1. Report on Payments without reference Rapport sur les paiements sans renvoi |
Committee Recommendation
That Council receive this report for
information.
Recommandation du comité
Que le Conseil prenne connaissance du présent
rapport.
Documentation
1. City Treasurer's report dated 16 October 2007
(ACS2007-CMR-FIN-0027).
2. Extract of Draft Minute, 16 October 2007.
Report to/Rapport au :
Corporate Services and Economic Development Committee
Comité des services organisationnels
et du développement économique
and Council / et au Conseil
16 October 2007 / le 16 octobre 2007
Submitted by/Soumis par : Marian Simulik, City Treasurer/trésorière
municipale
Contact
Person/Personne ressource : Phil Andrews, Manager, Supply Management
Financial Services/Services financiers
(613) 580-2424 x, Phil.Andrews@ottawa.ca
SUBJECT: |
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OBJET : |
Rapport sur les paiements sans renvoi |
REPORT
RECOMMENDATION
That the Corporate Services and Economic Development Committee and
Council receive this report for information.
RECOMMANDATION DU
RAPPORT
Que le Comité des
services organisationnels et du dévéloppement économique et le Conseil
municipal prennent connaissance du présent rapport.
BACKGROUND
On September 4, 2007, the Corporate Services and Economic Development Committee (CSEDC) requested that staff submit a report providing details and suggested resolutions with respect to the purchases identified as non-compliant to the Purchasing By-law (being By-law No. 50 of 2000) in the Professional and Consulting Service Contracts With A Cumulative Total Value Of $100,000 Or More, Sponsorship And Advertising, Legal Outsourcing Costs, And Related Purchasing Activity For 2006 Report (ACS2007-CMR-FIN-0024), hereinafter referred to as the Professional and Consulting Service Contracts Report for 2006.
DISCUSSION
The Professional and Consulting
Service Contracts With
A Cumulative Total Value Of $100,000 Or More, Sponsorship And Advertising,
Legal Outsourcing Costs, And Related Purchasing Activity For 2006 Report
for 2006 (ACS2007-CMR-FIN-0024)was
tabled at the CSEDC meeting on September 4, 2007. In response to a recommendation in the
Auditor General’s 2005 Annual Report, Chapter 4, the report included a list of
purchases greater than $25,000, generally paid without reference to a purchase
order. In addition, this list indicated
which purchases were and were not in compliance with the Purchasing By-law.
Payment
without reference to a purchase order describes a
method of payment and is not a reflection of the method used to procure the
goods or services. All procurement
actions that go through the Supply Division have a purchase order created
therefore these are known to be in compliance with the Purchasing By-law. Payments without reference is a legitimate
payment method permitted within corporate procedure and
recognized in the Purchasing By-Law. These types of payments provide
a cost effective process for low dollar value goods and services and are
the standard method used for paying utility and telecommunication costs. As payments without reference do not
go through the Supply Division an assessment of their compliance with the
Purchasing by-law can only be made by Supply after the fact.
In
the Professional and Consulting Service Contracts Report for 2006, Document 5 provided
details of approximately $54
million spent
on purchases and
services paid
without reference
to a purchase order. Of that
amount approximately $34
million was for payments to utility and telecommunication companies,
which would not be paid
through a purchase order. Another
$13.4 million in purchases were determined to be in compliance with the
Purchasing By-law as they were appropriately sourced and in compliance with the
corporate procedure for payment without reference.
In the same report, Supply
Management Division identified forty
incidents as being non-compliant to the Purchasing By-law with a total
expenditure of $6.6 million dollars. ThereThe City Manager committed to
report back on the following:
Ø the circumstances surrounding the non-compliant purchases
Ø
whether or not best
value for
dollar had been achieved in those cases
Ø
whether the people
staff who made these purchasing decisions had
the authority to do so and
Ø if necessary, the corrective action that has been or will be taken in these cases.
Details on these expenditures, including an
assessment of whether the City received best value for these purchases and any
actions taken to ensure compliance in the future is provided in this report. In
order to facilitate the explanations,
the payments to each vendor have been grouped by like purchases into the
following categories:
Ø
Automotive and heavy equipment parts and services
Ø
Retail fuel outlets
Ø
Print related services outsourced
Ø
Library material
Ø
Computer Software purchases
Ø
Police Service Contracts
Ø
Consulting services
Ø
Other miscellaneous purchases
The
results of this further review,
indicate that:
1.
Approximately $1.5
million were
purchases
made by the Library and by Police
and approved by their respective Boards.
These Boards are not regulated by the City’s
Purchasing By-law
and therefore should not have been included in the original report.
