Internal Audit Procurement Contract Procedure Rules (CPR ... Contract... · Internal Audit Procurement – Contract Procedure Rules (CPR) Compliance – November 2015 Distributed

Internal Audit

Procurement – Contract Procedure Rules (CPR) Compliance – November 2015

Distributed to: Chief Operating Officer Head of Procurement, CSG Director of Resources Partnership Manager Business Partner / Principal Consultant, CSG Assistant Director of Finance, CSG Head of Exchequer, CSG Education and Skills Director Senior Business Resource and Contracts Officer, SEN Referral and Assessment Team, Education and Skills Family Services Director Head of Service Commissioning Strategy, Insight and Commissioning Manager Adults & Communities Director Head of Care Quality, Adults and Communities Street Scene Director Business Support Officer, Street Scene Commercial Director for RE Commercial Manager, Property and Infrastructure

Procurement – CPR compliance

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Audit Opinion and Direction of Travel

Previous audit: Corporate Procurement May 2011 (Pre-Capita) – Limited (comparable scope)

No Limited Satisfactory Substantial


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1. Executive Summary

Introduction The Procurement – CPR Compliance audit was agreed in the Internal Audit, CAFT and Risk Management Plan 2015-16. Background & Context

Public procurement is the process whereby public sector organisations acquire

goods, services and construction works from third parties.

The Customer Support Group (CSG) Procurement Team are engaged with and

oversee procurement processes, on behalf of the Council, end to end from when

commissioning requirements and objectives are considered by Delivery Units

(DUs) until contract award.

Procurement is currently governed by the Council’s Contract Procedure Rules

(CPR) – 2015 which is part of the Council’s Constitution and are aligned to

European Union (EU) Regulations. The aim of CPR is to ensure value for money

in the spending of public money and the delivery of high quality services in a

timely and legitimate manner.

Corporate objectives The audit supports all four of the strategic objectives in the Corporate Plan 2015 – 2020: The council, working with local, regional and national partners, will strive to ensure that Barnet is a place:

1. of opportunity, where people can further their quality of life

2. where people are helped to help themselves, recognising that prevention is better than cure

3. where responsibility is shared, fairly

4. where services are delivered efficiently to get value for money for the taxpayer.

Audit work Our audit work involved:

- interviews confirming and corroborating processes with procurement officers in CSG Procurement and procurement lead officers within the Adults and Communities, Family Services, Education and Skills, Street Scene and Re delivery units;


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- confirming procurement processes and related documentation with contract managers and other Delivery Unit officers involved in procurement exercises; and

- testing whether spend with a sample of vendors from 2012/13 onwards, selected from Integra vendor spend analysis reports provided by CSG Procurement, was CPR compliant.

Key findings (informing audit opinion) There are three priority 1 and seven priority 2 recommendations. The following controls were noted as operating effectively:

- The availability and accessibility on the Intranet of the Council’s most up to date Contract Procedure Rules (March 2015) and fit for purpose procurement guidance covering CPR requirements.

- The delivery of regular fit for purpose training, covering CPR requirements, to officers with the relevant procurement roles.

- The management and visibility of procurement exercises undertaken through the Curtis and Fitch Procurement E-Portal, the secure system used for the submission of tender documentation, the receipt of final bids from potential suppliers and receipt of/response to queries raised by potential bidders prior to close date, to ensure independent oversight of procurement initiatives by procurement experts for compliance with CPR, including completion of relevant Delegated Powers Reports (DPRs).

- Restricted system access to the Curtis and Fitch Procurement E-Portal to prevent the fraudulent communication of bids submitted/lodged by bidders prior to the close date and the retention of bids on Curtis and Fitch after close date to mitigate the risk of fraudulent alteration of bids.

- Confirmation from all internal Delivery Units of ongoing interaction between CSG Procurement and Delivery Units in the provision of procurement advice and guidance and the development of Procurement Forward Plans.

Our view is that procurement systems and control processes followed by CSG Procurement in overseeing and monitoring compliance with CPR are adequate and effective to mitigate the identified procurement risks.

However, the following significant issues were noted for procurement across the Council:

- Contract Registers – Delivery Unit contract registers did not reflect all contractual relationships exceeding £5k in line with the CPR. Responsibility for the maintenance of this level of contract register rests with Delivery Units. (Priority 1)

- Conflicts of Interest – Procurement declaration of pecuniary interest forms were not completed at the start of each procurement exercise in line with the Officer Code of Conduct.(Priority 1)


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- Vendor creation and approval – We noted 6 out of 25 instances

where vendors were created in Integra without the approval of CSG Procurement officers. Our expectation is that a vendor should not be created in Integra without prior scrutiny, challenge and endorsement by central CSG Procurement. (Priority 1)

The following other issues were noted:

- Procurement method - CPR compliance - We noted 4 out of 34 instances of vendor spend exceeding CPR £10k thresholds without evidence of the required quotation exercise. (Priority 2)

