Tender Process Follow Up - 11/12 Follow Up Audit Report

Transcription

1 Tender Process Follow Up - 11/12 Follow Up Audit Report Issued: 24/04/12 Original Audit Report Issued: 18/03/11 Author: Audit Services Stoke-on-Trent City Council

2 Follow Up Audit Report Table of Contents: Contents Commentary Page Summary Audit Report: Overall Opinion of Assurance Improvement Profile Basis of Audit Opinion Role of Responsible Officers Control Summary Exception Report Action Plan Opinion of Audit Services on the effective management and control of the system/controls reviewed based on the work undertaken at this audit, supported by a summary of the number of recommendations made. Summary of the overall projected improvements to be made by the system/controls Scope and nature of the work undertaken upon which the audit opinion is based. Systems are to secure the economy, efficiency and effectiveness of resources and ensure integrity, proper stewardship and governance. Summary of the controls reviewed and the assessments of their effectiveness. Findings are reported on an exception basis: All controls/elements of control found to be good are not documented in this report. Only findings in respect of those controls/elements of control that are not assessed to be good are reported. Summary of recommendations made by Audit Services, and the actions agreed with responsible officers to improve areas of assessed risk; including forecasted timescales

3 Summary Follow Up Audit Report It is acknowledged that a significant amount of work has been undertaken to develop a robust tender process in order to support adherence to the City Council Contract Procedure Rules. However whilst we are able to provide comment on the existence of these procedures it is too early to provide any assurance on their effectiveness as they have not yet embedded into the organisation. At the time of follow up audit Procurement training workshops were being delivered to officers from all directorates of the City Council to communicate the new guidance. A member Procurement Task and Finish Group reported their findings during February 2012 to highlight how Procurement could support the creation of a great working city. The review covered aspects of becoming an effective and confident council and also looked at ways to improve how the City Council does business with businesses, how the City Council can make major contracts perform better and how to work better with small businesses and the voluntary sector. Formal outcomes and recommendations of the review were reported to the Business Services and Chief Executives Overview and Scrutiny Committee and will be considered by Cabinet on 26/04/12. Overall Opinion of Assurance At this follow up the seven recommendations originally made have been revisited. Furthermore, due to the nature of the controls reviewed and their associated risks, new recommendations may be raised by the follow up audit where necessary. The outcomes for the outstanding recommendations and agreed actions, which are summarised as follows, are detailed in the attached action plan:- s Original Original Outstanding New raised at Follow up Outstanding to Implement Low Medium High Total Overall opinions are categorised as Good, Satisfactory, Marginal, Unsatisfactory or Unsound. It is our opinion based on the work undertaken at this follow-up audit that the effective management and control of the system risks is assessed as MARGINAL. This conclusion is reached from the evaluation and testing of the system and a number of weaknesses have been identified which make it difficult to place reliance on the operation of the internal control framework. Improvements are required to increase the adequacy and effectiveness of control. As only those recommendations requiring a follow up have now been audited, this opinion is given on the basis that the controls audited at the previous audit (and not subject to this current follow up) have not deteriorated. File Ref: Page 1 of 11 Issued: April

4 Improvement Profile n/a August 2010 September 2011 April months on Previous Audit Current Audit Expected Progress Follow up Audit Opinion Original Audit Opinion Expected Follow up Opinion Actual Follow up Opinion Future Expected Audit Opinion n/a Unsound Marginal Marginal (1) Good (2) n/a 17 of 37 controls were good 29 of 37 controls were good 18 of 37 controls will be good 37 of 37 controls will be good 7 Recommendations 1 Recommendation 3 Recommendations 0 Recommendations (1) As only those recommendations requiring a follow up have been audited, this opinion is given on the basis that the controls reviewed in the original audit and assessed to be Good have not deteriorated. (2) The future expected audit opinion is based upon the controls tested within this audit continuing to operate effectively. The programme of testing is subject to change in order to capture new areas and to reflect changing systems. Such changes may have a bearing on the accuracy of the future expected audit opinion. Basis of Audit Opinion (Follow up) The scope of the follow up audit was based on the results of the original audit. The audit work was undertaken within available resources, and the findings and results are based upon the assessment of identified controls. These controls are assessed based upon the assurances provided by officers during the course of the audit and the selection and review of relevant documents. Based on the extent to which agreed actions have been successfully implemented, an opinion is formed as to the effectiveness with which system risks are managed. As the audit examined selected key controls of the system on a sample test basis, it does not aim to detect all errors, irregularities or weaknesses. Role of Responsible Officers Officers charged with managing the above area are reminded that they are responsible for putting in place proper arrangements in accordance with the relevant policies, regulations and best practice to secure the economy, efficiency and effectiveness of the Authority s resources, ensuring integrity, proper stewardship and governance. It is the primary role of internal audit to report to the s.151 Officer on the effectiveness and integrity of the Authority s systems of internal control and the management of its resources. File Ref: Page 2 of 11 Issued: April

