BLUEFIELD STATE COLLEGE - wvhepc.org

BLUEFIELD STATE COLLEGE

PURCHASING PERFORMANCE AND COMPLIANCE AUDIT

YEAR ENDED JUNE 30, 2004

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Description of Agency The Organization’s legal name is Bluefield State College (College). The College is a governmental entity that is part of the West Virginia Higher Education Fund, which is a component unit of the State of West Virginia. The College is composed of 5 schools and colleges, including the Schools of Arts and Sciences, Business, Engineering Technology and Computer Science, Professional Studies, and the New River Community & Technical College. The College campus is located in Bluefield, West Virginia. The College is governed by the Bluefield State College Institutional Board of Governors as established by Senate Bill 653 in West Virginia State Code Section 18B-2A-1. Senate Bill 653 was enacted by the West Virginia Legislature on March 19, 2000 and restructured public higher education in West Virginia. Effective July 1, 2001, certain powers were transferred to the Governing Board of each of the institutions of higher education in the West Virginia system. These powers and duties include, but are not limited to: the power to determine, control, supervise, and manage the financial, business and educational policies and affairs of the institution under its jurisdiction; the duty to develop a master plan for the institution; the power to prescribe the specific functions and institution’s budget request; the duty to review at least every five years all academic programs offered at the institution; and the power to fix tuition and other fees for the different classes or categories of students enrolled at its institution. Senate Bill 653 also created the West Virginia Higher Education Policy Commission (the Commission), which is responsible for developing, gaining consensus around and overseeing the implementation and development of a higher education public policy agenda. Senate Bill 448 enacted by the West Virginia Legislature in 2004 created the West Virginia Council for Community and Technical College Education (the Council), a peer governance board to the Commission. The Council has jurisdiction over all community and technical colleges in the state. The Council assumed all of the responsibilities previously held by the Commission with respect to the community and technical college. Senate Bill 448 requires the Commission and Council to jointly adopt rules governing and controlling acquisitions and purchases for the Commission, Council, and Governing Boards. The College is a state-supported interactive college located in Bluefield, West Virginia offering two-year and four-year undergraduate programs as well as certificate degrees. Students can choose from 18 associate programs and 15 baccalaureate programs, including a Regents Bachelor of Arts program. The enrollment at the College is approximately 2,935. The College is accredited by the Higher Learning Commission and is a member of the North Central Association of Colleges and Schools. The facility also has accreditations from various other boards and associations for specific disciplines, including the Technology Accreditation Commission of the Accreditation Board for Engineering and Technology, the National League for Nursing Accreditation Commission, the Commission on Collegiate Nursing Education, the National Council for the Accreditation of Teacher Education, the Joint Review Committee on Education in Radiologic Technology, and the Association of Collegiate Business Schools and Programs. Bluefield is a member of the National Collegiate Athletic Association (NCAA) Division II and participates in the West Virginia Intercollegiate Athletic Conference.

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PROCUREMENT COMPLIANCE AND INTERNAL CONTROL Audit Methodology To satisfy the procurement compliance and internal control objective noted above, we performed the following procedures: 1. Chief Procurement Officer (CPO) Designation

Procedure - Reviewed the CPO designation made by the institution of higher education president and evaluated whether the designation was filed with the Vice Chancellor for Administration, State Auditor, and the Attorney General.

Results - No relevant exceptions noted.

2. CPO Responsibilities

Procedure - Reviewed the responsibilities that the CPO was performing to evaluate compliance with the responsibilities and duties as defined in the West Virginia Higher Education Purchasing Procedures Manual.

Results - One item noted, see 2004-01.

3. Appointment of Buyers

Procedure - Obtained a listing of Buyers appointed by the CPO and reviewed the designation to ensure that it was made in writing and filed with the Vice Chancellor for Administration, State Auditor, and the Attorney General.


4. Review of Buyer’s Credentials

Procedure - Reviewed the personnel file for all Buyers appointed to determine at a minimum either; (a) the Buyer was a graduate of an accredited college or university; or (b) the Buyer has at least four year’s experience in purchasing for any unit of government or any business, commercial or industrial enterprise.


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5. Insurance Bond

Procedure - Obtained the institution of higher education insurance coverage to evaluate that bond coverage was executed for all Buyers and CPO’s appointed.


6. Review of Authority Revocations

Procedure - Obtained a listing of delegated authority revoked by the CPO and reviewed the written notification made to the Vice Chancellor for Administration, State Auditor, and the Attorney General.


7. Review of Procedures for Purchases Not Exceeding $5,000

Procedure - Obtained a copy of the institution of higher education guidelines and procedures established by the CPO for purchases not exceeding $5,000 and determined whether the procedures and any modifications had been filed with the Vice Chancellor for Administration.


8. Test Selected Procurement Transactions Not Exceeding $5,000

Procedure - Reviewed 10 procurement transactions under the $5,000 limit to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code.

Results - Three items noted, see 2004-02.

9. Test Selected Procurement Transactions Exceeding $5,000 But Not Exceeding $25,000

Procedure - Reviewed 10 procurement transactions between $5,001 and $25,000 to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code.

Results - Ten items noted, see 2004-03 and 2004-04.

