AUDIT SUMMARY

Sourcing and Facilities Management

Audit 2015

Internal Audit Report as at August, 2015

Distribution list
For action Follow up For information

Branch Manager Chief Manager, Branch Director Retail Banking

Banking
Operation Manager Managing Director
Branch Credit officers Board Audit Committee

Internal Audit Department

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 TABLE OF CONTENTS

ABBREVIATIONS…………………………………………………………………………………
2
INTRODUCTION………………………………………………………………………………...
3
Summary of key internal audit
findings……………………………………………………...3
Issue and report
ratings……………………………………………………………………….. 3
Follow up tracking…………………………………………………………………………….
4
CONCLUSION……………………………………………………………………………………
4
Overall report rating………………………………………………………………………….
4
Appreciation………………………………………………………………………………………
5
DETAILED FINDINGS…………………………………….….
…………………………………..6

ABBREVIATIONS
The key abbreviations used in this report are:

Kshs - Kenya Shillings

Internal Audit Department
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INTRODUCTION
The department has a team of 28 staff headed by Eunice Karau and assisted by
the following heads of units; Michael Eloget (Head - Projects & Facilities),
Florence Asiimwe (Head - Space & Contracts), Catherine Kirori (Head -
Procurement), William Mboga (Head - Monitoring, tracking and reporting) and
Tabitha Makau (Head – Inventory Management & Transport). The current audit
was carried out in August 2015 and covered the period from November 2014 to
August 2015.

EXECUTIVE SUMMARY

Summary of key internal audit findings

The full list of the findings identified and the recommendations made during this
review is included in the ‘detailed internal audit findings’ section of this report.

These findings and recommendations were discussed with the management of

the department responsible for the key business processes. Management has
accepted the findings and has agreed on action plans to address the
recommendations.

The management action plans will be included in the tracking of internal audit
recommendations maintained by the internal audit function.

Issue and report ratings

In this report we have reviewed the control environment relating to operations

and credit. Our main findings are summarised below:

Re Focus Area High Mediu Low Total

f m
no
.
1. Procurement 10 3 0 13
0
2. Monitoring, tracking & 2 2 0 4
0 reporting
3. Inventory Management & 8 6 0 14
Internal Audit Department
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 0 Transport
4. Help desk 1 0 0 1
0
Total 21 11 0 32

Issue rating
The following stratification has been used to rate the significance of each issue /
finding that has been raised.

High Issues classified as high risk are significant control issues that
expose the bank considerably. They should be addressed
immediately.

Mediu Criteria: Issues classified as medium-risk represent a valid internal

m control exposure. The implementation of these controls is highly
recommended. They should be addressed after high-risk items within
the next 0-1 month.

Low Issues classified as low-risk do not immediately threaten the security

and integrity of bank, but should be implemented to achieve a higher
standard of control and improve operational efficiency and
effectiveness. We recommend that they should be implemented after
the medium-risk issues, i.e. within the next 1 - 3 months.

Follow up tracking

The following table illustrates management’s progress made in implementing

prior internal audit recommendations as at October 2014. Details of the same
are included in pages 49 to 54 of this report.

Re Status of recommendations Total Percentage

f
no.
1.0 Fully implemented 41 67.21%
2.0 Partially implemented 6 9.84%
3.0 Not implemented 14 22.95%
Total no of recommendations 61 100

CONCLUSION
Overall report rating

Rating Rating Summary

Internal Audit Department
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 Poor

Fair
Satisfacto The department had an overall rating of Fair (60%)
ry
Good
Appreciation
Internal audit would like to thank the department’s management and staff for
their support during the audit.

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

PROCUREMENT

1. Inappropriate purchase of PIN Mailers Rating of internal audit

finding: High

As per the Expenditure Management Committee (EMC) The head Response: There was no
meeting held on 28th January 2015, they recommended the procurement should purchase at Kes.7.08 and
approval of payments for PIN mailers to the Group ensure that no Kes.8.82 in January 2015
Managing Director & CEO as listed below; tender award is since tests for the new PIN
issued without the Mailers had not been
Coop Cash VISA PIN Mailers appropriate approval done.
The approval to procure 200,000 Co-op Cash VISA PIN to incur costs in
Mailers and 50,000 Sacco Link PIN Mailers from Bewa place. Case one is a re-order at
Wholesalers Ltd at Kshs. 9.50 each (totalling Kshs. 1.9M) Kes.9.50 for both the Co-
was granted by ICTPC on 23/01/2015. The EMC should op cash and sacco link pin
ensure that they do mailers whereas case two
In the same ICTPC meeting, they approved the purchase of not give is the analysis of quotes
Co-op Cash VISA Mailers at Kshs. 7.08 and Sacco Link PIN contradicting received from suppliers.
Mailers at Kshs. 8.82 thus causing the bank to incur an approval The pin mailers from the
unnecessary loss Kshs. 518,000.00 recommendations on lowest bidder in that
the items. analysis had not been
From our review, the tenders were opened on 14th January tested and hence the need
2015 and the analysis done thereafter for presentation to to have safety stock
ICTPC on 23/01/2015. through placing a re-order
The head Sourcing and Facilities Management department to avoid stock out.
who is the secretary to the EMC should have noted this.
Way Forward:
However, from our observations, the LPO 617 for the All tender awards to have
approvals in place.

