revelstoke aglg report may 2016

8/17/2019 Revelstoke AGLG Report May 2016

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Audit Topic 1 – Report 6 (May, 2016)

ACHIEVING VALUE

FOR MONEY IN

OPERATIONAL

PROCUREMENT

City of Revelstoke

A Performance Audit carried out by the Auditor Generalfor Local Government of British Columbia


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Audit Topic 1 – Report 6 (May, 2016)

A Performance Audit carried out by the Auditor General for Local

Government of British Columbia

ACHIEVING VALUE FOR MONEY IN

OPERATIONAL PROCUREMENT

City of Revelstoke

Audit Topic 1, Report 6: City of Revelstoke


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Audit Topic 1, Report 6: City of Revelstoke 2

MESSAGE FROM THE AUDITOR GENERAL FOR LOCAL GOVERNMENT

It’s my pleasure to present this perormance audit report on the operations othe City o Revelstoke, covering the topic“Achieving Value or Money in Operational

Procurement.”

I want to thank the City or itscooperation during the perormance audit process. I also want to thank them or givingcareul consideration to the audit findings andrecommendations and providing a constructiveresponse, which is included toward the end othis report. Te period covered by this audit was 2010 to 2012. While most o theexamination work or this audit was completedin 2013 and 2014, the audit itsel and therecommendations presented are still relevanttoday.

Te office o the Auditor General orLocal Government was established tostrengthen British Columbians’ confidence intheir local governments’ stewardship o publicassets and the achievement o value or moneyin their operations. Perormance audits o localgovernments are one o the tools we use tocarry out this mandate.

Tis report describes our work incarrying out our audit o the City oRevelstoke’s management o the procuremento goods and services to support its day-to-day

operations. Tis activity is known asoperational procurement. Like all o our audits,this is an independent, unbiased assessment,carried out in accordance with proessionalstandards. It aims to determine the extent to which the area being examined was managed with due regard to economy, efficiency andeffectiveness during the period covered by theaudit.

Tis audit is one o six our officeundertook on this topic beginning in 2013/14.

Overall, we ound that the City oRevelstoke met most o our expectations, had asolid oundation or operational procurementand that staff ully complied with theexpectations provided to them in the City’s policies.

o meet its operational procurementobjectives more ully, Revelstoke will need tobuild on its existing good practices by updating

its procurement and conflict o interest policiesand undertaking additional monitoring andreporting relating to operational procurementand the achievement o value or money.


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Building on the work we carried out onthis audit, the other five audits we have done onthis topic and a review o local government practices, we have published an AGLG

Perspectives booklet titled “Improving LocalGovernment Procurement Processes.” Aimed atlocal government staff and council/boardmembers, this booklet aims to assist a wide rangeo local governments to strengthen their procurement processes by developing strong procurement policy, perormance metrics and vendor perormance evaluations.

Our hope is that this audit report – andthe inormation provided in our AGLGPerspectives booklet – will assist the City oRevelstoke in enhancing its procurement practices and delivering value or the tax dollarsit spends.

Gordon Ruth, FCPA, FCGA

Auditor General or Local Government



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TABLE OF CONTENTS


LIST OF EXHIBITS

EXECUTIVE SUMMARY

What We Examined

What We Found

Revelstoke’s Management of OperationalProcurement

A Focus on Operational Procurement

Procurement-Related Policies

What the Sampled Transactions Showed

Monitoring & Reporting

Conclusion INTRODUCTION

Operational Procurement Our Expectations

What We Examined CONTEXT

The City of Revelstoke FINDINGS

Revelstoke’s Management of OperationalProcurement A Decentralized Procurement Function

Acquisition Authority and Competitive Procurement Requirements

A Focus on Operational Procurement Council Involvement in Strategic Procurement

Efforts to Generate Value for Money

Bulk Fuel Purchasing


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VoIP Phone Service

Opportunities Explored

Procurement-Related Policies Purchasing Policy

Ethical Requirements

What the Sampled Transactions Showed Overall Compliance with Policies

Gaps in Documentation

Monitoring & Reporting Absence of Key Performance Indicators

Absence of Reporting on Procurement Data to Council

CONCLUSION

RECOMMENDATIONS

SUMMARY OF LOCAL GOVERNMENT’S COMMENTS

CITY OF REVELSTOKE’S ACTION PLAN

ABOUT THE AUDIT

Audit Objectives

Period Covered by the Audit

Audit Scope and Approach

Audit Criteria

Performance Audit Process

APPENDIX – PROCUREMENT TOOLS DEFINED


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EXHIBIT Summary of Recommendations

EXHIBIT City of Revelstoke Visual Facts

EXHIBIT City of Revelstoke Revenues and Expenditures, 2010-2012

EXHIBIT City of Revelstoke Estimated Operational Procurement Comparedto Total Operating Expenditures (Excluding Protective Services),2010-2012 ($ millions)

EXHIBIT City of Revelstoke Acquisition Authority

EXHIBIT City of Revelstoke Competitive Procurement Requirements

EXHIBIT Performance Audit Process

LIST OF EXHIBITS


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We undertook perormance audits onoperational procurement because localgovernments spend significant taxpayer undsor purchased goods and services in support o

their daily operations and effectivemanagement provides opportunities to containcosts and/or enhance program delivery.

