Tuesday, June 8, 2010

Independent external audit approved by council

An independent external auditor will be going through The City’s purchasing and contracting files after Council approved a recommendation from administration today.

City Manager Owen Tobert asked Council for the review after allegations were made by the City Auditor that potential procurement fraud is occurring given the size of The City of Calgary.

“Even though City Auditor Tracy McTaggart clarified that she was speaking only hypothetically (about fraud) based on statistical probability, I felt any doubt lingering in Council’s or the public’s mind needed to be addressed by an independent third party,” said City Manager Owen Tobert.

The external auditor will provide a detailed review of The City’s procurement practices - how The City obtains or acquires goods and services - and address any outstanding concerns.

This is after a preliminary internal review found no evidence of procurement wrongdoing.

Files Reviewed, addressing allegations

Since the Auditor’s Report was received at Council’s Audit Committee on May 20, The City’s own Internal Control Risk Management group has reviewed almost 600 files which cover approximately 80% of the dollar value of all the procurement files referenced in the Auditor’s report to identify the specific cause of the concerns raised.

The majority of contracts and purchase orders reviewed have been traced to existing paper work, electronic files and Council or management approval to change budgets. However, any file that is deemed high risk in terms of potential impropriety – such as change orders, limited tenders, purchases without purchase order – would be turned over to an external auditor to verify.

The City’s external auditor of record, Deloitte and Touche LLP, was consulted to design a methodology for proceeding with the investigation of the last five year’s procurement activity at The City.

Policy and process change

“The allegations made by the City Auditor affect all of us – members of Council, City employees and taxpayers – deeply. We needed to clear the air,” said Tobert.

“Our preliminary review has failed to turn up procurement impropriety, the Auditor has produced no evidence of fraud; let’s see what an independent review concludes.”

City Administration agreed with the Auditor’s report that significant work had to be undertaken to ensure appropriate policies and procedures are in place and are well understood by employees, purchasers and vendors.

Since April 2009, significant changes have been implemented to ensure goods and services, as well as work contracts, meet best practice standards. The changes seem to be working.

For example, processes for more competition on all significant City contracts have been in place since April 1, 2009. Excluding allowable exceptions for emergencies or for proprietary products, The City has reduced the use of single-sourced contracts to less than eight percent of all contracts let over a value of $100,000. That’s down from 33 per cent pre-April 2009. Ninety-two percent now are awarded competitively.

This represents a portion of the work that has been done to ensure City procurement practices meet industry standards and government regulations.

The external auditor hired to complete the review of high risk procurement files will be selected by Request for Proposal once the scoping of potential fraud and procurement impropriety criteria have been completed.

Below is Owen Tobert's interview with the media following the Council meeting.

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