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

200,000 Co-op Cash VISA PIN Mailers was issued on

07/01/2015 but collected on 13/03/2015 whereas the LPO Responsibil Head
604 for the 200,000 Co-op Cash VISA PIN Mailers was ity: Procuremen
issued on 31/12/2014 but collected on 06/01/2015. t
From above, this was caused by issuance of LPOs before
the approval to incur the costs was issued and lack of Target Continuous
keenness of the EMC committee of the items they are date:
approving.

Risk:
Loss of funds by the bank due to overvalued costs.

2. Delay in dispatching LPOs to suppliers. Rating of internal audit

finding: High

LPOs should be sent out to suppliers within the shortest Suppliers should be Response: Suppliers are
time possible upon authorization. Quotations received from informed about engaged to collect the POs
suppliers usually have a time limit within which the bank is awarded tenders to but request for scanned
supposed to engage the supplier through an LPO upon make supplies and ones.
whose expiry the supplier can fail to accept the LPO. Our picking of the
review of the LPO books noted instances where LPOs had prepared LPO. Most suppliers prefer e-
been prepared but were not picked by suppliers. We could Follow up should be POs and in most of the
not ascertain whether the suppliers were the ones delaying made with suppliers mentioned occasions the
in picking the LPOs or they had not been informed by the to pick the LPOs on PO’s were scanned to
unit to pick them. The LPO acts as a contractual document timely basis. them for them to
which details the items to be supplied, at what quantities acknowledge.
and the prices to be supplied at. Delays in picking the LPOs
may lead to stock outs.  In the case of LPO no.
62 Victoria Furniture
Internal Audit Department
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

Further, the LPO is valid for 90 days after which could not pick the LPO
cancellation is done. on time since there was
a historical pending
Cases noted include; payment.
 LPO no. 81 dated 23/03/2015 for the supply of 2 laptop  LPO no. 263 for the
chargers for Kshs. 4,990.00 by MackPhilisa was picked supply of 4 drawer
on 23/05/2015 i.e. after 2 months. cabinets by orbit
 LPO no. 617 dated 07/01/2015 for the supply of 50,000 Engineering, the LPO
Sacco Link PIN Mailer for Kshs. 475,000.00 by Bewa has since been
Wholesalers Ltd was collected on 13/03/2015 i.e. after 2 cancelled.
months.  On the issue of the LPO
 LPO no. 34 dated 06/02/2015 for the supply of 3 metres no. 271 for fast choice
CAT 6 patch Siemen Cables for Kshs. 22,500.00 by ltd the seats were for
Applewood Tech was collected on 10/05/2015 i.e. 93 the first wave of
days. Transformation
 LPO no. 62 dated 04/03/2015 for the supply of cashier branches and the LPO
tools at Kshs. 49,500.00 by Victoria Furniture Ltd was was scanned to the
collected on 19/05/2015 i.e. 76 days. supplier to fast track
delivery as they were
There were some LPOs that had been issued but were yet urgently needed and
to be collected. Examples were; promised to pick the
More than three months;- LPO later.

 LPO no. 253 dated 22/04/2015 for Changes in the BSC

workflow (changes in the BSC portal) for Kshs. 8,758.00
by Dimension Data.
 LPO no. 263 dated 08/05/2015 for the supply of 4 drawer Dimensions Data was
cabinets for Kshs. 55,680.00 by Orbit Engineering. issued with a letter of
award, attached below;
Internal Audit Department
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

 LPO no. 267 dated 11/05/2015 for the supply of 1,000

pieces POS terminals, Portable and Contactless for Kshs.
454,270.00 by Tracom.
 LPO no. 271 dated 15/05/2015 for the supply of 168 sets
visitors' waiting area 3 seater chairs for Kshs.
LPO 267 for the POS
3,245,760.00 by Fast Choice Ltd.
terminals was scanned to
 LPO no. 289 dated 22/05/2015 for the supply of 100
the supplier and we had to
pieces of hand held metal detectors (garret) for Kshs.
do a call back to TRACOM
1,566,000.00 by Riley Services Ltd.
to confirm the same which
 LPO 401 raised on 25/06/2015 to Wells Fargo.
they affirmed but they
 LPO 415 raised on 02/07/2015 to Eclectics.
said they will pick the
 LPO 418 raised on 07/07/2015 to office technologies.
originals, but they have a
 LPO 392 raised on 23/06/2015 to Ductile.
copy which they already
 LPO 392 raised on 23/06/2015 to Multi design.
used to invoice the bank.
Risk:
 Lack of engaging the suppliers on time may lead to LPO 289 was also scanned
stock outs thus affecting business. and the vendor also
 Bearing in mind that majority of price quoted by confirmed the same.
suppliers have a validity period, delay in awarding the
LPOs can lead to expiry of such validity periods causing Way Forward: We will
suppliers to fail in supplying the items at the offered continue engaging the
price and eventually lead to purchase of the same items suppliers to pick the PO’s
at higher prices. regularly but where not
 LPOs authorised and have not been cancelled are prone picked but an e-PO was
to mishandling and can end up in the hands of done, the same will be
unscrupulous suppliers and if not properly tracked result recorded in the register
and indicated as sent via
email. Also we are working
Internal Audit Department
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

in payment and financial loss to the Bank. on the procurement

system whereby an
electronic PO will be sent
to the suppliers hence
eliminating the need for
the physical LPO’s.
Therefore we would only
need an acknowledgement
from them.