What We Examined Our objective was to determine whether the City o Revelstoke managedoperational procurement strategically and withdue regard or value-or-money between 2010and 2012. Our findings are based on our reviewo the City’s procurement policies, proceduresand practices. We undertook a review o procurement data and supportingdocumentation, interviewed staff and selected25 operational procurement transactions ordetailed review. We assessed Revelstoke’sinternal controls and whether these wererespected. We examined the procurement toolsRevelstoke used and its reporting o results.

What We Found Overall we ound that the City metmost o our expectations, had a solidoundation or operational procurement andthat staff ully complied with the expectations provided to them in the City’s policies.

o meet its operational procurementobjectives more ully, Revelstoke will need to

build on its existing good practices by updatingits procurement and conflict o interest policiesand undertaking additional monitoring andreporting relating to operational procurement

and the achievement o value or money.

Revelstoke’sManagement ofOperationalProcurement Te City used a decentralized procurement process, as outlined in its

purchasing and tendering policy. Eachdepartment was responsible or managing itsown procurement processes, ollowingguidance contained in the purchasing policyand several purchasing-related templates. Tefinance department monitored procurement processes and processed payments onceappropriate approvals had been indicated. TeCity’s management team met on a weekly basisand was a venue or discussing operational procurement issues.

Te City’s Purchasing and enderingPolicy directed staff to achieve maximumeconomy, efficiency and effectiveness in the purchase o goods and services based on the pursuit o best value or its money. Te policy permitted sole source procurement or purchases under $5,000, but required that purchases over $5,000 be procuredcompetitively, with some exceptions.

EXECUTIVE SUMMARY

Overall we found that the City met most of our expectations, hada solid foundation for operational procurement and that staff fullycomplied with the expectations provided to them in the City’s policies


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A Focus onOperational

Procurement Revelstoke Council participated inreviewing and approving a range o operational procurement transactions and discussed theCity’s spending priorities at Council meetings.During the period covered by the audit,Council approved approximately 17 contracts,five o which were below the usual dollarthreshold required or Council approval.

Te City also demonstrated several

initiatives intended to generate value or moneythrough operational procurement decisions,including initiatives to purchase uel in bulkand switch telephone service to voice overinternet protocol (VoIP). Staff also told usabout other opportunities they explored in aneffort to generate value or money.

Procurement-Related Policies We ound that Revelstoke’s policies toguide operational procurement were generallysound, but had some gaps:

• Lack o guidance on the use o procurementdocuments and contracting.

• Lack o guidance on working with vendors.• No policy on unsolicited proposals rom

vendors.

We also ound several gaps in the City’sconflict o interest provisions, although wenoted that the City made some advancement inits ethical provisions since the end o the period

covered by the audit.

What the SampledTransactions Showed We undertook detailed testing o 25operational procurement transactions enteredinto by the City between 2010 and 2012,including 13 direct contract award transactionsand 12 competitive processes. We ound that

staff complied with the City’s purchasing policies in all cases, although the City did notretain the scoring sheets or 11 out o 12 o thecompetitive processes.

Monitoring &Reporting We ound that, although different Citydepartments took steps to identiy and

implement strategies or cost savings related toboth operations and operational procurement,the City did not develop a perormancemonitoring ramework, or identiy and trackkey perormance indicators relating tooperational procurement. We also ound thatthe City had no standardized requirements orreporting tools or inorming Council aboutoperational procurement results.

EXECUTIVE SUMMARY


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Conclusion Tis audit set out to determine

whether – during the period covered by theaudit – the City o Revelstoke managedoperational procurement strategically and withdue regard or value or money. Overall, weound that the City met most o ourexpectations.

Te City can build on this solidoundation by enhancing its policies andincreasing its efforts to link its operational procurement activities to the City’s largerobjectives and monitor and report on its

operational procurement perormance. Webelieve that these enhancements wouldimprove the City’s ability to demonstrate to itstaxpayers that it is achieving value or money.

EXHIBIT : Summary of Recommendations

ISSUES RECOMMENDATIONS

Procurement

and Conflict of

Interest Policies

The City of Revelstoke should enhance its purchasing and conflictof interest policies to align with current good practice. Specificareas for attention include:

• Guidance on use of procurement documents and contracting;

• Guidance on vendor performance and debriefing unsuccessfulbidders;

• Guidance on unsolicited proposals;

• Guidance for vendors to disclose and sign off on potentialconflicts of interest; and,

• Provisions to protect employees reporting a known or potentialconflict of interest regarding City employees or Councilmembers involved in procurement.

Monitoring andReporting

The City of Revelstoke should enhance its monitoring andreporting on operational procurement activities and results by:

• Developing and implementing key performance indicatorsrelating to operational procurement and a system to monitorthem; and,

• Increasing reporting to Council about operational procurementresults.