- Procurement method - waivers – The detailed e-mail audit trails of the Legal clearance and reasoning/assessment around the legality of waivers were not consistently retained by Delivery Units for referral and scrutiny where necessary. (Priority 2)

- Training – The Re procurement lead and her manager had not attended CSG Procurement training. It is expected that all officers with a procurement role, including external Delivery Units procuring on the Council’s behalf, should attend training on Council procurement processes. (Priority 2)

- Contract repository and procurement documentation – We were unable to identify key procurement documentation, for example contracts and DPRs, in the contract repository/folders for 4 vendors evident on the spend analysis provided by CSG Procurement. (Priority 2)

- Authorisation and acceptance of procurements – DPRs for the award/acceptance of 2 vendors out of 19 tested were not found. One had not been prepared owing to time constraints and we were told would be completed shortly. (Priority 2)

- Contract and contract value limits – Contract details such as the contract reference, contract value and contract term, were not consistently reflected in Integra for referral where necessary (Priority 2)

- Transparency Code – The quarter 1 data set “Barnet Contracts Register Q1 2015-16” published on the Council’s website did not include all contractual relationships above £5k as required by the Council’s Transparency Policy. (Priority 2)

Area of Scope Adequacy of Controls

Effectiveness of Controls

Number of Recommendations Raised

Priority 1 Priority 2 Priority 3

Procurement method

1 4 0

Conflicts of Interest

1 0 0


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Authorisation and acceptance of procurements and success bidders

0 1 0

Contracts and contract value limits

0 1 0

Contracts Register 1 0 0

Transparency agenda

0 1 0

Total number of recommendations by priority rating 3 7 0

Limitations to Scope:

The audit excluded: - The arrangements for the development of a fit for purpose contract

specification. - Post-award contract management – contract service delivery

monitoring and administration arrangements. - The conflict management area where Capita, through Capita CSG

procurement, IT or estates staff, could have access to bidder procurement information as part of a tender in which Capita are also one of the bidders.

Acknowledgement We would like to thank officers in CSG Procurement, Street Scene, Adults and Communities, Re, Family Services and Education and Skills for their time and co-operation during the course of the internal audit.


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2.1 Contracts Register (Scope Area 5)

P Detailed finding Risk Recommendation

1 Completeness

The contracts registers for all Delivery units (Street Scene, Adults and Communities, Family Services, Education and Skills and RE) that were provided to us did not reflect all vendors with spend of £5k and over.

For a sample of 43 items of vendor spend of £5k and above identified on spend analysis reports provided by central CSG Procurement for 2012/13 to 2015/16, we noted 24 instances where such contractual relationships were not recorded in the expected contracts registers.. Paragraph 5.15 of the Contract Procedure Rules (CPR) requires Delivery Units to “keep a register of all Contracts with total values of £5,000 or over, which may be inspected and will support the annual Budget review.”

The cause of the omissions is that responsible officers in the Delivery Units are not routinely reconciling their contracts registers to reports of vendor spend provided by CSG Procurement. We were also informed that Delivery Units are unable to review vendor spend in Integra in the same way as they were able to do in SAP.

Accuracy

If contract registers - a tool to support financial and procurement forward planning, for example to support the identification of contracts approaching expiry or requiring variation processes to be considered where spend exceeds the contract values - are not complete with all contractual relationships above £5k or do not include all relevant detail for example correct expiry date and contract value, then:

- budget setting may not take into account all relevant spend leading to in-year overspend or the need to withdraw planned services unexpectedly to meet budgets damaging the Council’s reputation.

- procurement processes to secure VfM outcomes in line with CPR may not be undertaken when necessary.

Recommendation 1

a) The processes undertaken annually in developing Delivery Unit Procurement Forward Plans should also be used to ensure that all contractual relationships above £5k are included in the Delivery Unit Contract Registers, for example in a £5k-£10 column.

b) CSG Procurement training and development should remind trainees of their role in keeping Contract Registers accurate and up to date, for example contract registers should also include suppliers procured through external framework contracts where competitive tendering has not been undertaken by the Council itself.

We would suggest that:

- periodic reconciliations between vendor spend analysis reports and contract registers are undertaken by officers responsible for contract registers to ensure that they are complete

- accuracy checks be undertaken to ensure that contractual data is correct for example:

vendor name,


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Our consideration of accuracy of the contracts register was based on discussion with the responsible officers during fieldwork. We were informed that the Adults and Communities contract register recorded spend but not contract values and we noted one instance in discussion with the Family Service procurement lead where the expiry date of a contract in the register was incorrect. We also noted that a person noted as contract manager in the contracts register had left the Council.

contract value/purchase order value if below £10k,

contract term,

end date,

expiry date,

last DPR/Committee Report reference, and

DPR/Committee Report date if above £10k

Management Response Responsible Officer Deadline

CSG Procurement Action To support the DUs in delivering their responsibilities for maintaining their contracts register continuously and accurately, we will:

- help identify contractual relationships above £5k as part of the support to DUs in the development of the Procurement Forward Plans each year.