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10. Test Selected Procurement Transactions Exceeding $25,000

Procedure - Reviewed 5 procurement transactions greater than $25,000 to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code.


11. Test Selected Procurement Transactions Exceeding $15,000

Procedure - Reviewed 7 procurement transactions greater than $15,000 to evaluate compliance with the Attorney General and State Auditor’s Office requirements.


12. Test Selected Special Procurement Transactions

Procedure - Reviewed 5 special procurement transactions which are defined as sole/single source procurement contracts, emergency contracts, motor vehicle contracts, open-end contracts, and professional service contracts to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of the West Virginia State Code.

Results - Three items noted, see 2004-05 and 2004-06.

13. Test for Potential Stringing

Procedure - Utilizing data extraction software, reviewed all purchase orders issued during the fiscal year ended June 30, 2004 for potential stringing.


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14. Test Selected Complaints, Protests, and Reconsiderations

Procedure - Reviewed for complaints, protests, and reconsiderations filed during the period of review to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code.

Results - There were no complaints, protests, or reconsiderations filed during the period

of review. 15. Test Selected Vendor Suspensions

Procedure - Reviewed for vendors suspended during the period of review to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code.

Results - There were no vendors suspended during the period of review.

16. Review Receiving and Inventory Procedures

Procedure - Obtained a copy of the institution of higher education guidelines and procedures for receiving and distributing materials, supplies, equipment, services, and printing to departments and offices, and reviewed the procedures to evaluate compliance with the West Virginia Higher Education Purchasing Procedures Manual and the applicable sections of West Virginia State Code.


17. Review Inventory Dispositions

Procedure - Reviewed dispositions of surplus equipment, supplies, and materials to evaluate compliance with the institution of higher education’s internal control policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and the applicable sections of West Virginia State Code.


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18. Review Prompt Payment Act Procedures

Procedure - Obtained a copy of the institution of higher education guidelines and procedures for administering the requirements of the West Virginia State Code Prompt Payment Act to evaluate compliance with the West Virginia Higher Education Purchasing Procedures Manual and the applicable sections of West Virginia State Code.


19. Review Selected Transactions for Compliance with Prompt Payment Act

Procedure - Reviewed 20 invoices paid during the period of review to evaluate compliance with the requirements of the West Virginia State Code Prompt Payment Act.

Results - Seventeen items noted, see 2004-07.

20. Review Annual Report to Vice Chancellor

Procedure - Reviewed the annual prescribed report submitted to the Vice Chancellor for Administration and subsequently to the Finance Committees of the House of Delegates and the Senate to evaluate compliance with the requirements of the filing.


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2004-01 Procurement - Chief Procurement Officer Criteria: Section 1.4.4.1 of the West Virginia Higher Education Purchasing

Procedures Manual states: “Unless otherwise stated in writing by the President, the Chief Procurement Officer shall have full authority to act as the designee of the president for the purchase and acquisition of all materials, supplies, equipment, services, and printing; leases and lease-purchases, receiving and inventory management; and for disposal of surplus, obsolete and unusable materials, supplies, and equipment as may be required by the institution.” Section 1.4.5.1 further states: “To assist the Chief Procurement Officer in performing his or her duties and obligations, the Chief Procurement Officer may appoint Buyers and delegate authority to them as designees, or may delegate such authority to any department within an institution.” Further, Section 6.1.1 states that contracts “shall be signed in the name of the institution by the institution’s Chief Procurement Officer or by another person in the employ of the institution who is lawfully authorized to sign contracts and has signature authority for the institution.”

Condition: Upper management of the College does not permit the Chief Procurement

Officer to use his signature authority to approve purchase orders and contracts. Instead, the Vice President for Financial and Administrative Affairs approves and signs all purchase orders and contracts.

Context: The Chief Procurement Officer currently processes all of the paperwork for

purchase orders and contracts for the College. Once he has completed the paperwork, it is forwarded to his direct supervisor, the Vice President for Financial and Administrative Affairs, for approval. Discussions with the Vice President for Financial and Administrative Affairs indicated that she does not believe that the Chief Procurement Officer designation form grants the Chief Procurement Officer signature authority. Further, discussions with the President indicated that the Vice President for Financial and Administrative Affairs is responsible for the procurement of goods and services for the College, not the Chief Procurement Officer.

Effect: The Chief Procurement Officer designation forms appear to name the wrong

individual as Chief Procurement Officer. Cause: The President or the Vice President for Financial and Administrative Affairs

approves all purchase orders and contracts on behalf of the College, not the Chief Procurement Officer.

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2004-01 Procurement - Chief Procurement Officer (Continued) Recommendation: We recommend that the College review this structure and the related rules

and regulations related to the responsibilities of the various designees to determine if changes need to be made to the individuals’ designated in the procurement process.

Agency’s Comments /Corrective Action:

The requirements and processes have been reviewed. Filing of new signature cards is taking place. This issue is a question of internal controls and segregation of duties. No one individual should have the authority to insure all policies and procedures are followed; to prepare, process and execute a financial transaction; and approve and commit institutional funds for this transaction without review from someone else.