5 Follow Up Control Summary Overall Objective: That the Authority has robust tendering arrangements in place to help ensure compliance with corporate requirements across the organisation and demonstrate that all procurement requiring tender takes place in a fair, transparent and equitable manner. Audit Opinion Marginal Date of Opinion 17/04/12 NB: Reference numbers may not be in sequence as only those controls for which recommendations were made during the original audit have been reviewed at the follow up. Original REF EXPECTED CONTROLS Recommendation Follow Up Good (Yes/ Recommendation) 1. Tender process There is a clearly defined, documented and communicated process to help ensure tender exercises undertaken throughout the Authority are to a consistent quality and are unimpeachable. 1.1 Documented procedures to instruct officers on the correct procurement route, controls to be applied and documentation to be retained when undertaking tender exercises are available to all staff requiring access to them. 1.2 The personnel involved in contract procedures are given formal instructions/ training regarding their duties and responsibilities and the procedures to be followed. R2 RF2 2. Contract valuation An estimate of the contract sum is completed in advance of inviting contractors to tender. 2.1 Documented tendering procedures require an estimate of the contract sum to be formally produced. 2.2 A detailed specification/bill of requirements is produced and provided to the individual valuing the contract. 2.3 Written documentation of the contract valuation has been provided and retained. 2.4 The estimate of the contract value is performed by an appropriately skilled/qualified individual with independence from the main tender exercise. 3. Document preparation Tender documentation sent to organisations wishing to tender is complete and accurate. 3.1 All tender documents are checked prior to being sent to all contractors approved to tender for a contract, to verify the details sent are accurate and complete. 3.2 Contractors are notified of the deadline for the receipt of tenders at the time of invitation to tender. The deadline date and time is recorded by the procurement department to enable them to expect the receipt of tender bids. Control Evaluation - Good - Low Risk - Medium Risk - High Risk File Ref: Page 3 of 11 Issued: April

6 Follow Up Control Summary 4. Invitation tender to The tender invitation process is undertaken in a fair and equitable manner and complies with Standing orders and EU regulations. 4.1 A record is maintained to support the decision and approval to invite tenders from contractors to ensure unauthorised firms are not invited to tender. 4.2 Advertisements for the exercise are clearly publicised through relevant channels on a timely basis, and maximise the probability of obtaining the best available supplier base. 4.3 A record of every contract, contractors invited to tender and contractors who have tendered is maintained to identify from whom tenders were expected to be received. 4.5 EU tenders comply with the time limits specified by EU Procurement Directives. R4 Yes 6. Tender opening Opening of tenders is controlled in a manner that ensures the process is open and transparent complies with Contract Procedure Rules. 6.1 There is a list of officers who are authorised to open tender documents. This is regularly monitored and reviewed. At least two authorised officers are required to complete tender opening. 6.5 Suspension certificates are obtained in circumstances where less than three completed tenders are received. 7. Contract award Accepted tenders are assessed in a transparent, fair and equitable manner. 7.1 All tender documents are examined for unauthorised amendments/arithmetical accuracy, omissions, and any significant variations investigated. This process is certified as being completed. 7.3 A standard scoring methodology is in place against which all tenders are scored. 8. Contract signing Contracts are appropriately signed/sealed and exchanged on a timely basis by all parties and securely stored afterwards. 8.1 The signature of the individuals signing the contract on behalf of the contracting organisation is checked to verify they have been granted the appropriate authority. 8.3 Work/supply has not commenced until a signed contract is in place and has been exchanged. 8.5 Once signed, contracts are logged and stored in a secure, central location. 8.6 Document retention periods have been established for contracts and contract documentation. R5 R4 R6 R7 Yes Yes Yes RF3 Control Evaluation - Good - Low Risk - Medium Risk - High Risk File Ref: Page 4 of 11 Issued: April