Responsibil Head
ity: Procuremen
t

Target Continuous
date:
3. Inappropriate tender awards Rating of internal audit
finding: High

The procurement function involves the acquisition of goods, The head Response:
services and works from an external source, that are Procurement should
appropriate and procured at the best possible cost to meet ensure that  The manual does not
the business needs in terms of quality, quantity, time and responses for bids state 50% but states “A
location. As per the procurement manual section 5.1, page are received from at tender that has more
14; a minimum number of 10 suppliers should be invited for least 50% of the than half the response
any bid. Where a category has less than 10 suppliers, all suppliers invited, (5 responses) should be
the suppliers should be invited and where responses are telephone follow ups considered successful
and should be

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

should be made to evaluated”.

from below half of the minimum suppliers invited then a non-responding
telephone follow up should be done to the non responding suppliers or re-  There is minimum
suppliers to obtain their quotations. If no responses are tendering considered control over suppliers’
obtained, the procurement team should make a decision on and where a decision response from the
whether to do re-tender and include all the suppliers in the is reached on procurement side and
list or to work with the only responses obtained. This should whether not to re- calling suppliers to
be captured in the analysis report for approval by Head S & tender, the same respond after the
F. However, responses obtained for the following bids were should be noted on deadline is not good
below 50% of the number of suppliers invited but the non the tender analysis practice since the only
responding suppliers were not called for their quotes and document and time to know the
there were no comments on whether re-tendering was approved by the number of responses
considered. head S & F. received is after tender
opening. The above is
 Request for quotations (RFQs) were sent to 58 based on the measures
suppliers for the supply of POS receipt rolls but only 6 put in place to ensure
(10%) responded but there was no evidence of dual custodianship and
telephone follow ups with the suppliers that did not best practice.
respond to obtain quotes for about 50% of the
suppliers invited.
Way Forward: As per the
 Printing of 2,500 copies of financial statements for manual, Head S&F will
the year 2014 (Annual reports) for an amount of Kshs. make a call when
841,000 (LPO number 260) - Request for quotations quotations are analysed as
(RFQs) were sent to 15 suppliers but only 4 to retender or to go on.
responded (27%), there were no telephone follow ups Once she approves, the
or retendering, given that the response was less than tender as is, then it will be
50%. adopted. If a retender is

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

recommended then it will

 LPO no. 57 dated 26/02/2015 of Kshs. 556,150.00 to be executed.
supply 35,000 A4 tamper proof bags at Kshs. 15.89
Ramco Printing Ltd. Responsibil Head S&F
 The prequalified list has 50 suppliers. 15 suppliers ity:
were invited to quote but only 4 responded. This is Target Continuous
below the required 50% respond needed with no re- date:
tendering done.
 LPO no. 321 dated 03/06/2015 of $66,870.00 VAT
exclusive to supply Lenovo laptops from Trans
Business Machines (TBM) Ltd.
 The prequalification list has 176 suppliers. Only 3
suppliers were invited and responded on the
requests.
 As per the approval Evaluation committee decision
dated 19/5/2014 and EMC approval guarantee to
purchase 100 metal detectors. This category has 28
suppliers but only 3 were requested to quote where
the cheapest was Riley Services Ltd at Kshs.
15,660.00 per piece.
 Quotation for supply of small portable cash box gauge
16 analysed and approved on 3/8/2015-15 suppliers
were invited and only 4 responded (27%of invited) no
evidence of follow up with the non-responding
suppliers.
 Quotation for supply of filing cabinet 4 drawer
wooden mahogany analysed and approved on
3/8/2015 in which 15 suppliers were invited and only

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

four responded (27%of invited) .No evidence of

follow-up with none responding suppliers was
documented.
 Quotation for supply of cash/cheque deposit A5,NCR
paper60gsm,2 printed one side, self-carbonated,
duplicate to be marked as “duplicate”1000 copies per
ream in which 15 suppliers were invited and only two
responded (13% of invited suppliers) no documented
evidence of follow up on non-responding suppliers
was maintained.

Risk:

The costs of procurement may not be the best bargains

given than that the number of suppliers that responded
were less than 50% of the bids sent out.

4. Low number of suppliers invited for bids. Rating of internal audit

finding: High

The minimum number of suppliers that can be invited for The head Response: The two items
any bid is 10 as per the procurement manual, section 5.1 procurement should relate to specialised items
page 14. However, there were occasions in which tenders ensure that at least whereby;
were sent out to a very low number of vendors/ suppliers a minimum number
whereas there are others in the same category that could of 10 suppliers are  The Bank currently uses
have been invited to bid as well. Examples are:- invited for bids a system procured from
 Only two suppliers were invited to bid for the supply where the numbers AUA for access control
and the system is
Internal Audit Department
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