- Provide monthly vendor spend reports to the Delivery Unit Procurement lead officers, below.

- emphasise this requirement in training and development and provision of ongoing advice and guidance.

Note: It will be the responsibility of DUs lead officers to use the vendor spend reports provided to update and maintain their contracts registers accurately and for DUs to then provide them to

Head of Procurement, CSG

1 March 2016


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the Information Management Officer in the Information Management Team for publication in terms of the Council’s Transparency Policy (refer to recommendation 10) Education and Skills Action: We’ll request / obtain the relevant information from Integra periodically and reconcile to the contracts register to ensure that the Education and Skills contracts register is updated and includes all contractual relationships above £5k. This will also be undertaken as part of the engagement with CSG Procurement in the development of the annual Procurement Forward Plan. Accuracy checks will be undertaken to ensure that details are correctly recorded in the contracts register. Family Services Action: Periodic reconciliations between Integra and contract registers will be undertaken to identify contractual relationships above £5k for inclusion. Accuracy checks will be undertaken to ensure that contract register information is correct. Street Scene

Action: Agreed. We will review a monthly spend analysis report to monitor aggregate spend and ensure that contractual relationships above £5k will be added to the current contract register going forward. A communication was sent on 23 November 2015 to all ordering officers and notified them that all contractual spend over £5K/POs should appear on the Contract Register. They were requested to ensure that they send all relevant documentation for saving in the repository/add to the register.

Adults and Communities Action: Adults to ensure all contracts of the necessary value are included in the Contracts’ Register. Adults will be working to refresh a fully comprehensive version of the contracts’ register for 2016/17 with all required information refreshed at monthly intervals in line with current SCOT mapping reporting.

Senior Business Resource and Contracts Officer, SEN Referral and Assessment Team

Education and Skills

Head Of Service Commissioning - Family Services

Business Support Officer, Streetscene Head of Care Quality Adults and Communities


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Re Action: Re is in agreement that a method of tracking and keeping up to date information is necessary. As per the DRS contract all procurements follow a business case procedure. A register of all active business cases is kept centrally and each business case owner reports in to Re’s commercialisation Manager to regularly update this information.

Commercial Manager - Property and Infrastructure

2.2 Conflicts of interest (Scope Area 2)


1 CSG Procurement Business Partners indicated that they advised / communicated the need to consider and disclose conflicts of interest at key stages of the procurement process, for example at the specification development or evaluation stage. A completed and signed procurement declaration of pecuniary interest form was not available for our inspection for each procurement exercise as there is no formal requirement for DU officers involved in procurement exercises, for example at the specification development or evaluation stage, to complete such a form in line with the Officer Code of Conduct. The extract from Code of Conduct September 2014, part of the Council’s constitution, reads as follows: “9.10 At the start of each procurement exercise all staff must complete a new procurement declaration of interest form

If declaration of interest forms are not completed to formally record and sign-off the existence or non-existence of pecuniary interests in future procurement exercises, then pecuniary interests may not be declared, procurement outcomes may stem from a biased non-objective application of procurement processes and the selection of vendors/award of contracts which do not optimise VfM outcomes for the Council.

Recommendation 2 At the start of each procurement exercise all involved staff, including within CSG or other relevant contractors, should complete a new procurement declaration of interest form documenting the existence or non-existence of any pecuniary or other interests which compromise the objectivity of vendor selection. The completed form should be retained for referral and evidenced as being signed off by the relevant Head of Service. The resultant decision should be documented on the form. Procurement guidance and training should be updated to record the Council requirements for the declarations of interest for procurement exercises and a standard form for this process should be agreed and


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which must then be stored with the Service’s Scheme of Delegation for Audit purposes. This completed form will also be reviewed by an appropriate AD to consider any action that may be necessary. Failure to make a declaration where there is subsequently discovered to be grounds for doing so, will be treated as a disciplinary issue and a potential breach of the council’s Contract Procedure Rules.” We reviewed the “Contract Procedure Rules & Governance Workshop” guidance on the Intranet. Our view was that while conflicts of interest were referred to in the guidance there was scope to increase the related content in the guidance. The Declaration of Interest form - Hospitality, Gifts and Sponsorship - did not have a sufficient procurement focus.

made available on the intranet and as an appendix to the Officer Code of Conduct for ease of access.


CSG Procurement

Action

A procurement declaration of interest form does exist but has not been universally used. Procurement have started to invoke the formal sign-off procurement declaration of interest forms of conflicts of interest especially for higher value procurements to improve the rigour and documentation around the related conversations that occur currently. DU officers involved in the procurement will be told to sign the declaration of interest form which will be sent to and retained by CSG Procurement.


1 March 2016


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Action

All officers involved in procurement initiatives involving an evaluation of quotations/responses to tenders will complete a procurement declaration of interest form at the start of each procurement documenting the existence or confirming the non-existence of any pecuniary interests which could compromise the objectivity of their evaluation and selection of related documentation.

