Procurement Systems Report

Procurement Systems Report Internal Audit Final Follow-up Report March 2017 1

Contents 1. Background page 3 2. Purpose of this report - page 3 3. Executive Summary page 4 4. Summary of Findings page 5 5. Overall Conclusion page 7 6. Further work / next steps page 7 Appendix 1 Table of Recommendations from the Procurement Systems Report issued to the Assurance, Audit and Risk Committee on 3 rd September 2015 page 8 Appendix 2 Table of Recommendations: External Review Report - to AARC 3 rd page 43 Appendix 3 Table of Recommendations: Proposals carried at AAR meeting 3 rd page 63 Appendix 4 Procurement Follow Up Audit Testing: - page 65 2

1. Background In January 2015, the Interim Chief Executive of Derry City Council (DCC) was contacted by the Director of the Northern Ireland Audit Office regarding a number of allegations that had been made about Council procurement arrangements in specific areas. The Interim Chief Executive immediately formed a team to carry out an investigation into the allegations that were made. As a result of the investigation work, a significant number of issues were identified and recommendations were made to improve the overall control environment going forward. These recommendations were included in a Systems Report which was presented to the Assurance Audit and Risk Committee in September 2015. Additionally, in August 2015, DCSDC appointed On Board Training and Consultancy Ltd to carry out an external review based on a specified Terms of Reference. As a result of this external review, a number of recommendations were made. This report was presented to the Assurance, Audit and Risk Committee at its meeting in. Furthermore, at the meeting of the Assurance, Audit and Risk Committee in, two additional proposals were made by Members and carried for implementation by Council. 2. Purpose of this report Three follow up reviews have been carried out to date, in, February 2016 and April 2016. It was agreed that a further follow up review would be carried out and a further update provided to the Assurance, Audit and Risk Committee. Therefore, the purpose of this report is to provide a further update on the current position on the implementation of the recommendations as contained in the Procurement Systems Report. Additionally, Internal Audit will also provide an update on the current position on the recommendations made in the External Review Report and also on the two additional proposals carried at the Assurance, Audit and Risk Committee in. 3

3. Executive Summary In the Procurement Systems Report, the key observation / issue was the decentralised nature of procurement across the Council and the lack of assurance on the consistency of the operation of key procurement controls. The key recommendations were with regard to the centralisation of procurement, improving and retaining tender documentation, reviewing the way the council produces and manages tender specifications, formalising the way evaluation criteria are set and scored and formalising the tender evaluation process to ensure that a robust audit trail is in place going forward. Also there was a need to ensure that Single Tender Actions are minimised and managed in line with Council policy. The External Review Report, in essence, reiterated the recommendations made in the Procurement Systems Report; however, a number of additional recommendations were made for consideration and implementation. The additional recommendations were in areas such as involving external parties in significant procurement exercises and meeting with the complainants to acknowledge the previous shortcomings and to build confidence and better relationships going forward. The further proposals approved at the Assurance, Audit and Risk Committee meeting on Thursday 3 rd were with regard to the management of malicious and vexatious accusations and credibility checks being carried out on all applicants as part of tender processes. This follow up report has captured all the recommendations made into three action plans / tables as follows: Appendix 1: Table of Recommendations from the Procurement Systems Report issued to the Assurance, Audit and Risk Committee on 3 rd September 2015 Appendix 2: Table of Recommendations: External Review Report - to AARC 3 rd December 2015 Appendix 3: Table of Recommendations: Proposals carried at AAR meeting 3 rd December 2015 4