EXECUTIVE SUMMARY


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OperationalProcurement

All local governments carry outoperational procurement, much o it taking place on a day-to-day basis. While the size oindividual transactions can vary widely, thetotal amount spent through operational procurement is significant. In the case o theCity o Revelstoke, we have estimatedoperational procurement spending accountedor approximately 33 per cent o operatingexpenditures in 2012.

Operational procurement can bechallenging or local governments o all sizes tomanage strategically because o its inherentcharacteristics:

• It can involve widely varying types o goodsand services;

• It ofen involves a relatively high volume otransactions;

• For many local governments, it involves arelatively large number o suppliers;

• Individual transactions may vary widely in

value;• It is ofen carried out by a relatively large

number o people in the organization;• Local government financial systems are

not always set up to capture procurementtransactions easily and holistically; and,

• Procurement inormation anddocumentation in support o transactionstends to be dispersed across theorganization.

INTRODUCTION

Tese characteristics may make itdifficult or a local government to quantiy itsoperational procurement and easy or it tounderestimate the significance o operational

procurement and the potential or generatingsavings or enhancing service delivery. As aresult, some local governments may approachoperational procurement as a series oindividual transactions rather than as an overall process running the breadth o theorganization.

As operational procurement issometimes monitored only inormally, in thecourse o overseeing operating budgets, somelocal governments may support the unctionmainly through ad hoc initiatives rather than amore effective, systematic and strategicapproach.

In the ace o these challenges, somelocal governments ocus on good managemento individual operational procurementtransactions. Tis may involve mandating theuse o competitive procurement tools orrelatively small dollar value transactions inorder to maximize value or money. Such a

decision depends on the specific circumstanceso the local government and the perceived risksand rewards.

Tese local governments tend tomeasure the success o their procurementactivities mainly by looking at whethercontracts were let competitively and the extentto which departments stay within theirbudgets.

Operational procurement can be challenging for local governments ofall sizes to manage strategically because of its inherent characteristics.


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significant areas o operational procurementexpenditure, with clear strategies to achievebest value in these areas.

• Te collection and retention o cost

inormation necessary to calculate potential savings through the use o various procurement tools.

• A good understanding o key procurementrisks and how they are identified, monitoredand mitigated.

• Monitoring o perormance and regularreporting to the council/board and the public on the local government’s operational procurement activities.

When we talk about best value, we meana balance between low cost and the qualityor effectiveness of what a local governmentpurchases.

It is the responsibility of each local governmentto define quality and effectiveness, as this canvary depending on priorities that may be set outin local government policy.

The concept of best value can includeconsiderations such as social or environmentalvalues as well as narrower, more traditional,measures of quality and effectiveness.

What We Examined Te overall objective o this perormance audit was to determine the extentto which the City o Revelstoke managedoperational procurement strategically and withdue regard or value or money.

Our findings are based on our reviewo Revelstoke’s operational procurement

policies, procedures and practices between2010 and 2012. We undertook a review o procurement data and supportingdocumentation and we interviewed the City’s

staff.

In addition, we selected 25 operational procurement transactions relating to the periodcovered by the audit or detailed review. Weselected these transactions on a judgementalbasis in order to gain an understanding o thetypes o operational procurement transactionsthe City undertook and how they complied with its policies and procedures.

Te audit also assessed whether theCity o Revelstoke had put in place sufficientinternal controls over procurement and whether these were respected. We examinedthe tools Revelstoke used to pursue best valuein operational procurement and its reporting oresults.

Our audit work primarily covered the procurement process up to the point oawarding contracts. We did not assess contractadministration ollowing contract award other

than looking at how the City monitored vendor perormance.

We provide details about the auditobjective, scope, approach and criteria in the“About the Audit” section, near the end o thisreport.

INTRODUCTION

We selected 25 operational procurement transactions relating to theperiod covered by the audit for detailed review.


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CONTEXT

EXHIBIT : City of Revelstoke Visual Facts

City of RevelstokePOPULATION

7,139

Source: BC Stats 2013 (http://www.bcstats.gov.bc.ca)

GEOGRAPHIC LOCATION

Columbia-Shuswap

AREA

41 sq km

INCORPORATED

1899

The City ofRevelstoke Te City o Revelstoke is located in thesoutheast o British Columbia and is part othe Columbia-Shuswap Regional District. TeCity is situated on the Columbia Riverbetween the Selkirk and Monashee mountainranges. Revelstoke was ounded in the 1880sand officially incorporated on March 1, 1899.

Te City o Revelstoke covers a landarea o 41 square kilometers and had a population o 7,139 as o 2011. Te median

age o Revelstoke’s residents in 2011 was 40.3 years, which was very close to the Canadianmedian age o 40.6 years.

As o 2012, the City o Revelstoke hadapproximately 105 employees, including ulltime, part time and casual staff.