Procurement lead officers will co-ordinate the completion and collection of the procurement declaration of interest form at the start of the procurement and escalate completed forms to the relevant Director or delegated officer with the appropriate seniority to ensure that officers are excluded from the procurement process where appropriate.

Family Services

Action: Agreed. The Procurement declaration of interest form will be reviewed by the budget holder / a Head of Service or above.

Street Scene

Action: Agreed. The procurement declaration of interest from was received from CSG Procurement and we have included the requirement in a communications email to all relevant parties to notify them of the process. The form will be saved in the contract repository. Adults and Health

Action: Upon completion of the Procurement Options Appraisal, an initial assessment of conflict of interest is undertaken. Once the evaluation panel is identified, a further assessment is undertaken. CSG Procurement will then administer the completion and collation of all

Senior Business Resource and Contracts Officer, SEN Referral and Assessment Team Education and Skills

Head Of Service Commissioning

Business Support Officer, Streetscene

Head of Care Quality

Adults and Communities


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declarations which will then be retained by the Delivery Unit.

Re Action: Agreed. Re is the Managing Agent for LBB for DRS therefore all contract procurement follows a governance procedure as per the DRS Contract and will continue to do so.


2.3 Vendor creation and approval (Scope Area 1)


1 We tested 25 new vendor creations in Integra to ensure that they were all approved centrally by CSG Procurement as required within the London Borough Barnet Procurement Toolkit 2014. We noted the following:

- 4 instances where social care placement vendors were created by Accounts Payable directly on e-mail instruction from the Delivery Unit without a vendor creation form approved by CSG Procurement. The Head of Exchequer Services indicated that the vendors were non-procurement vendors and would not require approval from CSG Procurement.

- 1 instance where the vendor creation form provided to Accounts

If vendors are created based solely on the instruction of the Delivery Unit so that their creation in Integra is not subject to central independent scrutiny and challenge by CSG Procurement, then payments may be made to vendors which do not optimise value for money outcomes or which have been created for the purposes of receiving fraudulent payments.

Recommendation 3 Accounts Payable should be instructed to refer new vendor creation forms which have not been signed by central CSG Procurement Business Partners back to CSG Procurement for sign-off and challenge, where necessary. CSG Procurement should also be notified, for review and challenge where necessary, of the following vendors when they are created in Integra:

- Social care placement vendors and - any “historic” procurement vendor

which had not been migrated from SAP to Integra but is now required in Integra.

DUs should complete new vendor forms or include/”cc” the relevant CSG Business


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Payable was not signed by an officer in CSG Procurement and therefore should have been rejected and returned to CSG Procurement in the absence of any other documentation confirming CSG endorsement.

- 1 instance where an old vendor which had not been migrated from SAP was created in Integra directly in response to an invoice from the vendor. The Head of Exchequer Services indicated that not all SAP vendors were migrated across to Integra to prevent the upload of vendors from SAP to Integra that would not be required. Where a vendor was found to be required it would be created in Integra without approval as the view was that approval had already been given in the past for its creation in SAP.

The expectation is that new vendors should not be created in Integra without the knowledge of CSG Procurement to ensure that their validity and creation in the system is subject to independent scrutiny and challenge where necessary. The Procurement Toolkit 2014 referred to the process for the creation of new vendors in Integra and we could not see any reference there to a different process where they were originally created in SAP.

Partner in the DU e-mail requests to create such vendors Note: We understand from the Head of Exchequer Services that an e-form will be developed shortly by CSG Procurement for the creation/amendment of all vendors - procurement and non-procurement - which will route by workflow to all relevant parties, originator, manager, CSG procurement and Accounts Payable. Delivery Units should be reminded, for example through procurement training, of the correct process for requesting the creation of approved vendors in Integra. Procedures defining any acceptable exceptions and process requirements for creating vendors including any agreements reached between CSG Procurement and Accounts Payable should be formally documented and communicated.


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Accounts Payable

Action Vendors will be categorised/grouped to determine those which need to be approved by CSG Procurement. This will be formally documented for example as part of a workflow. The categorisation will address the recommendation for the following vendors:

- Social care placement vendors and - any “historic” procurement vendor which had not been migrated from SAP to Integra but

is now required in Integra, for example those not used for a 14 month period.

Documented procedures will be communicated to the relevant officers in the DUs and CSG


Action: As before, new vendor creation requests in Integra will be sent to CSG procurement on New Vendor forms.

Family Services

Action: New vendor creation requests in Integra will be sent to CSG procurement on New Vendor forms.

Street Scene

Action: Street Scene is compliant with this process and will continue to ensure that requests

Head of Exchequer, CSG Senior Business Resource and Contracts Officer, SEN Referral and Assessment Team Education and Skills


1 March 2016


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for new vendors are made on vendor creation forms submitted to CSG Procurement for their scrutiny and challenge where necessary. The requirement to fill in a vendor form, including vendors that were previously on SAP, was communicated to ordering officers/contract managers on 23 November 2015.


