Mohave/Member Update

March 31, 2004 / Revised April 15, 2004

MOHAVE MEMBER UPDATE

MOHAVE’S STATUS
Mohave’s status is unchanged. Mohave and ASPIN are managing contracts, processing purchase orders and invoices, answering questions and addressing the concerns of our members and contractors.

MOHAVE’S STATUS WITH THE AUDITOR GENERAL
Mohave continues to communicate with the Auditor General to resolve outstanding issues. We are also in the process of performing a thorough review of the Auditor General’s report and preparing a detailed response. Once completed, the response will be posted on Mohave’s website.

STATUS OF MOHAVE’S CONTRACTS
Mohave and ASPIN contracts comply with the procurement rules and remain valid for member use. We are preparing electronic information packages to enable members to make the determinations that Mohave contracts comply with the procurement rules. We began posting those packages Thursday, March 25, 2004. The downloadable packages can be found on the Contract Documentation page in the Purchasing Services area of the website. New links will be added daily until information for all contracts is posted.

AUDITOR GENERAL’S MARCH 17, 2004, EMAIL
The Auditor General’s email did not indicate members should not use Mohave contracts. It informed members that they are responsible for determining that any Mohave or ASPIN contract, from which a purchase is made, complies with the procurement rules. This is neither a new requirement nor one unique to Mohave. Any time a public entity uses a cooperative contract, the buying entity is responsible for ensuring the contract complies with applicable rules, regulations and statutes. A public entity cannot free itself from responsibility for complying with its competitive procurement requirements simply by using another entity’s contract.

STATUS OF THE CPA REVIEW OF MOHAVE’S PURCHASING PRACTICES
No procurement practices review has been scheduled at this time. Semi annual reviews of Mohave’s contracting practices are included in Mohave’s discussions with the Attorney General and Auditor General. We are agreeable and ready to proceed immediately with an initial procurement practices review. We have asked the Auditor General to provide us with parameters for an acceptable review, and are waiting for her response.

TIMELINE FOR RESOLVING ALL ISSUES
Mohave is addressing all issues associated with the Auditor General’s report as its top priority. Many items have been resolved. Resolution of other issues is in process, but involves negotiation or action by others and will take more time. Be assured that we are addressing this matter as prudently and promptly as possible, and all issues will be resolved.

CONTRACTS REVIEWED BY THE AUDITOR GENERAL
The Auditor General did not review current Mohave contracts. The report addresses contracts that were awarded during or before 1999. The contracting deficiencies cited in the report were corrected in the year 2000, or before. Written determinations are prepared prior to using RFPs. Evaluation and award criteria are listed in relative order of importance. Award recommendations are substantiated and documented. All of the corrective actions occurred in the normal course of business, and did not result from either the investigation or the report.

MOHAVE’S KNOWLEDGE OF THE RESULTS OF THE AUDITOR GENERAL’S SPECIAL INVESTIGATION
Mohave was first notified of the results of the investigation in late November 2003. At that time, Mohave was presented with a copy of a confidential summary of the investigation’s findings. However, we did not receive a copy of the report that was posted until March 15, 2004.
Mohave has been in discussions with the Attorney General and Auditor General since late November 2003. Details of those discussions have not been subject to public disclosure.

MOHAVE DID NOT CONCEAL EXISTENCE OF THE AUDITOR GENERAL’S REPORT
It has been questioned whether Mohave concealed existence of the report from January 2003, until its posting on the Auditor General’s website on March 16, 2004. We received a faxed copy of the report at close of business on Monday, March 15, 2004. The report was posted on the Auditor General’s website the next day, Tuesday, March 16, 2004. Mohave made no effort to conceal the report’s existence.

MOHAVE CONTRACTS PROVIDE ECONOMIC VALUE FOR MEMBERS
Mohave contracts provide good value for members. Increased competition for each new solicitation continues to increase the value of Mohave contracts.

The overcharge analysis in the report is based on old and expired contracts with one vendor. MESC does not agree with all of the overcharge findings and is attempting to negotiate and resolve this amount. Following our standard practice, we are prepared to recover and reimburse members for any valid overcharges.

The pricing analysis in the report, which compares MESC pricing to State contract pricing, was not based on similar procurements. In most instances, the analysis used State contract pricing for School Facilities Board (SFB) large volume purchases for specified requirements. MESC contract pricing was standard contract pricing, with no consideration given to volume discounts, or promotional pricing.

The report indicated that Mohave pricing for one brand of school chairs, desks and computer tables was 4.53% higher than identical furniture on State contract. Mohave reviewed the analysis and determined the following:

The State contract prices were based upon the SFB’s deficiencies correction purchase.
The specified items were not available from State contract prior to the SFB purchase.
Mohave prices were standard contract prices. The review did not address available volume discounts under contract.
Mohave prices were lower than State prices for chairs and desks.
The computer table price comparison was not for identical products. MESC computer table pricing included wire management. State contract pricing did not. When wire management was subtracted from Mohave prices, Mohave prices were lower for one table and $0.40 higher for the second table.
The purchases analyzed constitute only a small portion of the total purchases made under the contract, and represent only a small sampling of the items available to members.

