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A risk-based approach to auditing procurement in English councils. Mark Wardman Senior Manager Audit Commission 19 May 2014. This presentation will cover:. the Audit Commission and its role the criteria auditors use to assess risks in the procurement of local public services
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A risk-based approach to auditing procurement in English councils Mark Wardman Senior Manager Audit Commission 19 May 2014
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
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
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
Procurement is part of auditors’ Value for Money conclusion The Value for Money Conclusion CODE OF AUDIT PRACTICE Securing economy, efficiency, effectiveness Accounts Prioritising resources Prioritising resources Improving efficiency & productivity Improving efficiency & productivity Accounting records Financial position Internal control
“The organisation has proper arrangements for challenging how it secures economy, efficiency and effectiveness”
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.
Forces shaping councils’ recent approaches to public procurement • Austerity and cuts • The Public Services (Social Value) Act (2012) • 2014 EU Procurement Directives
The challenges for councils areconsiderable and multi-faceted Secure efficiency gains! Satisfy user needs Support the local economy Procure in partnerships Provide choice Develop a diverse supply base Improve service quality Incorporate Sustainability Build Voluntary sector capacity Foster innovation Support SMEs
English councils spend over £29 billion with third parties Source: Dept. of Communities and Local Government Subjective Analysis Return 2011/12
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’
There was significant variation in prices paid for the same product
The challenges for councils areconsiderable and multi-faceted Secure efficiency gains! Satisfy user needs Support the local economy Procure in partnerships Provide choice Develop a diverse supply base Improve service quality Incorporate Sustainability Build Voluntary sector capacity Foster innovation Support SMEs
Understand needs Understand the market Procure effectively Long term impact on competition & contestability User-focused, outcomes-based services Select most appropriate service providers Redesign services? Develop the market? Improve processes? Intelligent commissioning is the best way to secure VFM in procurement INTELLIGENT COMMISSIONING VALUE FOR MONEY
Contract management is as important as procurement Source: LGA/Audit Commission, Savings from Contract Management (2014)
A corporate approach helps to manage risks in procurement and contract management
Thank you for listening. I’m happy to answer any questions m-wardman@audit-commission.gsi.gov.uk +44 (0)7974 007230 www.audit-commission.gov.uk