East Texas Council Audit

John Keel, CPAState Auditor

An Audit Report on

The East Texas Council ofGovernments’ Procurement ofServices for Selected Programs

August 2010

Report No. 10-038

An Audit Report on

The East Texas Council of Governments’Procurement of Services for Selected Programs

SAO Report No. 10-038August 2010

This audit was conducted in accordance with Texas Government Code, Section 321.0132.For more information regarding this report, please contact Nicole Guerrero, Audit Manager, or John Keel, State Auditor, at (512) 936-9500.

Overall Conclusion

The East Texas Council of Governments(Council) followed statutory and contractualrequirements when procuring and providingservices funded through the State for its ChildCare Services Program and its RuralTransportation Program. However, auditorsidentified areas for improvement in theCouncil’s procurement of services for its SeniorNutrition Program.

Senior Nutrition Program

Although the Council has a documentedprocurement process for awarding contracts forits Senior Nutrition Program, it did not followthat process when selecting a provider for theprogram. The Council did not document thecriteria it used to resolve an appeal of anaward recommendation. Although it completedthe initial assessment and ranking of proposalsbased on standardized criteria, the Councilmodified its award recommendations after oneprovider appealed the initial recommendations,and it awarded a contract to a provider thathad not submitted a proposal. The Council did not document the criteria or otherinformation it used as the basis for modifying its initial award recommendations.In addition, the Council did not adequately document a plan for operating andevaluating a congregate dining pilot program or all of the costs associated withoperating the pilot program. As part of that program, the Council contracted witha private provider for the bulk meals; the Council provided all other services,including transportation, meal service, set-up, and clean-up. Auditors calculatedthat the Council’s average cost per meal was $10.88 at the pilot program’slocation from March 2009 to September 2009. In contrast, the average cost permeal at congregate dining locations operated by other providers was $5.52.All 29 Senior Nutrition Program expenditures auditors tested were allowable inaccordance with contract requirements and applicable regulations. The Council’sfiscal year 2009 expenditures for the Senior Nutrition Program totaledapproximately $4.0 million.

Background Information

The East Texas Council of Governments(Council) was created in 1970. The Council is avoluntary association of counties, cities,school districts, and special districts serving14 counties in the East Texas region (seeAppendix 2 for a map of the 24 Councils ofGovernments in Texas). The membergovernments represent approximately 813,838citizens and cover an area of 9,722 squaremiles.In fiscal year 2009, the Council reported totalrevenues of $43,286,978, comprising $230,195in general fund revenues and $43,056,783 ingrant fund revenues.The Council employs 99 persons to assist localgovernments in planning, cooperating, andcoordinating for regional development. Eitherdirectly or through providers, the Councilprovides programs and services for East Texasseniors, employers, and job seekers. TheCouncil also maintains the 9-1-1 emergencycall delivery system; provides peace officertraining and homeland security planningservices; and provides rural transportationservices, business finance programs, andenvironmental grant funding for the region.Source: East Texas Council of Governments.

An Audit Report onThe East Texas Council of Governments’ Procurement of Services for Selected ProgramsSAO Report No. 10-038ii

Child Care Services Program

The Council’s Child Care Services Program’s procurement process met competitivebidding requirements and had sufficient monitoring processes, which the Councilused to determine that the provider did not meet the agreed-upon performancetarget. However, the Council did not follow up to ensure that the providersubmitted a corrective action plan to rectify the deficiencies identified, asrequired by contract, until the Texas Workforce Commission issued a sanction forthe shortfall in December 2009. In response to the sanction, a corrective actionplan was developed and the sanction was removed in May 2010.All 17 Child Care Services Program expenditures auditors tested were allowable inaccordance with contract requirements and applicable regulations. The Council’sfiscal year 2009 expenditures for the Child Care Services Program totaledapproximately $15.0 million.

Rural Transportation Program

The Council’s Rural Transportation Program’s 2007 contract with the priortransportation provider met competitive bidding requirements, and the Councilawarded the contract to the proposal that received the highest score. InSeptember 2007, the Council began directly providing Rural Transportationservices. The Council engaged the Texas Transportation Institute to analyze thecost-effectiveness of providing the transportation services in-house and hasimplemented its plan to provide those services. Since taking over the operation ofthe program, the Council has increased transportation services provided to itsresidents.Under its direct operation, the Council increased average ridership—from 70,250total riders in fiscal year 2007 to 107,673 total riders in fiscal year 2009, a 53.3percent increase. Additionally, the program’s total expenditures increased—from$2,733,427 in fiscal year 2008 to $4,068,938 in fiscal year 2009, a 48.9 percentincrease. The largest increases were in the areas of salaries and total benefits,fuel and maintenance, and capital equipment.All 25 Rural Transportation Program expenditures tested were allowable inaccordance with contract requirements and applicable regulations.

Summary of Management’s Response

The Council agreed with the recommendations in this report. The managementresponses are presented immediately following each set of recommendations inthe Detailed Results section of this report.