Compliance Review: HCIDLA IT Professional Services Contracting
Compliance Review: Housing + Community Investment Department Los Angeles IT Professional Services Contracting
DATE: June 5, 2019 TO: Rushmore D. Cervantes, General Manager Housing and Community Investment Department Los Angeles FROM: Bob Wingenroth, Director of Auditing
Office of the Controller – Audit Services Division
SUBJECT: IT PROFESSIONAL SERVICES CONTRACTING
The Office of the Controller conducted a review of Information Technology (IT) commodity procurement at the Housing and Community Investment Department Los Angeles (HCIDLA) to ensure its properly monitoring the use of IT professional services contracts, related payments are authorized, reasonable, and properly supported.
While management of each City department is responsible for designing, implementing, and maintaining its internal controls to provide reasonable assurance all IT professional service contract payments and purchases are authorized, reasonable, supported, and comply with established policies and regulations, the Office of the Controller assists management by performing periodic reviews of the effectiveness of these departmental internal controls. These reviews compliment, but do not in any way replace, management’s assurance responsibilities.
Our review identified a few opportunities where HCIDLA can enhance its internal controls related to monitoring the use of IT professional service contracts, as detailed in the attached report.
We thank your management and staff for their cooperation and assistance during this review.
City of Los Angeles (City) departments use various Information Technology (IT) professional service contracts for unique, scientific, expert, or technical services of a temporary nature because the City’s Information Technology Agency does not have all the resources or specialized services required by City Departments and the need for IT services can fluctuate greatly from year to year.
The Office of the City Controller conducts periodic IT professional services contracting reviews to assess how well City departments, such as HCIDLA, are doing monitoring the use of IT professional service contracts, ensuring the related payments are authorized, reasonable, and properly supported.
Fact #1: HCIDLA’s Fiscal Year 2019 adopted budget is just over $88 million, with $12.5 million (14%) funded by the City’s General Fund and $75.5 million (86%) funded by Special Funds, which includes federal and State grant funding.
Fact #2: HCIDLA has over 700 employees who facilitate the financing and development of housing projects, oversee social services and housing programs to assist lowincome populations and special needs, and responds to City and State housing code complaints by conducting inspections and investigations.
Fact #3: HCIDLA’s Fiscal Year 2019 adopted budget for Contractual Services was $15.4 million, a portion of which is dedicated for IT professional services.
Fact #4: Between July 2017 and February 2019, HCIDLA has paid one contractor $2.8 million for IT professional services.
Fact #5: In Fiscal Year 2016, the capitalization threshold for reporting new software acquired/developed decreased $250,000 or more to $5,000 or more.
Compliance Review Results
While HCIDLA frequently meets with IT contracted staff on planned system/application upgrades or development, based upon a sample of IT professional service payments and interviews, certain control enhancements are necessary. Specifically:
Transition plans should be developed to have HCIDLA employees trained to support and maintain systems/applications that have been implemented and to reduce an over reliance on professional service contractors to provide ongoing support and maintenance of a permanent nature.
Formal performance metrics should be used to monitor the timeliness and associated costs of system/application upgrades.
Documentation of IT contracted staff selections is needed to demonstrate that the selections had been made in a fair and objective manner, with the most qualified contracted staff being selected. Moreover, IT contracted staff working with sensitive or confidential information should undergo a background check.
Tracking of new IT software development costs requires enhancement to ensure the Office of the City Controller is provided with accurate and complete information on software development costs for capitalization and reporting within the City’s financial statements.