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CONTEXT

Exhibit 3 shows the City oRevelstoke’s revenue, expenditures andoperating surplus between 2010 and 2012. TeCity advised that the summary inormation in

Exhibit 3 also reflects the impact o a numbero changes in areas such as accounting practicesand grants in lieu o taxation during this period; thereore additional inormation wouldbe needed or any ull comparison o the trendsillustrated.

City Of Revelstoke’s Operational

Procurement Expenditures

Te City o Revelstoke’s estimatedoperational procurement expendituresaveraged about $5.9 million per year during the period covered by the audit. Exhibit 4 shows anestimate o these expenditures compared to theCity’s other operational expenditures. It showsthat approximately one third o all operatingexpenditures in each year were spent throughoperational procurement.

EXHIBIT : City of Revelstoke Revenues and Expenditures 2010-2012 ($ millions)

REVENUE CHANGE

Taxation Revenue

Non-Taxation Revenue -

Total Revenue -

Expenditures

Operating Surplus (Deficit) -

EXHIBIT : City of Revelstoke Estimated Operational Procurement Comparedto Total Operating Expenditures (Excluding Protective Services), 2010-2012 ($millions)

CHANGE

Estimated operationalprocurement expenditures

Estimated other operationalexpenditures

Total operating expenditures

Estimated operationalprocurement expenditures as% of total operatingexpenditure

-

Note: This exhibit estimates operational procurement expenditures, not including protective services, based

on information in the City of Revelstoke’s Annual Report (2010 to 2012).

Estimated other operational expenditures includes expenses such as personnel costs, RCMP contracted

services, flow through funds, amortization of tangible capital assets, etc.


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EXHIBIT : City of Revelstoke Acquisition Authority

ACQUISITION OF GOODS AND SERVICES

Purchases Up to

$2,000

Petty cash (up to $50)Specific department staff (up to $500)Supervisors

Purchases from

$2,000 Up to

$5,000

Deputy Director of Corporate AdministrationBuilding and Property ManagerDeputy Director of Finance (up to $4,000)

Purchases from

$5,000 Up to

$50,000

Department Heads

Purchases from

$50,000 Up to

$75,000

Director of Finance

Purchases from

$75,000 Up to

$100,000

Chief Administrative Officer

Purchases from

$10,000, and UpApproval by Council required for all contracts or agreements

Approval by Council required for all contracts of any amount that are unusual incircumstance or of a controversial nature.

A Decentralized Procurement Function

Te City o Revelstoke used adecentralized procurement process, as outlined

in its purchasing and tendering policy. Eachdepartment was responsible or identiying thegoods and services it required and managing its procurement processes. Staff would purchase what they required ollowing guidancecontained in the purchasing policy and several purchasing-related templates.

Te director o finance monitoredRevelstoke’s procurement process and ensured purchases were made in accordance with policyand with the correct authorization. Te financedepartment received all invoices, sent them toindividual departments or authorization,confirmed the authorization and coding andauthorized payments. Te City’s managementteam met on a weekly basis and was a venue ordiscussing operational procurement issues.

Acquisition Authority and CompetitiveProcurement Requirements

Exhibit 5 illustrates the staff positions

that were authorized to make purchases or theCity o Revelstoke at particular dollar levels. Asit indicates, Council delegated its approvalauthority over operational procurement to staffor transactions up to $100,000 that were notunusual or controversial.

FINDINGS

The City of Revelstoke used a decentralized procurement process, asoutlined in its purchasing and tendering policy.


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Te City’s Purchasing and enderingPolicy directed staff to achieve maximumeconomy, efficiency and effectiveness in the purchase o goods and services based on the

pursuit o best value or its money.

Te policy provided various mechanisms tomanage procurement, including:

Quotations

Requests or verbal or written bids by suppliersto provide goods or services for a specified price.

Tenders

Bids or offers to provide goods or services,submitted in response to an invitation thatindicates specific terms required by the City.

Proposals

Responses to a ormal request or sealed proposals o solutions to the City’s specificneeds, objectives or required deliverables.

Invitational Tenders

enders to which only a select number o vendors are invited to bid on a contract.

Public Tenders enders that are open to the general public, where anyone may submit a bid.

Exhibit 6 summarizes Revelstoke’srequirements, set out in its procurement policy,or using competitive processes or the purchase o goods and services. Te policy

permitted direct awards or purchases under$5,000, but required that all purchases over$5,000 be procured competitively througheither written or verbal quotations, publictenders, or proposals. Exceptions were permitted or “one off ” items o up to $15,000that could also be sourced rom a singlesupplier.

FINDINGS

EXHIBIT : City of Revelstoke Competitive Procurement Requirements

ACQUISITION OF GOODS AND SERVICES

Purchases under

$5,000No quotations required but must make effort to obtain the bestvalue

Purchases from

$5,000 Up to

$25,000

Verbal or written quote (minimum 3 required)Public call for written proposals for consultants ($10,000 ormore)

Note: A “one off” item may be sourced from a single supplier if it is of a

low dollar value ($15,000).

