Author: Victoria Barnato - Categories:
On the 1 June, a UK parliamentary body published a report on the use of government procurement cards (GPCs).
These payment cards were introduced in 1997 as a cost effective way for government bodies to make low value purchases.
They are an example of government e-procurement. However the report questions their value arguing that poor controls over the use of GPCs are increasing the risk of inappropriate or fraudulent spend.
One particularly poor department identified was the Ministry of Defence. It is by far the biggest spender and accounts for almost three quarters of all expenditure using Government Procurement Cards. However it only checks 5% of its transactions using the cards. The report also found that the Department for Work and Pensions did not even have receipts for a third of its transactions.
This is an embarrassing situation for the UK government given that one of the reasons it started using e-procurement was to increase spend visibility. It was thought that this would reduce non compliant purchasing. However the case of GPCs suggests that e-procurement does not always protect against such risks.
So what can the public sector learn from this? The first is that there must be a minimum standard of controls across organisations. In the case of GPCs there is significant variation in the controls used by different departments. Some departments block certain spending categories by default, such as ‘hotels and accommodation’ and ‘travel’, while others are not. Lack of standardisation makes compliance harder to enforce.
The case of GPCs also highlights a wider issue. There is not point in having sophisticated intelligence systems if your organisation does not do basic risk management - like transaction checking. Organisations may have reporting systems that generate large amounts of information. But this information has no value unless someone looks at it. There must be dedicated resources to determine spend and measure compliance.
Without such controls e-procurement is unlikely to lead to cost savings or greater efficiency. It also brings significant risk, both to value for money and to an organisation’s reputation.