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2004-02 Procurement - Lack of Quotations Criteria: Section 2.2 of the Bluefield State College Purchasing Procedures Manual

states that for purchases greater than $1,000 but not exceeding $5,000: “Informal quotes (phone or fax) are required for competitive purchases greater than $1,000.”

Condition: For three of the ten purchase orders tested for purchases of $5,000 or under,

informal quotes were not obtained before the purchase. Context: The total amount of the three purchase orders was $8,918. The total amount

of the ten purchase orders tested was $15,614. The total number and amount of purchase orders processed during the year was 1,371 for approximately $3,600,000. Total non-payroll expenditures for the fiscal year ending June 30, 2004 were approximately $7,800,000.

Effect: The College is not in compliance with the Bluefield State College

Purchasing Procedures Manual section referenced above. Cause: Per management, the institutional procedure requiring quotes for purchases

greater than $1,000 was waived for the purchases noted. However, no documentation of this waiver was maintained in the file.

Recommendation: We recommend that the College abide by the institutional purchasing

policies and procedures noted in the Bluefield State College Purchasing Procedures Manual. We further recommend that the College consider raising the threshold for informal quotations to $5,000, the threshold allowed under the West Virginia Higher Education Purchasing Procedures Manual.


Documentation of waived bidding limits will be attached to all effected orders. The threshold for bidding has been raised to $5,000.

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2004-03 Procurement - Quotations for Purchases Between $5,000 and $25,000 Criteria: Section 5.3.1 of the West Virginia Higher Education Purchasing Procedures

Manual states that, “Insofar as practical for purchases in this category, no less than three qualified vendors shall be solicited to submit written quotations, or oral quotations that are recorded by the Chief Procurement Officer or designee and placed in the procurement file.”

Condition: For three of the ten purchase orders tested between $5,000 and $25,000, we

found that only two written or oral quotations were maintained in the procurement file.

Context: The total amount of the transactions was $19,347. The total amount of the

purchase orders tested was $105,959. The total number of purchase orders issued during the fiscal year ended June 30, 2004 was 1,371 in the amount of approximately $3,600,000. The total non-payroll related expenditures for the fiscal year ended June 30, 2004 were approximately $7,800,000.

Effect: The College was not in compliance with the section of the West Virginia

Higher Education Purchasing Procedures Manual referenced above. Cause: Per management, only documentation of the responses received from bidders

were maintained in the procurement file. Documentation of the request for bids for any vendors whom did not respond was not retained.

Recommendation: We recommend that the College obtain three competitive quotations for all

purchase orders between $5,000 and $25,000 in accordance with the West Virginia Higher Education Purchasing Procedures Manual. We further recommend that the College retain documentation of all vendors solicited in the event that three quotations are not received.


In review it was determined that in each case an attempt was made to get bids from three or more vendors. The list of non responsive vendors was not properly documented and attached. This has been corrected by further review by Purchasing staff.

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2004-04 Procurement - Purchasing File Documentation Criteria: Section 5.3.2 of the West Virginia Higher Education Purchasing Procedures

Manual states that for purchases greater than $5,000 but not exceeding $25,000, “The procurement file for purchases in this category, at a minimum, shall contain the following:...The name and title of the individual quoting the price;”.

Condition: For seven of the ten purchase orders tested, the procurement file did not

contain the title of the individual quoting the price. Context: The total amount of the purchase orders was $60,311. The total amount of

the purchase orders tested was $105,959. Total purchase orders processed during the year were 1,371 for approximately $3,600,000. The total non-payroll expenditures for the fiscal year ended June 30, 2004 were approximately $7,800,000.

Effect: The College is not in compliance with the West Virginia Higher Education

Purchasing Procedures Manual section referenced above. Cause: The College did not retain a record of the title of the individual who quoted

the price. Recommendation: We recommend that the College ensure that the title of the individual

quoting the price for a purchase order be properly documented and retained in the procurement file.


The listing of the title of bidders was an oversight. All bids that are received that do not have the bidders name and title listed will be rejected to the department.

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2004-05 Procurement - Sole Source Purchase Order Criteria: Section 5.29.2 of the West Virginia Higher Education Purchasing Procedures

Manual states that: “The determination as to whether procurement shall be made as a sole/single source shall be made by the Chief Procurement Officer. Such determination and the basis therefore shall be in writing.”

Condition: For two of the two sole source contracts and change order awards tested, the

purchase file did not contain written documentation of the sole source determination and basis.

Context: The total amount of the purchase orders was $26,136. The total number of

sole source purchase orders issued was 10, in the amount of approximately $298,000. The total amount tested was $26,136. Total purchase orders processed during the year was 1,371 for approximately $3,600,000. Total non-payroll expenditures for the year were approximately $7,800,000.

Effect: The College is not in compliance with the West Virginia Higher Education

Purchasing Procedures Manual section referenced above. Cause: The College did not file written documentation for the reason the vendor was

awarded a contract as a sole source purchase order in the purchasing file. Recommendation: We recommend that the College ensure that all future sole source purchases

contain a written determination for the basis of the vendor as sole source in the purchase file in accordance with the West Virginia Higher Education Purchasing Procedures Manual.


All sole source documentation will be attached and signed off by the Director of Purchasing and/or the Vice-President of Financial and Administrative Affairs. A new form has been created to resolve this issue.