There were 37 recommendations made in the original Procurement Systems Report issued in September 2015. For completeness purposes, the Appendices list all the recommendations as they appear in their respective reports. Although there are some recommendations fully or partly duplicated across the reports, there are now 69 recommendations in total listed in column 1 of the Appendices. For reference purposes, Column 1 will also include the relevant report item / title, page number or other reference. The Appendices action plans / tables then capture the recommendations / proposals made along with the management responses, implementation dates, priorities and the position in and February 2016. The last column is now the as at mid. This section was completed by Internal Audit. The section details whether each recommendation has been, or Not Implemented along with a narrative. 4. Summary of Findings Overall, Internal Audit found that since the Procurement Systems Report was issued in September 2015, work has been ongoing to implement the recommendations made in the report. Out of the 69 recommendations made, 55 are now fully implemented and 14 are now partially implemented. On the basis of the follow up work carried out, Internal Audit is satisfied that significant progress has been made to date on the implementation of the recommendations. At this stage all of the recommendations have either been fully or partially implemented. At this stage all of the recommendations have either been fully or partially implemented. Members are advised that a number of the recommendations remain partially implemented due to the fact that there are a number of significant activities ongoing and being implemented at present. These activities include the implementation of the E-tendering system which require significant changes and as such require a longer period to fully implement. Due to the significant changes in working practices that these activities have brought about, it will take some time to fully implement all the recommendations; however, Internal Audit is satisfied that significant progress has been made to date. It should be noted that it will only be when these activities are fully and demonstrably implemented that all the recommendations will be deemed to be fully implemented. In the last follow up report, Internal Audit stated that it could not provide the necessary assurance that all the recommendations are fully implemented until a compliance audit was carried out which will provide assurance that the new procurement controls were not only in place but operating effectively and reliably across the Council. It was Internal Audit s opinion 5

that the required level of assurance would only be able to be provided following the completion of a number of significant procurement exercises. The Internal Audit compliance work carried out consisted of a follow up review of 8 procurement exercises across all Directorates and including Strategic Support Services. Based on the issues identified as a result of the investigation and subsequent system report and external review, two of the procurement exercises reviewed were the last two Stewarding & Crowd Management for Festivals and Events Procurement exercises, both carried out in 2016. Overall, Internal Audit found that for the 8 procurement exercises reviewed, the procurement checklist and associated templates were completed and the new procurement controls were in place and operating. For 6 of the 8 procurement exercises, there were no significant issues identified. However, Internal Audit did identify a number of issues with the two Stewarding Procurement exercises and the significant issues identified are as follows: o o o For both Stewarding procurement exercises, it was confirmed that the external procurement professional was not available at the time of the evaluation exercise so the Council was unable to comply with this element of the tender specification. Management advised that Council officers, on both occasions, attempted to ensure that an external advisor was available but this was not possible given Council deadlines; Additionally, the qualification / compliance checks were not carried out for the events delivered in 2016. Events staff carried out the qualification / compliance checks in. As a result there were no issues identified for the checks on the Jazz Festival, North West Angling Festival, Summer Jamm, Waterside Half Marathon, Slow Food Festival and the Halloween Carnival Celebrations. However, the checks were unable to confirm the appropriate qualifications for a small number of Stewards at the Foyle Maritime Festival (3 Stewards) and the Christmas Lights / Festive Time Celebrations (1 Steward). It should be noted that there were no compliance issues identified around the supervisor s qualifications; For the Spring Events 2016 Stewarding exercise, the feedback evidence from Council to the unsuccessful supplier was limited to the overall scoring and did not cover why the quality submission was deemed inadequate. Therefore, there is a risk that the limited nature of the feedback given to tenderers does not assist them to improve their future submissions. 6

As a result of compliance testing Internal Audit made a number of recommendations and a management response has been provided. The detail of the findings, recommendations and management responses is included in Appendix 4. 5. Overall Conclusion On the basis of the follow up work carried out, Internal Audit is satisfied that good progress has been made to date across the organisation on the implementation of the procurement recommendations. The updated position on each of the recommendations is detailed in the Appendices below. Overall, management should continue to monitor to ensure that the new procurement checklist and templates continue to be embedded across the Council with evidence of reviews signed off and dated by managers. 6. Further work / next steps Another Procurement compliance audit will be scheduled in due course and the results will be reported to the Assurance, Audit and Risk Committee. 7

Appendix 1 - Table of Recommendations: Procurement Systems Report Final Report - to AARC 3 rd September 2015 Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 1 Report Item 4.1 De-centralised versus Centralised Procurement Centralised Procurement: It is recommended that a review of procurement is carried out to implement a more centralised approach to the administration of procurement exercises across the Council. From an audit perspective, the objective of this review would be to ensure that the key expected procurement controls as detailed in the table at 3.1 are in place, operating and reliable for all procurement exercises across the Council. Following consultation with Unions & Staff a more centralised approach to the administration of procurement exercises will be implemented. The review of Procurement and the transition from a decentralised approach to more centralised approach is ongoing. On 9 th November 2015, a delegation from DCSDC visited Belfast City Council representatives to discuss and review their experiences in this area. The review of Procurement was discussed at DCSDC Management Team on 16/11/15 and 14/12/15. The first stage is for each Directorate to identify 2 / 3 staff to liaise with the Procurement Manager. The Procurement Manager confirmed that E-Tendering will be implemented by 31 st March 2016. This will automate a number of the key expected procurement controls. Initial: Dec 2015 New: June 2016 Priority 1 A number of staff throughout the organisation have been trained in relation to procurement by the Procurement Manager. Regular reminders are issued via SLT that only trained staff should be involved in carrying out procurement exercises. The Procurement Manager explained that the E- Tendering system is due to be fully operational within the next few weeks. The implementation of this system has taken longer than initially anticipated as a significant amount of preparatory work has been carried out to encourage suppliers to register on the system prior to going live. 8