7 Follow Up Exception Report Overall Objective: That the Authority has robust tendering arrangements in place to help ensure compliance with corporate requirements across the organisation and demonstrate that all procurement requiring tender takes place in a fair, transparent and equitable manner. Audit Opinion Marginal Date of Opinion 17/04/12 Expected Control: 1.1, 2.2, 2.2, 2.3, 2.4, 3.1, 3.2, 4.1, 4.3, 4.5, 6.1, 7.1, 7.3, 8.6 It is recommended that a) a comprehensive tender process covering all tender types is designed and documented to meet the CPR requirements and as a minimum must include the following sequence of activities: Contract valuation Document preparation Scoring methodology Invitation to tender Tender receipt Tender opening Contract Award Contract signing Using the Bravo e-tendering system The process should establish both a clear QA process and managerial responsibility with sign off at all stages of the tender development. The tender process must be a repeatable process to be used by all officers involved in a tendering exercise, without exception. b) An implementation and rollout plan is developed to embed the process throughout the authority. Supporting written procedures must be developed on how to complete each activity and guidelines provided to identify best practice including document templates, checklists and record keeping. High Follow up work carried out during December 2011 a) The Director of Business Services is utilising systems thinking to lead a piece of intervention work regarding procurement. Amongst other benefits, this work will result in the establishment of a comprehensive tendering process. The requirements of the recommendation will be considered when the process is being designed. b) A corporate-wide implementation and roll-out plan will be drawn up and executed for the new procurement process. Original Owner Director of Business Services Timescale: Original Timescale 31/08/11 At the time of follow up audit the tender process document was in an incomplete state, had not been approved, published and communicated throughout the City Council. Therefore as the document has not been implemented, Internal Audit cannot provide an opinion to its effectiveness and the extent to which it has been embedded throughout the City Council. Additional as at 29/03/12 The final version of the Contract Procedure Rules (CPR s) has now been written in liaison with various stakeholders including Legal Services, Risk Management, Financial Services, Audit Services and the Procurement Task & Finish Working Group. The CPR s set out the high level requirements which must be complied with. More detailed guidance is provided within a supporting Procurement Process Guide, a document which provides an appropriate framework for the delivery of a comprehensive tender process. These documents were presented to Full Council on 29/03/12 for approval. Ten formal training workshops have now been delivered to various officers from all directorates of the City Council regarding the updated CPR s and Procurement Process Guide. A training session for members is scheduled to be delivered on 30/03/12 with mandatory sessions planned to be delivered to senior officers during 2012/13. Reiterated Revised Removed Additional Cleared File Ref: Page 5 of 11 Issued: April

8 Follow Up Exception Report Expected Control: 1.1 R2 A review of the use and licensing arrangements of the Bravo e-tendering system should be undertaken to ensure tenders can be conducted electronically across the Authority as required by the CPRs and should be considered during the review of CPRs that is in progress. The intervention work will encompass the use of e-tendering platforms and potential benefits they may bring to the organisation. CPR s will be adhered to or amended as required in light of process improvements identified. Medium Original Owner Director of Business Services Timescale: Original Timescale 31/08/11 The review is on-going at the time of follow up audit. Corporate Procurement have liaised with all directorates however a conclusion is still to be reached with a proposed number of additional licenses to be purchased. Although an indication has been provided by the Assistant Director, Financial Services that funding will be available for the purchase of additional Bravo licenses, a formal consideration has not been given to the affordability and sustainability of increasing the number of Bravo licenses. Projected costs for future year s license purchases and renewals have not been formally identified and budgeted for. Reiterated RF2 Revised Removed Additional Cleared File Ref: Page 6 of 11 Issued: April

