Results in Brief

The purchasing component of the Integrated Financial System (IFS) contains a number of controls designed to ensure that purchasing transactions are properly recorded and executed. However, we identified areas where internal control weaknesses exist. For example, vendor payments could be better controlled, discounts are not always taken, and fixed asset codes need to be consistently entered. These weaknesses were caused, in part, because the Division’s policies and procedures for the online processing of purchasing transactions have not been fully developed. In addition, Purchasing staff must enter incorrect dates to process certain transactions. Further, transactions can be completed in one fiscal year, but recorded as expenditures in the prior year. As a result, the reliability of information and the accuracy of budgetary accounting data could be impacted. The development of sound internal controls is critical to help ensure the integrity of purchasing transactions and that management’s directives are carried out.

Principal Findings

· Payments to vendors could be controlled better by adequately segregating data entry authority of purchasing staff. In addition, staff responsible for approving these payment vouchers do not have sufficient criteria to assist them with their approvals. This increases the risk that an error, either intentional or unintentional, could be made and go undetected. (page 9)

· Cash discounts offered by vendors for timely payment of goods purchased were not consistently taken. This occurred because payment terms were not included in over 20% of the purchase orders reviewed. In addition, in four purchases where the vendor offered a discount, only one was taken because incorrect discount information was recorded on the purchase order. (page 9)

· NRS 333.220(4) requires the Division to maintain an inventory of the state’s fixed assets. However, current procedures do not ensure all assets will be recorded. We found that fixed asset codes were not entered for the eight asset transactions examined. Although these assets were later identified by property management staff, this occurred after the transaction had been completed. On average, it took almost 2 months after the assets were acquired before they were recorded in the system. In one instance, equipment costing $118,000 had not been recorded in the state’s fixed asset inventory until we brought it to the Division’s attention. (page 10)

· The Division’s policies and procedures do not fully document the purchasing component of the IFS. Although procedures have been developed, they could be improved to ensure better control of Division activities. In addition, we identified several areas where procedures have not been developed. (page 11)

· In order to process certain transactions, incorrect delivery dates must be used. In 9 of 23 transactions we examined, incorrect delivery dates had been entered in the IFS. Staff indicated they had to enter incorrect dates in order to get the IFS to process “confirming” purchase orders. Date inaccuracies could impact the reliability of reports and other information provided to management, the legislature, and the public. (page 12)

· During the period when the State has two fiscal years open, transactions can be completed fully in one fiscal year, but recorded as expenditures in the other fiscal year. We identified three transactions where all the information was entered in July 2000, although these transactions were posted to fiscal year 2000 (the prior fiscal year). This is possible because there is no system control in place to reject purchasing transactions based on the date of an element of the transaction. (page 13)

Department of Administration

Purchasing Division

Agency Response

to Audit Recommendations

Recommendation Number		Accepted	Rejected

1	Segregate the responsibilities for entering the information creating a vendor payment voucher	X

2	Create a report that will identify discounts available and taken	X

3	Establish a process to identify those users who consistently fail to include the “FA” code, providing additional training where necessary	X

4	Develop policies and procedures for the Division’s use of the extended purchasing component, including approving payment vouchers, ensuring cash discounts are taken, and reviewing purchase orders to ensure fixed assets are properly coded	X

5	Request that appropriate staff be provided the ability to authorize the continued processing of a transaction when the error message occurs that indicates the delivery date is before the transaction date	X

6	Request a system edit to control the recording of transactions to the wrong fiscal year	X

	TOTALS	6	0