Action: Current practice is in line with recommendations and will be continued.

Re

Action: Re acts as the managing Agent for LBB so any vendor information that needs updating/creating on Integra will need to be carried out by LBB.




Commercial Manager -

Property and Infrastructure

2.4 Procurement method - CPR compliance (Scope Area 1)


2 We noted 4 instances out of a sample of 34 vendors tested where spend was above £10k at 30 June 2015 but was not supported by a quotation exercise on the Procurement E-Portal platform, Curtis and Fitch, as required by CPR – March 2015. We were informed that there would be no quotation exercise managed in Curtis-Fitch for the vendors as the spend was initially below £10k and that the Delivery Unit would now need to be challenged on the future use of those vendors so as to implement the appropriate procurement process, if applicable

If spend exceeding CPR quotation thresholds is raised against existing vendors – for example where the vendor is secured initially following the reasonable means of selection procurement method for spend below £10k - without detection, then that spend may not optimise value for money outcomes for the Council as use of the vendor continues.

Recommendation 4

The “no purchase order, no payment of invoice” approach should be communicated to vendors to ensure that vendors pro-actively request purchase orders from the Council before delivering the service. Purchase orders raised which cause commitments and existing spend to exceed existing contract value limits should be challenged and addressed to ensure future spend is CPR compliant.

The processes undertaken annually in developing Delivery Unit Procurement Forward Plans should also be used to


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The vendor spend was as follows:

Vendor 12/13 13/14 14/15 15/16 Total

1. Pettitt Sports (Street Scene)

0 0 2,040 8,480 10,520

2. Day Plant Hire Co Limited ( CSG Estates)

1,372 386 12,127 2,289 16,174

3. AJS Limited (Re)

0 0 21,097 5,013 26,110

4. Wates Living Space (Re)

0 524 7,280 51,076 58,880

The amounts are not material but as this challenge had not been raised at the date of the audit, it highlighted the potential for spend to be incurred against vendors - after their initial creation - in excess of CPR thresholds, undetected, potentially causing the spend to become non-compliant with CPR as use of the vendor continued. Generally, Interviews confirmed the potential for “bad habits” and Delivery Units spending “off-contract” in excess of contract value limits notwithstanding being instructed not to do so by CSG. Note:

identify and challenge instances, for example as part of workshops, where vendor spend has subsequently exceeded the relevant CPR threshold - in this instance the lowest £10k threshold associated with procuring vendors based on the reasonable means of selection criteria – and taking the necessary CPR action, including potentially supporting local suppliers where appropriate, to ensure that future spend against the vendor remains CPR compliant.

The position around the future use of the 4 vendors noted should be established so that future spend against them, if applicable, is CPR compliant. Arrangements for Re to communicate to CSG Procurement as to how it has secured value for money in line with the Council’s CPR when it has a secured a vendor for use and payment by the Council should be introduced. Related documentation demonstrating VfM in Re’s selection of such vendors should be retained by CSG for referral.


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CPR June 2014 – reasonable means of selection (up to £25k) CPR – March 2015 – reasonable means of selection (up to £10k)


CSG Procurement

Action: The process will be further developed to investigate and refer Integra system automated e-mail alerts, received by Procurement CSG, to the DU procurement lead where the total of purchase orders raised approaches or exceeds the contractual value/limit for the vendor, including vendors above and below the £10k threshold. The investigation will involve discussions as to the procurement method to follow to ensure that excess future spend is CPR compliant.


Action: Agreed. We will ensure that vendor spend which exceeds CPR thresholds is identified and addressed. We will continue to highlight the no purchase, no payment of invoice approach in our discussions with providers.

Family Services

Action: Agreed

Street Scene

Action: The “no purchase order no payment of invoice process” will be re-iterated in a communications e-mail to responsible officers. The review of aggregate spend analysis report will ensure that spend on suppliers beyond CPR thresholds is identified and addressed to ensure that future spend is CPR compliant.





1 March 2016


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Action: Following the roll out this year of a new annualised and more rigorous forward planning process, this will now be incorporated into this approach. The responsibility to challenge will be shared across 3 areas, Procurement, Commissioning and the DU.

Re

Action: Re are happy to accommodate Audits from LBB in regards to business case procurements or change requests. Procurements are made in consultation with LBB and follow a governance procedure as required under the DRS Contract.




2.5 Procurement method - waivers (Scope Area 1)


2 We tested a sample a sample of 14 waivers across Street Scene, Family Services, Education and Skills and Adults and Communities to the detailed audit trails of Legal clearance. Evidence of Legal clearance was provided in 2 instances in Street Scene. At the date of the report responses from Adults and Communities were still outstanding, 7 in total. The actual e-mail audit trails of Legal clearance had not been retained in all other instances for which we received a response (5 in total). Delivery Units generally were of the view that the Legal initials on the Committee or DPR report were sufficient evidence of

If the detailed Legal clearance of waivers is not retained and available for scrutiny and challenge so that instances where legal clearances were not obtained or were the waiver was not properly considered legally, then there is a risk that VfM will not be optimised from the incumbent vendor or through future competition being compromised where other viable vendors decide not to participate in future procurements.