The report indicated that Mohave pricing for another brand of desks was 14.83% higher than identical furniture on State contract. Mohave reviewed the analysis and determined the following:

The review indicated there was no pricing available for chairs and other desks, although they were available from Mohave.
The State contract prices were based upon the SFB’s deficiencies correction purchase.
The specified items were not available from State contract prior to the SFB purchase.
Mohave prices were standard contract prices. The review did not address available volume discounts under contract.
Mohave’s warranty was 10 years.
The purchases analyzed constitute only a small portion of the total purchases made under the contract, and represent only a small sampling of the items available to members.

The report indicated that State contract pricing for three models of Apple computers was lower than Mohave Apple Computer contract pricing. The report did not provide the following additional information.

The State contract prices were not standard contract prices off the State’s computer contract. They were based upon a separate quote for the SFB’s $35 Million deficiencies correction technology purchase.
Apple computers were not available from State contract at the price used in the analysis prior to the SFB quote.
Standard State contract pricing for the specified Apple computer products was not provided, and was not available from information on State Purchasing’s website.
Mohave prices were standard contract prices. Mohave offered to request volume pricing from Apple and its other computer contractors for the SFB deficiencies purchase, and the offer was declined by the SFB. The review did not address “bundle pricing” or other available volume discounts available under contract.
Considering the incongruities above, the Apple Computer pricing analysis was not based upon a valid comparison.
The purchases analyzed constitute only a small portion of the total purchases made under the contract, and represent only a small sampling of the items available to members.

The report compared Mohave and State contract pricing for basketball backboards, goals, posts, and padding. The report did not provide the following information.

The State contract prices were based upon the SFB’s deficiencies correction purchase.
The specified items were not available from State contract prior to the SFB purchase.
Mohave prices were standard contract prices.
The breakaway basketball goal comparison in the report was not for the same part number. The price shown was $199.77. The correct price for the item was $186.54.
The purchases analyzed constitute only a small portion of the total purchases made under the contract, and represent only a small sampling of the items available to members.

The report compared Mohave and State contract pricing for Lexmark printers.

Mohave prices were an average of 7.22% lower.

The Auditor General’s report questions the validity of Mohave’s biannual savings survey. Mohave believes the report, performed by a well-respected Certified Public Accounting firm, provides valid and useful confirmation of the value of our contracts.

MOHAVE’S FINANCIAL PRACTICES COMPLY WITH RULES AND REGULATIONS
The Auditor General’s finding that Mohave failed to follow proper financial practices is based upon the determination that Mohave is part of Mohave County government, and should follow the County’s rules and regulations. Mohave has operated for over 30 years following legal opinions issued by the Mohave County Attorney and Mohave’s own legal counsel. No one indicated that Mohave should have been following Mohave County Rules and Regulations until the Auditor General released the findings of its investigation.

Under guidance from the Mohave County Attorney and its own legal counsel, Mohave has followed the requirements of the USFR. An independent Certified Public Accounting Firm audits our financial operations annually. The audits include completion of the USFR Compliance Questionnaire. The audits are sent to the Auditor General.

Outside of indicating that Mohave should be under County oversight, the Auditor General’s issues primarily deal with documentation. Mohave believes it properly documents its operations. However, we are prepared to make any required improvements.
Mohave staff members, government officials, Mohave members, and vendors have not personally benefited from our operations.

OTHER MESC OPERATIONS ARE PROPER
Mohave believes the report’s finding that other Mohave operations are improper is very misleading due to its reliance on the Auditor General’s recent determination that MESC is a Mohave County entity.

Mohave purchased, acquired and holds property in accordance with legal opinions from the Mohave County Attorney.
Mohave County has never taken an active role in Mohave’s operations. The County provides no tax support, facilities, or direction on financial or procurement laws and rules.

The Mohave County School Superintendent established MESC as a school service agency under A.R.S. § 15-365. Mohave has consistently followed rules and regulations using the same standards that school districts do because we have been defined as a school service agency. This includes the use the USFR, MESC Board Policy Manual, Arizona Procurement Code, and the procurement rules established by the Department of Education.

ADDITIONAL INFORMATION
We are continually posting information on our website, www.mesc.org. Check the website often for updates. We will also continue emailing updates.

Your comments and questions are always welcome. Please contact Tom Peeler, tom@mesc.org, Craig A. McKee, craig@mesc.org, or Mark DiBlasi, mark@mesc.org, with any questions regarding MESC contracts.

Rev. 4/15/04
Admin Team