This operational audit, covering the period June 18, 2001, through February 28, 2005, and selected actions taken through May 19, 2005, focused on the State Board of Administration’s (SBA’s) contract administration procedures.  In evaluating these procedures, we concentrated primarily on the SBA’s purchase of an investment portfolio management system (Project).  Our audit disclosed that SBA contracting procedures could be improved in the following respects:

Finding No. 1:        Board records did not fully document the processes leading to selection of one Project consultant retained at a cost of over $5.7 million.

Finding No. 2:        For one key contract, under which payments totaling $269,834 were made, the deliverables were not clearly or adequately described.

Finding No. 3:        For one contract, under which payments totaling $506,575 were made, the SBA did not document the circumstances necessitating the selection of the consultant without the benefit of competitive processes.

Finding No. 4:        Some contracts did not include penalty and dispute resolution provisions.

Finding No. 5:        The Board had not established policies and procedures requiring individuals taking part in the evaluation and contract award process to attest in writing that they are independent of, and have no conflict of interest with respect to, entities evaluated and selected.

Finding No. 6:     Consistent with established policy, SBA staff did monitor Project progress and contractor performance.  However, the SBA had not established written procedures and standards to guide staff in the effective implementation of this policy for all contracts.

The Executive Director's response is included in its entirety at the end of this report as Exhibit A