February 2016 Review meetings carried out with all three Directors and Heads of Service with new checklist template distributed. A half day implementation session arranged with the management team. Following this a report will presented at Committee level regarding decisions on procurement issues. CPD training on the E- Tendering software arranged for 18 th February 2016. April 2016 Work is ongoing. In April 2016, a paper was presented by officers to the Governance and Strategic Planning Committee regarding the Council use of E- tenders NI. It was recommended that the Council use etendersni for procurement activity initially under 30K from 1 st April 2016 and consider the options for using the system for all activity by March 2017. 9

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 2 Report Item 4.1 De-centralised versus Centralised Procurement Recommendation Risk Owner: It is recommended that, operationally, there is one risk owner responsible for ensuring uniform and consistent procurement practices and administration across Council. The Procurement Manager will be responsible for collating assurances on procurement practices and providing these assurances to Committee. Not Implemented The 2 / 3 officers identified in each Directorate will work in conjunction with the Procurement Manager on the operation of the Procurement Controls. The new E-Tendering system will be managed by the Procurement Manager. February 2016 Review meetings carried out with all three Directors and Heads of Service with new checklist template distributed. A half day implementation session arranged with the management team. Following this a report will presented at Committee level regarding decisions on procurement issues. CPD training on the E- Tendering software arranged for 18 th February 2016. April 2016 Audit testing required to confirm full implementation. Initial: Ongoing New: June 2016 Priority 1 A number of staff throughout the organisation have been trained in relation to procurement by the Procurement Manager. Regular reminders are issued via SLT that only trained staff should be involved in carrying out procurement exercises. Standard files are completed now for all procurement exercises using a procurement checklist and pro formas. The objective is to ensure uniform and consistent procurement practices and administration across Council. The Procurement Manager explained that the E-Tendering system is due to be fully operational within the next few weeks. The implementation of this system has taken longer than initially anticipated as a significant amount of preparatory work has been carried out to encourage suppliers to register on the system prior to going live. 10

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 3 Report Item 4.1 De-centralised versus Centralised Procurement Assurance Framework and Performance Management: It is recommended that an appropriate assurance framework (including performance indicators) is in place to provide senior management with assurance that there is a uniform and consistent procurement system across the organisation and that procurement policies and procedures are being complied with at all times. The Procurement Section should provide Procurement performance information covering procurement activities across the new Council. For example, assurance that procurement timetables are being met, specifications are appropriately approved, the rota of evaluation panels are in place, written procedures are being adhered to and that all contracts have been appropriately approved at Committee and contract managers have been allocated. The Procurement Manager will be responsible for collating assurances on procurement practices and providing these assurances to Committee. Not Implemented The E-Tendering system will assist the Procurement Manager in collating assurances on procurement practices and providing these assurances to Committee. February 2016 Review meetings carried out with all three Directors and Heads of Service with new checklist template distributed. A half day implementation session arranged with the management team. Following this a report will presented at Committee level regarding decisions on procurement issues. CPD training on the E- Tendering software arranged for 18 th February 2016. April 2016 Audit testing required to confirm full implementation. Initial: Ongoing New: June 2016 Priority 1 All procurement exercises valued over 10K are carried out with the guidance and assistance of the Procurement Manager. The Procurement Manager maintains a record of all tender exercises and allocates a unique reference number for each tender. Standard files are completed now for all procurement exercises using a procurement checklist and pro formas. The objective is to ensure uniform and consistent procurement practices and administration across Council. The E-Tendering system is due to be fully operational within the next few weeks. The implementation of this system has taken longer than initially anticipated as a significant amount of preparatory work has been carried out to encourage suppliers to register on the system prior to going live. 11

