City falls short on financial propriety

A CLAYTON’S review of Fremantle council’s financial management practices found while “generally sound”, its procurement policies fell short of achieving best value for ratepayers’ money.
The review by Avant Edge Consulting supports a recent motion by South Ward Councillor Marija Vujcic to establish an independent probity auditor to investigate the Kings Square hospitality deal on the basis the proposal did not meet the original criteria and processes defined by the City’s own policies on property leasing and asset disposal.
As reported by StreetWise in January, this motion, which would have included and incorporated ALL financial policies and activities designed to protect the financial interests of ratepayers, was rejected as unnecessary by all councillors except Cr Vujcic.
Importantly, the review covers what AEC found were questionable practices and procedures before COVID-19, including its draft contract management and investment policies last reviewed in 2014. Procurement policies are supposed to follow State Government guidelines to provide ratepayers with the best value for money goods and services.
However, AEC says the review was not an audit and, “may not necessarily be a comprehensive statement”, because of COVID-19 restrictions and closure of City offices during the review … Reliance was placed on information that was requested and provided to us remotely by City staff.”
Short of a proper audit, the AEC states it could provide only, “limited assurances”, of the risks to City ratepayers.
One of the risky items passed this week by council’s audit and risk management committee included the City’s procurement policy in which, “a manager can request a quote, evaluate the quotes and also approve the commitment to award a contract up to $249,999”.
AEC noted instances where requests for quotes were assessed solely by relevant managers without scrutiny nor assessment as to whether the City had obtained best value for money in the best interests of ratepayers.
One instance included $135,750 for ‘Consumer Brand Launch Campaign’ awarded to Leederville branding agency Juicebox, “the evaluation, the approval to award the contract and the letter of award”, all undertaken by the City’s economic development and marketing manager.
The new brand was launched by Mayor Brad Pettitt in April 2019 and followed the failed ‘Fremantle Story’ campaign to attract interstate and overseas visitors, in the process costing ratepayers hundreds of thousands of dollars.
AEC notes a further three requests for quotes were awarded to Juicebox in the three months before the April launch (between January and March 2019).
A total of $245,130 (just a few thousand dollars short of the contract limit before it must go to tender) was awarded to the digital marketing company including $65,000 for video production destination marketing, $34,100 brand logo design and $10,280 website redevelopment. That’s more than $80,000 a month to sell Freo as a tourism, arts and festival destination.
“Although the various services may have been considered to be separate services and therefore not requiring a formal tender process,” AEC found, “no evidence was found from information provided to us during the review that would indicate that some form of assessment was made and a formal decision reached to seek separate requests for quotes.”
This suggests if due process had been followed as per prescribed procurement policies, the expense to and interests of Fremantle ratepayers would have been protected by an open and competitive market tender process.

Highly recommended

AEC recommended procurement managers and evaluation panel members, who presently sign a report with the standard no conflict clause, sign individual conflict of interest declarations to, “legalise the process”.
It also recommended:

• The City endorse, as a matter of priority, its contract management policies, with eight out of 17 contracts reviewed having lacked supplier contracts and signed letters of acceptance.
• The City tighten its accounting procedures related to changes in suppliers’ bank details, with eight of nine supplier bank account change requests not completed properly. Six did not have a signed letter head or details of the new bank account. One had neither letter head or application form.
• The City update its human resources policy, last reviewed in 2016, and put in place a whistleblower policy.
• The City update its investment policy, last reviewed in 2014, given the impact of COVID-19 on current investments.
• The City establish an internal audit process, “to undertake routine internal control assurance work”.