Procurement Audit 2e3x3p

PROCUREMENT AUDIT By: Gerald U.G. Mabveka The general definition of audit is an evaluation of a person, organization, syst em, process, project or product. Auditing is conducted to examine carefully for accuracy with the intent of verification. In telecommunications, the term audit has the following meanings: to conduct an independent review and examination of system records and activities in order to test the adequacy and effectiveness of data security and data integrity procedures, to ensure compliance with establis hed policy ….(Wikipedia 2010). Audit is mostly associated with finances. However , from the above explanations shows that audit(ing) can be conducted in deferent fields. In procurement, audit is conducted with the same aim of reviewing and e xamining the procurement system and activities undertaken to find out the extent of compliance with established laws by the procurer. Procurement is implemented through the use of funds. For instance it is estimate d that seventy percent of Malawi Government annual budget is used for procuremen t. This simply means that financial auditing that has to be conducted for these funds has also to audit how procurement has been conducted. The Public Procureme nt Act 2003 Section 39 (PPA 2003) says, ‘Procurement activities shall be subject to regular auditing by the Auditor General to ensure that public funds are expe nded for their intended purpose, and with a view to maximizing value received by the public purchaser, ensuring that proper and able systems are in place and adhered to, and identifying any weaknesses in procurement.’ As it has clearly been put in this section of the PPA 2003, the Auditor General has the responsibility to audit the procurement activities with the primary purp ose of ensuring the funds has been expended as intended. This means auditors are expected to go further after conducting financial audit. For example, all the d ocumentations for an expenditure on a ream of paper could be available. However, the procurement procedure that has been used could not been as stipulated in th e PPA 2003. This raises the issue of the capacity of the auditors at the Auditor General’s office in procurement. It is a well know fact that the auditors at Au ditor General’s office are ants. A number of options in addressing this i ssue could be considered. The first optional is of training Auditor General’s au ditors in (public) procurement so that they can professionally conduct procureme nt audit. The second option is where arrangements could be made between the Dire ctor for Office of Public Procurement (ODPP) and Auditor General (AG) which coul d see officers from both offices working together. That is the ODPP could assign some of its officers to work with AG’s auditors whenever they are conducting fi nancial audit. The third option could be to have establishment(s) at AG’s office to employ procurement personnel on permanent basis. The fourth option could be to give the auditing function of procurement to the O DPP. This option is somehow problematic in a number of areas considering some o f the functions the ODPP is performing as stipulated in the PPA 2003. For exampl e, procuring entity, which are government departments, ministries and parastatal s that use public funds seek authorisation whenever they want to procure using o ther procurement methods except open tender above the set threshold. Even after using open tender, the PEs have to submit the bids together with evaluation repo rt and Internal Procurement Minutes to ODPP for prior review before contract awa rd. Then the ODPP gives a ‘No Objection’ to that procurement. This shows that OD PP review process is also a form of audit exercise. Therefore, giving the respon sibility of procurement audit to ODPP could be seen as a repetition of the same process. However, it has to be stated here that the ‘No Objection’ given by ODPP on specific procurement sometimes are not implemented as given. There some inst ances a ‘No Objection’ has been given for an award of contract to bidder A but o n the ground bidder B is the one awarded a contract. Another example is where a ‘No Objection’ is given for a specific contract sum funds but on the ground the contract sum is not the same and mostly is higher.

Procurement audit is also conducted to establish if PEs are slicing/dividing the ir procurement with an aim of not exceeding the threshold they are allowed to us e request for quotation (RFQ). For example, PEs are allowed to use RFQ for procu rement that does not exceed three million kwacha. It has been established that m ost PEs would divide its procurement for example of stationery/motor vehicle mai ntenance not to exceed that threshold within a month or three. Therefore, to est ablish this form of mis-procurement, auditing is conducted. On a more deviant point, there are some PEs that use for example RFQ for procure ment of goods, services and works above their threshold without seeking authoris ation from ODPP. In some cases, they use single sourcing method also without aut horisation. Another area that procurement audit also reveals if whether the procurement is b eing done using the right institutional structures and processes. In an organis ation, there is always a section or department that would request for goods/serv ices/ works to be procured. This section/department is called the unit. The refore, any procurement has to originate from a unit that requests the proc uring entity to procure the required goods/services/works. Thereafter, the PE ha s to facilitate the procurement process by working hand in hand with the un it in developing the specifications of the required goods/services/works. After that, they choose a procurement method to be used based on the amount of funds c ommitted for that particular procurement. After the choice has been made quotati ons/bids are solicited from potential suppliers in compliance with the law on pe riod it has to be given to the bidders to submit their bids. However, it has bee n observed that some procurement is done based on the individual interest of the controlling officer. For example, there have been cases where goods/services/wo rks were procured just to give business to a friend/relation. Sometimes it is do ne because the official(s) involved in that procurement are to be given somethin g from the supplier. Later alone, it has been observed that wrong procurement me thods are also used where individual interest sures the organizational ones. Once the bids are received, they have to be opened in compliance with the PPA 20 03. For example, bidders may send their representative to witness the bid openin g. Thereafter, the bids have to be evaluated according to the set criteria outli ned in the bid document (RFQ) with an independent evaluation team. In certain in stances, procurement audit has revealed that PE uses criteria that were not in t he bid document. In other cases, some bidders are disqualified based on a certai n criteria whilst another one is awarded contract despite failing to meet the sa me. In most evaluation, the of the IPC are the same people who conduct e valuation and later on approve their recommendations as IPC.