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 4 Report Item 4.2 Retention of Procurement Documentation Standardised Procurement Files and Retention: The Council should retain all tender documentation on a standardised and agreed procurement filing system held in a secure location as part of a centralised procurement unit. Each procurement exercise should have a designated procurement file with standardised sections to record the lifecycle of each procurement exercise from initiation and planning of the exercise to completion. Access to these files and information should be tightly controlled and should be available at all times for review and audit purposes. The files should be retained in line with the Councils agreed retention policy and procedure with controlled disposal after the designated period of time. The Procurement Manager has commenced a series of tender training awareness sessions for all relevant staff. All control weaknesses identified in this report are being covered as part of these awareness sessions. The Procurement Manager confirmed that from July 2015 to there have been nine training sessions and 76 Council Officers have received the training. Evidence of the training has been provided to Internal Audit. A checklist has been created to ensure that all required documentation is included in the standardised procurement files. A copy has been provided to Internal Audit. February 2016 Bespoke training has now been provided to all identified staff. It is now up to each Directorate to contact Procurement to arrange training as and when required. Management are now satisfied that the organisation has enough staff trained to manage procurement exercises. Staff will not be permitted to issue tenders / quotations or to sit on procurement evaluation panels without the appropriate training. Initial: All relevant staff to be trained by the end of September 2015. Priority 1 All procurement exercises valued over 10K are carried out with the guidance and assistance of the Procurement Manager. The Procurement Manager maintains a record of all tender exercises and allocates a unique reference number for each tender. Standard files are completed now for all procurement exercises using a procurement checklist and pro formas. The objective is to ensure uniform and consistent procurement practices and administration across Council. 12

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 5 Report Item 4.2 Retention of Procurement Documentation Written Procedures and Training: Additionally, management should ensure that detailed written procedures for all procurement activities are written and appropriately approved. Training on these agreed processes should then be rolled out across the organisation. The Procurement Manager is currently in the process of developing written procedures. Further training will be provided when the procedures are finalised. Not Implemented The development of process flowcharts has commenced which will become documented operating procedures. Internal Audit will review draft procedures in due course. February 2016 A first draft or Procurement Procedures has been provided to Internal Audit. The procedures cover Council Policy on Quotations and Tenders, Quotations / Tenders values of purchases between 1500 and 30K and then over 30K and associated flowcharts. Review work ongoing. April 2016 Work ongoing on the written procedures. Initial: New: June 2016 Priority 1 Written procedures and process flowcharts have now been finalised. A number of staff throughout the organisation have been trained in relation to procurement. Regular reminders are issued via SLT that only trained staff should be involved in carrying out procurement exercises. Recommendation 6 Report Item 4.2 Retention of Procurement Documentation Unique Reference Numbers: It is recommended that all tenders are annotated with unique reference numbers going forward. Agreed. All tenders are now assigned unique T numbers and this information is collated and held by the Procurement Manager. This requirement is included in the Procurement training provided. September 2015 Priority 2 13

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 7 Report Item 4.3 Cost Estimates Formal Cost Estimates: A documented cost estimate should be prepared outlining that the spend would breach tender threshold leading to spending department having to contact Procurement Unit for initiation of tendering procedures. This document should be included in procurement files. Agreed. Procurement checklist developed and all required documentation included as part of this checklist. Section 1 of the standard procurement file is for the inclusion of the Formal Cost Estimates. This requirement is included in the Procurement training. February 2016 A Formal Cost Estimates template for inclusion on the standard file is currently being developed. A copy of the template is to be provided to Internal Audit for review. Initial: 2015 New: June 2016 Priority 1 September A Formal Cost Estimates template is now included on the standard file. A copy of the template was provided to Internal Audit for review. This area formed part of Internal Audit compliance testing with no issues identified. See Appendix 4. April 2016 Audit testing required to confirm full implementation. 14

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 8 Report Item 4.4 Approval to seek tender Documented Procurement Plans: To enhance the control environment, it is recommended that a documented Procurement Plan is developed, which is reviewed and signed off by relevant Council officers. The Procurement Plan would detail all the necessary requirements of the procurement exercise for development into the formal specification for issue. The Procurement Manager has addressed this as part of the tender awareness sessions and will continue to liaise with Directors and Heads of Service to ensure that a Procurement Plan is developed. The Lead Assurance Officer confirmed that when the rates process is completed an overall Procurement plan for Council will be developed. The requirement for individual Procurement Plans for tender exercises is included in the Procurement training and in each standardised Procurement file at Section 2. April 2016 In order to prepare the overall Procurement Plan, the Lead Assurance Officer has contacted all three Directors to gather information from each Directorate on future tender exercises. Additionally, a Procurement Plan template for inclusion on the standard file is currently being developed. A copy of the template is to be provided to Internal Audit for review. Initial: 2015 New: June 2016 Priority 1 September The Procurement Plans template is now included in the standard file. A copy of the template was provided to Internal Audit for review. This area formed part of Internal Audit compliance testing with no issues identified. See Appendix 4. 15

