1 a risk-based approach to auditing procurement in english councils mark wardman senior manager...
TRANSCRIPT
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A risk-based approach to auditing procurement in English councils
Mark Wardman
Senior Manager
Audit Commission
19 May 2014
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This presentation will cover:
• the Audit Commission and its role
• the criteria auditors use to assess risks in the procurement of local public services
• recent developments in procurement and commissioning in local government in England
• the costs and benefits of collaborative procurement
• arrangements in public bodies that ensure value for money in procurement and contract management
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The Audit Commission – until recently
• An independent public corporation (since 1983)
• Appoints auditors
• Publishes guidance and a Code of Practice
• Analyses and publishes financial & performance information
• Produces data analysis and tools
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The arrangements for local public audit are changing
• inspection by the Commission ended in 2010
• auditors moved to the private sector in 2012
• the Local Audit and Accountability Act 2014 abolished the Audit Commission and established a new local public audit framework
• some Audit Commission functions will pass to other bodies
– The National Audit Office (the Code, value for money Studies)
– The Financial Reporting Council (overall public audit regulation)
• the Audit Commission will close on 31 March 2015
But
• there will be transitional arrangements for managing audit contracts until 2017, or 2020 if contracts are extended
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Procurement is part of auditors’ Value for Money conclusion
CODE OF AUDIT PRACTICE
Securing economy, efficiency,
effectiveness
Improving efficiency & productivity
Internal control
Accounts
Financial position
Prioritising resources
Accounting records
The Value for Money Conclusion
Improving efficiency & productivity
Prioritising resources
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“The organisation has proper arrangements for challenging how it secures economy, efficiency and effectiveness”
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And can manage risks effectively
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Reporting the work of the Auditor
• Auditors publicly report their findings on this work to the public body:– report to those charged with governance
– audit report including the conclusion on whether the audited body has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources
– annual audit letter (the published summary of the auditor's findings aimed at the general reader)
– Public Interest Report
• The Audit Commission produces a summary of the Auditors’ work in the Annual Auditing the Accounts report.
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Forces shaping councils’ recent approaches to public procurement
• Austerity and cuts
• The Public Services (Social Value) Act (2012)
• 2014 EU Procurement Directives
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The challenges for councils areconsiderable and multi-faceted
Secure efficiency gains!
Develop a diverse supply base
Build Voluntary sector capacity
Support SMEs
Incorporate Sustainability
Support the local economy
Foster innovation
Satisfy user needs
Provide choice
Improve service quality
Procure in partnerships
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English councils spend over £29 billion with third parties
Source: Dept. of Communities and Local Government Subjective Analysis Return 2011/12
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And the trend is upwards
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Key findings from ‘Collaborative Procurement’ (2009)
• 93% of public bodies used Framework Agreements
• Only half used category management in 4 of 8 standard commodity categories
• 80% didn’t record the costs of letting contracts
• The collaborative procurement landscape is fragmented
• Too many brands
• Not enough aggregation of demand
• Too much ‘gold plating’
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There was significant variation in prices paid for the same product
Price variation for LCD flat screen monitors
£0
£20
£40
£60
£80
£100
£120
£140
£160
Pri
ce
pa
id
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The challenges for councils areconsiderable and multi-faceted
Secure efficiency gains!
Develop a diverse supply base
Build Voluntary sector capacity
Support SMEs
Incorporate Sustainability
Support the local economy
Foster innovation
Satisfy user needs
Provide choice
Improve service quality
Procure in partnerships
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Procure effectively
Select most appropriate service
providers
Improve processes?
Intelligent commissioning is the best way to secure VFM in procurement
INTELLIGENT COMMISSIONING
VALUE FOR MONEY
Understand the market
Develop the market?
Long term impact on competition & contestability
User-focused, outcomes-based
services
Understand needs
Redesign services?
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Contract management is as important as procurement
Source: LGA/Audit Commission, Savings from Contract Management (2014)
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A corporate approach helps to manage risks in procurement and contract management
RISKS MITIGATION
Scale and complexity Aggregating demand
Skills and capacity Specialisation and training
Fragmentation Collaboration
Contract management Procurement & CM staff continuity
Contract rigidity Renegotiation
Fraud Active management & monitoring
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Thank you for listening. I’m happy to answer any questions
+44 (0)7974 007230
www.audit-commission.gov.uk