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2004-06 Procurement - Advertising Expressions of Interest Criteria: West Virginia State Code §5G-1-3 states that in the procurement of

architectural and engineering services, “all such jobs shall be announced by public notice published as a Class II legal advertisement.” §59-3-2 of the West Virginia State Code states: “A Class II legal advertisement shall be published once a week for two successive weeks.” §59-3-1 further states: “Once a week for two successive weeks’ means two publications of a legal advertisement in a qualified newspaper occurring within a period of fourteen consecutive days with at least an interval of six full days within the period between the date of the first publication and the date of the second publication.”

Condition: For the one architect purchase order tested, the College did not place the two

advertisements for expressions of interest in qualified newspapers at least six days apart during consecutive weeks. Instead, the advertisements ran on two consecutive days.

Context: The purchase order tested was the only architecture contract issued during

the fiscal year and is an open-end contract with an initial encumbrance of $50,000. The total number and amount of purchase orders processed during the year was 1,371 for approximately $3,600,000. Total non-payroll expenditures for the fiscal year ending June 30, 2004 were approximately $7,800,000.

Effect: The College was not in compliance with the section of the West Virginia

Code referenced above. Cause: Management indicated that they were unaware of the specific advertisement

requirements for expressions of interest for architecture contracts. Recommendation: We recommend that the College ensure all future advertisements for

expressions of interest for architectural contracts are announced by public notice published in accordance with West Virginia State Code.


Prior to the audit this issue was detected and corrected for future contracts.

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2004-07 Procurement - Prompt Payment of Vendors Criteria: Section 11.2.2 of the West Virginia Higher Education Purchasing Procedures

Manual states in part that: “An institution receiving a legitimate uncontested invoice shall process the invoice within ten working days from its receipt.” Furthermore, Section 11.2.6 states that: “When material, supplies, equipment, and printing are delivered to a receiving department or location, receipt of the goods shall be reported to the accounts payable function. In all other instances, the accounts payable function shall obtain a written or electronic certification of receipt from the receiver in the department receiving the goods or services.” Section 11.3.2a states that: “The accounts payable function should indicate the date of receipt of the goods or services in a prominent place on the face of the original invoice.” And finally, Section 11.3.2b states that: “All invoices should be date stamped upon receipt.”

Condition: During our review of the prompt payment transactions tested, we noted the

following:

• For one of the twenty transactions tested, a receiving report was not obtained from the department receiving the goods or services.

• For three of the twenty transactions tested, the receipt of goods or

services was not indicated on the face of the original invoice.

• For one of the twenty transactions tested, the receipt of goods or services was not indicated on the face of the original invoice and a receiving report was not obtained from the department receiving the goods or services.

• For one of the twenty transactions tested, the receipt of goods or

services was not indicated on the face of the original invoices and the invoice was not date stamped upon receipt.

• For five of the twenty transactions tested, the legitimate uncontested

invoices were not processed with 10 days of receipt. • For one of the twenty transactions tested, the receipt of goods or

services was not indicated on the face of the original invoice, the legitimate uncontested invoice was not processed within 10 days of receipt, and a receiving report was not obtained from the department receiving the goods or services.

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2004-07 Procurement - Prompt Payment of Vendors (Continued) Condition: • For one of the twenty transactions tested, the receipt of goods or

services was not indicated on the face of the original invoice, the invoice was not date stamped upon receipt, and the legitimate uncontested invoice was not processed within 10 days of receipt.

• For two of the twenty transactions tested, the receipt of goods or

services was not indicated on the face of the original invoice and the legitimate uncontested invoice was not processed within 10 days of receipt.

• For one of the twenty transactions tested, the invoice was not date

stamped upon receipt, the legitimate uncontested invoice was not processed within 10 days of receipt, and receiving report was not obtained from the department receiving the goods or services.

• For one of the twenty transactions tested, the invoice was not date

stamped upon receipt and the legitimate uncontested invoice was not processed within 10 days of receipt.

Context: The total amount of the invoices for the instances noted above was $8,363.

The total amount tested was approximately $10,900. The total number of vendor payments processed during the fiscal year ended June 30, 2004 was approximately 7,000 in the amount of approximately $7,800,000.

Effect: In these instances, the College is not in compliance with the section of the

West Virginia Higher Education Purchasing Procedures Manual referenced above. However, the West Virginia State Auditor’s Office does not require the indication of the receipt of goods or services on the face of the original invoice. Therefore, in those instances, the College was in compliance with the West Virginia State Auditor’s Office requirements.

Cause: Management indicated that some vendors erroneously mailed invoices

directly to the departments instead of to the accounts payable office.

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2004-07 Procurement - Prompt Payment of Vendors (Continued) Recommendation: We recommend that the College ensure that all invoices not requiring a

receiving report be approved for payment by someone with first-hand knowledge of the receipt of the services. This first-hand knowledge may rest at the user department level. We further recommend that the College ensure that all uncontested vendor invoices are paid within ten working days and that receiving reports are prepared when goods or services are received. Furthermore, we recommend that all invoices be date stamped on the face of the invoice when received and that the College’s policies and procedures be updated to ensure the prompt payment of vendor invoices.