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 9 Report Item 4.5 Specifications: Development and management of tender specifications More formal preparation and approval of tender specifications: There should be a more formal approach in the preparation of tender specifications. Tender specifications should be demonstrably approved for issue by the officers involved in the preparation of the specifications and this exercise should be reviewed and approved by a Senior Manager. The setting of criteria, evaluation and scoring should also be approved in this way at the outset and included in the procurement plan. There should also be a clear distinction as to what requirements are mandatory and what requirements are not mandatory and the impact that non provision of requested items will have to the scoring and the overall evaluation process. The Procurement Manager has addressed this as part of the tender awareness sessions. All relevant staff are now aware of the procedure for preparing tender specifications. This requirement is included in the Procurement training and in each standardised Procurement file at Section 3. Director / Head of Service approval / sign off also included at Section 3. The key contact for each Procurement exercise is to be named as the Contract Manager to ensure compliance with contract terms and conditions. This will be included section 4 of the standardised Procurement file. February 2016 Tender specifications will be held on the standard file based on the procurement plan. A copy of the procurement plan template is to be provided to Internal Audit for review. April 2016 Audit testing required to confirm full implementation. Initial: 2015 New: June 2016 Priority 1 September The Procurement Plans and Key Contact templates are now included on the standard file. A copy of the template was provided to Internal Audit for review. This area formed part of Internal Audit compliance testing with no issues identified. See Appendix 4. 16

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 10 Report Item 4.5 Specifications: Development and management of tender specifications Formal approach to inclusion of required qualifications in tender specifications: All future specification should state clearly the nature of the qualifications required by tender applicants and how and when they are to be assessed as part of tender process. In the tender file, there should be a rationale and explanation for the use of specific qualifications and this should be signed and agreed with the officers involved. Any changes, deviations or amendments should again be appropriately documented and approved. Any consultation with external organisations including recommendations or advice should also be documented and held on file for review purposes. Agreed This requirement is included in the Procurement training and in each standardised Procurement file. This will be included in section 3 of the standardised Procurement file. February 2016 The qualifications requirements will be included in section 3 of the standardised Procurement file and included in the Procurement Plan. A copy of the procurement plan template is to be provided to Internal Audit for review. It should be noted that as a result of additional controls in place, a breach of contract with regard to supervisors qualifications held was identified in the Halloween / Christmas 2015 events. This was passed to Legal Services and action was taken. Based on the associated risk, a further control has now been put in place. The Stewarding & Crowd Management for Initial: 2015 New: June 2016 Priority 1 September Internal Audit reviewed the two Stewarding Procurement exercises carried out in 2016. The qualifications requirements were clearly detailed in the specifications / Invitations to Tender. However, there were a number of issues identified. The detailed findings, recommendations and management responses are detailed in Appendix 4. 17

Festivals and Events 2016 / 2017 Invitation to Tender, under Evaluation/Award Criteria now includes the following requirement: It should be noted that DCSDC will require submission of supervisor s qualification prior to appointment. Furthermore, it also states: DCSDC will conduct a qualification / compliance audit after each event. April 2016 Audit testing required to confirm full implementation. 18

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 11 Report Item 4.5 Specifications: Development and management of tender specifications Vetting considerations: In terms of vetting with other organisations (when applicable), the Council should determine what the process should be, what assurances are needed and how long the Council should hold the information. Agreed. The Procurement Manager is currently liaising with the Lead Legal Services Officer in relation to this. This requirement is included in the Procurement training provided and in each standardised Procurement file. This will be included section 3 of the standardised Procurement file February 2016 The vetting considerations will be included in section 3 of the standardised Procurement file and included in the Procurement Plan. A copy of the procurement plan template is to be provided to Internal Audit for review. Initial: New: June 2016 Priority 2 The vetting considerations is now included in section 3 of the standardised Procurement file and included in the Procurement Plan. This area formed part of Internal Audit compliance testing with no issues identified. See Appendix 4. April 2016 Audit testing required to confirm full implementation. 19

