Presentation on theme: "Internal Audit themed review of procurement in schools"— Presentation transcript:
1 Internal Audit themed review of procurement in schools Barrie Cull, Senior Auditor
2 Introduction Overall aim of the session: To provide an understanding, or refresh knowledge, of:Risks and controls over procurement processesWhy they are required and what might happen if they are not adhered toWhat does Internal Audit do ?Carry out audits as agreed in the annual plan approved by the Governance and Audit CommitteeProvide advice and informationInvestigate potential irregularitiesCarry out pro active fraud work
3 Internal Audit themed review of procurement Objective :The aim of the audit was to provide assurance that procurement/contract risks are being managed effectively by schools in order to meet their and Kent County Council (KCC) service and corporate objectives.Reason why the review was carried out :In recent years we have become aware of purchases or leases of equipment or building work undertaken which did not comply with financial and procurement regulations and failed to demonstrate value for money. We wanted to see how effective the existing controls are and how they could be improved in future.
4 ‘Spending the Council’s Money’ Key documents‘Spending the Council’s Money’KCC procurement - “Spending the Council’s Money” contains a mixture of legislation, rules, guidance on good practice and examples of potential pitfalls. Rules are put in place to provide a structure to deliver :Value for money;Consistency of approach;Competition;Transparency; andFairness‘Procurement rules are also often seen by those subject to them as hindering their day to day roles especially considering that spending money is not why councils exist. What is appreciated less often is that following appropriate rules when spending the Council’s money provides strong personal protection to individuals against accusations of unfair or inappropriate behaviour.’ ( Spending the Council’s Money )
5 Key documents ( continued ) Scheme for Financing SchoolsFinance PolicySets out the financial policy of the school – template on KelsiShould be presented to and approved by the Governing Body. Signed by the Chair of Governors and reviewed very two years.
6 Value for moneyThere are numerous websites including the DfE website with links to procurement for public sector organisations. Examples are :-The Government Procurement Service (GPS) - now part of the Crown Commercial Service, a new organisation which also includes the former commercial function of the Cabinet Office, and common goods and services procurement and commercial management currently undertaken by departments.Department for Education -Alternatively, some schools have got together locally to contact suppliers and obtain quotations for bulk purchases.
7 A reminder of the thresholds The financial values (exclusive of Value Added Tax) at which processes become mandatory are:£8,000 to £49,999 – at least three written quotations must be sought from appropriate sources.£50,000 and above – the competitive tender process must be followed.The current levels at which these apply are for goods and services,£172,514 and for works, £4,322,012 - European Union Directives, enacted in UK Law, set these limits for public contracts above which specific procedures are required to be followed.The overall obligations of the Code and the statutory requirement to achieve value for money apply to all transactions and don’t just apply from the above amounts. A competitive tender process may therefore be appropriate for procurements below £50,000.
8 General findingsSome schools did not obtain three written quotations for goods and services – with a risk that value for money could not be demonstrated. One school had only used one supplier for building maintenance work and this amounted to over £80,000 in one financial year.Some schools used the same suppliers when obtaining quotations without testing the market – resulting in a risk that value for money could not be demonstrated. In future, schools will be able to advertise on the Kent Business Portal.Two schools had not raised purchase orders for building work during the year – with the risk that committed expenditure was not known, monitored and checked against when the invoices were received, resulting in possible overpayment and overspend.
9 Some schools had obtained written quotations for goods or services which totalled over £50,000 and therefore a tender exercise should have been run. There are however risks with tender exercises not being run properly. ‘Spending the Council’s Money’ has very useful guidance on the transparency and accountability required in tendering for goods and services and the controls which should be in place. If an unsuccessful bidder challenges the award of the contract, there will be a need for the school to demonstrate that the correct procedures and controls were followed throughout the process.
10 Some schools did not have evidence of contracts or services eg grounds maintenance or computer maintenance, being reviewed on an annual basis and competitively tested against other suppliers. Two schools had paid suppliers in advance for work not fully completed. This related to work carried out during the Summer holidays when the finance staff were not present. We found instances of no current contract with agreed rates for individuals providing services to schools. There is a risk that an individual is, in effect, an employee but their tax status is not known.
11 Good points !The Finance Policy at schools visited had been approved by the Governing Body and in most cases, the thresholds stated in the Finance Policy agreed with the thresholds in ‘Spending the Council’s Money’. There were instances of primary schools setting up agreements with Technical Colleges for IT maintenance and support services. There were effective systems in place for ordering and receiving goods and making payments. In particular, from our sample of schools visited, no individual was found ordering, receiving and paying for goods and services. The majority of Bursars realised and appreciated the risks and the need for effective and robust controls over procurement processes, including the need to complete a declaration of interest form as required.
12 Why is all this important ? Need to demonstrate compliance with legislation and regulationsFair, transparent and accountable procurement processesMissed opportunities to achieve value for moneyStatement of Internal Control and Annual Governance StatementFreedom of Information Act requestsPossible sanctions :-More compliance visits to a schoolReport to Chair of GovernorsFinancial investigationChallenge from unsuccessful tenderers or suppliers could lead to excessive time or expenditure being spent defending the challenge, unwelcome publicity for the school and/or the risk of fines and prosecution.Needing to terminate a serviceDelegation could be taken away
13 What next … ?Internal Audit report to Director of Education, Learning and Skills setting out findings and recommendationsLiaison with Schools’ Financial Services and Procurement TeamExplore opportunities to provide promote good practice and provide training and advice on procurement processes, risks and controlsReview guidance – ‘Spending The Council’s Money’ for schools ?Governor training and/or guidance on procurement risks and controls ?Maybe carry out another themed review of procurement during the coming financial year …