The college will adhere to the recommendations and ensure receiving reports are prepared, invoices will be date stamped, and will make every effort to ensure the prompt payment of vendor invoices. With a limited financial staff and occasionally time off utilized, processing payments within 10 work days sometime is difficult, almost impossible, especially with 7,000 annual transactions, and the additional requirements imposed in recent years by legislation. Every effort will be made to process all payments within the reasonable time frame. Also, reporting of payments in process will be adhered to by Accounts Payable staff to the departments at Bluefield State College and New River Community and Technical College.

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PURCHASING CARD COMPLIANCE AND INTERNAL CONTROL To satisfy the purchasing card objective noted above, we performed the following procedures: 1. Review Purchasing Card Policies and Procedures

Procedure - Obtained and reviewed the institution of higher education’s purchasing card program’s policies and procedures and obtained an understanding of the internal controls over the purchasing card program during the period of our review.


2. Review Prior Purchasing Card Audits

Procedure - Obtained a copy of the State Auditor’s Office purchasing card audit conducted during the period of our review and noted any items of audit significance.

Results - There were no State Auditor’s Office purchasing card audits conducted during

the period. 3. Test Selected Cardholders

Procedure - Obtained a detail listing of the institution of higher education cardholders, transaction limits, and transactions for the period, and tested 5 cardholders to evaluate whether the cardholder was eligible to be assigned a purchasing card, whether transaction limits assigned to each cardholder were adhered to for individual transactions, and whether a cardholder agreement was signed and on file at the institution of higher education.


4. Test for Potential Stringing

Procedure - Utilizing data extraction software, reviewed all purchases made with purchasing card during the fiscal year ended June 30, 2004 for potential stringing.


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5. Test Selected Purchasing Card Transactions

Procedure - Reviewed 20 purchasing card transactions to evaluate compliance with the institution’s internal control policies and procedures, State Auditor’s Office Purchasing Card Policies and Procedures, and the applicable sections of the West Virginia Code.


6. Test Purchasing Card Transactions for Utilities

Procedure - Obtained a detail listing of purchasing card transactions issued for payment of utilities and scanned the detail to note whether any unusual or non-utility related purchases were made.

Results - A utility card is not utilized at the institution.

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2004-08 Purchasing Card - Defaulted Items/Lack of Policies and Procedures Criteria: Section 7.0 of the West Virginia State Auditor’s Office Purchasing Card

Policies and Procedures states in part that: “Documentation must be obtained for each transaction placed on the purchasing card and must be available upon request by the Purchasing Card Program. Documentation will include itemized receipts, log sheet, individual statements, and any other documentation required by Purchasing Card Policies and Procedures or other purchasing guidelines.” Furthermore, management is responsible for establishing an internal control structure which ensures adequate documentation exists to support transactions.

Condition: Defaulted items are transactions for which the cardholder has not remitted

the proper documentation to the purchasing card coordinator for final approval of the transaction. Management did not have policies and procedures in place during the fiscal year to follow-up, resolve and/or seek disciplinary action for cardholders in noncompliance.

Context: The total defaulted items for the fiscal year ended June 30, 2004 was

unknown. Total expenditures utilizing the purchasing card for the fiscal year ended June 30, 2004 were approximately $876,000

Effect: Policies and procedures did not exist during the fiscal year to follow-up and

resolve noncompliance with the purchasing card program. Cause: The College did not have policies and procedures in place during the fiscal

year to follow-up, resolve and/or seek disciplinary action for cardholders in noncompliance.

Recommendation: We recommend that the College establish written policies and procedures to

follow-up and resolve any potential noncompliance in the purchasing card program.


The PCard non-compliance penalties have been revised and distributed to cardholders. The process to monitor the problems has been reviewed and corrected to resolve this issue.

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2004-09 Purchasing Card - Potential Stringing Criteria: Section 6.1 of the West Virginia State Auditor’s Office Purchasing Card

Policies and Procedures states in part that: “The purchasing card may be used to make payments for goods and designated services that do not exceed the current transaction limit.” Furthermore, Section 6.3 of the West Virginia State Auditor’s Office Purchasing Card Policies and Procedures defines stringing as, “The intentional manipulation of the ordering, billing, or payment process in order to circumvent the transaction limit.”

Condition: Utilizing data extraction software, we reviewed all purchases during the

fiscal year ended June 30, 2004 and noted one instance of multiple purchases made on the same day, with the same vendor, by the same cardholder which appeared to allow the purchase to not exceed the cardholder’s credit transaction limit. This instance was also identified during the internal review performed by management.

Context: The total number of identified potential stringing instances was one out of

4,450 purchasing card transactions for the fiscal year ended June 30, 2004. The purchases with the vendor totaled $2,250, while the cardholder’s individual transaction limit was $2,000. The total number of purchasing card payments processed for the fiscal year ended June 30, 2004 was approximately $875,600. The total non-payroll related expenditures for the fiscal year ended June 30, 2004 were approximately $7,800,000.