2. Approximately $2.5 million of purchases of automotive parts and printing related services were procured using the procedures stipulated within the Purchasing by-law for procuring goods and services of a low dollar value. This would ensure that the City received best value on an individual basis. As each of these purchases was of a low dollar value they were appropriately paid as a payment without reference. However as the cumulative value of the purchases made from the various vendors is significant Supply Management Division has advised the clients to utilize the competitive process required for higher dollar levels pursuant to the Purchasing By-law. Standing Offers have been commenced and will be in place for printing related services before the end of the year. The automotive parts issue will require extensive discussion and agreement with our Fleet client, and several separate procurement initiatives. Staff propose to complete those initiatives between Q4 2007, and Q2 2008.
3.
Approximately $250,000
of the miscellaneous purchases
identified was, upon further review, inappropriately
identified as non-compliant in the report. These purchases were either outside
the Purchasing By-law, or were refunds of deposits or lease fit-up payments
required through contract. In the case of Nepean Cement Works Ltd., the
appropriate procurement
process was
followed, but the contract should have been formalized
through the issuance of a purchase order. In the case of Belair Recreational Products
Inc., the branch involved has been advised that a purchase order is required in
advance of the work proceeding and will comply in future.
4.
Approximately $100,000 of computer
software and maintenance costs was
for proprietary goods and services that
could
not be purchased from
other vendors. Under
the Purchasing By-law these goods and services can be obtained on a
non-competitive basis. The client will
in future issue a Purchase Order before receipt of these goods.
5.
Approximately $2
million spent on retail fuel outlets were reported
as non-compliant.
As these purchases were made from retail fuel outlets the City
paid market price. A standing offer agreement has been implemented
with seven local firms, which will result in annual savings in the 2% to 3% range.
The table attached
outlininges
these transactions in more detail is attached at Appendix A.
To
improve accountability, the reporting requirements around payments
without reference were recently amended in Tthe
Purchasing By-Law. has
recently been amended to include a reporting requirement in tThe
final quarter’s delegation report in each year, (October to December)
will identify
cumulative with
respect to payments made without reference to a purchase order
greater than $25,000 and identify whether or not theses
payments comply to the Purchasing By-law.
The non-compliant purchases will be fully investigated and the
corrective action being proposed and or taken by the Finance
Branch will be
outlined in the report. This amendment will allow the Supply
Management Division to review decentralized purchasing activity on a regular
basis and take corrective action in a timely fashion upon discovering the
irregularity.
CONSULTATION
There has been no public consultation regarding this item.
FINANCIAL IMPLICATIONS
There are no financial implications as a result of this report.
STRATEGIC DIRECTION
Not applicable.
SUPPORTING DOCUMENTATION
Appendix A - Payment Without Reference Reported to CSEDC September 04, 2007 as Non-Compliant to the Purchasing By-law
DISPOSITION
The Supply Management Division
will ensure the action outlined in the attached table is completed.
APPENDIX A
Payment Without Reference Reported to CSEDC September 04, 2007 as Non-Compliant to the Purchasing By-law
Vendor |
# of Invoices |
$ Amount |
Action taken or
proposed |
Automotive parts and services |
|
|
|
AUTO PARTS EXTRA (3 vendors) |
2325 |
153,978 |
Automotive and heavy equipment parts and services are
required for a large and diverse fleet, and immediate delivery is often
critical. Many parts are readily
available from a large local vendor community, and ordering as needed with a
delivery guarantee is often more economical than keeping parts in
stock. Where no standing offer is in
place, or where the part is unavailable
from inventory, staff |
KEMPTVILLE TRUCK
CENTRE |
24 |
47,344 |
|
B AND N
TRANSMISSION |
49 |
106,188 |
|
MICHELIN NORTH
AMERICA CANADA INC |
321 |
193,127 |
|
FRANCIS CANADA
TRUCK CENTRE INC FREIGHTLINER OF OTTAWA |
431 |
281,992 |
|
538 |
354,954 |
||
Retail Fuel outlets |
|
|
|
CANGO INC CITI
COMMERCE SOLUTIONS |
4 |
91,114 |
These expenses relate to 2006 fuel purchased for city
vehicles from fuel retailers, at which point there
was no |
SAAB GAS CENTRE |
10 |
138,473 |
|
PIONEER PETROLEUMS |
13 |
