The Judicial Council of California (Judicial Council) is the policymaking body for the Judicial Branch of California (Judicial Branch), an independent branch of state government. The Judicial Branch is subject to the California Judicial Branch Contract Law (judicial contract law), which generally requires Judicial Branch entities—including the Judicial Council—to follow procurement and contracting policies that are consistent with the Public Contract Code (contract code). The judicial contract law requires the Judicial Council to adopt and publish a contracting manual for the Judicial Branch that is consistent with the contract code and substantially similar to the State Administrative Manual and the State Contracting Manual (SCM). Finally, the judicial contract law requires that the California State Auditor’s Office, subject to legislative appropriation, conduct a biennial assessment of the Judicial Council’s compliance with the judicial contract law. This current biennial assessment concludes the following:
Although we found that the Judicial Council generally complied with the Judicial Branch Contracting Manual (judicial contracting manual)
when conducting procurements, we identified some instances in which it did
not follow its competitive bidding policies and thus lacked assurance that
it received the best value for the goods and services it acquired.
Specifically, we reviewed procurement files for a total of 60 contracts,
purchases, or amendments from fiscal years 2015–16 and 2016–17, and we
found one contract and four purchase orders that did not follow the
judicial contracting manual’s policies. For example, two of the four
purchase orders did not have appropriate management authorization.
According to the procurement manager, staff did not follow Judicial Branch
policy in those two cases.
In another instance, a supervisor signed a $345,000 purchase order, well above the $50,000 limit of his authority at the time. According to the procurement manager, the supervisor’s position should have had a higher approval limit, and the Judicial Council later changed its policies to give that position the authority to sign purchase orders up to $500,000. Additionally, the Judicial Council did not document adequately its justification for a sole‑source purchase of $8,000 in office supplies that it should have procured competitively. The procurement manager agreed that staff should have procured these items competitively and stated that he has since implemented additional training and oversight about the use of sole‑source justifications.
Finally, we found that the Judicial Council entered into a series of contracts with one vendor when a single agreement for the services would have better served its needs. Indeed, the Judicial Council’s definition of contract splitting in its judicial contracting manual is not as precise as the definition in SCM; under that definition, the series of contracts may have constituted contract splitting. When the Judicial Council finally obtained a single master agreement with the vendor, it obtained an hourly rate for the services that was lower than it had paid in the series of contracts. Had that agreement been in place from the start, the Judicial Council could have saved about $10,000.
The Judicial Council’s Lack of Clear Written Procedures for Processing Invoices Could Lead to Inappropriate Payments.
The Judicial Council generally complied with the judicial contracting manual when processing invoices; however, in a small number of instances, it did not comply, and it has not provided adequate guidance for its accounting staff to ensure that they adhere to the judicial contracting manual when processing invoices. The judicial contracting manual requires accounting staff to support payments made to vendors with a properly authorized contract, a properly submitted vendor invoice, and documentation verifying that the Judicial Council received the goods or services satisfactorily. We reviewed 60 payments from fiscal years 2015–16 and 2016–17, and we identified three in which the Judicial Council did not comply with the judicial contracting manual. Two payments did not have proof that the Judicial Council received the goods or services, and the Judicial Council paid an invoice from a vendor to another Judicial Branch entity, even though that entity created the purchase order supporting that invoice a year after the services were rendered. Finally, although the Judicial Council has three documents describing its policies and procedures for providing guidance to its accounting staff, the guidance is incomplete because it does not address common exceptions to the payment process or how to process invoices for other Judicial Branch entities. This lack of clear guidance could lead staff to make inappropriate payments.
Summary of Recommendations
To help ensure that it obtains the best value for the goods or services it purchases and that its staff take the steps necessary to comply with the judicial contracting manual, the Judicial Council should continue to reinforce with its staff—through management memos, training, or other formal means—the need to obtain authorized approvers’ signatures for noncompetitive procurements and to ensure that the person with the appropriate level of authority approves purchases.
The Judicial Council should update its contracting manual’s guidance on contract splitting to reflect the more specific definition in state requirements.
To ensure that Judicial Council staff have the information they need to process invoices appropriately and to comply with the judicial contracting manual, the Judicial Council should develop one document with clear invoice‑processing procedures for its accounting staff. This document should define common deviations to the typical process, including instructions for handling invoices processed on behalf of other Judicial Branch entities.
In its response to the audit, the Judicial Council agrees with the recommendations in our report.