed during an audit performed by MDE state auditors


    Lea fiscal review tool1

    LEA Fiscal Review Tool

    • Lists all items contained within the FMS Self-Assessment Survey and reflected in the Professional Development modules

    • Purpose

      • To assist an LEA in the development of its own plan for improvement of its FMS


    Financial management procurement

    Resources


    Resources

    Resources

    All resources identified in this Professional Development module are available on:

    Michigan LearnPort

    www.learnport.org

    Collaboration Center

    Community Room

    LEA Financial Management Resources


    Financial management procurement

    Committee

    Membership


    Mde maisa monitoring and compliance committee

    MDE/MAISA Monitoring and Compliance Committee

    • Becky Rocho, Calhoun ISD, (269) 781-5141 [email protected]

    • Patty Cantú, MDE, Office of Career and Technical Education, (517) 373-3373

      [email protected]

    • Mary Ann Chartrand, MDE, Grants Coordination and School Support, (517) 373-8862

      [email protected]

    • Terri Lynn Giannola, MDE, Office of Career and Technical Education, (517) 373-4670 [email protected]


    Procurement subcommittee

    Procurement Subcommittee

    • Tom Bean, ISD ChairCalhoun ISD

      (269)789-2476; [email protected]

    • Dan Hanrahan – MDE ChairMDE – State Aid and School Finance

      (517) 335-0521; [email protected]

    • Gus BishopCharlevoix-Emmet Intermediate School District

      (231) 547-9947; [email protected]

    • Steve EzikianWayne RESA

      (734) 334-1451; [email protected]

    • Cheryl SchubelMDE- Grants Coordination and School Support

      (517) 241-2597; [email protected]


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