Audit of Mission Procurement – Port-au-Prince

Audit report
Office of the Chief Audit Executive
June 2023

Table of Contents

• Background
• About the Audit
• Overall Assessment
• Audit Findings
• Conclusion & Recommendation
• Annex A: Management Response and Action Plan

Background

Port-au-Prince

• Mission has 23 Canada-based staff and 54 Locally engaged staff.
• It is a large full service mission with all departmental business lines represented, along with multiple programs from other departments.

Common services and property programs

• Vast majority of procurement spending is from these two programs
• These programs manage key service contracts, including security services, cleaning, and heating/ventilation maintenance.
• Procurement activities in these programs are managed by four Canada-based staff: a Management and Consular Officer, two Deputy Management and Consular Officers, and a Finance Officer.
• It is noted that the Finance Officer (FI02) position is not standard across the mission network, and is temporary (expires September 2025). This position allows mission management to have an additional layer of due diligence and review over complex procurement activities.

Operating environment

• Port-au-Prince is a high level hardship posting due to a complex local environment and security concerns. In recent years, the mission has been under a constant state of crisis. This negatively impacts the mission’s procurement activities in multiple ways, including: a lack of reliable local vendors, and difficulty attracting and retaining competent staff.
• In 2016 numerous fraud schemes were discovered to be taking place at the mission, which involved significant financial loss, and resulted in multiple staff dismissals.
• Over the years, significant efforts have been undertaken to improve procurement practices and establish good controls.

Mission Property & Vehicle Fleet

About the Audit

Objective

The objective of this audit is to determine whether the Port-au-Prince mission has effective controls in place to support mission procurement activities in compliance with applicable legislative requirements and policies.

Criteria

1. Controls are in place at the mission to support the effective management and oversight of the procurement and payment of goods and services.
2. Procurement processes and practices at the mission comply with applicable legislative requirements and policies.
3. Information related to procurement activities at the mission is accurate and complete.

Scope

This audit included a review of the Port-au-Prince mission’s procurement activities and controls through data analytics and testing of transactions between April 1, 2019 and September 30, 2022.

Statement of conformance

The audit was conducted in conformance with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and with the Treasury Board Policy and Directive on Internal Audit, as supported by the results of the external quality assurance and improvement program.

Methodology

a. Limitations on procedures

The audit was conducted remotely, and therefore limited to remote procedures. Findings were based on transaction data and available digital documentation. The audit team did not conduct any fieldwork at the mission but met virtually with key mission personnel to gather and validate information.

b. Sample testing

The audit team selected and tested 55 samples from FY 2020 to FY 2023 (September), which included 82 transactions. The judgemental sample of transactions was selected based on financial and non-financial risk indicators identified through expenditure, contract, and vendor data analysis.

Broader data analysis was conducted on the past ten years of vendor and expenditure information.

c. Document review and interviews

The audit team reviewed and analyzed documents prepared by the mission.

The audit team conducted interviews and walkthroughs with key personnel at the mission and at the Common Service Delivery Point in Washington.

Overall Assessment

Audit Findings

Audit Findings: Procurement Practices – Process and Controls

Criterion: Controls are in place at the mission to support the effective management and oversight of the procurement and payment of goods and services.

Finding Summary: The mission has many good controls in place to support the procurement and payment of goods and services, although there are opportunities to improve the management of service contracts. Specifically, the following processes could be improved: evaluating competitive contract proposals, establishing clear contract terms (incl. services and pricing), and ensuring vendor invoices include sufficient details to support the invoiced amount. Without effective controls over service contracts, the mission is at an elevated risk of not selecting the best contractor at a reasonable price; not receiving expected services at established pricing; and, being invoiced for amounts that do not align to work performed.

Detailed findings

Planning, Procurement Initiation, and Monitoring

• Generally, effective procedures are in place to identify and initiate procurement activities.
• The annual business planning process identifies upcoming needs and reoccurring services/activities. The Mission Request Online platform is used to initiate ad-hoc requirements.
• Some procurement was not planned, but reactive based on an evolving needs or available funding. This is a common practice across missions.
• Some good contract monitoring practices are in place, such as consumption tracking, monitoring of contract expiry date, and conducting contract performance reviews.

Competitive Contracting

Transaction review identified issues with some competitive contracting processes, including:

• Evaluations of contract proposals by the evaluation team appear to be completed only as a group, rather than reviewed individually then results compiled to reach a consensus (as required);
• In one competitive process, the rates from the proposal evaluation grid did not match the rates in the proposals, resulting in the vendor with highest proposed rate winning the contract;
• Several maintenance service contracts did not include a detailed price breakdown, only an overall contract price; and,
• Instances where three bids were not obtained prior to selecting the winning bid.

Invoicing and Payment

The mission has some effective procedures in place to support the approval of invoices (S.34), such as confirmations on invoices that goods were received, or services rendered. In addition, the mission’s Finance Officer (FI02) is able to exercise additional due diligence in reviewing invoices prior to approval.