9 Follow Up Exception Report Expected Control: 1.2, 4.1, 4.2, 4.5, 6.5, 8.3, 8.5, 8.6 It is recommended that Procurement develop and launch a training and capacity building programme regarding procurement and wider contract management. (Reference Contract Governance - 09/10 Audit Report issued 23rd April 2010, 5) This to include guidance on: EU procurement regulations Framework agreements The tendering process Scoring methodology Authorisations required at each stage of the tender process Checklists & available guidance Exemption certificates Permissible contract extensions Records retention and disposal NSRP should be included early in the training plans; in particular the teams involved in play area construction and in demolition. A programme of procurement workshops has been delivered to the business since the issue of the initial draft audit report. The increase in contracts let via Corporate Procurement and the reduction in exemption certificates issued is evidence of the success of these workshops. CPR guidance will be made available to staff in the interim. However, it is recognised that further education of the business will be required following the intervention work and the redesign of procurement processes. Medium Original Owner Principal Procurement Officer Timescale: Original Timescale 30/11/11 There are a series of planned procurement training workshops which are intended to be delivered from 11/01/12. The planned workshops were advertised via Our Staff on 07/11/11. The Corporate Procurement Manager stated that requests from all directorates to attend the workshops have been received attendance requests to date have been observed. No training has yet been delivered and at the time of audit no training material had been written to be delivered. The Corporate Procurement Manager stated that an expression of interest for member training had also been received and that this was being considered for inclusion. This has been planned for 16/03/12. Additional as at 29/03/12 Eight formal training workshops have now been delivered to 103 officers from all directorates of the City Council regarding the updated CPR s and Procurement Process Guide. A training session for members is scheduled to be delivered on 30/03/12. The Corporate Procurement Manager has also stated that mandatory training sessions for senior City Council Officers are also planned to be presented during 2012/13. Reiterated Revised Removed Additional Cleared File Ref: Page 7 of 11 Issued: April

10 Follow Up Exception Report Expected Control: 4.3, 8.3 R4 It is recommended that the specification of the contracts register currently under development (Contract Governance - 09/10 Audit Report issued 23rd April , 2, 3) is reviewed to remove the need to operate different systems throughout the tender process such as the CMS used for receipting; and is extended to include: The allocation of a unique reference number at the time of gaining approval to invite for tender and inclusion in the contract register at that stage Recording the date of signing of the contract, and the date of commencement in the contract register. This will provide a complete view of procurement activity across the authority in a single place although the fit with Bravo e-tender system must be clearly defined. The first draft of the Corporate Contracts Register will be published shortly. This will include the use of a unique reference number for new procurements added to the register. The contracts register is soon to be published in line with guidance produced by the DCLG/LGA. The intervention work will ensure that the use of the contracts register is maximised and accuracy of entries is maintained. Medium Original Owner Principal Procurement Officer Timescale: Original Timescale 31/03/11 As part of the Government s commitment to increase transparency across LA s a register of contracts awarded ( 500+) from Jan 2011 onwards has been prepared and published on both of the City Council s internal and external web sites. This is maintained by Corporate Procurement to ensure its content is contemporary. Reiterated Revised Removed Additional Cleared Expected Control: 8.1 R5 It is recommended that the risk of not confirming the registered appointment of the supplier signatories on contracts is assessed and the appropriate actions put in place. The form of contract employed most commonly used by Legal Services is a deed normally requiring signature by two Directors of the successful supplier. Discussion will be held with Legal Services in respect of putting appropriate safeguards in place for checking contracts are signed at the appropriate level by external contracting parties. Low Original Owner Principal Procurement Officer Timescale: Original Timescale 31/03/11 The recommendation has been implemented. Although a formal risk assessment has not been conducted, the explicit advice of Legal Services has been sought. The Principal Solicitor confirmed that there is no risk to the Council regarding the recommendation. Reiterated Revised Removed Additional Cleared File Ref: Page 8 of 11 Issued: April

11 Follow Up Exception Report Expected Control: 8.5 R6 It is recommended that an additional check in legal services is undertaken to ensure that the original contract is logged and stored on case closure. It is envisaged that, as part of the redesign of the tendering processes, a copy of each completed contract will be scanned and attached to the Contracts Register. Whilst signed, hard copies of deeds will be stored in the Legal deeds room. Low Original Owner Principal Procurement Officer Timescale: Original Timescale 31/08/11 An agreement between Corporate Procurement and Legal Services has been reached which now ensures that copies of future completed contracts are to be forwarded to Corporate Procurement for uploading to the central contracts register. Reiterated Revised Removed Additional Cleared Expected Control: 8.6 R7 It is recommended that the Corporate records retention and disposal schedule and current practice is reviewed and the schedule is updated as appropriate. A review will be undertaken of both the Corporate Retention Schedule and the requirements and practices of Legal Services to ensure consistency. Following this, appropriate guidance will be added into the Contract Procedure Rules. Low Original Owner Principal Procurement Officer (for CPR s) & Assistant Records Manager (for consistency review) Timescale: Original Timescale 31/08/11 The Corporate Procurement Manager has co-ordinated a review of the Corporate Retention schedule to ensure that this is consistent with the Legal Services rules on retention with a view to aligning the two. The Principal Solicitor has confirmed that she has been tasked with reviewing Legal Services retention periods and harmonising with Corporate standards however this task was incomplete at the time of audit. Reiterated RF3 Revised Removed Additional Cleared File Ref: Page 9 of 11 Issued: April