of "Proximity card access control system for CIC plaza of suppliers in a locked meaning it is not
6 doors complete with control accessories and category are more compatible with devices
software" even though there are 47 pre-qualified than the minimum. from other providers.
suppliers for the category under "Supply and The quotation from Top
installation of CCTV systems". The lowest bidder was Security was for price
Top Security at an amount of Kshs. 1,204,984.80 but discovery.
the tender was awarded to AUA Industria at an
amount of Kshs. 1,399,987.61 with the presenter to  Security Department
the evaluation committee that sat on 12/05/2015 have been engaged to
stating that preference was given to AUA, the current review how the Bank
service provider, since they have the structure and can benefit from
bringing in a new contractor may cause compatibility multiple vendors for
issues and breach of contract if the new contractor different buildings
uses AUA's platform. instead of one vendor
for all buildings and this
 The tender invitations for the procurement will be handled in 2016.
of ThinkPad Lenovo laptops at an amount of USD
43,290 (Exclusive of VAT) were only sent to three  The Laptop
vendors namely; HP, Lenovo and ASUS. However, manufacturers
other manufactures such as Toshiba, Acer and Dell contacted were three
could have been invited as well. as indicated as we were
Risk: unable to obtain
The Bank may procure goods and/ or services at costs that contacts for Dell. The
are high as a result of a few number of suppliers invited to manufacturers
bid without the benefits of analysing a larger number of contacted were the
leaders as per
attached.

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

suppliers.

Way Forward:
We will endeavour to
reach out to more
suppliers / manufacturers
for specialised items.

Responsibil Head
ity: Procuremen
t
Target Continuous
date:
5. Documentation of the procurement process. Rating of internal audit
finding: High

Procurement is the purchase of goods and services at the The management Response:
best possible price to meet a purchaser's demand in terms should come up with Recommendations noted.
quantity, quality, dimensions and site. Procurement an efficient way of
requirements are initiated via a purchase requisition filing procurement Way Forward: During
template which includes all the necessary information documents or filing, we will ensure all
pertaining to the procurement or through a business case consider investing in purchases are
for projects. After analysing the requests, obtaining and a system that will accompanied by user
evaluating bids from request for quotations (RFQs)/request collate related requisitions for ease of
for information (RFIs) or request for proposals (RFPs), the documents for ease matching and retrievals.

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

procurement unit obtains necessary approvals from the of retrieval or Responsibil Head
evaluation & expenditure management committees (EMC) review. ity: Procuremen
of the bank. A local purchase order (LPO) or a tender award t
letter is then issued to the selected supplier/ vendor who in
turn delivers the requested goods or renders the requested Target Continuous
services, a delivery note is then issued by the supplier and date:
later an invoice is presented for payment. However these
documents are not matched and filed together and as a
result it is difficult to establish whether the items procured
were the ones requested for, delivered and paid for. For
example; from the following items procured, the requisition,
invitation for bids and delivery documents were not availed.
 The requisition form for the procurement of 40,000
pieces of 930G POS receipt rolls and 25,000 pieces of
IWL POS receipt rolls supplied by BEWA Wholesalers
worth Kshs 2,314,000 was not held.

 There was a re-order of 8,000 pieces of NCR journal

rolls at an amount of Kshs. 1,264,000. However the
previous analyses of quotations (RFQs) are not held,
though it was indicated that the supplier (ArtMedia
Limited) reduced the unit price from 200.50 to
158.00.

 The user requisition form for the procurement of

'Proximity card access control system for CIC plaza 6
doors complete with control accessories and software'
awarded to AUA Industria at an amount of Kshs.

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

1,399,987.61 is not held.

 Printing of 2,500 copies of financial statements for

the year 2014 (annual reports) for an amount of Kshs.
841,000 - the user requisition form is not held. It was
also noted on the analysis documents that the lowest
bidder (Elwak Printers and Stationers) @ 295.43 per
unit was said to have a long lead time and didn't
deliver quality work in a previous job offered to them.
However this information is not held somewhere for
all the suppliers.

 The requisition forms (Capex forms) and tender

analysis documents are not held for the procurement
of 8 ThinkPad X250 i5 4GB, 53 ThinkPad E450 i5 4GB,
7 ThinkPad E450 i5 8GB for an amount of USD 43,290
and 68 ThinkPad travel mouse and 68 Laptop bags.
ThinkPad Essential Top Load case for an amount of
USD 2,380 both exclusive of VAT.

 LPO no 66 sent to Pacific stationers for 3,000 reams

of photocopy papers done on 11/03/2015 at the
negotiated price of Kshs. 342 no EMC minutes were
provided to confirm authorization of this expenditure.
The last EMC approval obtained from the file was on
19/02/2015 for the purchase of the same item from
same supplier at Kshs. 328 upon which another LPO
was raised on 11/03/2015 .There was no documented
evidence why two LPOs for the same item could be
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INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

issued to the same supplier on the same day at

different prices.
 As noted on the LPO no 129, the unit purchased 3,000
reams of photocopy papers from Pacific stationers on
25-Mar-15 at Kshs. 344 per ream. Our review of the
analysis memo done in the same month reveals the
purchase price had been negotiated downward with
the supplier to Kshs. 342. No EMC approval was
provided to confirm authorization of this expenditure.

Risk:
Poor management of procurement records makes it difficult
to trace and/ or retrieve documents, lack of audit trail for
reconstructing processing.

Improper documentation can result in revenue loss for the

bank through inaccurate price discovery as noted in the
case of photocopy papers where one supplier has been
increasing prices without significant effort by the unit to
negotiate downwards.

