Report 2019-112 Recommendation 6 Responses
Report 2019-112: California State Lottery: The Lottery Has Not Ensured That It Maximizes Funding for Education (Release Date: February 2020)
Recommendation #6 To: Lottery Commission, California State
To ensure that it conducts procurements in a way that preserves all possible funding for education, by August 2020, the Lottery should develop procurement procedures that, at a minimum, do the following:
-Provide examples of when products are truly available from only one source and examples of when the Lottery should consider whether alternative products can also fulfill its needs.
-Require its staff to collect and maintain documentation supporting any exception to competitive bidding and provide examples of adequate and inadequate documentation.
-Instruct its contracts unit to deny all procurement requests that do not demonstrate adherence to contracting requirements.
1-Year Agency Response
a) The Lottery implemented a framework for non-competitive bid agreements including standardized justification requirements. In addition, procurement policy and processes have been implemented that give procurement staff the final determination whether a good or service is only available from one source. All single source procurements classified as non-competitive bids are only approved with a corrective action plan to reduce similar purchases in the future. Procurement staff are conducting one-on-one focused training and assisting program staff through the procurement process including the identification of available competitive procurement options when non-competitive bids are submitted for review.
b) The Lottery conducted Lottery-wide training on the procurement process in August 2020. Since that time, additional procurement forms have been implemented that focus on documentation of decisions made during the solicitation process and throughout the life of the procurement. These forms include an Agreement Summary and a Purchase Order Summary. Part of the Lottery's effort to standardize and streamline the procurement program, it was also determined that a single Agreement form, the Standard Agreement, provides the Lottery with a cover page that identifies all required contract elements, clearly outlines the funding information required by the SCO, and organizes the information in a manner that is similar to the STD 213 utilized by most State Agencies in the contract process. The new Standard Agreement was implemented and is now the standard contract cover page utilized by the Lottery.
c) This was fully implemented in the previous corrective action report dated August 25, 2020.
- Completion Date: August 2020
- Response Date: February 2021
California State Auditor's Assessment of 1-Year Status: Resolved
The Lottery provided evidence that it has addressed the deficiencies that led to our audit findings. It has adopted new procurement policies around noncompetitively bid contracts and developed a new noncompetitive bid justification form that asks staff to explain how they determined that there was no other vendor with which they could contract. These policies and procedures do not align exactly with our recommendation. For example, they do not provide examples of adequate and inadequate documentation for noncompetitively bid contracts. However, the policies and forms, if followed and used by the Lottery, should be sufficient to ensure it adequately documents the need to enter into noncompetitively bid agreements.
- Auditee did not address all aspects of the recommendation
6-Month Agency Response
Reason for not fully implemented:
a) The Lottery has created a framework for non-competitive bid agreements and is implementing various elements, including standardized justification requirements and training. In addition, procurement staff will have final determination whether a good or service is only available from one source. All single source procurements classified as non-competitive bids will only be approved with a corrective action plan to reduce similar purchases in the future. The Lottery will be implementing additional mandatory procurement training that is focused on how to conduct market research and how to define business requirements so that procurements are based on meeting the functional requirements and not brand specific features. Training is expected to be completed by December 2020.
b) The Lottery is conducting Lottery wide training on the procurement process. File documentation checklists are under development and will be maintained with the official procurement. To aide procurement staff in ensuring adequate documentation is included, checklists will detail specific documentation required for the type of purchase being made. Sample purchase files will be created and used as training tools for procurement staff. The Lottery will be implementing additional mandatory procurement training that is focused on documentation requirements which is expected to be completed by December 2020.
c) The Lottery has implemented an overarching procurement policy that directs the procurement office to conduct an analysis of all procurements to determine whether the requesting program has demonstrated a clear business need and how that need is in support of the Lottery's mission; and whether best value is clearly identified and supported prior to execution of the procurement. Any procurement that does not meet policy may be denied or returned to the program for additional clarification.
- Estimated Completion Date: December 2020
- Response Date: August 2020
California State Auditor's Assessment of 6-Month Status: Pending
60-Day Agency Response
The Lottery is currently revising procurement policies and processes with regards to single source procurements. This will include a standardized process for documenting alternatives considered, detailed justification substantiating why alternatives could not meet business needs, and multi-level documentation review and approval. The policy is expected to be completed and submitted for approval by Lottery Management by end of April 2020. The revised procurement processes to implement the revised policy are expected to be completed by August 2020. Lottery-wide training on and full implementation of the revised policy and procedures are expected to be completed by December 2020.
- Estimated Completion Date: August 31, 2020
- Response Date: April 2020
California State Auditor's Assessment of 60-Day Status: Pending
Agency responses received are posted verbatim.