HRM procurement system at risk of fraud, auditor general finds

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HRM procurement system at risk of fraud, auditor general finds

Halifax's auditor general says the municipality's procurement system needs "significant improvements."

Evangeline Colman-Sadd presented a report with 28 recommendations to the audit and finance committee on Wednesday.

"We didn't find anything to suggest there was fraud, however some of the lack of controls does provide an avenue where somebody could commit fraud," said Colman-Sadd.

She pointed out that people who moved to different departments, went on long-term leave or were no longer working for the municipality continued to have access to some of the financial information.

In the 2017-2018 budget year, the Halifax region processed around 50,000 purchase orders worth just over $265 million.

No safeguards to ensure policy is followed

The auditor general's office checked 32 request-for-proposal files and found 18 of them did not include conflict-of-interest forms for the evaluators.

In a third of those same files, the auditors could not confirm that the award went to the highest-scoring bid. The scoring was either done verbally, or the scores were missing or the comments were not consistent with the value given.

The new report also suggests procurement staff are not familiar with all the policies. In one case, that meant allowing a municipal director to unilaterally sign off on a $2.5-million standing offer.

"I don't think that is in keeping with the spirit of the procurement policy," said Colman-Sadd. "A director's approval is limited to $100,000."

In other cases, contracts were extended without proper approvals and "may not have been in the best interest of the municipality." 

There were five procurements that were split over multiple purchase orders but should have been done as one. In each case, the total value was over the spending limits of the staff handling the approval.

Of 94 files examined, 20 per cent did not have proper approval. 

Councillor frustrated

Some of the recommendations have been made before in auditor general reports submitted in 2011 and 2012. The situation frustrated the chair of the audit and finance committee.

"I thought this committee had sent the message on previous occasions that procurement needed to be tightened up," said Coun. Bill Karsten. "That's where my personal disappointment lies."

Halifax's mayor told reporters after the presentation that this was not about saving money.

"This is about our reputational integrity and making sure we live up to that," said Mike Savage.

Chief administrative officer Jacques Dubé told the committee that working on the auditor general's recommendations is "an immediate priority" and that a project manager is now in place to ensure the procurement policies are followed.  

"We're focused on getting most of this done in the next three months," said Dubé.

The audit and finance committee has asked the CAO for a progress report in September.