Purchases from

$25,000 Up to$50,000

Written quotes (minimum 3 required)

Purchases from

$50,000, and Up

Invitational tenderPublic tenderProposal

Note: With approval from Council, a contract may be sole sourced if there

is clearly only one qualified supplier available or capable of providing the

required service.

Source: City of Revelstoke’s Purchasing and Tendering Policy.


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FINDINGS

Procurement-Related Policies

Complete, clear and up-to-date procurement-related policies and proceduresare essential or local governments to ensureconsistency in their efforts to achieve best valueor tax dollars. Tis is particularly important asstaff come and go over time.

Purchasing Policy

An effective purchasing policy includesseveral key components:

• It is comprehensive, providing sufficient andappropriate guidance to staff and suppliersto communicate expectations.

• Its ormatting and language make it easy tounderstand and ollow as a guide.

• Policy statements are presented withsufficient depth to provide clear andunambiguous direction.

• It includes clear guidance on ethical conductand conflict o interest.

Regardless o their size, all localgovernments should have clear policies ocusedon encouraging the use o competitive procurement, preventing misconduct andensuring value or money.

Te City o Revelstoke’s purchasingand tendering policy delegated purchasingauthority up to $100,000 per transaction tostaff. Te policy was developed by the financedepartment in 2002 and amended in 2008. It was in effect during the period covered by the

audit and was subsequently reviewed andamended afer the period covered by the audit,in 2015.

Staff told us that new employees weremade aware o the City’s purchasing policyduring their departmental orientation i purchasing was an aspect o their job. Tey were also required to sign and initial the City’s purchasing and authorization sheet, which wasused by the finance department to confirm thatstaff adhered to authorization limits whensigning invoices or contracts.

We ound that Revelstoke’s policies toguide operational procurement were generallysound, but had some gaps. It is important orkey practices to be reflected in policy to ensureconsistency over time, particularly in the evento staff turnover.

Guidance on the Use of Procurement

Documents and Contracting

Although the City had templates andguidance or procurement-related processessuch as service contracts and requests or proposals, City policies included no reerence

to the use o these templates. Additionally, weound no written guidance on the length ocontracts, contract dispute resolution procedures, the use o sub-contractors, contractmonitoring or legal review o larger contracts.

Lack of Guidance on Working with Vendors

Te purchasing policy provided nodirection on how staff should work with vendors, including debriefing unsuccessulbidders and assessing vendor perormance.

We found that Revelstoke’s policies to guide operational procurementwere generally sound, but had some gaps.


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Lack of Guidance on Unsolicited Proposals

Te policy also lacked direction onhow to treat unsolicited proposals that may bereceived rom suppliers.

Ethical Requirements

Te City’s conflict o interest provisions were included in its Purchasing andendering Policy, which was approved in 2008.Revelstoke required staff to adhere to thePurchasing Management Association oCanada (PMAC) proessional code o ethics.In addition, the City required exempt staff tocomplete an annual statement o financialdisclosure that included a list o the employee’sassets, liabilities, sources of income and property.

However, we ound some gaps in theCity’s conflict o interest provisions, including:

• No requirement or employees involved in procurement to periodically review conflicto interest requirements and sign off toindicate their understanding and knowledge.

• No standardized requirement or vendors todisclose potential conflicts o interest.

•

No provision to protect employees reportinga known or potential conflict o interestregarding other City employees or Councilmembers involved in procurement.

Staff told us that, during the periodcovered by the audit, new Councillors receivedtraining and mentoring by other Councillors.Te City expected Council members to comply with statutory rules set out in the CommunityCharter , which include ethical requirementssuch as those covering conflict o interest.

FINDINGS

We also noted that the City made someadvancement in its ethical provisions since theend o the period covered by the audit. In 2015,Revelstoke developed a new Standards o

Conduct policy or all staff that includedreerence to conflict o interest. It also createdan Administrative Fairness Policy that outlined procedures or complaints regarding the City’sadministrative practices, processes and procedures.

What the SampledTransactions Showed

We undertook detailed testing o 25operational procurement transactions enteredinto by the City o Revelstoke between 2010and 2012. Tis sample – which was notintended to necessarily be representative o alloperational procurement carried out by theCity – included 13 direct contract awardtransactions and 12 competitive processes. Foreach transaction, we ocused on the need orthe procurement, due diligence, appropriateapprovals and the preparation and keeping oappropriate documentation.

Overall Compliance with Policies

In our review o the sampledtransactions, we ound that staff complied withthe City’s purchasing policies in all cases.Guidelines or direct awards and competitivebidding requirements were ollowed in allsample transactions that we tested.

The City made some advancement in its ethical provisions since theend of the period covered by the audit.


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FINDINGS

Tese measures should demonstratethe extent to which the local government’s procurement efforts are successul, drawing ondata its inormation systems can generate, given

the local government’s capacity and resources.Local governments may wish to exploreopportunities to work cooperatively with othernearby local governments on the developmento perormance measurement and analysistools, as there may be opportunities to costshare initiatives in this important area.