6. Failure to conduct regular and comprehensive market surveys. Rating of internal audit
finding: High

The procurement manual on page 14, section 5.1 ‘Operationalization of the Bank’s suppliers list’ part (b) states
that;- “The procurement manager should at all times undertake market surveys on the going average prices of
items being tendered for comparison with the tender process”. Also on page 6 of the same manual, section
2.3.2 ‘Responsibility’ states that “Purchase of recurrent items – Note: The committee approves prices only
once, for the prices to hold for the next six months". However, the last comprehensive market survey was done
Internal Audit Department
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

in May 2014, the head procurement stated that a survey was done in March 2015 but the report (attached) held
only had a few items, some of which had the price for only one supplier and others did not have any price on
them, thus not comprehensively researched and cannot be relied upon. This in effect means that the Bank
could be procuring items at prices that are higher than the market.

Examples of such items that were not surveyed include:

 Photocopy papers
 Computer Mouse Fujitsu Siemens Only. USB/PS/2 M 510 USB Black
 Hp laser jet printer cartridge CC364A(64A)
 HP laser jet cartridge Q5950A-black
 Canon/Sony camera 16.1 megapixels, 8gb memory card 5x optical zoom intelligent auto
 70 inch LCD Sony Bravia
 Hand writing carbon paper-blue pelican plenticopy 200H
 Epson projector EB905
 48 inch LED screen Samsung TV

Risk: The procurement Response: In addition to

The Bank may be procuring items not at the best possible manager should the prices attached in the
prices given that the procurement unit may not have the ensure that market audit report, we obtained
current information on market on prices. surveys on recurrent recommended prices from
items are conducted PPOA website as per
attached which includes

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

within a period of 6
months for and the other items like furniture,
report signed by the some electronic items and
head sourcing and stationery.
facilities
management for
price estimates to be Market Price Index
used in tender June 2015.pdf
analysis.
Way Forward: We will
continuously check the
market prices of items that
are not included in the
PPOA market price index.

Responsibil Head
ity: Procuremen
t

Target Continuous
date:
7. Failure to rely on market price when procuring items Rating of internal audit
finding: High

The Procurement Manager should at all times undertake Procurement Response:

market surveys on the going average prices of items manager should Recommendations noted.
being tendered, for comparison with the tender prices. The conduct a fresh
Way Forward: All our

Internal Audit Department

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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
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Finding and Risk (Implication) Recommendation Agreed management
action

market price is supposed to help the procurement manager request for purchases will be based on
asses the quotations from suppliers and confirm if prices quotations from market survey.
are within the market range. suppliers or engage
the cheaper supplier Responsibil Head
The department conducted a market survey on printer identified in the ity: Procuremen
ribbon ERC 31 in March 2015 and obtained the market price market survey. t
as Kshs. 450 from FranCrom. An LPO (Number 424) for 400
units was raised at a price of Kshs. 1,252.80 in July 2015. The department Target Continuous
Despite the unit being aware of the market price of the should consider date:
product, they then proceeded to procure the ribbons at blacklisting the
Kshs. 1,252.80 which was over twice the price discovered in supplier for over
the department’s survey. Ukulima and Naivasha branches pricing.
were able to purchase the item at an average of Kshs. 600
despite buying in low quantities. Comprehensive
market survey
Additionally reference to the market survey done in March should be conducted
was not made in analysing the below quotations. and reference made
to when conducting
 Quotations for the supply of HP cartridge 6000A analysis.
were analysed in March and a recommendation to
purchase from Pacific stationers at Kshs. 7,482 made
while the department had identified a supplier (silver
eagle) at Kshs. 6,000 in the market survey.
 Quotations for the supply of HP cartridge Q7553A
were analysed in March 2015 and recommendations
made to purchase the item from Brand spark at Kshs.
7,772 while the unit had identified a supplier selling
the same at Kshs. 6,300 in the market survey done in
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

the same month.

This could have been caused by negligence on the part of

procurement unit by failing to make use of price
information in making purchasing decisions or failing to
have conducted a market survey at all as evidenced by the
below extract from the report sent by head procurement
unit which shows the date that the report was created as
11/08/2015 and not in March 2015.

Risk:

Failing to rely on the market survey occasioned the bank a

loss of Kshs. 501,120 assuming the 400 units could have
been purchased at Kshs. 450 each.

8. Engaging Suppliers to supply items without LPOs Rating of internal audit

finding: Medium
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

As per the Operations manual, the procurement unit is the Management should Response:
custodian of the local purchase order book. Supply of ensure that all Recommendations noted.
awarded tenders is authorized by issuance of a local awards to supply are
purchase order to the supplier. This should be done after authorised through Way Forward: Staff
approval of the supply by the relevant committees for the issuance of LPOs cautioned not to engage in
bank to enter in to the contract with the suppliers. before goods and such activities and to
There was an instance where a supplier delivered goods services are ensure that all awards are
before issuance of an LPO. This was; delivered by the through issuance of LPOs.
These were explained to occur due to the lengthy period it suppliers.
takes to process an LPO. Examples are; Responsibil Head
ity: Procuremen
LPO no. 198 dated 5/5/2015 awarded to Moringa Ltd to t.
supply 100 mail bag metal D-Locks at Kshs. 350.00 each.
Target Continuous
 There was an email dated 17/4/2015 from Geoffrey date:
Nyamuro to Tabitha Makau advising her to receive the
locks at Kshs. 350.00 though the LPO was not ready.