Generally, invoices included sufficient detail to support the amount, although invoices for some maintenance contracts (noted above) did not include any cost breakdown or details of the work completed during the month (contract value simply divided into 12 monthly invoices).

Audit Findings: Procurement Practices – Compliance

Criterion: Procurement processes and practices at the mission comply with applicable legislative requirements and policies.

Finding Summary: While procurement processes and practices at the mission generally comply with departmental policies and applicable legislative requirements, opportunities for improvement were noted around the selection of appropriate procurement strategy and method. Compliance with these policies helps mitigate procurement risks and supports the mission in receiving quality goods and services, at reasonable prices.

Detailed findings

Compliance with the Financial Administration Act (FAA)

Most contract and transaction approvals were in compliance with the FAA, although the following issue was identified:

• The Readiness Program Manager provided the approval for two contracts (S.41) without having the appropriate authority over the Common Services program budget.

Compliance with the Directive on the Management of Procurement – Procurement Strategy

Procurement practices at the mission generally comply with the requirements of the Directive, however the following issue was identified regarding the use of the best procurement strategy for the required need:

• Multiple overlapping contracts were in place for the same goods or service, which should have been larger comprehensive contracts.

It was noted, however, that the mission’s operating environment can make competitive procurement difficult, and in some instances quick decisions were taken to maintain continuity of service.

Compliance with Departmental Requirements – Procurement Method

The mission does have guidelines in place that outlines the different procurement methods and their appropriate use (petty cash, acquisition cards, direct invoices, purchase orders, or contracts). The transaction testing found that generally the appropriate procurement method was used, although the following issues were found:

• Three instances of direct invoices that should have been processed as purchase orders/contracts (as required based on $5000 threshold); and
• Three instances of purchase orders established after being invoiced.

Audit Findings: Procurement Practices – Information

Criterion: Information related to procurement activities at the mission is accurate and complete.

Finding Summary: Information related to procurement activities at the mission is generally accurate and complete. However, instances of incomplete and missing documentation and coding errors were noted, although it is not considered a systemic issue.

Detailed findings

Sole Source Contract Documentation

The mission utilizes sole source procurement options regularly due to the operating environment. The signed “Non-Competitive Contract Certification” justification form was not always retained and available in the procurement files.

Information to Support Approvals

Transaction review found that, generally, supporting information was included in the financial system to support transaction approval.

In addition, some good practices were noted to be in place at the mission to support approvals, including guidelines that outline the considerations prior to approving S.34, such as:

• Ensuring that all the supporting documentation is attached to the approval document, such as invoices, links to inventory lists, or before/after pictures to confirm services rendered; and
• Attestation by the Storekeeper that the goods were received in accordance with the purchase order.

Accurate Financial Coding

Transaction information recorded in the financial system was generally found to be accurate.

A few tested transactions were found to have coding errors and/or missing information, such as:

• Four transactions coded against the wrong General Ledger account; and
• Coding for property and vehicle transactions often did not include the specific asset numbers, which hinders expenditure tracking and monitoring.

Conclusion and Recommendation

Conclusion

The audit concluded that the Port-au-Prince mission generally has effective management practices and controls in place to support mission procurement activities in compliance with applicable legislative requirements and policies. There are, however, opportunities to improve the selection of appropriate procurement methods, and the establishment and management of competitive contracts.

Recommendation

The Head of Mission should strengthen procurement controls in the following areas:

• Selecting the most appropriate procurement method to address a specific need;
• Solicitation and review of bids for competitive contracts; and
• Establishing clear contract terms, expectations, and pricing.

Annex A: Management Response and Action Plan

Audit recommendation: 1. The Head of Mission should strengthen procurement controls in the following areas:

• Selecting the most appropriate procurement method to address a specific need;
• Solicitation and review of bids for competitive contracts; and
• Establishing clear contract terms, expectations, and pricing.

Management response: Mission management agrees with this recommendation, and intends to implement the following actions:

• With guidance from the Common Service Delivery Point (CSDP), HOM will approve clear guidelines for all phases of procurement in compliance with the applicable departmental policies and procedures. The guidelines will articulate the need for clear contract terms, expectations, and pricing.  The mission will communicate these guidelines to all common services staff;
• The procurement guidelines will indicate that bids for competitive contracts be presented to the Committee on Mission Management for review and comments;
• Mission will identify training opportunities for common services staff who are involved with procurement, and create a list of mandatory procurement training courses for staff based on the departmental Procurement Management Learning Roadmap; and,
• Mission will develop a procurement plan which will define appropriate procurement mechanisms based on assessed needs and in consultation with the CSDP. Through this planning process, the Mission will seek to increase the number of competitive contracts put in place to support ongoing mission needs.

Management action plan:

• With guidance from the CSDP, Mission will clarify and communicate guidelines for all phases of procurement.
• Mission will create a list of mandatory training courses for common services staff who are involved with procurement.
• Mission will develop a procurement plan which will define appropriate procurement mechanisms based on assessed needs and in consultation with the CSDP.

Area responsible: Head of Mission, Embassy of Canada to Haiti

Expected completion date: October 2023