Effect: Cardholders may be splitting transactions to bypass the credit transaction

limit and internal control structure established by the College. Cause: Cardholder credit transaction limits may not be sufficient to carry out the

day-to-day purchases necessary for the cardholder. Recommendation: With the revision of the credit transaction limits by the West Virginia State

Auditor’s Office, we recommend that the College review the assigned credit transaction limits for reasonableness. Furthermore, periodic reviews should be conducted to determine the reasonableness of the credit transaction limits and to determine if cardholders are abusing the established limits.


The Pcard Coordinator is currently reviewing the PCard limits and adjusting the limits as needed. In the case listed above there was a misunderstanding of the limits by the cardholder; therefore, the cardholder was retrained. The PCard Coordinator now has access to do stringing test and will do so.

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PERFORMANCE AUDIT To satisfy the performance audit objective noted above, we performed the following procedures: 1. Compare Procedures to Identified Best Practices

Procedures - Obtained and reviewed the purchasing procedures of the institution of higher education and compared these procedures to other institutions of higher education in West Virginia and best practice procedures as defined by the National Association of Educational Buyers, Center for Advanced Purchasing Services, and the National Institute of Governmental Purchasing, Inc.

Results - Three items noted, see 2004-10 through 2004-12.

2. Compare Staffing Levels to Benchmarks

Procedures - Reviewed the staffing levels and other key benchmarks for the purchasing program at the institution of higher education and compared these benchmarks to other institutions of higher education in West Virginia and information available from the Center for Advanced Purchasing Services.

Results - Two items noted, see 2004-13 and 2004-14.

3. Review Procedures for Efficiency and Accountability

Procedures - Reviewed the purchasing function processes and procedures to make recommendations regarding potential improvements in efficiency and accountability at the institution of higher education level and at the system-wide level.

Results - Six items noted, see 2004-10, 2004-11, and 2004-15 through 2004-18.

4. Review for Factors Inhibiting Performance

Procedures - Reviewed the purchasing function processes and procedures to identify factors that may inhibit satisfactory performance of the purchasing program.

Results - Two items noted, see 2004-16 and 2004-18.

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5. Review Procedures, Laws, and Regulations to Identify Additional Flexibility

Procedures - Reviewed the purchasing function policies and procedures, the West Virginia Higher Education Purchasing Procedures Manual, and West Virginia State Code, to identify additional flexibility in purchasing rules, policies, procedures and state law that could potentially improve efficiency and execution of the purchasing program.

Results - No relevant items noted.

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2004-10 Purchasing Card - Alternate Information System Benchmark/Criteria Section 8.1 of the West Virginia State Auditor’s Office Purchasing Card

Policies and Procedures Manual states that: “The agency card coordinator is responsible for reconciling the master statement.” Further, Section 8.3 states that: “Pathway Net is a web-based software program designed to facilitate and automate the process of reviewing, editing, and accounting for all Pcard transactions.”

Condition: Currently, the College utilizes Microsoft Excel for their purchasing card

reconciliation process. While this software accomplishes the reconciliation process, there may be more effective software that would permit daily reconciliation and auditing of the purchasing card transactions.

Context: According to information provided by the West Virginia State Auditor’s

Office Purchasing Card Program Administrator, the Pathways software utilized by West Virginia University provides for a more efficient daily reconciliation and auditing of the purchasing card transactions.

Effect: Utilizing a more efficient software and more enhanced technology could

result in a more efficient and timely purchasing card reconciliation and review by the College.

Cause: The College currently utilizes Microsoft Excel software program for

reconciliations. Recommendation: Given the volume of purchasing card transactions and the current

reconcilement process in place, we recommend that the College implement the use of Pathways for purchasing card reconciliation once the interface between Banner and Pathways is completed.

Agency’s Comments:

The college is currently signed up for Pathways Net when it becomes available. When software and staffing is available we will look at implementing the program if there would be a savings via personnel time or other funds.

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2004-11 Procurement - Central Website Benchmark/Criteria West Virginia State Code Section 18B-5-9(3)(f) states: “Each institution

shall establish a consortium with at least one institution in the most cost-efficient manner feasible, to consolidate the following operations and student services:…(7) Any other operation or service appropriate for consolidation as determined by the commission.”

Condition/Context: Currently, the various institutions of higher education maintain individual

websites with a variety of information related to the procurement process. Information that varies by website includes purchasing policies and procedures, current contracts available, statewide contracts available, resource links to additional purchasing resources, etc. The total cost and time of maintaining each individual website is currently not available.

Recommendation: The establishment of a central website could enhance the procurement

process users’ ability to access procurement related information at one location. Furthermore, centralizing the maintenance of the majority of the website content will reduce time and effort as duplicated processes will be minimized. In addition, more current and up-to-date information can be made available in a timely manner. We recommend that the institutions of higher education work with the central office and consider establishing one centralized website for all higher education procurement functions in the State. At a minimum, the website should include the procurement policies and procedures, standardized forms, statewide contracts available, higher education contracts available, and links to additional resources. In addition, the website could be utilized to post bid notices and awards which could reduce the time and cost of mailing information to potential users. Further, if established, this website should be maintained daily and all users of the procurement function should be informed of the benefits and how to use the site.


Bluefield State College currently collaborates with Concord University on many issues. In addition, New River Community and Technical College is required, by SB448 to be administratively linked with Bluefield State College. This requires both institutions to work together on many, many common responsibilities. The Purchasing Office of Bluefield State College has also been in contact with the Higher Education Policy Commission staff in consideration of a centralized website.