239,720 |
|
DRUMMOND FUELS
OTTAWA LTD |
15 |
482,422 |
|
MR. GAS LIMITED |
13 |
102,921 |
|
ECONO GAS |
12 |
107,188 |
|
IMPERIAL OIL |
13 |
828,623 |
APPENDIX A
Vendor |
# of Invoices |
$ Amount |
Action taken or
proposed |
Printing related services |
|
|
|
INKWORKS QUALITY
PRINTERS |
22 |
80,795 |
Printing services are managed in the Copy Centre. Staff |
GILMORE
REPRODUCTIONS |
331 |
580,722 |
|
FND GRAPHICS INC |
35 |
120,979 |
|
DAVID GORDON LLOYD
ENT. |
42 |
141,700 |
|
SUPREMEX INC |
47 |
151,439 |
|
TRI CO PRINTING INC |
40 |
280,750 |
|
|
|
|
|
Library materials |
|
|
|
EBSCO CANADA LTD |
15 |
266,261 |
These issues relate to a subscription broker for magazines
at the library, the purchase of books as well as consulting services
for the Library. The Library
Board has delegated all spending authority to the City Librarian. |
WHITEHOTS INC |
290 |
569,795 |
|
UNIQUE MANAGEMENT SERVICES |
5 |
50,633 |
|
|
|
|
|
Computer software, maintenance |
|
|
|
CREDITRON INC |
2 |
28,721 |
These
purchases are related to software
which is proprietary to a specific vendor. |
FDM SOFTWARE LTD |
7 |
71,520 |
|
Police Service contracts |
|
|
|
HUNT CLUB MOTORS
LTD |
1 |
28,158 |
These purchases were made by the
Ottawa Police Services. |
PATHWAY HYUNDAI |
28 |
140,873 |
|
VERSATERM |
5 |
440,332 |
APPENDIX A
Vendor |
# of Invoices |
$ Amount |
Action taken or
proposed |
Consulting services |
|
|
|
ROSE VICTORIA |
3 |
32,682 |
These are individual consulting services obtained by various branches and the payments were approved at appropriate management levels. With respect to Rose Victoria, the client obtained quotes and this vendor was the only provider able to meet the client’s needs and expectations. Delta Media is on the City’s standing offer to provide communication services and was selected based on their expertise and the tight timelines around the work required. Gentium Consulting was sole sourced to leverage the knowledge previously gained in undertaking a related contract. Payment of this contract was cost shared with the Province. These particular purchases were non-compliant in that a Purchase Order was not established, and the Supply Management Division has advised the clients of their obligation to comply with the Purchasing By-law. |
DELTA MEDIA INC |
1 |
37,635 |
|
GENTIUM CONSULTING |
4 |
78,384 |
|
Miscellaneous services |
|
|
|
CLARKE PROPERTIES |
1 |
31,725 |
This purchase relates to a one-time maintenance fee for fit-up work pursuant to a lease agreement. This work was properly sourced through the landlord and approved appropriately in accordance with the lease agreement. This was inappropriately identified as non-compliant. |
NEPEAN CEMENT WORKS
LIMITED |
2 |
33,636 |
These purchases were from an authorized standing offer, at best value rates, however the wrong payment method was used. The Supply Management Division has advised the client that proper contract approval must be obtained, and that a purchase order must be issued. |
FRISBY TIRE CO |
3 |
26,316 |
This issue relates to the return of financial deposits held by Finance. As such this was inappropriately identified as non-compliant. |
DUNCAN
MACLENNAN |
3 |
61,500 |
The City and the Canadian Policy Research Network
participated in a 100% federally funded project related to Social
Infrastructure. The City was responsible to
facilitate the billing and payment process and submit quarterly claims for
reimbursement. As this is not a
City contract and is not funded by the City this was inappropriately
identified as non-compliant. |
APPENDIX A
Vendor |
# of Invoices |
$ Amount |
Action taken or
proposed |
FITNESS DEPOT |
5 |
58,663 |
Majority of purchases were made on behalf of the Active Living Centre funded from members’ dues, and not city funds. Payment without reference was appropriate in this case. |
SAW VIDEO
ASSOCIATION |
8 |
71,248 |
Arts & Cultural Services – grant payment approved by Council in budget, and paid appropriately without reference. |
BELAIR RECREATIONAL
PRODUCTS INC |
6 |
127,540 |
One time issue where Supply Management Division was unable to issue a purchase order after work had begun. The Supply Management Division has advised the client of the appropriate procurement process and the client has a clear understanding of its responsibilities with respect to future purchases of this nature. |
Report on Payments without reference
Rapport sur les paiements sans renvoi
ACS2007-CMR-FIN-0027 city-wide / À l’Échelle de la
ville
Councillor Bloess thanked staff for the report, noting that the explanations contained therein served to give members of Council some level of comfort with respect to the spending reported previously.
That the
Corporate Services and Economic Development Committee and Council receive this
report for information.
RECEIVED