Risk:
 Circumventing controls that are put in place in relation
to purchases thereby creating room for frauds.
 Lack of LPO number for recording keeping and tracking
of the order on delivery.
 Lack of reference on the specification of items to be
supplied.

9. Pre-qualification of suppliers Rating of internal audit

Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

finding: Medium

As per the procurement manual on pages 13 & 14, section The management Response:
5.0 on supplier prequalification. "The suppliers shall be pre- should ensure that Recommendations noted.
qualified by the procurement unit and approved by the pre-qualification of
head - Sourcing and Facilities Management. It is the Bank's suppliers is done at Way Forward:
desire to have a supplier list which is as diverse as possible. least once annually Presentation to BOM
I.e. as many suppliers per category as possible. to ensure that the seeking to outsource pre-
Refreshments and review of the suppliers list should be Bank derives value qualification for 2015/2016
done on an annual basis". However the last comprehensive for money from a ongoing.
pre-qualification of suppliers was done in February 2014 current list of
and only seven suppliers have been added since then. We suppliers satisfying Responsibil Head
were informed that the reason the same has not been done the Bank's selection ity: Procuremen
was as a result of the staff being overwhelmed by criteria relating to t
workloads. their interest and
capability in Target 21st
Risk: supplying particular date: December
The Bank may not derive the best value for money on goods and/ or 2015.
goods and/ or services from an outdated list of suppliers. services.

10. Missing pre-qualification documents Rating of internal audit

finding: High

While conducting supplier prequalification, due diligence on Procurement unit Response: We are
the supplier must be done which is part of the should following up with the
documentation that the department relies on while ranking suspend suppliers providers to give the
the suppliers. As per the prequalification questionnaire with incomplete documents.
2014-2015, the following documents are supposed to be documentation from
Way Forward: We will
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

any award of tenders follow up with the

provided by the applicants. or contracts until full suppliers to provide the
compliance. documents.
 Certificate of registration/incorporation
 Certificate of registration with Ministry of roads public Procurement unit Responsibil Head
works (where applicable) should contact the ity: procuremen
 Current trading license suppliers and ensure t
 Pin &VAT certificates all necessary
 Tax compliance certificate documentation is Target 31st
 Copies of LPOs, award letters or any other approved provided. date: December
document from each of the referees showing 2015
evidence of work done and the values.

A review of the documentation on prequalified

suppliers from December 2014 to July 2015 reveals
variations from this as per below examples:
 Nishani management-LPOs and award letters from
referees were not provided
 Kenya valuers and estate agents-prequalification
questionnaire not filled, registration certificate and
tax compliance certificate missing.
 Premier valuers-award letters from referees missing.
 Quality homecare services-prequalification
questionnaire not filled.
 Ecomex enterprises-prequalification questionnaire not
filled.

Risk:
 Possibility of dealing with illegitimate suppliers which
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

exposes the bank to a risk of even lacking a legal

redress in case of non-performance.
 Inability by the bank to evaluate supplier’s capacity to
deliver on a project.
 Results into subjective ranking of suppliers into various
categories as prescribed in the manual.

11. Tracking of EMC recommendations Rating of internal audit

finding: High

As per the Procurement Manual, the head Sourcing and The head Response: All tender
Facilities Management is the secretary of this committee. procurement should awards are issued as per
As the secretary, they are mandated to prepare the EMC ensure that no EMC approval.
minutes and track any recommendations and issues tender award is
discussed at the meeting. From our review, we noted issued without the  Base Cards
instances where the EMC recommendations were not appropriate approval The Base Card RFP took
tracked for action and thus subsequent decisions to award to incur costs being a long time to close and
tenders was hampered. Examples were; in place. indeed was ongoing
during the dates
Base Cards The EMC committee pointed out.
On the 5/2/2015 EMC minutes, the committee approved the should ensure that It has since been closed
purchase of 19,000 base cards at a total cost of they do not give and awarded to a
$25,510.00. Further, they recommended the need for the contradicting different party.
bank to establish if an alternative supplier could be sought. approval
However, this was not done and a further purchase of base recommendations on  POS Terminals
10,000 cards at a cost of $12,400.00 was approved as per EMC declined the
items.
the 6/3/2015 EMC minutes. request at the first
As at the audit date 27/08/2015, the evaluation for instance but approved
on appeal and gave
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

alternative suppliers was underway where cheaper options certain conditions.

had been identified. The committee is also
aware that the
POS terminals conditions given were
On 29th July 2015 EMC minutes, the committee not met and has since
recommended approval for South Sudan POS Activation approved continuation
project at a cost of $32,665.03. On 16th July 2015 EMC of the project with the
presentation, the committee declined to approve the incumbent vendor
request by challenging the team to re-look into the market owing to the urgency
and obtain cheaper vendors. They cited that the experience that the Bank is
with the Co-op Kenya current vendor was not the best. On required to automate
the 23rd July 2015 minutes, the head ICT undertook that in processes in South
the next three months the department will engage other Sudan.
providers for price discovery and for purposes of getting an
alternative provider. This is yet to be done. Way Forward: EMC
recommendations will be
Risk: keenly tracked.
 Impairment of decision making.
Responsibil Head
Possible loss of funds due to higher purchase costs. ity: Procuremen
t.
Target Continuous
date:
12. Inappropriate procurement of B4 Envelopes Rating of internal audit
finding: High