Absence of Key Performance Indicators

As previously discussed, we ound thatdifferent departments at the City o Revelstoketook steps to identiy and implement strategiesor cost savings related to both operations andoperational procurement. We were inormedthat staff and Council regularly reviewedcontracts that were up or renewal to determinei cost-savings could be identified.

However, the City did not develop a perormance monitoring ramework oroperational procurement. For example,Revelstoke did not identiy and track key

perormance indicators such as how much oits operational expenditures were discretionary(managed operational expenditures wherebetter value could be achieved through acompetitive process), or other indicators ocost savings/cost avoidance, procurementefficiency metrics or vendor related metrics.

Gaps in Documentation

Although not required by the City’s policy, it is a good practice or staff to retain

documentation or the scoring o results incompetitive processes such as the assessment o proposals and tenders. We ound that the Citydid not retain the scoring sheets or 11 out o12 o the competitive processes related to oursampled transactions.

Monitoring &Reporting

Perormance measurement can providea local government with the inormation itrequires to act on opportunities to achievebetter value or money in its operations.

Given the pervasive and sometimesdisparate nature o operational procurement, alocal government’s only way to really knowhow it is perorming is to gather inormationrelating to procurement rom across theorganization, analyze it, monitor procurementresults and report on them. In the absence othese steps, decisions on how to carry out procurement cannot be ully inormed.

A local government’s approach to perormance measurement and analysis may vary based on the organization’s size andcomplexity. Key perormance indicators relatedto operational procurement should be aligned with the local government’s overall goals,objectives and strategies as well as its specificobjectives or its procurement unction.

Key performance indicators related to operational procurementshould be aligned with the local government’s overall goals, objectivesand strategies.


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Absence of Reporting on ProcurementData to Council

As mentioned previously, we ound

that Revelstoke Council had significantinvolvement in matters related to individualoperational procurement decisions, as staffbrought contracts valued at over $100,000, as well as anything deemed unusual incircumstance or controversial in nature, toCouncil or consideration and approval.

In addition, during the period coveredby the audit, staff reported to Council on progress toward achieving key departmentalobjectives, some o which included procurement activities and efforts to achievebest value in their operations. Examplesincluded garbage collection, energy efficienciesand snow removal, among others. Teseactivities were documented in the City’s annualreports rom 2010 through 2012.

However, we ound that the City hadno standardized requirements or reportingtools or inorming Council about operational procurement results. Between 2010 and 2012,

Council did not receive any reports on key perormance indicators or operational procurement.

We also noted that public reporting ondepartmental objectives related to achieving value or money decreased in the yearsollowing the period covered by the audit.

FINDINGS

However, we found that the City had no standardized requirements orreporting tools for informing Council about operational procurementresults.


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RECOMMENDATIONS

Recommendation 1

Te City o Revelstoke should enhance its purchasing and conflict o interest policies to

align with current good practice. Specific areasor attention include:

• Guidance on use o procurement documentsand contracting;

• Guidance on vendor perormance anddebriefing unsuccessul bidders;

• Guidance on unsolicited proposals;• Guidance or vendors to disclose and sign

off on potential conflicts o interest; and,• Provisions to protect employees reporting

a known or potential conflict o interestregarding City employees or Councilmembers involved in procurement.

Recommendation 2

Te City o Revelstoke should enhance itsmonitoring and reporting on operational

procurement activities and results by:

• Developing and implementing key perormance indicators relating tooperational procurement and a system tomonitor them; and,

• Increasing reporting to Council aboutoperational procurement results.


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26Audit Topic 1, Report 6: City of Revelstoke

SUMMARY OF LOCAL GOVERNMENT’S COMMENTS

City of RevelstokeP.O. Box 170, Revelstoke, British Columbia V0E 2S0

revelstoke.ca

______________________________________________________________________________________

April 20, 2016

Gordon Ruth, FCPA, FCGA,

Auditor General for Local Government,

Suite 201 – 10470 – 152nd Street,

Surrey, BC, V3R 0Y3

Dear Mr. Ruth,

Re: City of Revelstoke Operational Procurement Performance Audit

On behalf of the Council and staff of the City of Revelstoke, I would like to thank youand your staff for the audit report on our operational procurement processes provided to

us.

We are not surprised to learn from your report that your testing concluded full

compliance with our existing policies and procedures. We are committed to open and

accountable government and we strive to improve the ways in which that commitment

can be strengthened through best practices. In this regard, the recommendations in your

report will be valuable in helping us shape and improve our procurement policies and

processes going forward.

Finally, I would like to express our appreciation for the respectful manner in which your

staff carried out their assignment over a long and sometimes challenging period.