12 Follow Up Action Plan Expected Control: 1.1, 2.2, 2.2, 2.3, 2.4, 3.1, 3.2, 4.1, 4.3, 4.5, 6.1, 7.1, 7.3, 8.6 Ref Recommendation Management Response It is recommended that the communication programme regarding the recently updated Contract Procedure Rules and Procurement Process Guide should continue to be delivered as planned. Mandatory training for senior officers should also be scheduled and delivered as per Cabinet s recommendation. Corporate Procurement have now delivered ten procurement training workshops one of which was for elected members. To date, 113 officers and 6 elected members (including 2 members of the Cabinet) have been trained on the new procurement process as contained in the Procurement Process Guide. Feedback has been strongly positive. Procurement training should be delivered as part of a continual cycle in order to encourage organisational continual learning in procurement. Once the current planned cycle of training has been delivered consideration should be given to providing periodic sessions in order to refresh officer knowledge, update legislative or procedural changes and to accommodate new City Council officers that would benefit from such training. Regular procurement training sessions will help to build organisational capability and ensure the awareness and effectiveness of the Contract Procedure Rules and the supporting Procurement Process Guide. Further training on the Procurement Process Guide Following the completion of the first round of workshops, a wider procurement training program will be rolled out in the first quarter of 2012/13 to Assistant Directors, Strategic Managers and any other budget holders. This will again focus on giving tuition on the Procurement Process Guide to ensure one consistent approach to the way that procurement is carried out across the City Council. Procurement training is now embedded into the Council s wider training program for staff, and Organisational Development staff are supporting this initiative through corporate booking arrangements. Discussions have been held with Organisational Development so that such procurement training can be embedded into the Council s wider training program for staff. Further training initiatives will be undertaken as follows: Corporate Induction All corporate induction meetings will include an overview presentation on the Procurement Process Guide. Advanced Procurement Training A half or full day training course will be held on a quarterly basis for those council officers requiring more in-depth procurement training. This course will be developed in conjunction with Organisational Development and will form part of the Corporate Training Program. Bravo Training Training will be provided during the first quarter of 2012/2013 to Council officers using the Bravo system. It is also proposed to hold a number of Bravo training courses with suppliers on the supplier side of the system. Darren Pearce Corporate Procurement Manager High Timescale: The further training on the Procurement Process Guide will be delivered in the first quarter of 2012/13. This training will then be on-going and so will the training initiatives regarding Corporate Induction and the Advanced Procurement Training. Bravo training will be delivered in the first quarter of 2012/13. File Ref: Page 10 of 11 Issued: April

13 Follow Up Action Plan Expected Control: 1.1 Ref Recommendation Management Response RF2 The review of the use and licensing arrangements of the Bravo e-tendering system continue with the objective of ensuring tenders can be conducted electronically across the Authority as required by the CPRs. All officers doing regular procurement work will be issued with a Bravo licence in their specific name enabling them to create tender documentation on the Bravo system, receive completed tenders on Bravo and carry out tender evaluation. A formal consideration of the availability of funding should also be prepared in order to enable accurate financial planning and to limit any adverse unexpected outcomes. A further review will be undertaken of the requirements for Bravo licences together with the renewal of the contractual arrangements. Furthermore, confirmation of the funding for Bravo licences and training will be obtained. Low Darren Pearce Corporate Procurement Manager Timescale: Quarter 1 of 2012/2013 Expected Control: 8.6 Ref Recommendation Management Response RF3 It is recommended that the Corporate records retention and disposal schedule and current practice are reviewed as planned and the schedule is updated as appropriate. Corporate Procurement will do a follow up with Legal Services and Governance to ensure that the Legal Services Retention Schedule is consistent with the Corporate Retention Schedule. A paragraph has been inserted into the new Contract Procedure Rules at that Tender documentation shall be retained and disposed of in accordance with the requirements of the Corporate Retention Schedule. Low Darren Pearce Corporate Procurement Manager Julie Savage Principal Solicitor Timescale: Quarter 1 of 2012/2013 File Ref: Page 11 of 11 Issued: April