As per LPO no. 47 dated 20/02/2015 for the supply of 5,000 The head Response:
envelopes by Redox Services, the tender was awarded to procurement should
 The B4 reinforced
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

Redox Services at Kshs. 16.24 each as opposed to Hill ensure that no envelopes cost by Hill
Converter’s (K) Ltd at Kshs. 8.12 each thus occasioning the tender award is Converters is Kes.81.20
bank a loss of Kshs. 40,600.00. issued without the against Redox’s price of
appropriate approval Kes.16.24
to incur costs being
Risk: in place.  B4 normal envelopes
Loss of funds by the bank due to overvalued costs. cost by Hill Converters
The EMC committee is Kes.8.12 against
should ensure that Redox’s price of
they do not give Kes.6.90.
contradicting
approval  The analysis is
recommendations on available for
items. confirmation.

Way Forward:
No loss but we shall
continue to monitor.

Responsibil Head
ity: Procuremen
t
Target Continuous
date:

MONITORING, TRACKING AND REPORTING

1. Tracking of issued LPOs Rating of internal audit

Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

finding: Medium

The Procurement Unit are the custodian of the Local The head Monitoring, Response: We have
purchase order book. The signing of all LPO’S are done Tracking and developed an LPO tracking
jointly between Procurement unit and Finance Department Reporting should report to aid in tracking
as per the signing limits. The supply for awarded tenders is ensure that a the age of LPOs once
authorized by; process is in place to issued.
a) Issuance of an order (LPO.) for goods & services or track issued LPOs for
b) Signing of a contract between the Bank and the prompt delivery and Way Forward: We are
successful bidder for works and projects payments. also expecting this feature
From our review, there were some LPOs that were long to be contained in the
outstanding after the 90 days validity period where items Any exceptions upcoming procurement
were still accepted without an appropriate approval. The should have an system.
team sited lack of system though the same could be done approved for receipt
manually. and payments. Responsibil Head
ity: Monitoring,
Examples were;- Tracking &
LPO no. 30921 dated 18/09/2014 awarded to Hill Reporting
Converters (K) Ltd to supply 10,000 LA4 (a) personal loans
application forms. The items were received as below; Target date: Done
 09/07/2015 – 1,500
 29/06/2015 – 8,000
 19/06/2015 – 500

LPO no. 207 dated 25/03/2015 awarded to Art Media to

supply 1,000 ATM NCR receipt rolls. The items were
received as below;
 29/07/2015 – 136

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Finding and Risk (Implication) Recommendation Agreed management
action

 07/07/2015 – 276
 03/07/2015 – 100
 25/05/2015 – 168

Risk:
Stock-out of bank inventory which may hinder adequate
planning and sourcing.

2. Tracking of costs per item Rating of internal audit

finding: High

The unit has no tracking mechanism of items approved for The head Monitoring, Response: We have
purchase, the vendor awarded and at what cost over a Tracking and developed an EMC
period of time. Reporting should tracking report for this
We noted a scenario where an item was recommended for institute measures to purpose, back dated to
approved to purchase on different EMC sittings but no track and produce year 2014. This is updated
query was raised some from the same supplier. Examples timely reports to the on a weekly basis.
were; EMC of items
historical costs for Way Forward: This report
TC Box Files adequate decision shall be incorporated in
On 11th May 2015 EMC minutes, the committee making. the Procurement system.
recommended approval of 900 TC box files at Kshs. 570.00
from Ricoh Systems. Responsibil Head
On 12th May 2015 EMC minutes, the committee ity: Monitoring
recommended approval of 400 TC box files at Kshs. 470.00 Reporting &
from Ricoh Systems. Tracking.
On 25th May 2015 EMC minutes, the committee
recommended approval of 900 TC box files at Kshs. 800.00 Target Done.
from Moringa Ltd. date:
Internal Audit Department
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INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

On 26th May 2015 EMC minutes, the committee

recommended approval of 200 TC box files from Moringa
Ltd and Ndewa each at a cost of Kshs. 800.00 each.

Risk:
Poor decision making due to impaired costs metrics.

3. Idle assets at the department Rating of internal audit

finding: Medium

The department staff members were recently issued with The head of the Response: All desktops
laptops in place of desktop computers. This ultimately department should have since been
rendered the 20 desk tops in the unit redundant. On ensure that there is surrendered and re-
observation, the staff are still using both. The laptops were a proactive way of distributed to branches.
bought as per the LPO no. 321 dated 03/06/2015 and having the desk tops
delivered on 29/06/2015 after which they were issued to re-assigned where Way Forward: All staff
the staff. there is need. will only have a laptop and
On enquiry, the department has no immediate use of the no desktop.
desk tops as they have others lying idle at the store.
Responsibil Head
Risk: ity: Procuremen
Idle assets increases the bank's costs unnecessarily e.g. t
due to purchase costs, depreciation, insurance etc.
Target Done
date:
4. Incompletely filled taxi vouchers Rating of internal audit
finding: High

