This story has been updated with comment from a General Land Office spokesman.
The General Land Office’s contracting procedures are riddled with “significant weaknesses” that threaten the agency’s ability to ensure it is wisely spending its dollars, State Auditor John Keel said in a report made public Tuesday.
“Due to significant weaknesses in its processes,” the audit said, the General Land Office “did not always plan, procure, form, and monitor” the contracts according to state rules and the agency’s own policies. The audit was based on three contracts that predated the tenure of Land Commissioner George P. Bush, who took office in January.
The audit, which specifically dinged the 179-year-old agency for how it handled two contracts and dealt with one potential conflict of interest, comes amid heightened interest in the way Texas agencies spend millions of taxpayer dollars. It follows a legislative session that saw major contracting reforms triggered by high-profile trouble other agencies.
With rising political star Bush as its commissioner, the GLO has a wide range of duties, including managing the rights to millions of acres of state-owned minerals, protecting the state’s coastline, handling billions of dollars for disaster recovery, preserving the Alamo and administering loans and other benefits to veterans.
Tuesday’s report criticized the agency's deals with Grant Thornton, an oil and gas royalty auditor, and IDEA Integration Corporation, an information technology firm.
The GLO agreed with the auditor’s many recommended fixes and said it was already making changes.
"Upon taking office Commissioner Bush implemented an interim procurement and contracting process that has already addressed a number of the findings and he will ensure that the recommendations highlighted in the audit are fully adopted," Bryan Preston, an agency spokesman, said in a statement.
For the nearly $1 million Grant Thornton contract, signed in 2013 and renewed in 2014, the auditor identified “significant deficiencies,” such as failing to study whether it needed to hire the firm in the first place.
“The Office did not assess the need to hire Grant Thornton to provide supplemental staffing for the Office’s existing minerals audit department,” the report said. The agency researched rates at other firms, but only after it decided to hire Grant Thornton.
The audit also identified a potential conflict of interest on the contract, which the GLO’s internal auditing department investigated in 2014, following a complaint. That investigation showed that a GLO employee who worked on the contract received a personal loan from her former supervisor – a Grant Thornton subcontractor who was also involved with the contract. That same subcontractor, a former deputy commissioner, also hired a former GLO mineral auditor to train Grant Thornton’s staff, Tuesday’s report said.
That GLO employee who received the loan did not disclose her relationship with the subcontractor, the audit said.
The agency initially told the state auditor that it removed the employee from the Grant Thornton contract, but it downplayed her involvement in brokering the contract.
The auditor, however, concluded that the employee “had a significant role in the procurement,” including attending a relevant meeting, preparing a proposal for staffing mineral audits with Grant Thornton personnel and helping approve contracts with the company in 2013 and 2014.
The GLO noted that Bush recently created an Office of Compliance and Ethics that has “increased the depth and types of conflict checks on all potential vendors for appearances of and actual conflicts of interest prior to each procurement.”
The audit found other problems with the information technology contract with IDEA Integration Corporation. In that case, the report said, the GLO prepared an incomplete “statement of work,” and underestimated the roughly $1.9 million cost. The agency initially pegged the cost at about $93,000.
While planning the deal, the agency "did not include key information, such as project time lines and applicable Texas Administrative Code information technology requirements," the report said.
Because of that error, the auditor said, agency staff did not complete disclosure forms designed to ward off nepotism, as required for contracts over $1 million.