LOFT report, state agency purchases
Mike Jackson, director of the Legislative Office of Fiscal Transparency, speaks to legislators and state officials during a LOFT Oversight Committee meeting Thursday, April 6, 2023. (Joe Tomlinson)

(Update: On April 13, one week after the original publication of this article, Attorney General Gentner Drummond released an official AG opinion in response to a question from Rep. Ryan Martinez regarding whether the Central Purchasing Act requires the Office of Management and Enterprise Services to verify that a purchase labeled by an agency as “exempt” meets the stated exemption requirements. Drummond’s opinion — available here — states that OMES is supposed to be “routinely verifying” such purchases. The following article remains in its original form.)

During a nearly three-hour meeting of the oversight committee for Oklahoma’s Legislative Office of Fiscal Transparency, LOFT Director Mike Jackson presented findings Thursday from a report showing that a fraction of state agency purchases are made within the oversight of the state’s Central Purchasing Division.

According to the report, which analyzed Fiscal Year 2022 data, “state agency purchasing outside of Central Purchasing Divison’s oversight exceeded $3 billion while an estimated $538 million in purchases was overseen by the (CPD.)”

The LOFT report listed three findings:

  • The state’s purchasing processes are time consuming and vague on exemption use;
  • Lack of oversight for exemptions pose financial and legal risks to the state;
  • Central Purchasing Division lacks effective enforcement of compliance with the Central Purchasing Act.

The release of the report (embedded below) came one day after CPD’s former director, Dan Sivard, submitted his resignation.

“I don’t know the circumstances around why the state purchasing director resigned,” Jackson said before the LOFT meeting. “During our meeting I will give him credit for being easy to work with.”

The Central Purchasing Act requires agencies making acquisitions over a certain dollar threshold to process their purchase with the oversight of CPD. Agencies can be assigned purchasing thresholds such as $25,000, $50,000, $100,000 and $250,000, which is the maximum threshold.

For purchases under an assigned threshold, the Legislature has allowed agencies to use purchase cards for smaller items and services without CPD’s involvement.

But according to LOFT’s report, “these changes have focused on removing certain purchases from oversight rather than streamlining the process to ease the burden on agencies.”

State statute also provides a number of exemptions or partial exemptions to the purchasing process for different agencies, with the intent to expedite the purchasing process. The report states there are more than 87 full or partial purchase exemptions listed in state statute, which apply to different state agencies.

Data from the Office of Management and Enterprise Services — which houses the Central Purchasing Division — shows an average of 95.8 business days from requisition to reward of each transaction. That time is used to review and ensure fair and competitive bidding of products and purchases.

“LOFT found agency spending below thresholds to be functionally similar to exemptions, as purchases do not receive external review before being completed,” the report states.

When the agency labels the purchase as exempt, Jackson said there are no checks for whether the exemption is legal.

“If an agency classifies the expenditure as exempt, it’s being treated as exempt with no oversight or checking of whether or not the purchase itself even qualifies through state statute,” Jackson said.

However, CPD and OMES staff contended that they do not have statutory authority to review purchases that agencies deem exempt.

“We have a legal opinion that we’ve gone by for a while that basically excluded us from the authority to oversee exemptions from agencies, so that’s how we’ve been acting,” said John Suter, director of the state Office of Management of and Enterprise Services. “But I must say, we are quite open to handling that.”

Under the current process, according to the LOFT report, an agency does not submit a request for approval or review before making an exempt purchase.

“Instead, the agency processes its transaction as exempt without any external confirmation that the agency is either entitled to the exemption or using it appropriately.” the report states.

‘The statute already says that. It’s very clear’

During and after Thursday’s meeting, members of the LOFT Oversight Committee disagreed with CPD’s interpretation of the statute.

“I think statute is very clear. It says that the director of central purchasing is the one who has the authority to (perform) oversight and they are to check on the agencies,” said House Appropriations and Budget Chairman Kevin Wallace (R-Wellston), who also co-chairs the committee. “They’re wanting it spelled out in statute. The statute already says that. It’s very clear.”

Rep. Ryan Martinez (R-Edmond) agreed with Wallace.

“It’s pretty clear that there’s a lot of work to be done, and there needs to be some clarifications on what the office of Central Purchasing actually does and what they need to be doing,” Martinez said before the meeting. “I think that statute is pretty black and white as to what they should be doing. And it’s pretty clear they haven’t been doing it well, or at all.”

Another issue surrounding oversight is the lack of training for certified procurement officers, which are assigned to each agency to ensure compliance with the Central Purchasing Act. The training regimen is online, self-guided and to be completed within 90 days.

According to the report, “$2.06 billion of the spending without oversight was through transactions recorded under the most commonly used exemption code.”

Agency recommendations and legislative considerations

LOFT’s summary of agency recommendations states that OMES should:

  • Create a process by which the Central Purchasing Division reviews all purchase requests exceeding an agency’s authorized spending thresholds to confirm whether a purchase is subject to the Central Purchasing Act or exempt from it;
  • Update its compliance processes by creating a dedicated entry field within the Statewide accounting system to cite the authority for the exemption, a description of the item that qualifies for the exemption, and a process by which Central Purchasing confirms the agency is properly applying the exemption;
  • Update CPO training to include training on proper agency exemptions;
  • Make publicly available a plan to accomplish the auditing mandate issued in Executive Order 2023-04.

LOFT states that the Legislature should consider the following policy changes:

  • Clarify within statute the Central Purchasing Director shall review all exempt purchases to ensure they are validly within the claimed exemption.
  • Require the director of OMES to report violations of statute found by the audit team to the Attorney General’s office and legislative leadership.
  • Require agencies using exemptions to post purchases publicly, similar to what is currently publicly available for P-card purchases.
  • Require OMES to send a consolidated report to the Legislature of agencies that have violated statute related to agency acquisitions.
  • To ensure independence of the Audit Team, remove this function from under the oversight of the Central Purchasing Divison.
  • Authorize the purchasing Audit Team to review purchases taking place outside of the Central Purchasing Act.
  • Require Central Purchasing’s audits be made publicly available on a state website.
  • Require Central Purchasing to track time from agency request to purchase completion for all procurements as a key performance metric.
  • Statutorily require that all audits performed by the Audit Team are full procurement audits, which are to include expenditures by P-cards but not be limited to just P-card expenditures.
  • Evaluate all existing exemptions within statute to determine if they are still necessary in light of recent increases in agency purchasing limits.
  • Require sunset dates with the enactment of any future exemptions.
  • Require agency central purchasing officers to maintain a record of exemption approvals, to include identification of the CPO and the date of approval.
  • Centralize all exemptions, both complete exemptions from the Central Purchasing Act and specific purchase exceptions, under the same section of statute.
  • Create mandatory penalties within statute for agencies found by the purchasing Audit Team to be in violation of the Central Purchasing Act. These could include violations for purchase cards, competitive bidding, split purchasing, internal purchasing procedures and improper exemption usage.
  • Require the internal purchasing procedures be approved by the State Purchasing Director every two years and create penalties for violations.

Read the LOFT report on state agency purchases

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