Sincerely,

Mark McKee

Mayor


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CITY OF REVELSTOKE’S ACTION PLAN

AGLG RECOMMENDATION MANAGEMENT RESPONSE AND NEXT STEPS PERSON RESPONSIBLE TIMEFRAME

RECOMMENDATION

The City of Revelstoke should enhance its

purchasing and conflict of interest policies

to align with current good practice. Specific

areas for attention include:

• Guidance on use of procurement

documents and contracting;

• Guidance on vendor performance and

debriefing unsuccessful bidders;

•Guidance on unsolicited proposals;

• Guidance for vendors to disclose and sign

off on potential conflicts of interest; and,

• Provisions to protect employees reporting

a known or potential conflict of interest

regarding City employees or Council

members involved in procurement.

The city has a program of reviewing and updating policies and

procedures on a regular basis. We will continue with this program

and incorporate guidance language as necessary.

Administration

Administration

AdministrationAdministration

Administration

Ongoing

March 31, 2017

March 31, 2017March 31, 2017

March 31, 2017

RECOMMENDATION

The City of Revelstoke should enhance its

monitoring and reporting on operational

procurement activities and results by:

• Developing and implementing key

performance indicators relating to

operational procurement and a system to

monitor them; and,

• Increasing reporting to Council about

operational procurement results.

We will explore best practices in terms of key performance

indicators and determine those that are appropriate to the city

as part of i ts ongoing decision making processes

We agree that reporting needs to be increased

Finance

Management

Ongoing

Ongoing


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Audit Objectives

Te overall objective o this perormance audit wasto determine whether the City o Revelstoke managedoperational procurement strategically and with due regardor value or money.

Period Covered by the Audit

Te audit covered the period 2010 to 2012. Wecompleted the majority o our audit work by November2014, but we also received and reviewed some additionalinormation afer that date.

Audit Scope and Approach

Te audit included a review o City o Revelstoke’s perormance in managing operational procurement. It didnot include procurement by any entities consolidated in theCity’s financial statements. It also did not include the procurement o physical assets. Tese were excluded as they were not routine, day-to-day procurement o goods andservices.

o carry out the audit, we undertook data analysis,interviews, process walkthroughs and review o

documentation. We sampled 25 operational procurementtransactions and assessed them against the audit criteria.

We assessed Revelstoke’s implementation o policies and procedures designed to achieve best value andassessed the reporting o results by reviewing a sample o procurement files.

Audit Criteria

Perormance audit criteria define the standardsagainst which we assess the City o Revelstoke’s perormance. We express these criteria as reasonableexpectations or Revelstoke’s operational procurement processes and practices to achieve expected results andoutcomes.

Below are the criteria we used to assess the City:

Operational procurement is managed strategicallyand linked to program and service delivery objectives.

a. Procurement plans and transactions are linked toapproved priorities, programs and budgets.

b. All procurement options are considered and are inline with local government strategic policies andobjectives.

Local governments are knowledgeable about thelevel o spending through procurement, as well as thenature and type o contractual arrangements entered into.

a. On an aggregate level, procurement expendituresare orecasted, budgeted, approved and monitored.

rends are analyzed and results are reported in atransparent manner.

b. Inormation provided to decision makers iscomprehensive and covers the nature and breadth o procurement arrangements being planned.

All the audit work in this report was conducted in accordance withCanadian Standards on Assurance Engagements.

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Operational procurement results in best valuethrough assessment o available sourcing options in

keeping with local governments’ strategic procurementobjectives.

a. At the transactional level, sound planning andbudgeting or procurement is conducted and planned acquisitions consider existing inventorylevels and liecycle costs. Opportunities or costefficiencies and effectiveness in the procurement process are routinely explored, including in responseto changes in market conditions.

b. Contracts are managed in a diligent manner toensure that all terms and conditions are ulfilled.

c. Te local government undertakes a systematic process to assess vendor perormance and lessonslearned rom operational procurement experienceare used to inorm planning or uture procurement.

Conflict o interest and other key procurement risksare mitigated.

a. In addition to Community Charter requirementsor elected officials, the local government hasimplemented conflict o interest and code oconduct guidelines or staff, including disclosure.

b. Mechanisms are in place to ensure key procurementrisks are identified and mitigated.

Te procurement model is cost effective, valuebased, effective, transparent, affordable, implemented in

accordance with legislative requirements and considersenvironmental and socio-economic impacts.

a. Te local government has current and welldocumented policies, procedures, roles andresponsibilities that are publicly known, linked to program objectives and well understood by users.Sufficient and appropriate documentation exists tosupport the basis o decision-making throughoutthe procurement process.

b. Te awarding o operational procurement contractsollows a systematic process that is air, transparent

and in line with local government policies andrelevant legislation. Other local governmentobjectives including environmental, social andfinancial impacts are considered.

c. Reporting to decision-makers and the public istimely, accurate, and relevant and reports assess theresults achieved through operational procurementactivity and decisions.

Innovation and best practices are explored andimplemented where appropriate.

a. Te local government shares its knowledgeo innovation and best practices in public procurement.

b. Best practices are implemented where appropriatein line with local government needs.

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Performance Audit Process

At the beginning o the perormance audit process, we shared key audit-related documents with theCity o Revelstoke. Tese included a description o theaudit background, ocus, scope and criteria and anengagement protocol document describing the audit process and requirements. Te process is summarized inExhibit 7.