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 12 Report Item 4.5 Specifications: Development and management of tender specifications The tender specification for Council Elections: There should also be a specific review carried out of the specification for the security element at future Council Elections and legal advice should be sought on the nature of this criteria to be used in the revised specification. For future elections, it will be recommended that the Electoral Office manage this Procurement exercise. DCSDC do not currently maintain a Restricted List for Stewarding / Security. Priority 2 Agreed. The Procurement Manager is currently liaising with the Lead Legal Services Officer in relation to this. Recommendation 13 Report Item 4.6 Specifications: the key contact in tender specifications The Procurement Section as Key Contact: For consistency purposes, the Procurement Section should be listed, where possible, as the key contact going forward and be responsible for managing the responses to potential tenderers. DCSDC Procurement Section is now always listed as the key contact in all tenders. Immediately Priority 1 Agreed 20

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 14 Report Item 4.7 Specifications: Use of Restricted Lists Management of Restricted Lists : Management should consider whether procurement procedures going forward should stipulate that restricted lists can only be used when the organisation gets a critical mass of suppliers to justify the existence of the list, for example, five suppliers as a minimum. DCSDC do not currently maintain a Restricted List with regard to Stewarding / Security. Immediately Priority 1 Agreed but the organisation needs to plan for the eventuality where a Restricted List does not generate sufficient competition. 21

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 15 Report Item 4.8 Waiving of tenders Management of Single Tender Actions: Ideally the use of Single Tender Actions are to be avoided but if there is no other option then they should now only be completed in line with Council policy with completion of the corporate forms introduced in June 2013 being presented for appropriate approval and retained on file for audit and review purposes. Agreed. In addition to this a quarterly report detailing all STA s awarded will be presented to the Assurance, Audit & Risk Committee. Work is ongoing in this area. The Procurement Manager currently maintains a list of all STA s. The first quarterly report detailing all STA s awarded will be presented to the Assurance, Audit & Risk Committee at the meeting on 4 th February 2016. The Procurement Manager has redrafted the STA form and this was reviewed and approved by the Chief Executive / Management Team at its meeting on 14 th. February 2016 The Lead Assurance Officer and Procurement Manager confirmed that STA s are now being completed in line with Council Policy. A new STA form was developed and approved by the Senior Leadership Team in January 2016. All STA s are approved by the Procurement Manager and the relevant Director or Chief Executive (dependant on value) and retained on file for audit and review purposes. In addition to this a new procedure is currently being introduced in relation to recording decisions. The Lead Legal Services Officer has developed a procedure whereby all Immediately Priority 1 The procedure in place for the approval and recording of STAs is now in place. All STA s must be recorded on a standard pro forma and approved by the relevant Head of Service/Director, Procurement Manager and Chief Executive (depending on limit). The Procurement Manager keeps a register of all STAs. In addition to this the Lead Finance Officer maintains the Register of Decisions. Both the STA Register and Register of Decisions are reconciled annually and reported to the Governance & Strategic Planning Committee. 22

major / key decisions must be recorded and this will include the recording of STA s. All of the recorded major / key decisions will be reported to the relevant Committee. A report is being presented to the Governance and Strategic Planning Committee in March 2016 to advise Members of this new procedure. STA s will also be reviewed as part of normal audit testing carried out by Internal and External Audit, for example, as part of Accounts Payable Audits. April 2017 Work ongoing. Lead Legal Officer took paper to Committee in April 2016 on the register of decisions. The Lead Finance Officer is liaising with Directors and Heads of Service in order to take a further paper to Committee in May 2016 which will include the information on STA s. The register of decisions report to include expenditures of greater than 7.5K that were approved under the scheme of delegation. 23

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 16 Report Item 4.8 Waiving of tenders Ongoing Monitoring of Contracts: Management should ensure that there is ongoing monitoring of contracts to ensure that Procurement limits are not breached. Risk owners, i.e. contract managers should be identified for all potentially materially significant contracts issued to monitor expenditure to ensure that spend does not breach procurement thresholds and to ensure that the Council always spends in line with the Procurement policies and procedures. Contract Managers should ensure that expenditure is monitored on a regular monthly basis with assistance provided by the Directorate Accountants through the budgetary control process. This process ensures the cost centres are constantly under review for expenditure (or contract income) figures and action can then be taken to address any issues as they arise. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 4. The key contact for each Procurement exercise is to be named as the Contract Manager to ensure compliance with contract terms and conditions. February 2016 On checklist and the Contract Manager is now determined by Director / Head of Service. September 2015 Priority 1 Agreed. All relevant managers have been made aware of this requirement as part of the ongoing training awareness sessions. 24

