Public Procurement audit

Ch. 6, §38, p.22: After the first sentence, suggest to add a new one « Consideration needs to be given to risks associtated with not valuable for money supplies in terms of lifecycle costs or unsustainable supplies. » Ch. 7, §44, p.25: Suggest deleting §44 (almost the same content as §42) Ch. 9, §85, p. 34: Suggest to complete §85 by adding after « failure of procurement to achieve innovation or environnemental objectives or lack of due procurement planning », « poor risk allocation between providers and public bodies »

Dear Colleagues, The Audit office of Mongolia has no additional comments on the content of the draft Guidance for audits of public procurement GUID 5280.  Thank you.

General comments   - We suggest that the guide should address financial audit as well as performance and compliance audit as it is a basic type of audit     - Although the guide has indicated that it deals with performance audit and compliance audit, most of the directory's supplements and most of its discussions deal with performance audit without compliance audit.   Specific Issues   Ch. 1 Introduction Para 3. contains the concept of public purchases that differs from the concept in ch.3 definitions Para 10. We suggest using the definition which is in the introduction in Para 3. as it is more comprehensive   Ch.2 Objectives With reference to general comments , Para 8 &9 addressed the objectives of the Guide, noting that they dealt with performance audit and compliance audit for the public purchases of state entities, without addressing financial audit, especially since State entities may be economic units to which financial audit is applied, or government units with a financial framework that is carried out in accordance with legal requirements and the financial audit procedures are similar for both. It is suggested that the Guid also cover the financial audit of the public purchases of state economic entities and consider the requirements of the issai 200, financial audit issai 2000-2999. With the modification of paragraph 12 of the scope to clarify this   Ch.3 Definitions Annex 2 The definitions were contained in Para 10 & 11, where Para 10 contained only the definition of public purchases, which is included in the introduction in section 3, while Para 11 included the reference to the remaining definitions mentioned in the annex. Suggests: Include the definitions in the annex 2 in this chapter & add the definition of public purchases to them.   Ch.4 Scope Suggests: Modify Para 14 by deleting the paragraph "This guide is not intended to cover aspects of the implementation of audits that do not contain any additional requirements" as it contradicts Para 12 as it is additional guidance for the audit and there is no need to state that it does not require additional requirements as this is clear from the manual itself.   Ch.5, THE OBJECTIVE OF THE AUDIT Wording Para 17,18 is only corresponded to performance audit and does not correspond to compliance audit, as compliance audit deals with the purchases process in all its aspects and its consistency with the framework specified within the provisions issued under a framework set in accordance with legal requirements.     CHP. 6 SOME CONSIDERA-TIONS WHEN DEFINING THE OBJECTIVE OF THE AUDIT Para. 22 to 42 all address considerations of the objectives of the review in performance audit without compliance audit, and it is suggested that the subject matter of the Guid should only take into consideration performance audit or take into consideration compliance audit also.     Issai 400 Para 59 doesn’t relate to risk assessment but to reporting.     Annex 5: Possible Audit Questions Regarding a Strategic Method to Public Purchases (Purchases Performance Model) 1st step we can add a question: Does the government legislation in line with the best practices?   2nd step we can add a question: Point 10 adding to it, Is the purchases process well organized and documented in line with the purchases manual, rules and regulations and procedures? Point 11, Do the employees have the necessary skills and experience to carry out purchases efficiently and signing code of ethics (code of conduct and integrity)?    

Annex number 8 does not desribe the audit risks, but the potential risks at each stage of public procurement. For this reason, it is necessary to clarify the provisions of paragraph 77 of the Guideline, because it incorrectly refers to Annex number 8.

“1- As part of the “Corruption Prevention in Tender Procurement Process” (Parag. 13 page 35), the Guideline may also include an additional section about a register called “Pre-qualification Register” prepared, under supervision of the concerned authority, by procuring bodies and entities in the government. In that register, pre-qualified suppliers and contractors are listed with all the necessary information about them which shall prove their abilities and qualifications that enable them to take part in the procurement procedures and meet requirements of purchased goods or services, and construction works. The informaation should include details such as: (a) Name and address of the supplier/contractor. (b) Nature and kinds of goods, services and construction works provided/implemented. (c) Financial position (bank statement – most recent audited balance sheet). (d) Management and technical staff working for him on a permanent basis. (e) The available and necessary equipment, machinery, and appliances to implement the work. (f) Period of experience. (g) The highest value of works implemented by the supplier/contractor. (h) Major works successfully implemented…etc. Utilizing this register during the Bid Evaluation process as a control will help ensure that procuring bodies/entities deal with suppliers and contractors who have the qualifications, professional, technical, and financial capabilities and the necessary equipment such as machinery, equipment, appliances and such other items in addition to the management resources, goodwill and the necessary expertise to implement the purchase contract. The concerned government authority shall re-evaluate and re-classify suppliers and contractors and regularly update the pre-qualification register data. Also, the Pre-qualification Register can be stated as a “preventive action” with the related “risk, red flag and example of noncompliance” in table 5 (Parag. 6 Page 31) and table 8 (Parag. 1 Page 42), because it is applicable to both Simplified Procurement Processes as well as the Tender Procurement Process. Consequently, some “Typical questions” should be added regarding this issue.   2- There is redundancy in the numbering of the tables (page 36 Parag. 9 & page 38 Parag. 12), as both tables are numbered with “6.”

We are suggesting that : 1. Public Procurement Audits be split into 2 seperate subject matter between  Public Procurement of Goods and Public Procurement of Services. This is due to creating a better understanding a more convenient audit system. 2. In support of 3E principle and accountability, a concrete conduct of pre assement is essential which may be in the form of a cost benefit analysis (CBA) considering not only limited to the output but including the outcome of the procurement which may apply to a certain procurement depending on the amount of expense.