AGLG initiates audit with notification letter and schedules opening

meeting with local government to discuss process and proposed auditscope and criteria.

AGLG finalizes audit scope/criteria and advises local government, whichacknowledges/accepts.

With cooperation of local government, AGLG gathers evidence byconducting enquiries, site visits and reviews, inspecting records,performing analysis and other activities.

AGLG shares preliminary findings with local government at fact clearingmeeting or by providing draft proposed final report.

Local government confirms all fact statements, advising AGLG if anyinformation is incorrect or incomplete, providing corrected informationwith documentary support.

AGLG may produce a draft proposed final report for local governmentreview and comment.

Local government may suggest revisions to the draft report. This requestmust be supported by evidence. Local government comments must beprovided within timeframes established by AGLG.

AGLG produces proposed final report and shares it with local government.

Local government has 45 days to provide comments. These should includeresponse to recommendations.

AGLG adds summary of local government comments to proposed finalreport and submits it to Audit Council for their review.

Audit Council may provide comments.

After considering any Audit Council comments, AGLG finalizes report.

AGLG will provide the local government with the final performance auditreport.

AGLG publishes the final performance audit report on AGLG.ca website.

EXHIBIT : Performance Audit Process

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APPENDIX PROCUREMENT TOOLS DEFINED

Corporate Supply Arrangement (CSA or “SupplyContract”)An arrangement in which a supplier has offered to providegoods or services or a specified period o time in accordance

with agreed terms and conditions.

Invitation to Quote (ITQ)A document issued to solicit quotes when the only competingactor is price.

Invitation to Tender (ITT)A document inviting vendors to submit prices or specified work. Tis is generally used only or construction projects.

New West Partnership Trade Agreement (NWPTA)A trade accord between Alberta, British Columbia andSaskatchewan that promotes interprovincial collaboration.

Notice of Intent (NOI)A document advising the vendor community o an intentionto directly award a contract in a situation where the purchaserbelieves only one qualified contractor is available.

Purchase Order (PO)A document committing the purchaser to buy a specified goodor service at a specified price and on terms outlined in thedocument.

Request for Expressions of Interest (EOI or RFEI)A document aimed at gathering inormation on the availabilityo desired services, potential suppliers or the level o interestrom the vendor community.

Request for Information (RFI)A document issued to obtain specific inormation about a goodor service. Tis can include inormation on the availability or perormance o the good or service.

Request for Proposals (RFP)A document outlining a requirement and asking vendors torespond with a proposed solution, their qualifications and price.

Request for Qualifications (RFQ)A document aimed at pre-qualiying vendors or a subsequentcompetition.

Service ContractAn agreement where a contractor supplies time, effort, and/orexpertise instead o a good. (http://www.businessdictionary.com/definition/service-contract.html)

Standing OfferAn offer rom a supplier to provide goods or services at pre-arranged prices, under set terms and conditions, when and irequired. (https://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/

standing-offers)

Standing OrderA purchase order covering repeated deliveries o goods orservices in specified quantities, at specified prices and accordingto a specific schedule. (http://www.businessdictionary.com/definition/standing-order.html)

Sources: Unless otherwise indicated, http://www.pss.gov.bc.ca/psb/pdfs/

PurchasingHandbook.pdf.

http://www.businessdictionary.com/definition/service-contract.htmlhttp://www.businessdictionary.com/definition/service-contract.htmlhttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttp://www.businessdictionary.com/definition/standing-order.htmlhttp://www.businessdictionary.com/definition/standing-order.htmlhttp://www.pss.gov.bc.ca/psb/pdfs/PurchasingHandbook.pdfhttp://www.pss.gov.bc.ca/psb/pdfs/PurchasingHandbook.pdfhttp://www.pss.gov.bc.ca/psb/pdfs/PurchasingHandbook.pdfhttp://www.pss.gov.bc.ca/psb/pdfs/PurchasingHandbook.pdfhttp://www.businessdictionary.com/definition/standing-order.htmlhttp://www.businessdictionary.com/definition/standing-order.htmlhttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttps://buyandsell.gc.ca/for-businesses/selling-to-the-government-of-canada/the-procurement-process/standing-offershttp://www.businessdictionary.com/definition/service-contract.htmlhttp://www.businessdictionary.com/definition/service-contract.html


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AGLG CONTACT INFORMATION

The AGLG welcomes your feedback and comments.

Contact us electronically using our website contact form

on www.aglg.ca or email [email protected] to share yourquestions or comments.

You may also contact us by telephone, fax or mail:

Phone: 604-930-7100

Fax: 604-930-7128

Mail: AGLG

201 - 10470 152nd Street

Surrey, BC

VR Y

http://www.aglg.ca/http://www.aglg.ca/mailto:info%40aglg.ca?subject=mailto:info%40aglg.ca?subject=mailto:info%40aglg.ca?subject=http://www.aglg.ca/


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