Controls and audits of public tender procedures - Ernst & Young - Czech Republic

Controls and audits of public tender procedures

Under the rules stipulated by the European Union, national legislation or the directives of individual tenderers, the objective of a public tender is to ensure that public funds are handled efficiently and economically during the procurement of services, supplies or construction work.

The current rules are extremely complex and make the tendering process something of a headache. In practice, organising a tender comprises several activities, which are broken down further into detailed rules valid for various groups of tenderers or types of tender. Nevertheless, the basis of these rules is always compliance with certain fundamental principles, namely transparency, fair and equal treatment, and a ban on discrimination. Compliance with these principles and all the detailed rules on a day-to-day basis is demanding in respect of planning, implementation and subsequent control. For this reason, clear internal management documentation should be drawn up and regular checks be conducted by managers as to whether the procedures set forth in the documentation are being followed.

Our experience of controls and audits shows that very often insufficient attention is devoted to the organisation of public tenders, and organisations thus put themselves at risk of being penalised by the Office for the Protection of Competition or other bodies. The same errors are made time and time again, and could easily be eradicated by properly drafted internal management documentation or the training of the relevant employees. The annual reports released by the Office for the Protection of Competition and the Supreme Audit Office reach the same conclusions.

An even greater emphasis on accuracy is placed on tenders co-financed from EU funds. Verification of the way a tender is organised is always part of the eligible expenses approval process in the case of such projects. In addition, if EU funds are involved, the contracting authority is at risk of incurring larger penalties than those applied by the Office for the Protection of Competition (a maximum of CZK 10 million), since failure to comply with legislative requirements can lead to a reduction or withdrawal of a grant. In certain cases this can involve billions of crowns. For this reason we must view the utilisation of EU funds as an opportunity to clarify and improve the system of organising public tenders and thus to promote best practice in this sphere.

As a leading advisory firm Ernst & Young actively supports and contributes to a transparent environment within which public tenders can be organised. It assists tenderers set up an effective process for calling tenders. The company’s qualified, experienced team draws on a tried-and-tested methodology in combination with suitable work tools (Public Tender Control Matrix, EY GRC Governance-Risk-Compliance). Ernst & Young specialists have a background in audit and extensive knowledge in the sphere of public contracts, which they combine with an expertise in internal auditing and control mechanisms in the public and private sectors. We can also expand our team to take in professionals from other spheres, such as IT, investigative services and financial audit.

We are able to undertake controls and audits of public contracts with guaranteed independence and quality backed by ISO 9001:2000 certification. We always ensure that our outputs are also of a preventative character and are directed at improving a given tenderer’s system of awarding public contracts.

Ernst & Young is a member of the Association for Public Tenders, an organisation bringing together bodies with a shared interest in developing the environment within which public contracts are tendered and awarded and representing the three main groups active in this sphere – the tenderer, bidder and advisor.

Selected references
We have carried out controls of tenders for contracts awarded as part of the Operational Programmes Infrastructure and Transport for the Ministry of Transport of the CR. These controls examined compliance with the procedures set forth in the relevant legislation pertaining to public tenders. The output was a separate report for each of the controls undertaken, which included the procedure and methodology used, verification of the facts, findings identified, and suitable recommendations.

For Lesy České republiky s.p. we analysed the organisation’s contractual relations, evaluated individual tenders organised, and verified whether the procedures followed had complied with the relevant legislation. The second part of the project involved an economic analysis of the possible impact of the alternative development of contracts concluded and any possible compensation resulting therefrom.

We implemented a project for the Ministry of Finance of the CR entitled “Strengthening the Role of Public Internal Financial Control in the Czech Public Sector”. The objective was to boost the capacity of the entire public sector to draw on EU funds in the programme period 2007 - 2013. As well as focussing on internal audit, risk management and financial management, we provided training and specimen controls and audits in the sphere of public tenders.

As part of the project entitled “The Organisation of Public Tenders in EU Member States with a Draft Basic Solution for the Czech Republic” implemented for the Ministry of Regional Development CR, we analysed the current institutional organisation of public tenders in the CR and EU Member States. Having compared several basic models we submitted three proposals for the institutional organisation of public tenders in the CR.