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Sheet1 Page 1 PURCHASING DEPARTMENT AUDIT BACKGROUND: The City's Purchasing Department is responsible for acquiring the goods and services for the various operating departments through a centralized purchase order function. There are some specific requirements in the City Code regarding procedures when a purchase exceeds a specific dollar amount. For example, the breakdown is as follows: $25-$500 may be purchased without price quotes. $501-$2500 requires three telephone price quotes. $2501-$5000 requires three written quotes supplied by vendors. Over $5000 requires an advertisement for bid in a newspaper of general circulation. In addition, the selected bidder must be approved by City Council. The process is designed so that the city does business with the lowest responsible bidder. There are exceptions to this such as, emergency purchases, and sole source acquisitions. However, these exceptions are rare when compared with the large volume of transactions handled according to the rules above. The City's Purchasing Agent has a staff of _____ buyers, and reports to the Director of Administration. Last fiscal year, $_____ million of goods and services were purchased for the city by the Purchasing Department. This audit will focus on three areas within the Purchasing Department: Purchasing rules and regulations (compliance), Internal control within the department (approvals, and segregation of duties, etc.), and file maintenance of the Vendor Master File, and the Purchase Order Master File. We will also, review the Purchasing Department's role in planning and coordinating the disposal of city assets at auction. SCOPE: The audit period will be the last 12 months for test work, and the last day of field work for the evaluation of internal control. PLANNING: 1. Prepare and send an entrance letter to the Director of Administration and the City's Purchasing Agent.
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Sheet1 Page 2 2. Prepare a planning program and include a time budget for the preliminary survey work. 3. Conduct an in-house review of the following: A. Prior internal and external audit reports and management comments. B. The annual budget for the Purchasing Department. C. The City-Wide Cost Allocation Plan (this shows the amount of indirect costs allocated to the Purchasing Department, total and departmental costs allocated to other departments. These costs were allocated based upon the number of purchase orders issued by each department. It also shows how much it costs the Purchasing Department to process a purchase order, $21). Thus, we would not expect to see a purchase order for less than that amount. D.
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