Time pressure on staff is one factor causing contracts to be awarded to companies by the Central Otago District Council (CODC) without proper checks or record-keeping being undertaken, according to a new report.

Auditing and financial advisory firm Deloitte has identified various failures in the council’s procurement processes, which Deloitte says is leaving it open to financial and reputational risks.  

Deloitte stated in its draft report this week that the policy failures related to the “basic elements of good practice with respect to procurement”.

“Given the number of issues, it is likely that this is a pervasive problem that is present across the full population of procurement decisions. This could result in reputational damage to CODC if the procurement decisions made are perceived to be unfair and it is unable to provide evidence to show fairness and transparency in its procurement processes,” Deloitte partner David Seath stated in the report.

The company was engaged by CODC to perform the audit for the 2020/21 financial year as part of its normal annual review processes.

CODC planning and environment executive manager Louise van der Voort told the Central App yesterday staff were meeting next week to discuss the new report.

“Following the meeting we will be going back to Deloitte with clarification and feedback prior to them finalising their report. We will be seeking to better understand their comments, including those specific recommendations relating to contracts, and pressures on staff,” she said. 

Once the report was finalised by the auditors, it would be looked at in detail to understand any risks and develop an action plan. 

That plan would be presented to the Audit and Risk Committee’s meeting on December 2.

“We take the Deloitte report, and all auditors’ reports seriously with a view to ensure we take the necessary action to minimise any financial risk and deliver the best outcomes for our communities,” Louise said.

Due diligence widely lacking

During the 2020/2021 financial year CODC spent $28.9M on goods, services and construction, most relating to roading, property, community halls, pools, parks, cemeteries, environmental services, water and wastewater, the report stated.

Fieldwork was carried out by Deloitte between June and August this year with “sample testing” of seven council contracts awarded, valued at up to $4M. For six of seven there was no evidence of due diligence being conducted over the proposed supplier and no formal risk assessment being conducted for the project.

Four of the seven contracts examined showed policy and processes had not been adhered to due to time constraints. The same number showed “no evidence of conflict-of-interest considerations and related forms not filled out prior to awarding the procurement contract”.

Three of the seven contracts were filled without a contract opportunity being advertised and with only one supplier being asked to submit a tender.

The council’s existing 62-page procurement policy was reviewed and refreshed in 2020 but Deloitte questioned how extensive it was and its ease of use for staff.

“We found that the policy is not widely used and not referred to when procurement activities are being executed, resulting in an inconsistency of approach and outputs.”

The lack of a dedicated manager to oversee all procurement activity and the geographical isolation of Central Otago hampering the supply of contractors to choose from, were also factors. The council had been attempting to fill such a role for some time.

The two “high risk” findings identified in the draft report were inconsistencies in the implementation of policy and execution of procurement activities, and the lack of monitoring, reporting and record keeping.

Suggestions were made on how council could improve the situation including regular training and workshops for staff and better, centralised recording of information. Deloitte, which produced the report “solely for the use of” CODC, acknowledged that management had recognised the need to improve the “control environment” over procurement activities.

The report was discussed in a closed meeting yesterday (Tuesday September 27) by council’s Audit and Risk Committee. 

The majority of all other policies across the council’s various departments, were confirmed as being up to date.