Town of Markham Auditor General

Audit Results of the Procurement Audit Follow-up

February 15, 2010

1.0 Background

In accordance with the Auditor General Mandate and Work Plan, the Auditor General conducts an annual follow-up process to ensure management has taken appropriate action to implement recommendations contained in Audit Reports.

This Report presents the results of the follow-up of audit recommendations and agreed actions for the Procurement Audit completed January 2009 and presented to Council through General Committee April 2009. Follow-up of other Audits completed since January 2009 is planned for the end of 2010.

The follow-up audit was conducted in accordance with the generally accepted auditing standards. A follow-up is defined as a process by which the auditor determines the adequacy, effectiveness and timeliness of actions taken by management on reported audit findings. The audit verificaton on the action status is done through inquiry and observation, review of relevant documentation, and may involve limited testing of transactions.

Where agreed action plans are not completely implemented the auditor asks the following questions:

o What remains to be done?

o By whom and when?

o Have alternatives been implemented that may be more appropriate?

o Has the agreed action plan ceased to be of value?

o If no action was taken, why not? What is the issue or concern causing inaction?

It is expected that management sets reasonable and achievable action completion dates. Management is responsible for providing information detailing the action taken on recommendations implemented as well as progress made on those not fully implemented. Management is expected to advise the Auditor General of actions that will not be met on time, or revised actions. Recommendations not fully implemented and those that miss the target completion date will be reported to Council through General Committee.

The January 2009 Procurement audit focused on the procurement process from initiation, when the user department determines a need, to when the goods and services are contracted for. It assessed compliance to By-laws and policies, the efficiency and effectiveness of the procurement process in using town resources and safeguarding town assets. It resulted in twenty (20) recommendations intended to improve the operation of the procurement program. The audit conclusion reached in January 2009 was that, overall compliance with Town By-laws and policies for processes relating to large value procurement actions was satisfactory, with some process improvements recommended, specifically in planning, spend analysis, data management and bid submission response rates. Departmental purchases needed some attention to strengthen compliance with policies and ensure transparency for potential conflict of interest situations.

2.0 Results of the Auditor General’s follow-up

Table 1 provides the status of all audit recommendations contained in the Procurement Audit Report. Town staff has implemented most of the agreed actions to address the audit recommendations arising from the Procurement audit, ensuring improvements in town wide procurement processes support achievement of value for money in procurement actions.

Of the 20 audit recommendations, only 4 are not fully implemented, and of those, 3 continue to make progress towards revised target completion dates within the next few months, with 1 that will take longer than anticipated based on the work effort and town wide scope (document management). The risk of not completing the 4 actions is mitigated through other completed actions, although efficiency gains through document management and streamlined data collection are not yet realized. Staff had identified opportunities for document management system as part of their information management study in 2008.

Table 2 provides specific details on the 4 recommendations that are not yet fully implemented.

Table 1 Status of Procurement Audit Recommendations

FI		Fully Implemented	Action plans are fully implemented as verified by the Auditor General
PI		Partially Implemented	Action plans are partially implemented. Completion date missed, action plans are not fully implemented, or some actions have yet to be completed. Auditor General has reasonable confidence that issue has appropriate ownership and that the revised date will be met, based on current progress.
RA		Requires Attention	Action plans require attention. Either requires re-planning, has inadequate resources, ownership, or profile.
#	Recommendation			Due Date	Status
1	Implement town wide procurement planning			06/2009	FI
2	Consolidated procurement plan early in the year			04/2009	FI
3	Develop service level agreements and standards			12/2009	PI
4	Vendor data to be brought current, organized, enriched, establish spend analysis			12/2009	FI
5	Staff training			06/2009	FI
6	Conflict of Interest disclosure and annual sign-off			10/2009	PI
7	Procurement actions >$25,000 involve purchasing			04/2009	FI
8	Request for Quotations to have 3 written quotes			04/2009	FI
9	Evidence evaluation process for Requests for Proposals			04/2009	FI
10	Purchasing compliance tests			04/2009	FI
11	Procurement card usage; explore automated accounts payable solution			04/2009	FI
12	Low value purchases not split, compliant with policy			05/2009	PI
13	Purchasing policy update re: green procurement policy			09/2009	FI
14	Sealed bids secured; reconcile bid deposits to be current			04/2009	FI
15	System access rights maintained on an as needed basis			07/2009	FI
16	On line bidding becomes standard process			04/2009	FI
17	Vender references on file, reviewed and verified			09/2009	FI
18	Improve vender selection for unadvertised quotations >$25,000			04/2009	FI
19	Streamline document management and data collection			12/2009	PI
20	Electronic approval for award reports			01/2010	FI

Table 2 Open audit recommendations (action plans not fully implemented)

#	Recommendation	Completion Date	What has been done	What remains to be done
3	Develop service level agreements and standards	Original 10/2009 Revised 04/2010	Purchasing has initiated discussions with the User departments on service levels.	Service timelines and deliverables to be finalized and posted on the intranet for all user departments. Ongoing: Measure compliance with timelines and readjust processes, expectations as required.
6	Conflict of Interest disclosure and annual sign-off	Original 12/2009 Revised 04/2010	Conflict of interest disclosure form in regards to the purchase of goods and services for the Town is available electronically and was posted on the intranet May 2009.	Implement a process for regular sign-off by all town staff indicating compliance to the Code of Ethics and Conduct Policy. Ongoing: Continue the regular sign-off process.
12	Low value purchases not split, compliant with policy	Original 05/2009 Revised 07/2010	Mandatory purchasing training included split purchases and related policy requirements.	Review of 2009 purchases that may be potentially split with the intent to identify cost savings in future procurement actions. Ongoing: continuous review of potential split purchases for cost savings. Note: Original completion date did not allow for a fulsome review of transactions, which is achieved with one year of data.
19	Streamline document management and data collection	Original 12/2009 Revised 01/2011	Finalized the implementation plan for records inventory exercise, next steps underway.	Complete the identification of high priority business processes with particular focus on records inventory. Revisit technology solution requirements in 2010.