Internal Audit themed review of
procurement in schools
Barrie Cull, Senior Auditor
Introduction
• Overall aim of the session:
• To provide an understanding, or refresh knowledge, of:
– Risks and controls over procurement processes
– Why they are required and what might happen if they are not
adhered to
What does Internal Audit do ?
• Carry out audits as agreed in the annual plan approved by the
Governance and Audit Committee
• Provide advice and information
• Investigate potential irregularities
• Carry out pro active fraud work
Internal Audit themed review of
procurement
Objective :
The aim of the audit was to provide assurance that
procurement/contract risks are being managed effectively by
schools in order to meet their and Kent County Council (KCC)
service and corporate objectives.
Reason why the review was carried out :
In recent years we have become aware of purchases or leases of
equipment or building work undertaken which did not comply with
financial and procurement regulations and failed to demonstrate
value for money. We wanted to see how effective the existing
controls are and how they could be improved in future.
Key documents
‘Spending the Council’s Money’
•
KCC procurement - “Spending the Council’s Money” contains a mixture of
legislation, rules, guidance on good practice and examples of potential
pitfalls. Rules are put in place to provide a structure to deliver :
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Value for money;
Consistency of approach;
Competition;
Transparency; and
Fairness
•
‘Procurement rules are also often seen by those subject to them as
hindering their day to day roles especially considering that spending money
is not why councils exist. What is appreciated less often is that following
appropriate rules when spending the Council’s money provides strong
personal protection to individuals against accusations of unfair or
inappropriate behaviour.’ ( Spending the Council’s Money )
Key documents ( continued )
• Scheme for Financing Schools
• Finance Policy
 Sets out the financial policy of the school –
template on Kelsi
 Should be presented to and approved by the
Governing Body. Signed by the Chair of Governors
and reviewed very two years.
Value for money
• There are numerous websites including the DfE website with links to
procurement for public sector organisations. Examples are : The Government Procurement Service (GPS) - now part of the Crown
Commercial Service, a new organisation which also includes the former
commercial function of the Cabinet Office, and common goods and services
procurement and commercial management currently undertaken by
departments. http://gps.cabinetoffice.gov.uk/
 Department for Education http://www.education.gov.uk/schools/adminandfinance/procurement
• Alternatively, some schools have got together locally to contact
suppliers and obtain quotations for bulk purchases.
A reminder of the thresholds
The financial values (exclusive of Value Added Tax) at which processes
become mandatory are:
£8,000 to £49,999 – at least three written quotations must be sought from
appropriate sources.
£50,000 and above – the competitive tender process must be followed.
The current levels at which these apply are for goods and services,
£172,514 and for works, £4,322,012 - European Union Directives, enacted
in UK Law, set these limits for public contracts above which specific
procedures are required to be followed.
The overall obligations of the Code and the statutory requirement to achieve
value for money apply to all transactions and don’t just apply from the above
amounts. A competitive tender process may therefore be appropriate for
procurements below £50,000.
General findings
Some schools did not obtain three written quotations for goods and
services – with a risk that value for money could not be
demonstrated. One school had only used one supplier for building
maintenance work and this amounted to over £80,000 in one
financial year.
Some schools used the same suppliers when obtaining quotations
without testing the market – resulting in a risk that value for money
could not be demonstrated. In future, schools will be able to
advertise on the Kent Business Portal.
Two schools had not raised purchase orders for building work during
the year – with the risk that committed expenditure was not known,
monitored and checked against when the invoices were received,
resulting in possible overpayment and overspend.
Some schools had obtained written quotations for goods or services
which totalled over £50,000 and therefore a tender exercise should
have been run.
There are however risks with tender exercises not being run
properly. ‘Spending the Council’s Money’ has very useful guidance
on the transparency and accountability required in tendering for
goods and services and the controls which should be in place.
If an unsuccessful bidder challenges the award of the contract, there
will be a need for the school to demonstrate that the correct
procedures and controls were followed throughout the process.
Some schools did not have evidence of contracts or services eg
grounds maintenance or computer maintenance, being reviewed on
an annual basis and competitively tested against other suppliers.
Two schools had paid suppliers in advance for work not fully
completed. This related to work carried out during the Summer
holidays when the finance staff were not present.
We found instances of no current contract with agreed rates for
individuals providing services to schools. There is a risk that an
individual is, in effect, an employee but their tax status is not known.
Good points !
The Finance Policy at schools visited had been approved by the
Governing Body and in most cases, the thresholds stated in the
Finance Policy agreed with the thresholds in ‘Spending the Council’s
Money’.
There were instances of primary schools setting up agreements with
Technical Colleges for IT maintenance and support services.
There were effective systems in place for ordering and receiving goods
and making payments. In particular, from our sample of schools visited,
no individual was found ordering, receiving and paying for goods and
services.
The majority of Bursars realised and appreciated the risks and the need
for effective and robust controls over procurement processes, including
the need to complete a declaration of interest form as required.
Why is all this important ?
Need to demonstrate compliance with legislation and regulations
Fair, transparent and accountable procurement processes
Missed opportunities to achieve value for money
Statement of Internal Control and Annual Governance Statement
Freedom of Information Act requests
Possible sanctions :More compliance visits to a school
Report to Chair of Governors
Financial investigation
Challenge from unsuccessful tenderers or suppliers could lead to
excessive time or expenditure being spent defending the challenge,
unwelcome publicity for the school and/or the risk of fines and prosecution.
Needing to terminate a service
Delegation could be taken away
What next … ?
Internal Audit report to Director of Education, Learning and Skills setting
out findings and recommendations
Liaison with Schools’ Financial Services and Procurement Team
Explore opportunities to provide promote good practice and provide
training and advice on procurement processes, risks and controls
Review guidance – ‘Spending The Council’s Money’ for schools ?
Governor training and/or guidance on procurement risks and controls ?
Maybe carry out another themed review of procurement during the
coming financial year …
Contacts
• Barrie Cull, Senior Auditor, Internal Audit, 01622
694544 barrie.cull@kent.gov.uk
• Siobhan Cheeseman, Business Manager, Schools
Financial Services
siobhan.cheeseman@kent.gov.uk