1. Houston ISD Board Workshop March 29, 2012 Performance Audit Report- Contract Recommendation Awards Process Presented by:

2. Government Auditing Standards Specific auditing and reporting requirements Statutes on client confidentiality apply Same standards as financial audit Required information included in Appendix to the report

3. Key Work Steps Reviewed key written documentation regarding the purchasing function, including, but not limited to, board policy, organization charts, procedures memos, and procurement file information. Conducted interviews with senior staff and staff in Procurement, Finance, and Construction and Facility Services. Interviewed all board members related to the audit objectives. Interviewed current and prior HISD superintendents.

4. Key Work Steps Performed detailed walkthroughs for each contract selection from the issuance of the procurement request through contract execution. Conducted comparison analyses on like entity procurement policy requirements. Verified factual data from compliance findings with HISD senior staff. Finalized and presented our report.

5. Recommendation Areas Board policy matters Procurement process improvements

6. KEY RECOMMENDATIONS Expanded board training on existing conflict of interest and related procurement policies affecting board members annually Simplify policies, including internal staff policies related to monitoring board activities and activities of procurement evaluation staff.

7. KEY RECOMMENDATIONS Continue internal procurement improvement initiatives that began in the late fall of 2011 Procurement should be involved on all purchases in some manner, even those that are being handled in other functional areas Board members should communicate benefits that might be received from existing vendors to the superintendent and evaluate exposing these services to market competition

8. Contract selection strata for compliance review Greater than $100,0008 $50,000 - $100,0005 Less than $50,0002

9. Contracts selected – Audit Committee: Job Order Contract Program Project No. 10-01-05 Annual Building Envelope Maintenance/Repair Project No. 08-03-04 Minor General Contract Services Under $25,000 Project 10-07-13 Supplemental Bus Transportation Project No. 11-01-09 Supplemental Painting Services $5 Million (over all contract)

10. Other contracts selected: Project Grad Southwest Wholesale Nursery Community Education Partners, Inc. Space Center Houston Stanley Security Solutions, Inc. Cecilia Edwards Stanbury Uniforms Little Green Apples, Inc Morganti Texas, Inc. Demetra Jones

11. Two key findings: 1. Policies need to be reviewed for potential simplification 2. Procurement process consistencies must be achieved

12. Other Board Policy Recommendations Board members should disclose any financial relationships, including governance responsibilities that exist with vendors. Evaluate the need for policies that exclude vendor work at HISD related to financial relationships, including governance responsibilities board members may have with vendors.

13. Other Board Policy Recommendations Board members should abstain from contract votes for those vendors where there are disclosed financial relationships or governance responsibilities. Policy should include provisions prohibiting board member involvement in anything other than votes on contract awards.

14. Other Board Policy Recommendations Board members having an interest in a vendor should communicate with only the superintendent on it and should not be involved in vendor discussions with HISD staff or be involved with vendor meetings with staff. The board packet on contract awards should include documented staff evaluation committee recommendations and any differences between board recommended contracts and staff committee evaluations should be included in the board packet.

15. Other Board Policy Recommendations Document all travel, lodging, or entertainment received by board members Vendor disqualification exception Adopt consistent procedures to allow votes on contracts with vendors who have made campaign contributions Publish notice on sole source contracts

16. Other Board Policy Recommendations Vendor Sanctions Guidelines for board members, staff, and vendors to follow that define when and how allowable contact may be made, including presentation of unsolicited proposals

17. Other Procurement Compliance Recommendations Periodic review and update of approved vendors Annual evaluation of continuing vendors Board approval on change orders on contracts

18. Questions and Discussions