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 accountable 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 accountants. 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 user unit. The
refore, any procurement has to originate from a user 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 user 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 surpasses 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 members of the IPC are the same people who conduct e
valuation and later on approve their recommendations as IPC.