Put simply, the type of oversight APS lacks “is kindergarten-level stuff” that makes fraud, corruption, bribery, waste, abuse and improper payments possible, said Jesse Morton, an accountant and financial fraud investigator with Stout Risius Ross, LLC in Atlanta.
Morton, who reviewed but wasn’t involved in creating the audit, was concerned by the district’s inadequate approach to separating employees’ duties to make sure nobody has unchecked purchasing authority as well as a dearth of records when it comes to reviewing and evaluating bids and vendors.
“The fact that the documentation wasn’t there implies that really anything could have happened,” he said, in an interview with The Atlanta Journal-Constitution and Channel 2 Action News.
The procurement office has had a troubled history. In January 2017, one top official left the district after it was discovered APS had paid his company more than $125,000.
According to the audit, a former procurement director altered vendor records for his company to include a new tax identification number and bypassed the required board approval for purchases.
In March of 2017, the district hired a new executive director “to help turn the department around.”
Auditors took a close look at a sample of 25 randomly selected transactions initiated between Sept. 1, 2017, and Jan. 28, 2019.
But Connie Brown, executive director of internal compliance, said the vast majority of those transactions were linked to contracts initiated before the current management took over.
Still, she told an APS audit committee last week, issues “should be addressed.”
The review found that in 65 percent of the transactions studied, documentation about vendors was missing.
In more than 90 percent of the audited transactions, there was no evidence of an administrative review or evaluation and no certificate of insurance from vendors, exposing APS to legal liability.
In some cases, auditors also couldn’t find documentation that the district had followed its rules requiring two written quotes for purchases between $2,001 and $25,000. That could cause the district to overpay, the report noted.
The district reported it is making changes to a “somewhat outdated” technology system, to help keep better track of quotes, contracts and vendors and maintain important records. APS is planning more training for employees and will more frequently review employee access to procurement systems. Beginning with the fiscal year that starts July 1, procurement employees will do regular checks of a sampling of each other’s purchase orders to make sure everything is in order.
“We are ensuring that the right people with the appropriate experience, certifications, and expertise are in place so that the procurement department within APS is a high-performing professional team,” Smith said.
Brown said her office is “comfortable” with how the district plans to respond and will monitor that work.
“We are going to come up with a follow-up timeline, and then we will go back in and just see how they are progressing on some of those recommendations,” she said.
Morton said the audit makes it clear that the district’s prior management did a poor job.
“The jury is still out with current management, but it certainly seems like they’re not moving as fast as they should be or need to be to correct really basic problems that would help prevent and mitigate fraud,” he said.
ORIGINAL DOCUMENT: SEE THE AUDIT