LAS VEGAS -- Clark County auditors on June 12 issued a report titled Haworth Contract Compliance Audit that slammed the quality of furniture inventory management services provided to the county by Haworth of Holland, Mich., and Faciliteq of Las Vegas.
The audit concluded that this performance, as of January, left "furniture products at a high risk of misappropriation."
Haworth has contracted with the county since 1999 to supply furniture, products, design, installation and program management services. The installation, inventory and warehousing of the furniture is managed by Faciliteq.
* "We found that inventory management at Faciliteq is virtually nonexistent," the audit stated. "An inventory list of products stored at the Faciliteq warehouse has not been updated since March 2010 … Without appropriate inventory listings, the county is unable to adequately analyze whether there is excess used product that can be sold. Further, the county could be required to purchase new product, when used product is actually available in inventory. Finally, the county has no way to ensure all items remain in inventory and are not lost or stolen."
* Auditors said the contract didn't address disposal of used products when they are no longer needed due to excess or damage once the warranty expires.
"Without inventory management and documentation for disposal, we are not able to determine whether there is any inventory shrinkage," the audit stated. "This can provide the opportunity for the vendor or county employees to misappropriate county assets."
* The audit also alleged -- and Haworth and Faciliteq denied -- that opportunity exists for the companies to manipulate the prices charged to the county.
"As currently written, labor charges are dependent on which type of furniture is used," the audit stated. "If the project is more than 50 percent new product, a percentage fee is added to the new items. If the project is more than 50 percent used, the county is charged a set hourly rate for labor. Since the used inventory is solely managed by the vendor, they could manipulate the amount of new or used product to be used in an installation to obtain the most beneficial rate.
"In one large project, 49.24 percent of new product was used, resulting in installation charges based on the hourly rate. As a result, the billed charges were approximately $45,000 more than they would have been under the alternate method, if only another 1 percent of new product was purchased."
* Auditors also complained that there was no verification of labor hours when approving payment for invoices.
"We requested timesheets from Faciliteq for two projects," the audit stated. "The timesheets we received were not always completed entirely and lacked project information, labor hour type and supervisor approval. We were unable to verify labor charges on invoices with the timesheet information provided."
These were among the responses to the audit:
* The county's Real Property Management Department has worked with Haworth and Faciliteq but never managed the Haworth contract. Department director Carel Carter wrote that if the department managed the contract, it would have written the agreement differently. The department doesn't have the staffing to enforce the contract as it is written
The department, known by the initials RPM, wrote: "RPM will request labor reports with all invoices. RPM does not have staffing or the overtime budget to verify every hour worked on every project." The department also "does not verify whether every individual piece of product is used or new. RPM does inspect the completed work and issues a punch list for non-conforming and missing work. RPM does not have staffing or the overtime budget to verify whether every individual piece of product is new or used."
* County purchasing and contracts manager Yolanda Jones said her office intended to meet with Haworth, presumably to discuss contract changes, and then take the changes to the Clark County Commission for approval.
* Faciliteq vice president of operations Damon Andrews wrote that the company agreed with the recommendation to implement a more efficient warehousing system, including adding provisions for disposal and recycling. The company also said it would work toward eliminating "the perception that pricing could be manipulated." But it sharply denied that Faciliteq or Haworth manipulated prices.
* Andrews also disputed the claim that inventory management wasn't evident.
"We agree that to some extent there has been insufficient inventory management," he wrote. "However, to conclude that it is ‘non-existent' is simply not accurate."