News: CJ Exclusives

State Audit Suggests State Sell Surplus Property on Auction Site

Report says a site similar to eBay would bring 10-50 percent more profit

A new report from State Auditor Beth Wood says that the State Surplus Property office likely isn’t getting all the revenue it could for taxpayers because of its bidding process, and suggests that the office move to an online bidding process similar to eBay.

“We found that vehicles sold on eBay received on average a 23 percent higher price than those sold through the Division’s online bidding process,” the report says. “The Division should evaluate the cost effectiveness of either modernizing its bidding software or using an available third party auction site. Valuable employee time could be saved by an improved automated bidding process and revenues from surplus property sales could potentially increase.”

The report notes that when the office gets surplus property – items ranging from cars to file cabinets that state government agencies no longer have any use for – it estimates the item’s value. Items valued at $200 or greater are sold through an online bidding process. Items of lower value are sold at a west Raleigh store.

The office uses a sealed-bid process. “Since bidders cannot see the bids of others, they cannot adjust their bids upwards in response to demand for an item,” the report says. “Division managers must meet to review the highest bids and decide which ones to reject because they are too low.”

The agency agrees with the auditor’s report, and says it plans to take steps to improve the bidding process.

According to the report, Surplus Property believes updating the surplus software to a live online bidding program similar to eBay could return between 10 percent and 50 percent more profit to the state. It plans to get an IT consultant to evaluate its options, including third-party auction sites. It anticipates having proposals by the spring of 2014.

The audit also recommended improvements to the physical security of the facility, and updating monitoring controls to discourage theft.

“We identified one employee with physical access to the property also has system access rights to create and edit property records and access to create, edit, and delete bid and sales data in the surplus property system,” the report says. “The employee could take property and delete it from the records, thus covering up the theft.”

The auditors were able to inspect a report that identified all deletions made to the inventory records from July-December 2012. “We found only two deletions by the employee and both were deemed reasonable and appropriate,” the report says.

The agency has already started implementing some of the recommendations to improve security, while others have already been completed, according to the auditor’s report.
Similar monitoring security recommendations were made for other divisions within the Department of Administration, including the ones that repair and maintain state vehicles.

Modifications implementing the recommendations have been implemented, or are under way, the report says.
The auditor’s office says that it didn’t find evidence of wrong-doing, but is making recommendations to head-off potential problems.

Barry Smith is an associate editor of Carolina Journal.