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2004-12 Performance - Internet Surplus Auctions Benchmark/Criteria Section 10.1 of the West Virginia Higher Education Purchasing Procedures

Manual establishes the policies and procedures as prescribed by West Virginia State Code Section 18B-5-7. Specifically Section 18B-5-7(a) states: “(a) The commission and the governing boards shall dispose of obsolete and unusable equipment, surplus supplies and other unneeded materials, either by transfer to other government agencies or institutions, by exchange or trade, or by sale as junk or otherwise.”

Condition/Context: Currently, most surplus property is disposed of either through landfill, a

public auction and/or through the State of West Virginia Surplus Property Division. The College should consider using alternatives such as internet auctions for certain types of disposals.

Recommendation: Data accumulated by the Center for Advanced Purchasing Studies indicates

that internet auctions for retail related items typically sell for higher dollars than other methods of disposals. Furthermore, various third-party companies can administer the internet auction such as U.S. General Services Administration, E-Bay, or Yahoo to name a few. We recommend that the College work with the central office and consider piloting an internet surplus auction.


Although we do not have the support staff to support such a program, the institution will discuss this issue with central office staff. We are also looking at an alternative method to advertise surplus such as to use the college publication of the Blue and Gold. Also, we are in discussions with Concord University to hold a joint auction of surplus property.

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2004-13 Procurement - Comparison to Benchmarks Benchmark/Criteria West Virginia State Code Section 18B-5-9(l)(1) requires that the

Commission, “conduct a performance audit of the policies, procedures and results of the procurement of goods and services by the state institutions of higher education.” A common useful component of a performance audit is the comparison of performance information to established industry benchmarks.

Condition/Context: We reviewed various industry benchmarks available, including information

provided by the Center for Advanced Purchasing Studies; however, none of the comparisons appear to provide useful information.

Cause: Due to the size of the institution of higher education being reviewed and the

data accumulated, the benchmarking comparisons were not considered useful.

Recommendation: We recommend that the institution of higher education work with the central

office in an effort to develop benchmarks for institutions of higher education in West Virginia. Specifically, the benchmarks should include the average institution budget per professional purchasing employee, the average purchase dollars per professional purchasing employee, the total professional purchasing employee headcount as a percent of the total institution employee head count, the total institution purchase dollars as a percent of the total institution budget, and the average purchase order cycle time.


The institution has spoken to the central office regarding this issue and it is being worked on. The plan is to have all higher education institutions actively involved in this process.

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2004-14 Procurement - Training Hours and Budget Benchmark/Criteria The Center for Advanced Purchasing Studies (CAPS) data indicates that for

institutions of higher education, the average training hours per professional purchasing employee is 39 hours per year.

Condition: The average training hours per professional purchasing employee was

greater than the benchmark established by CAPS. Context: During fiscal year 2004, the Chief Procurement Officer received 55 hours of

procurement training. This individual is responsible for oversight of procurement purchases of approximately $3,600,000.

Recommendation: Correctly administered training of professional procurement employees is an

investment in the future of the procurement department. Properly trained employees are often more aware of current policies and procedures, more efficient in their day-to-day responsibilities, are more aware of current technology enhancements in the procurement process, and may generate additional efficiencies and quality enhancements to the overall procurement process. We recommend that the College continue to provide training for all professional procurement employees.


The Purchasing Office will continue to attend as much training as possible. The institution provides funds through development for such training.

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2004-15 Procurement - Performance Measures Benchmark/Criteria West Virginia State Code Section 18B-5-9(l)(1) requires that the

Commission, “conduct a performance audit of the policies, procedures and results of the procurement of goods and services by the state institutions of higher education.”

Condition: Currently, the College does not accumulate certain data for measuring the

performance of the purchasing process. Some information that could be maintained and tracked include, but is not limited to:

• Average purchase order processing time • Average change order processing time • Total purchasing dollars per employee • Average purchase cycle time • Average training hours per professional purchasing employee • Total purchase orders processed (by type) per employee

Context: Performance measures, when properly developed and maintained, can

strengthen the employee evaluation process, increase efficiency and effectiveness, and provide the College with a useful management tool.

Effect: By monitoring purchasing performance, trends could be identified that could

improve the effectiveness of the purchasing function. Cause: Information necessary to monitor the performance measures is not readily

available and may not be tracked in the current information systems. Recommendation: We recommend that the College develop policies and procedures for

developing and tracking at a minimum the various performance measurements identified above.


The Purchasing Office currently maintains an Excel database that shows when an order is sent to accounting and when it’s returned from the Vice President of Financial and Administrative Affairs, but there is not a current template or personnel available to track the balance of information. We are currently working on a method to allow departments to access data via Banner Finance, and also input the departmental purchase order in their office, as well as electronic approvals. This process will begin piloting in April and will allow all users better access to their data.

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2004-16 Procurement - Electronic Requisitions Benchmark/Criteria Section 3.5.2 of the West Virginia Higher Education Purchasing Procedures

Manual states: “When a need develops to purchase goods or services, a requisition should be prepared and forwarded to the institution’s Purchasing Department with the required approval of the originating department.”

