What are Public Procurement audits?
An audit can be defined as a check or an examination and when such a check and examination is applied to public procurement, then it becomes public procurement audit.
Public procurement audits can be defined as a systematic and comprehensive, independent and periodic examination of public entities’ procurement, objectives procedures, problems, opportunities thereby facilitating the development of action plans.The most general definition of an audit is an evaluation of a person, organization, system, process, project or product.
Audits are performed to ascertain the validity and reliability of information, and also provide an assessment of a system’s internal control. Auditing is therefore a part of some quality control certifications such as ISO 9001. The goal of an audit is to express an opinion on the person/organization/system etc. under evaluation based on work done on a test basis.
Coverage/Content of Procurement audits
The procurement audit covers the following areas:
- Procurement problems and opportunities: To what extent are the problems for example related to
management, procurement personnel, colleagues, internal customers, suppliers, etc. What opportunities are there in the systems to improve procurement operations? - Procurement organisation. How is the procurement function in a particular entity? To whom do the procurement personnel report? Is there centralised or decentralised procurement? How does procurement relate with other functions? How do internal customers view the performance of the procurement function?
- Procurement Personnel. How many people are performing the procurement function? How qualified are they and what is their level of experience? Do they have appropriate job descriptions? Do they have these actual descriptions? What training and development opportunities do they have? etc.
- Procurement procedures: what written or unwritten policies apply to procurement? Is there a procurement manual and if so how frequently is it updated? What guidance is offered to the procurement staff in regard to supplier relationships, conflicts of interest, buying from abroad, environmental policies, etc.
- Procurement Reports: This relates to issues like what reports are prepared by procurement? Who prepares the reports? At what interval is a report prepared?
- Procurement, suppliers and prices: what in in the procurement budget? Who are principal suppliers? What attempts have been made to achieve single or partnership sourcing? How are suppliers selected and what in the criteria? What in the price compared to the market prices?
External Auditors:
Are independent staff assigned by an auditing firm to assess and evaluate financial statements of their clients or to perform other agreed upon evaluations. Most external auditors are employed by accounting firms for annual engagements. They are called upon from the outside of the company.
Objectives of Public Procurement Audits
- With a view of enforcing rules and regulations relating to public procurement and in order to build credibility in procurement procedures, public procurement authorities conduct procurement audits whose objectives are;
- Verification of procurement and contracting processes followed
- Verification of technical and physical compliance and price competitiveness of contracts.
- Review of the contract administration and management
Are procurement audits essential?
- Procurement audits are essential and they service four broad purposes.
- They police the extent to which procurement policies are being adhered to by public agencies and enterprises
- They help to ensure the organisation is using procurement techniques, procedures, and methods that conform to the best working practice
- They monitor and measure the extent to which resources are being used effectively.
- Procurement audits assist in the prevention & detection of fraud and malpractices prevalent in procurement.
Who should conduct procurement audits?
Procurement audits can be done at different levels and at different times so are the people to conduct them. For example, procurement audits can be carried out by the following
- External auditors
- Internal auditors
- A central procurement function
- External management consultants
- Funding agencies
In the decision on who should conduct public procurement audits and investigations two major principles govern the decision.
- The auditors should be external to the function or department that is being subjected to the audit
- The procurement auditors should have in-depth knowledge of the procurement function. This will enable them to monitor compliance and adhere to procurement policies and procedures. In addition they will be able to understand procurement problems and can make appropriate recommendations.
Specifically the department has the following roles.
- Conducting periodic inspections of the records and proceedings of the PDEs to ensure and correct application of the PPDA act.
- Institute procurement or disposal audits during the bid preparatory process
- Institute contract audits in the course of the exclusion of an awarded bid.
- Conduct performance audit after completion of the contract in respect to any procurement or disposal as may be required.
- Investigate any public procurement or disposal process where a breach, wrong-doing, mismanagement or collusion has been alleged or reported against a PDE
- Establish and maintain institutional linkages with the entities which have professional and related interest in public procurement and disposal.
