A Risk Based Approach to the Audit of Procurement [2010]

Risk Based AuditPublic sector organisations each spend tens, if not hundreds of millions of pounds each year, buying in goods, works and services. This expenditure ranges from relatively small valued purchases of commodity items to formal contracts for the delivery of major services and capital construction works.

In the past, CIPFA has advocated a systems based approach to the review of this type of expenditure, which involved focusing on the key controls governing contracting processes during the pre, current and post contract stages. However, the modern audit approach to procurement requires a holistic view that focuses on the issues associated with the key strategic risks faced by the organisation.

This publication was written by Ken Odgers of CAL to assist those who wish to adopt such an approach to the subject of procurement. It is designed to facilitate a top-down approach and will help auditors, as they come across procurement related issues when carrying out the reviews that are necessary to provide assurance on an annual basis. It will also help auditors, risk managers and procurement professionals, address the subject of contracts during their review of an organisation’s risk management structures and procurement policies by centering on the following top-level risks:-

  • Contracts not delivered on time, within budget or of acceptable quality.
  • Procurement expenditure failing to fulfil the need
  • Fraud
  • Failure to secure value for money;
  • Failure to reflect best practice, adhere to legislation or adequately accommodate equality and diversity;
  • Organisation fails to improve.

The publication will help steer reviews towards examining how risk management structures and systems of internal control ensure that the procurement framework adequately addresses each of the risks involved.

It is available to purchase from the CIPFA Shop.

Contract Procedure Rules [2006/07]

Contract Procedure RulesClear and modern Contract Procedure Rules is one of the keys to adopting best practice, encouraging innovation and achieving greater efficiency when procuring goods works or services.

The best authorities recognise the critical contribution that procurement makes to the quality of front line services delivered to their communities and that effective procurement is measured as much by the social outcomes and community benefits that result, as the financial gains that are achieved. Local authorities have corporate procurement strategies which set out their approach for identifying opportunities for partnering and collaboration, letting council-wide contracts and framework agreements and exploring various e-procurement initiatives. However, it is important to ensure the delivery of these strategies is facilitated by Contract Procedure Rules which encourage the adoption of current initiatives and modern best practice.

On behalf of the CIPFA, Ken Odgers worked with Constructing Excellence in 2006/07 to produce example Contract Procedure Rules that accommodates current procurement initiatives. The example Rules require minimal ‘tailoring’ to suit local requirements (e.g. setting financial thresholds and naming designated officers) and can therefore be adopted by any authority with little effort. While not intended to be a ‘model’, they illustrate how such Rules may be written in order to accommodate the principles of the National Procurement Strategy and the ‘Egan’ Rethinking Construction agenda.

Rethinking Construction in Local Government:
Ten Key Issues and How to Address Them. [2004]

The 1998 ‘Egan’ report, ‘Rethinking Construction’, the 2000 Best Value regime and more recently, the Government’s Public Sector Efficiency Reviews have set many challenges. Among them is to maximise expenditure on front line services by achieving cost efficiencies in procurement processes, whilst also producing better quality products. Those who met these challenges by adopting new and more efficient ways of working secured overall capital cost improvements that exceeded 8%.

In 2004, Ken Odgers from CAL produced a suite of documents for the Local Government Task Force within Constructing Excellence, to help local authorities rise to this challenge. The suite consisted of four documents that describe how local authorities could achieve the full benefits of this new way of working, and hard copies were distributed free by CAL to all local authorities in England and Wales.

The suite is aimed at all those in local government who are involved with procuring projects, irrespective of the size of their authority. This includes elected members, senior executive managers and strategic directors, as well as operational directors and technical professionals.

 OverviewStrategic IssuesOperational IssuesSupporting Information

Ten success factors that make a Procurement Champion [2006]

Is your authority Champions League material or in the Second Division?

10 success factorsAn effective and efficient procurement regime will secure maximum benefit from an authority’s expenditure on the purchase of goods, works and services. The main objectives are to take a long term view of expenditure that includes future running costs; delivering the best possible quality of product; and securing contractual relationships that avoid wasteful disputes and build on proven teams.

In 2006, Ken Odgers prepared ten success factors for Constructing Excellence’s Local Government Task Force to help authorities achieve the above objectives and deliver best practice within the procurement environment in which they operate. Hard copies of the document were distributed to all local authorities who were encouraged to examine their procedures to see how close their authority was to being in procurement’s ‘Champions League’.

Roger Latham (left), Chair of the LGTF in 2006, with Ken Odgers, producer of the guide.