Condition: Currently, the College prepares manual requisitions and does not utilize the

electronic requisition capabilities of the Banner information system. Context: The Banner information system has a module that can create electronic

requisitions; however, the College does not utilize that module. Instead, the user departments prepare manual requisitions, forward the information to the Purchasing Office and the Purchasing Office creates purchase orders in the Banner information system.

Effect: Utilizing electronic requisitions would provide greater efficiency in the

preparation of purchase orders. Cause: When the College implemented Banner, the College chose to not implement

all modules at once. Instead, they chose to implement one module at a time to enhance the transition to the Banner information system. In addition, training the user departments on entering the information directly into Banner would require a large commitment of time and personnel.

Recommendation: Given the greater efficiency that could be achieved by using the electronic

requisition module of Banner, we recommend that the College implement this module. We also recommend that the College provide sufficient training to the user departments to ensure that the implementation proceeds smoothly.


We are currently working to implement Banner requisition which would allow also for electronic approval. Banner support staff is limited; therefore we are proceeding with caution in the training/transition phase. This will begin in April.

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2004-17 Inventory Threshold Benchmark/Criteria Section 9.2.3(a) of the West Virginia Higher Education Purchasing

Procedures Manual states in part that the Chief Procurement Officer shall: “Account for all equipment and furnishings with a value at the time of purchase of $5,000 or more per unit. An institution may elect to inventory equipment and furnishings with a value of less than $5,000 per unit.”

Condition: Currently, the College utilizes a $1,000 inventory threshold to account for

inventory purchased. Context: The College’s net capital assets reported on the audited financial statements

for the year ended June 30, 2004 was approximately $13,200,000. Total assets reported as of June 30, 2004 was approximately $22,300,000.

Effect: The College may be utilizing a threshold that is smaller than necessary, thus

requiring additional administrative work with little benefit. Cause: Management has not increased the inventory threshold to the maximum

allowed per the West Virginia Higher Education Purchasing and Procedures Manual.

Recommendation: We recommend that the College review the current inventory threshold

utilized and evaluate the cost/benefit of increasing the threshold. Agency’s Comments:

The college for fiscal year 2005 has changed the threshold to $5,000.

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2004-18 Purchasing Card - Utilization Benchmark/Criteria Section 1.2 of the West Virginia State Auditor’s Office Purchasing Card

Policies and Procedures Manual states that: “The purchasing card provides an opportunity to streamline procurement methods for small dollar transactions. The card effectively manages expenses and cuts program costs by offering agencies increased control and monitoring of payments while reducing the time and paperwork associated with the use of purchase orders.”

Condition: The College does not have procedures in place to ensure that purchasing

cards are utilized to the fullest extent. Context: According to information provided by the National Association of

Purchasing Card Professionals, the College could realize savings of approximately $101 per transaction by utilizing the purchasing card instead of the regular procurement and accounts payable process.

Effect: The College may have expended additional resources when a more efficient

method of purchasing was available. Cause: The purchasing card has not been fully utilized for allowable purchases and

small dollar transaction purchases. Recommendation: We recommend the College develop policies and procedures, and provide

additional training to purchasing cardholders in an effort to increase the utilization of the purchasing card. Furthermore, we recommend that the College develop a monitoring plan which includes the periodic monitoring of cardholder credit transaction limits and purchasing card utilization by card holders in an effort to monitor necessary changes that may need to be made to increase utilization of the purchasing card.


During the audit period there was only one person in the PCard/Purchasing Office permitted to review and maintain PCard accounts. We continue to reject purchase orders that can be put on Pcards. We are currently reviewing the card limits of the cardholders and adjusting it to allow more PCard use. The PCard Coordinator is planning in-house training sessions as well as using the online training that the State Auditor’s Office is going to add to the Web. When Pathways or other software is made available the other monitoring issues will be addressed.

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EXHIBIT A USER SURVEY RESULTS

Bluefield State College

Summary of Purchasing Performance Benchmarking Questionnaire Responses

Procedure - A total of 9 questionnaires were e-mailed to various departments with a response

rate of 4 or 44%. Each respondent was asked to rate the purchasing function within the College on the following criteria using a scale of 1 to 7 where 1 = poor or disagree strongly and 7 = excellent or agree strongly. Below is a summary of the average ratings received by criteria:

Questionnaire Response Summary Service How happy are you with the range of services provided

by your Purchasing Department? 6.00

How happy are you with the methods you can use to access these services? 5.00

Website Do you find the website helpful? N/A

Is the website easy to use? N/A

Do you find it useful for information on suppliers? N/A

Do you find it useful for information on products? N/A

Do you find it useful for general purchasing advice? N/A

Confidence Are you confident in the qualifications, knowledge, experience and abilities of Purchasing staff? 6.75

Responsiveness Do you believe Purchasing staff are aware of your needs? 6.00

Do you believe Purchasing staff respond to your needs in an acceptable timescale? 5.50

Do you believe Purchasing staff put themselves out to meet your requirements? 6.33

Would you like one of the Purchasing managers to contact you to discuss this or any other issues you have raised? 4 - No

Results - Responses appear to be favorable in all applicable areas.

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