(The Center Square) — Officials at the North Carolina Agricultural and Technical State University split invoices for painting services to avoid policies that require quotes or formal bids, according to State Auditor Beth Wood.
Wood issued a report in August prompted by four allegations the university purchased services without contracts in violation of university policy.
Auditors found from July 2019 through June 2021, the school purchased painting services totaling $100,210 from G.S. Painting and Home Improvement, splitting the purchases to avoid the threshold for requesting quotes or formal bids.
University policy requires purchases of between $5,000 and $25,000 to include a written request for quotes, while purchases between $25,000 and $100,000 require formal bids.
The Purchasing Procedures Policy also specifically prohibits splitting purchases into smaller orders to avoid competition.
“The Office of Facilities and Campus Enterprises requested 15 purchase orders totaling $64,035 for G.S. Painting and Home Improvement for what appears to be six painting jobs,” according to the report. “Several of these purchases, when analyzed together, had similar job descriptions and were within a short period of time from one another. Each purchase order, except one, was under the $5,000 threshold requiring a written request for quotes.
“Each group of purchases with similar job descriptions, when added together, exceeded the $5,000 threshold for requiring a written request for quotes. No written requests for quotes were made.”
The purchase orders involved sets or groups of orders in 2019, 2020 and 2021 for things like paining lettering for signage and gates, painting switch stations, painting and installing vinyl lettering, as well as painting a lab, stairwells and dining hall. The 15 purchase orders totaled $64,035.
Wood also detailed four purchase orders totaling $36,175 for the same company to paint the dining hall in 2020, including one purchase order that exceeded the $25,000 threshold requiring a formal bid.
The suspect purchase orders included $1,600 on May 11, 2020, $2,650 on May 21, 2020, $2,300 on June 11, 2020, and $29,625 on June 15, 2020.
“In addition to one of the purchases exceeding the threshold to require formal bids, had these purchases been combined for painting the dining hall, as it appears they should have been, the total amount would have exceeded $25,000 and would have required formal bids,” according to the report.
“Based on the information reviewed during the investigation (the job descriptions, amounts, and dates of purchases), it appears that splitting of purchases to avoid competition may have occurred.”
The report argues “consistent violations of University policies may send a message to the employees that this behavior is acceptable. As a result, the University could subject itself to higher fraud risk as employees may believe it is acceptable to break or bend the rules.”
The report alleges school officials charged with overseeing procurement services admitted to investigators there are “no procedures in place” to prevent splitting purchases to avoid competition.
Auditors issued a series of recommendations that basically suggested the university follow its own purchasing policies and implement procedures to detect efforts to circumvent them.
Chancellor Harold Martin replied to the findings in a letter to Wood in September that agreed with the recommendations and detailed how the university is taking action.
Martin promised an additional review of the transactions and supplier relationship by the Division of Business and Finance by the end of October, and devoted an employee in the Procurement Services Department to manage procurement requisitions and detect irregularities.
Other efforts to correct the issues include a review of the vendor relationship, “refresher training on the procurement processes,” a standardized procurement form, and development of a preferred vendor list.
The university also updated procurement thresholds to align with the state, which will require one quote for requisitions up to $10,000, two quotes for requisitions between $10,001 and $25,000, and a bid/quote process for requisitions above $25,000.
