County of Sacramento County Administration Building*

R1

Adopt this report as Sacramento County's response to recommendations contained in the April 15, 2011 Special Grand Jury Report. 2. Direct the Clerk of the Board to forward a copy of this report to the Presiding Judge of the Superior Court and the Grand Jury Foreman. Measures/Evaluation Not applicable. Fiscal Impact The cost of responding to this report is approximately $6,000. Staff from General Services, Department of Finance, Risk Management and the County Executive Office contributed to this report. These costs were absorbed within each department. <b>BACKGROUND</b> The Sacramento County Grand Jury performed an investigation into the circumstances leading to Sacramento County owing $20 million payroll tax debt to the federal government. The County is required to process payrolls for its special districts. The County determined it would be less Response To The 2009-2010 Grand Jury Final Report expensive for a private contractor to process the special district payroll. A Request for Proposal was done and the selected contractor was Ingentra HR Solutions. The Grand Jury's investigation found that county employees followed the usual policies and procedures for contracting out services; however it also found that this type of service was unusual and therefore should have followed stricter procedures. DISCUSSION The Department of General Services, Purchasing Department is responsible for developing processes and has provided responses to the Grand Jury's findings and recommendations. The Department has also worked with the Internal Services Agency Administrator, County Counsel, Department of Finance and Risk Management to implement new tools and processes that will significantly enhance the risk assessment procedures the County needs to identify risks factors, the levels of contract risk, mitigation measures and long term contract monitoring. They will pilot the proposed new process that can be found in Attachment A.

R2

1: Involve risk management and the County Counsel while developing the RFP specifications for "special" contracts. A "special" contract is one that is the first of its kind for Sacramento County, a materially significant contract because of the amount of money involved in the transaction, or a complex contract.

R3

1: Bid evaluators should be instructed to bring any exception or variance from the established specifications to the attention of the purchasing department. The "purchasing department" refers to the purchasing department in whichever county agency originates the RFP process, not just the Purchasing Department contained within the Department of General Services.

R4

1: Reference checking should include credit and asset checks of the bidders plus litigation searches to look for lawsuits against the bidder and/or bidders' principals in jurisdictions in which the bidder has done or is doing business.

R5

1: Require employee dishonesty and computer fraud insurance in all cases in which the contractor handles public funds and makes payments to third parties. Require Sacramento County to be named an additional insured in the policies.

R6

1: For any payroll services contract, or any contract involving a third party payee, the user departments or agencies should verify receipt of payment directly from any applicable third party payee.

R7

1: Special contracts should be subject to performance audits and the contractor should be required to have a financial statement audit in addition to standard computer audits.

R8

1: Before any "special" contract, as defined in Recommendation 2.1, is renewed, Sacramento County should assess the contractor's performance and pursue credit, asset and litigation searches to make sure that the contractor remains a reliable provider of services.

R9

1 Any proposed extension of a contract that exceeds the term authorized by the Sacramento County Board of Supervisors must be specifically approved by the Board.