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 17 Report Item 4.8 Waiving of tenders Training on Council STA Policy and Procedure: The Procurement Manager should include compliance with and knowledge of the Council Single Tender Action policy and procedure (June 2013) in future corporate training exercises. Compliance with and knowledge of the Council Single Tender Action policy and procedure is now included in all corporate procurement training exercises. Implemented Priority 1 Agreed. Recommendation 18 Report Item 4.9 Advertising Advertisements in Procurement Files: It is recommended that Procurement files in future should have an Advertisements section and all adverts should be held on file for audit and review purposes. It is recommended that work on advertisement estimates should be included in the advertisement section of the Procurement file. Agreed. The Procurement Manager has included this requirement in the newly developed Procurement Checklist which is to be included at the front of all procurement files. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 5. A checklist has been created to ensure that all required documentation will be included in the standardised procurement files. A copy has been provided to Internal Audit. Implemented Priority 2 25

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 19 Report Item 4.10 Evaluation Criteria Formal preparation and approval of evaluation criteria: There should be a more formal approach in the preparation of evaluation criteria within specifications. The setting of evaluation criteria and scoring methodology should be included initially in the procurement plan based on a set of agreed Council procedures. The evaluation criteria should be demonstrably approved for issue by the officers involved in the preparation of the specifications and this exercise should be reviewed and approved by a Senior Manager. Procurement files should have more clarity and explanation around the tendering processes used by the Council and the rationale around the Most Economically Advantageous Tender (MEAT). This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 3. Director / Head of Service approval / sign off also included at section 3. Immediately Priority 1 Agreed 26

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 20 Report Item 4.11 Issuing of tenders Communication with tender applicants: The Procurement section should introduce a system to ensure that all future conversations and communications with suppliers are recorded for review purposes. Additionally, a tender de-brief should be formally offered to unsuccessful tenderers. Details of this should also be held on the Procurement File. Agreed. All conversations will be recorded going forward. Letters will be issued for all debriefs including all relevant information. All standard letters will be loaded on to the intranet and this procedure has been addressed as part of the ongoing tender awareness sessions. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 4. Hard copy documents such as letters / email correspondence will be held in this section of the procurement file for review / audit purposes. Immediately Priority 1 27

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 21 Report Item 4.12 Receipt Opening and Recording of Tenders Formal Tender Opening Form: Management should consider the introduction of a formal tender opening form which will be maintained / completed indicating name / number / tenders received and tender sign off for all tender exercises. All tender opening forms should be held in the relevant centralised procurement file. Agreed. Procurement Manager to develop a spreadsheet to include all relevant information. A spreadsheet / database has now been developed and maintained in Corporate Services. The spreadsheet includes the following information: Closing date, Tender title, companies who tendered and date received, names of Members who opened and sign off date. However, this information will be collated on a Formal Tender Opening Form and held at Section 6 of the standardised Procurement file. September 2015 Priority 2 28

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 22 Report Item 4.13 Tender Evaluations Declarations: It is recommended that staff on panels sign a declaration to indicate that they have acted in accordance with the Code of Conduct and acted fairly and equitably and that they are aware of no Conflicts of Interest that could influence their ability to be or to be seen to be impartial in this procurement process. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 7. Implemented Priority 1 Agreed. The Procurement Manager has developed confidentiality & conflicts of interest forms. These have been included on the intranet for all relevant staff to access. 29

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 23 Report Item 4.13 Tender Evaluations Methodology: The methodology for the tender evaluations should be appropriately approved at the outset of the tender exercise and included in the procurement plan. Panels should be provided with a checklist of mandatory criteria and how each element is to be scored against a scale, checked and then signed off by panel members. It should always be documented and formally clarified at the outset how the competition and each element is to be scored. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 8. Immediately Agreed 30