Recommendation 5 Procurement and governance advice and guidance should emphasize the need for DUs to retain the detailed audit trails of Legal clearance, particularly of waivers, as evidence of appropriate consideration as to their legality. We suggest that audit trails are retained for 3 years in line with the Council’s Records Retention & Disposal Guidelines. CSG Procurement should ensure that HB Public Law are aware of the revised stricter approach for allowing CPR waivers so that this approach is embedded as part of the legal clearance by HB Public Law of


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clearance; however this is not in line with the requirements of the governance guidance. The expectation is that more detailed clearance detail is required to be retained for example a copy of the email clearance from Legal, so that actual legal application is available for scrutiny and challenge where necessary. Note: Discussion with the Head of Procurement and CSG Procurement Business Partners confirmed that waivers stemming from poor procurement planning would not be permitted from 2016/17 onwards. The continued use of illegal waivers had been subject to discussion at the recent Procurement Board. Management also referred to the development of work plans involving Commissioners to allocate resources to resolving the issue of continually using CPR waivers to routinely roll contracts forward beyond the acceptable expiry dates.

Committee reports requesting a decision on CPR waivers. Strategic Commissioners should identify and focus on contracts where CPR waiver is a risk and ensure that the proper procurement processes are implemented sufficiently in advance. Note: Records Retention & Disposal Guidelines London Borough of Barnet: Paragraph 3.2: Management and Administration,• Corporate Planning and Reporting, Paragraph 3.2.3: The process of preparing business for cross departmental consideration and making the record of discussion, debate and resolutions Destroy 3 years from closure


CSG Procurement

Action: CSG Procurement has actively discouraged waivers of contract procedure rules. Waivers are included in the Committee reports that are submitted to the Procurement Board. CSG representation at the Procurement Board will continue to challenge, where necessary, waivers requested. CSG Procurement will also continue to “manage out” waivers to CPR as part of their support in the development of the Annual Procurement Plans to ensure that proper procurement processes are implemented sufficiently in advance.


ONGOING


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CSG will also emphasise the more robust approach to discouraging waivers as follows:

- in training and development - ensure that HB Public Law are advised of the stricter approach for allowing CPR

waivers so that this approach is embedded as part of the legal clearance by HB Public Law of Committee reports requesting a decision on CPR waivers.


Action: Agreed

Family Services

Action: Audit trails should continue to be kept in the form of appropriate DPRs published and held by governance. Governance should only accept these where the relevant area has confirmed they have the relevant clearance, including from legal. Actual Legal clearance showing the legal comments and assessment will be retained by the delivery unit for waivers for referral.

Street Scene

Action: Audit trails of clearances, in particular Legal clearances will be retained. Actual Legal clearance showing the Legal comments and assessment will be retained for waivers for referral.


Action: Audit trails will be appropriately retained for 3 years in line with the recommendation.

Re






January 2016 and ongoing


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Action: Agreed. The recommendation will be implemented.


2.6 Training (Scope Area 1)


2 We were informed that the RE procurement link officer and her manager had not attended procurement training run by CSG Procurement. Records of all who attended could not be provided by CSG Procurement during the audit when requested. The view was that these should be maintained in the Delivery Units. We inspected training material available on the Intranet, the Procurement toolkit and from the Contract Procedure Rules & Governance Workshop. We felt that content was sparse in relation to the areas of procurement fraud risk such as bid rigging, price fixing and market sharing as per the “CIPFA guidance, Managing the risk of procurement fraud” June 2015.

If CSG procurement training is not undertaken by all relevant officers or does not address fraud so that officers are not familiar with procurement rules and fraud risks or related signs/trends, then value for money may not be optimised for the Council from procurement exercises.

Recommendation 6 CSG Procurement should offer their procurement training to RE procurement leads and ensure that all officers in RE who are responsible for procurement areas on behalf of the Council are familiar with the Council’s CPR requirements. CSG Procurement should engage with the Corporate Anti-Fraud Team (CAFT) to determine the best approach for updating procurement guidance and delivering training to raise awareness of procurement fraud risks amongst all officers involved in Council procurement exercises, for example around bid rigging, price fixing and market sharing.



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CSG Procurement

Action: As per recommendation

CAFT

Action: As per recommendation

Head of Procurement, CSG Assurance Assistant Director

March 2016

2.7 Contract repository and procurement documentation (Area 1)


2 We were unable to locate procurement CPR documentation for the following items of vendor spend.

Vendor 12/13 13/14 14/15 15/16 Total

1. Amwell Construction Ltd (Re)

275,202 293,281 191,521 54,958 814,962

2. Trinity-Herts Care HomesLtd (Adults and Communities)

0.00 0.00 72,437 26,600 99,037

3. Wates Living Space (Re)

0 524 7,280 51,076 58,880

4. Impower Consulting Limited (Street Scene)

0 0 7,997 31,843 39,840

For the rest of our sample, 30 items of vendor spend, we had to search with CSG Procurement and DU officers to identify contracts and completed acceptance documents when the expectation was that all past and current documentation would be available in one repository. Prompt access

If the relevant procurement documentation is not easily accessible for referral to confirm the position where necessary, for example where spend reports show spend in excess of contract values, that spend may become non-compliant with CPR and may fail to optimise VfM outcomes or become illegal.

