Procurement and Payment Function Audit

Our consultants audited the procurement and payments functions of a major water utility company.

As part of the project David Bennett examined the systems around procurement including supplier contracts, materials pricing, and ensuring compliance in all contracts. Internal systems were also checked to make sure that all procurement and payment processes were being fully audited with relevant paperwork to meet OFWAT regulations

As a result of examining these systems we made several recommendations:

Internal Controls

There were a lack of formal systems in place to manage the procurement and payment process and as a result the company was failing in it's OFWAT responsibilities. We put in place a formal process for monitoring all procurement and payment transactions. Examples included ensuring all payments had a receipt and all goods and services purchased must have a relevant contract signed.

Financial Models

David also built financial models to show the total costs for anticipated mixes of lump sum and unit rate work from sub contractors. This exercise enabled the client to self-report to OFWAT and avoid penalties which could have run into many thousands of pounds.

Tender Control

Evaluation of bids from contractors and the subsequent negotiation and award of contracts were not being properly documented in many cases. As a result, value for money was not being ensured. We created evaluation files and processes to prevent this from happening in future.

Our audit helped the company to improve it's processes and thus meet OFWAT regulations, avoiding heavy fines. In addition processes were created to check all contracts were delivering value for money.

Consultant Responsible: David Bennett