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 24 Report Item 4.13 Tender Evaluations Tender Evaluation Evidence: Overall there is a need for more clarity on how decisions are arrived at and how scoring is carried out. There should be written explanations of the rationale and a clear audit trail for decisions made and how tenders are evaluated and equated with each other. Any amendments to scores as a result of panel discussions should be documented and signed off. Any communication with tenderers for clarity should also be documented. There should be confirmation / evidence on procurement files that all appropriate tender documentation requested has been supplied and verified. This confirmation should be retained on the procurement files for audit and review purposes. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 10. Additionally, as detailed in the external review, all future cost variances will be accompanied by an explanation of decisions taken and the rationale of the panel in making the decisions. The tender submissions will be held in Section 9. September 2015 Priority 1 Agreed. The Procurement Manager is addressing these issues as part of the ongoing training. 31

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 25 Report Item 4.13 Tender Evaluations Evaluation Panel Training: The Council should maintain a rota of trained evaluation assessment officers across the organisation to carry out tender evaluation exercises. As required, depending on experience, training should be offered to officers in these tender evaluation processes to ensure clarity and uniformity. Agreed. The Procurement Manager is currently providing training to all relevant officers. Going forward officers will not be allowed to sit on panels if they have not received relevant training. This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 10. This will include confirmation that panel members have been appropriately trained. Officers will not be permitted to sit on a panel without appropriate training. A database of trained officers will be maintained by the Procurement Manager. Sept 2015 Priority 1 32

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 26 Report Item 4.13 Tender Evaluations Panels: The composition of panels should be reviewed by senior management as assurance that there will always be a variety of officers participating in tender evaluation panels. Assurance on the rota system should be provided for review to the Assurance, Audit and Risk Committee. Agreed - As above This requirement is included in the Procurement training provided and in each standardised Procurement file at Section 10. Director / Head of Service approval / sign off also included at section 10. A report on the rota system will be provided for review to the Assurance, Audit and Risk Committee at its meeting on 4 th February 2016. Initial: 2015 September New: March 2016 Priority 1 Full list of trained officers now held by Procurement Manager. To be reviewed by management in liaison with Procurement Manager on an ongoing basis. February 2016 Directors identified the officers that are involved in writing Tender Specifications and who would be sitting on the evaluation panels. The Procurement Manager held a number of training sessions for the identified staff. The Procurement Manager now maintains a list of trained officers eligible to be members of evaluation panels. 33

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 27 Report Item 4.13 Tender Evaluations Retention of tender evaluation documentation: Additionally, there was a lack of a system for the retention of documentation and all tender documentation and evidence should be retained for at least 6 years. Agreed. A secure area is to be allocated for the retention of Procurement files. February 2016 Directors / Head of Service to determine 2 / 3 staff in each Directorate to be involved in procurement exercises and retain all tender documentation securely. April 2016 Audit testing required to confirm full implementation. Initial: Immediately New: June 2016 Priority 1 Internal Audit selected a random sample of procurement exercises across the organisation for review and the procurement files were supplied to Internal Audit promptly. However, procurement files are still retained locally and held by the relevant Directorate. Due to the decentralised nature of procurement in the organisation the procurement files must be held by the staff responsible for carrying out the procurement exercise. 34

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 28 Report Item 4.13 Tender Evaluations Cost v s Methodology Ratios: There should be a clear rationale provided for the cost v methodology ratio and this should be appropriately approved to demonstrate supervisory control. Any deviation from this should then be appropriately approved. Agreed This requirement is included in the Procurement training and in each standardised Procurement file at Section 3. Director / Head of Service approval / sign off also included at section 3. February 2016 Cost v s Methodology Ratios will be held on the standard file based on the procurement plan. A copy of the procurement plan template is to be provided to Internal Audit for review. Initial: Immediately New: June 2016 Priority 1 The Procurement Plans template is now included on the standard file. A copy of the template was provided to Internal Audit for review. This area formed part of Internal Audit compliance testing with no issues identified. See Appendix 4. April 2016 Audit testing required to confirm full implementation. 35

Description of Weakness & Risk, February 2016 & April 2016 Initial / New Implementation Date and Priority Recommendation 29 Report Item 4.14 Quotations / Tender Approval Retention of Quotations / Tender Approval: The procurement control environment would be enhanced if all appropriate approvals are retained in the designated centralised procurement file going forward. The management arrangements around approval of quotations and tenders should also be included as part of the recommended procurement written procedures. Any deviation from the agreed procedures should be investigated by management. The Procurement Manager has completed an approval form which summarises the process. A copy has been provided to Internal Audit for review. This pro forma will be held on the standardised procurement file at section 11. Implemented Priority 2 Agreed. The Procurement Manager has completed an approval form which summarises the process. This is to be completed for all exercises and included on the relevant file. 36