Recommendation 7 The procurement documentation for the 4 cases identified should be resolved by procurement leads / contract managers in the relevant Delivery Units, Re, Adults and Communities and Street Scene and stored within the Contract repository. Arrangements should be implemented to capture and save documentation key and relevant to procurement exercises in a structured and systematic way to facilitate prompt retrieval and to support the monitoring of contractual status of vendors, in particular where vendors are secured from procurement exercises undertaken outside the Council.


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to the relevant documentation is also considered key to effective procurement monitoring. NOTE: References in the CPR to the Contract Repository were as follows; Paragraph 5.11: ensure that an original signed Contract is provided to the Deeds Officer and a digital copy of the signed version, together with Acceptance and Authorisation documents and any waiver of these Contract Procedure Rules are placed in the Council’s contract repository and a version approved by the supplier is prepared for publication; Paragraph 15.2: Directors, Assistant Directors, Commissioning Directors and Heads of Service may take decisions on emergency matters (i.e. an unexpected occurrence requiring immediate action) in consultation with the Chairman of Policy and Resources Committee providing they report to the next available Policy and Resources Committee, setting out the reasons for the emergency waiver. A copy of the relevant Policy and Resources Committee report must be provided to CSG Procurement and stored on the Council’s contract repository.


CSG Procurement Head of Procurement, 1 March 2016


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n/a – the 4 cases will be investigated by Re


Action: Agreed

Family Services

Action: Agreed. Key contract documentation will be retained for referral.

Street Scene

Action: A communication e-mail will be sent to notify responsible officers of the process. All contractual documentation, for example DPRs and contracts, will be filed in the repository. The issue noted will be resolved with CSG.


Action: A process of internal review is underway to ensure contracts are stored appropriately within the contract repository. This will include the documentation for the identified case.

Re

Action: The 4 cases will be investigated. Key contract management documentation will be obtained where possible from the DRS contract start date (October 2013 onwards).

CSG Resource and Contracts Officer, SEN Referral and Assessment Team Education and Skills



Head of Care Quality Adults and Communities Commercial Manager - Property and Infrastructure


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2.8 DPR - vendor award/acceptance documentation (Area 3)


2 For a sample of 19 vendors which required Delegated Powers Report (DPR) in terms of CPR we noted 2 exceptions as follows:

1. Re - we were informed by HB Public Law that the DPR had not been produced for a contract valued at £800k at the time in February 2015 owing to work pressures.

2. Street Scene - a DPR could not be located for spend of £31,843 in 2015/16 for a vendor which we were informed was selected from the external West London Alliance Framework where this would have been expected.

If DPRs and Committee Reports are not completed where necessary so that they are subject to public scrutiny through publication, then vendors may be secured which do not optimise value for money outcomes for the Council.

Recommendation 8 The procurement documentation for the 2 cases should be resolved by procurement leads in the relevant Delivery Units, Re and Street Scene.


Street Scene

Action: Agreed. The issue noted will be resolved.

Re

Action: Re will ensure that this is investigated and resolved.



1 March 2016


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2.9 Integra contract data (Scope Area 4)


2 We tested contracts / items of spend for a sample of 35 vendors to contract/purchase orders to ensure that details were reflected in Integra. We noted the following:

Vendor Finding Instances

Eunomia Contract reference however there was no value or term in Integra

1

Straight, Diverse, Care, Fostering for You, Appleyard, Accedo, Hartwig, Parkview, Bunz, Kathy Allen, Foster Refrigeration

Contract exists but no contract reference, value or term in Integra

10

Bush Wheeler Integra referred to an old contract. New contract 70117

1

Honister and Anna

No record of a purchase order or contract in Integra. Spend 2015/16 below £10k but no record of a PO or £10k limit to

2

If Integra contractual data is incorrect or absent, then decision making/necessary actions may be incorrect or delayed.

Recommendation 9 Quality checking arrangements should be implemented to ensure that the correct current contractual/purchase order limits, start and expiry dates and contact terms for contractual relationships are included in Integra.


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control spend


CSG Procurement

Action: Agreed. Consideration will be also be given to Integra system development which could automatically enforce the input of the contract value limit.


1 March 2016

2.10 Transparency Code (Area 6)


2 The quarter 1 data set “Barnet Contracts Register Q1 2015-16” published on the Council’s website, did not reflect all vendors with spend above £5k.

For a sample of 43 items of vendor spend above £5k identified on spend analysis reports provided by central CSG Procurement, we noted 24 instances where such contractual relationships were not published as expected.

