The Central Otago District Council has agreed to update a flawed procurement policy after a damning audit report.
The council carries out several internal audits annually and in 2021-22 procurement policy was in the mix.
Accounting firm Deloitte presented a report to the council’s audit and risk committee in March, after reviewing seven complex procurement contracts ranging in value from $130,000 to $4 million.
Procurement is the process public organisations, such as councils, use to acquire and manage goods and services.
The two key findings were inconsistencies in implementing the policy and a lack of monitoring, reporting and record-keeping on procurement activities.
Risk and procurement manager Amelia Lines, in her report to this week’s council meeting, said the council implemented a procurement policy in 2020 but the 2022 Deloitte audit found it was not being followed.
However, the policy was overly complex, contradictory in places and at 66 pages, unnecessarily long.
At the time of the audit, Ms Lines’ role was vacant and not filled until May this year.
The report said the policy was neither widely used nor referred to when procurement activities were undertaken. The manager’s role had been vacant since January 2022, which meant there was a lack of oversight and staff from other departments were carrying out procurement themselves.
The report concludes the council’s procurement controls were informal/inadequate.
In six of the seven contracts audited there was no evidence of due diligence conducted over the proposed supplier, nor was any formal risk assessment conducted for the proposed procurement project.
In five contracts no procurement plan was prepared and in four policy and processes were not met, due to time constraints and there was no evidence of consideration of conflicts of interest and related forms were not completed before the contract was awarded.
In two contracts, conflicts of interest were identified but not formally documented.
The report said there was a higher risk of fraudulent activity if proper processes were not followed.
The report warned that as documents were not being stored centrally there was a risk of information being lost, or even financial loss if documentation supporting reasons for decisions could not be provided.
Ms Lines told councillors the policy had undergone a significant review which has resulted in a simplified document.
"The main difference from the previous document, the first is that it it no longer 66 pages long. It’s a much more concise document."
Rising costs had led to changes in the values for different procurement requirements, she said.
A market tender would now be required for $200,000 or more, up from $50,000.
The market interest was low in tenders for the lower value and smaller firms which might have found the cost of submitting tenders too high might be willing to offer comprehensive quotes, she said.
Business support group manager Saskia Righarts said the key focus was to roll out the new policy and, following up on the audit, to ensure there was governance oversight of all activities.
Deputy mayor Neil Gillespie said it was important the policy was well-known and understood.
It was all well and good to have policies but they needed to be used, otherwise they were a waste of time.
