GUIDELINES IN FORMULATING

TERMS OF REFERENCEFOR PROCUREMENT AUDIT

OF A UNDP COUNTRY OFFICE

I.Background

The United Nations Development Programme (UNDP) is the UN's global development network, an organization advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. We are on the ground in 166 countries, working with them on their own solutions to global and national development challenges. As countries develop, they draw on the people of UNDP and our wide range of partners, which includes Governments, Civil Society, the private sector, among others.

In the context of UNDP’s work, procurement is defined as the overall process of acquiring goods, civil works and services which includes all functions from the identification of needs, selection and solicitation of sources, preparation and award of contract, and all phases of contract administration through the end of a services’ contract or the useful life of an asset.

Since UNDP retains a decentralized organizational approach to procurement, UNDP Country Offices are made responsible for the acquisition of goods, civil works and services. These are undertaken based on the Procurement User Guide, which serves as the comprehensive framework of procurement and its policies and procedures in UNDP.

UNDP Country Offices are granted different levels of delegated procurement authority. In the event of emergencies and special situations, some Country Offices may be granted up to US$ 1 Million, with the majority having only the standard procurement authority of up to US$ 100,000.

As part of the review process of UNDP Headquarters, a procurement audit is mandatory in cases of Country Offices and Out-posted Headquarters Units which have been given delegated procurement authority of US$ 1 Million and above.

II.OBJECTIVES OF A PROCUREMENT AUDIT

The primary objective of a procurement audit is to determine the appropriateness of the current level of delegated procurement authority to the head of a given Country Office, and whether or not a higher level is justified.

In addition, a procurement audit may include one or any combination of the following related objectives:

a)Obtain an independent and impartial review of the existing procurement capacity with respect to the current and expected volume of transactions being handled or are expected to be managed by a Country Office;

b)Determine the extent by which the procurement practices of a Country Office help achieve economy and efficiency;

c)Verify the consistency and alignment of procurement practices with the policies of the organization; and

d)Identify procurement best practices and lessons learned, and recommend appropriate and sustainable measures for continuous improvement.

III.DESCRIPTION OF THE SERVICES REQUIRED

Scope of Audit

The scope of the procurement audit shall set the following :

a)Type of Procurement to be audited – goods, services, civil works, etc.

b)The period covered by the audit review – from what date to what date

c)The rating system that will be used in assessing the level of compliance

As a benchmark, the sampling of procurement cases shall at least include 80% of all the procurement actions over $100,000 and 10% of procurement actions between $30,000 and $100,000.

Methodology

The auditors shall be requested to propose the approach by which the procurement audit will be undertaken, with the end in view of reviewing the country office’s existing procurement practices, determining its procurement capacity, and recommend measures for future implementation.

Apart from the review of compliance to the policies, the methodology should also closely examine various controls in place such as the role of the procurement function in the overall office structure, the capabilities and effectiveness of the approving committees and its members, contracts budgeting strategies, management of vendors, documentation/records management, vendor performance reviews, handling of protests, contracts administration, optimization of use of IT resources, among others transverse issues affecting the procurement practice.

The methodology should include an evaluation of the existence, or lack, of mechanism in place that will minimize the legal liabilities and risks of UNDP against any and all forms of protests, claims and damages, which are all imminent in the course of performing the procurement functions.

Understandably, there is a reasonable expectation of detecting fraud and/or error as a result of the audit, so that the methodology should be designed in a manner that will lead to the identification of fraud and errors.

Audit Plan

An Audit Plan should be proposed by the auditors in accordance with at least the following information:

Activities

/ Documentations Required / Responsible
Person/Units /

Target Dates of Completion/ Submission

Right of Access to Information

The auditor/s shall be granted full and complete access at any given time to any and all procurement records and documents generated by UNDP for the duration of the period being audited.

UNDP staff shall also fully cooperate with the auditors, willing to sit through meetings and interviews as often as necessary, for the duration of the engagement.

Audit Focal Person

An audit focal person should be appointed for purpose of defining accountability in the overall planning and implementation of the procurement audit.

The procurement audit focal person shall liaise between the auditors and the units/staff responsible for the issues being studied/reviewed by the auditors, ensuring the smooth interaction of all personnel involved, while adhering to the activities and timelines spelled out in the procurement audit plan.

Final Report

The procurement audit activities shall conclude with the submission of a Final Report to the Director of UNDP’s Office of Audit and Performance Review (OAPR) and to the Office of Legal and Procurement Services (OLPS).

At a minimum, the report shall include the following :

a) Effectiveness of Procurement

This should assess the extent by which the procurement actions and decisions undertaken have led or contributed to satisfactory results in terms of quality, value-for-money, and impact on the context for which the procurement was undertaken.

b)Mapping of procurement capacity

This should look into the adequacy and levels of the existing procurement capacity (no. of staff, profile of staff, competencies, etc.) in the office for handling the type and nature of procurement activities. A review of the Country Office capacity on procurement shall necessarily include the capacity of all existing procurement-related committees and approving authorities.

The assessment to be made shall also take into consideration the interest of minimizing risks to the organization.

c)Level of Compliance

This should examine the manner by which the procurement processes are undertaken and if they comply with the governing regulations and procedures. Where compliance is not satisfactory nor sufficient, the report should indicate appropriately the reason/s for the non-compliance, and their impact on the procurement outcome.

d)Identification of best practices in procurement

This part of a Procurement Audit concentrates on the tactics and methods employed, concentrating on the achievement of transparency and best value. Examines the competition structure, how documentation was drafted, the effectiveness of communication and negotiations with suppliers. Recommendations may include further training, the development ofprocurement/contracting strategies and/or changes to procurement procedures.

e)Determination of the appropriate level of delegation of procurement authority

The findings from the abovementioned items (a to c) should lead to a determination of whether or not the current level of delegated procurement authority to the Head of Office is justified, or an upward or downward adjustment is warranted.

f)Overall Recommendations

The Recommendations for improvement should be stated specifically in an actionable and achievable manner, ranked in accordance will be directed to the UNDP country office. The response of the office will be included in the management letter, immediately following the recommendation.

g) Monitoring

The final report shall define the follow-through actions and monitoring schemes that will be undertaken or put in place after a reasonable period, normally six (6) months, aimed at ensuring that the recommendations and action plans are being pursued in a sustainable fashion.

All procurement audit findings and recommendations shall be substantiated and supported by documentations that should be annexed to the Final Report.

IV.QUALIFICATIONS OF THE AUDITOR/AUDIT TEAM

The auditor/audit team should have a sound track record in conducting procurement audit of international/global organizations or public entities.

An audit team member with knowledge and/or experience in UNDP procurement policies, or other standards set forth for a specific procurement audit, is definitely an advantage.

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