The external auditor to North Norfolk District Council has sharply criticised the local authority’s failure to comply with its financial regulations in respect of the procurement of a capability review costing £30,000, with the provider appointed following a recommendation of a member of an incoming administration.
In a report EY said the background to its investigation was that in January 2020 it received notification of a whistleblowing allegation through the Public Interest Disclosure Act (1998). The same PIDA submission had already been made to Norfolk Police.
The allegation focussed on the tender process for the procurement of the capability review – a review of the corporate structure at the council – and specifically the use of a tender waiver form for that process, that was alleged to have been back dated by two officers of the council.
In June 2020 Norfolk Police handed over the investigation responsibility to Cambridgeshire Police to maintain independence, given the collaborative working between Norfolk Police and the Council.
The police case was passed to the Crown Prosecution Service (CPS) on 16 September 2020. The CPS concluded that it would not pursue a criminal prosecution. Formally, the police case remained open until 19 March 2021, when it was closed.
EY said that following the May 2019 elections, the incoming administration had wanted to review the existing corporate management structure. The contracted capability review provider was known in the Local Government sector.
The EY investigation found that:
- no formal tender process was undertaken and no other quotes were obtained as required by North Norfolk’s financial regulations;
- the proper procurement exemption process was not followed in the procurement of the capability review;
- no formal contract was in place between the capability review provider and the council; and
- two leading members of the incoming administration were central to the selection of the capability review provider which the investigating officer viewed as being "inappropriate" due to their role as councillors.
The external auditors identified the following weaknesses in North Norfolk's arrangements:
- The rationale for following the Procurement Exemption policy was not in line with council guidance.
- The date that the Procurement Exemption Form (PEF) was downloaded for use, and the date that it was signed by the two officers was different. “The date it is ‘signed’ is significantly before the date the form itself was downloaded, suggesting that it was ‘backdated’, which is a clear override of the council’s procurement controls.”
- The council’s standard contract was not used for the engagement with the capability review provider. “This exposes the council to potential risk, given the standard terms and conditions of the council did not form part of the contract.”
- The council’s process for completing and authorising PEFs was not followed on more than one occasion.
EY added that it had also reviewed the contract from an accounting transaction perspective. It said: “The council can contract with a consultancy firm for a review of this nature. The cost of the contract with the capability review provider at c£30,000 is not out of line with what we would expect to see for a review of this type.
"We are therefore satisfied that the transaction was not unlawful and was not so unreasonable in value that wider value for money or public interest reporting considerations are required.”
The auditor said: “The council’s Internal Control environment, including financial regulations and standing orders need to be adhered to in full for each and every transaction.
“This issue is evidence of a weakness in proper arrangements in how North Norfolk District Council maintain a sound system of internal control.”
It made the following recommendations:
- North Norfolk should ensure that the recommendations made by Internal Audit with respect to procurement exemptions are completed in line with the agreed timeframe.
- The council should ensure that all PEFs are subject to robust review for adherence to council policy.
- All PEFs should be summarised and reported to the Governance, Risk and Audit Committee on a regular reporting cycle.
- The council should establish a standing Employment and Appeals Committee, which is in place at the commencement of each municipal year.
- The membership of the Employment and Appeals Committee should be provided with appropriate training to allow them to fulfil their responsibilities in a timely manner.
- Any Employment and Appeals Committee meeting should be formally recorded and those minutes agreed as an accurate record of the meeting
In a statement North Norfolk said: “The council has confirmed that it accepts and has taken on board Ernst and Young’s recommendations and has taken actions to strengthen its procurement and governance arrangements as detailed in the Management Response to the Annual Audit Results Report and has nothing further to add.”
The management response can be found here.