The Council’s published Transparency Policy requires the publication “of any contract, commissioned activity, purchase order, framework agreement and any other legally enforceable agreement with a value that exceeds £5,000.” We were informed that the reports provided

If all contractual relationships above £5k are not correctly published for review, scrutiny and challenge by the wider public, then procurement spend may be undertaken which is not in line with CPR and does not optimise VfM procurement outcomes.

Recommendation 10

DU contract register leads should be required to forward complete and accurate contract registers – stemming from the implementation of arrangements per recommendation 1 - to Information Management for publication on the Council website to fully meet the requirements of the Council’s Transparency Policy.


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by central CSG procurement to Information Management for publication reflected spend values above £10k meaning that contractual relationships between £5 and 10k would be omitted from publication. There is also a disconnect in relation roles and responsibilities in that DUs are responsible for the maintenance, completeness and accuracy of their contracts registers but the contract register information for publication is provided by CSG Central Procurement. Furthermore we found no evidence that Delivery Units approved the information for publication.


CSG Procurement

Action: CSG will provide the DUs with the tools, for example vendor spend reports, to ensure that DU contracts registers are maintained and kept accurate and up to date.

It will be the responsibility of DUs lead officers to provide them to the Information Management Officer in the Information Management Team for publication in terms of the Council’s Transparency Policy.


Action: Agreed


Senior Business

1 March 2016


30

Family Services

Action: The up to date contracts register, appropriately redacted, will be sent to Information Management for publishing in line with the Council’s Transparency Code.

Street Scene

Action: The up to date contracts register, will be sent to Information Management for publishing in line with the Council’s Transparency Code.

Adults and Communities Action: Following the review and refresh of the contracts register, recommendation will be assumed as standard practice. Re Action: LBB has sight of the registers used to track work (Commercial Documentation Register, CRN and SPIR Trackers, Business Case Summary). All new contracts that are procured are between LBB and the third party – the decision to publish this information would therefore sit with LBB.

Resource and Contracts Officer, SEN Referral and Assessment Team Education and Skills







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Timetable

Terms of reference (fieldwork start) 30 July 2015

Fieldwork completed 22 October 2015

Draft report issued – factual accuracy 06 November 2015

Management responses received 15 October 2015, 8 December 2015 (Emerging findings discussion with CSG Procurement) 17 November 2015, 2 December 2015 (Family Services) 2 December 2015 (Adults and Communities 24 November 2015, 08 December 2015 (Education and Skills) 17 November 2015 (Street Scene 18 December final responses and agreement received

Final Report Issued 23 December 2015


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Appendix A: Statement of Responsibility

We take responsibility for this report which is prepared on the basis of the limitations set out below:

The matters raised in this report are only those which came to our attention during the course of our internal audit work and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made.

Recommendations for improvements should be assessed by you for their full impact before they are implemented.

The performance of internal audit work is not and should not be taken as a substitute for management’s responsibilities for the application of sound management practices. We emphasise that the responsibility for a sound system of internal controls and the prevention and detection of fraud and other irregularities rests with management and work performed by internal audit should not be relied upon to identify all strengths and weaknesses in internal controls, nor relied upon to identify all circumstances of fraud or irregularity.

Auditors, in conducting their work, are required to have regards to the possibility of fraud or irregularities. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud.

Internal audit procedures are designed to focus on areas as identified by management as being of greatest risk and significance and as such we rely on management to provide us full access to their accounting records and transactions for the purposes of our audit work and to ensure the authenticity of these documents.

Effective and timely implementation of our recommendations by management is important for the maintenance of a reliable internal control system.

Appendix B: Guide to assurance and priority The following is a guide to the assurance levels given:

Substantial

Assurance

There is a sound system of internal control designed to achieve the system objectives.

The control processes tested are being consistently applied.

Satisfactory

Assurance

While there is a basically sound system of internal control, there are weaknesses, which put some of the client’s objectives at risk.

There is evidence that the level of non-compliance with some of the control processes may put some of the system objectives at risk.

Limited

Assurance

Weaknesses in the system of internal controls are such as to put the client’s objectives at risk.

The level of non-compliance puts the system objectives at risk.

No Assurance Control processes are generally weak leaving the processes/systems open to significant error or abuse.

Significant non-compliance with basic control processes leaves the processes/systems open to error or abuse.

Priorities assigned to recommendations are based on the following criteria:

1 – Fundamental issue where action is considered imperative to ensure that the Council is not exposed to high risks; also covers breaches of legislation and policies and procedures. Action to be effected within 1 to 3 months. 2 – Significant issue where action is considered necessary to avoid exposure to significant risk. Action to be effected within 3 – 6 months. 3 – Issue that merits attention/where action is considered desirable. Action usually to be effected within 6 months to 1 year.

Documents

Internal Audit Procurement Contract Procedure Rules (CPR ... Contract... · Internal Audit Procurement – Contract Procedure Rules (CPR) Compliance – November 2015 Distributed