As per the bank's transport policy, use of taxis in The department Response: Faith Atoiti is
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

conducting bank business is via a taxi voucher authorized should consider a COU staff, and at that
by the head of department or branch manager. A valid surcharging staff point, she was working on
voucher should bear the name and signature of the officer, who have not Night shift.
signature and name of authorizing officer and valid bank indicated time of
stamp of respective branch or department. Also the staff usage. Way Forward: We have
using the cab is supposed to ensure all necessary fields are Sensitize branch however warned the staff
filled and sign. management to on omission of pick and
A review of some vouchers used especially by security ensure security drop time and mileage
officers did not contain the name of the officer being ferried personnel using taxis failure to which we shall
as per below examples. indicate their names. surcharge them.
All vouchers not fully
 On 29/02/2015 Faith Atoiti used dial a cab to south C populated by staff will
(voucher no 26908) and failed to indicate both the henceforth be charged on
pick and drop time. the staff.
 On 30/04/2015 Faith Atoiti used dial a cab to travel to
south C from co-opt rust and failed to indicate both Responsibil Head
pick up and drop time. ity: Monitoring
 On 10/04/2015 Moses N. Munyu used dial a cab to Tracking &
travel to 3rd Ngong avenue (voucher no 27501) and Reporting
failed to indicate both the pick and drop time.
Target Done
Risk: date:
 Lack of personal accountability on the taxi usage by
failing to indicate name of staff
 Failure to indicate time of usage can leave room for
unscrupulous drivers to overcharge the bank
 Difficulty in confirming if vouchers used to ferry staff

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

home were used within the allowed time by the Bank.

INVENTORY MANAGEMENT & TRANSPORT

1. Lack of a proper method for determining re-order levels Rating of internal audit
finding: High

Our review of requisition forms (A105) from branches/ The management Response: Inventory
departments established several instances in which the unit should develop a Management team place
indicated that some items were not in stock (NIS) against method for stock replenishment
some orders. Re-orders points are indicated on bin cards (A determining re-order requests in good time with
record of receipt and issue of stock items) and whenever levels that will be enough buffer stocks to
the point is reached orders for replenishment are made able to forecast last a while. Long
with the procurement unit. However, the process used in usage during the procurement process lead
arriving at the re-order points/ levels is inadequate resulting replenishment lead times /long Suppliers
in stock outs for some stock items, some of which cannot time plus safety delivery lead times have
be source locally by branches such as cash deposit slips. stock. often lead to stock outs.
Examples of items that had stock outs are;-
Some of the highlighted
Nkrumah Road branch items have progressively
Date Order No Item been phased out since last
03/11/14 6307 A3 & A4 envelopes. year e.g. NHIF, Students
21/11/14 6302 A3 & A5 envelopes, Epson printer slip etc. and all deposit
ribbons, and tally Genicom ribbon slips hosted into intranet.
cartridge.
16/12/14 6305 Student deposit slips, cash deposit Way Forward: A Procure
slips and A3 envelopes. to pay System RFP has
08/01/15 6309 A3 envelopes, NHIF deposit slips and been done that would
carter for all inventory
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

white envelopes (without windows). needs.

BOS Responsibil Head

Date Order No Item ity: Procuremen
12/01/15 8848 HP tonner (64A), counter books and t
auto mailer envelopes.
23/02/15 12690 Staple removers, rubber bands, Target 30/07/2016
white envelopes (with windows), A4 date:
envelopes and counter books.
03/03/15 042 Toner (64A) staples, security bags
and rubber bands.
17/06/15 2835 Staple pins, counter books and
Colop.

Risk:
Stock outs that could hinder the smooth running of
branches or departments.

2. Long outstanding re-orders Rating of internal audit

finding: Medium

There were 53 outstanding re-orders as per the stationery status list as at 19 th August 2015 that had been
placed with the procurement unit but the items ordered are yet to be delivered at Inventory management unit.
Ideally when re-orders are approved by the evaluation committee (EMC), local purchase orders (LPOs) are
issued to the suppliers for them to supply the requested items within a period of 90 days. Examples of re-orders
that have taken unduly long are;-
Order No Date Item Quantity Status Priority
9495 26/03/14 Epson DFX-9000 printer 80 3 V. urgent
Ribbon – UK made.
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

9433 26/05/14 Lateral files 1,000 Nil ‘’

9317 08/08/14 HP C4844A. 1 Nil ‘’
9336 15/09/14 Business reply DL6 5,000 1,000 ‘’
Envelopes.
9586 05/12/14 Envelopes-C5- windowed 5,000 1,450 ‘’
9590 17/12/14 DVDs 8.5GB 350 New ‘’

Attached find the stationery status report as at 19 th August 2015.

Risk: The management Response: LPO books

Long lead times could lead to stock outs that may hinder should ensure that were reviewed last year to
the smooth running of branches or departments. stationery re-orders include validity period
are supplied within a within which stocks must
reasonable time to be delivered, 90 days.
avoid stock outs. Consistent follow ups &
coordination is done by
both Inventory team &
procurement team to
ensure suppliers are
pushed to deliver on time
once an LPO has been
given to them. Fortnight
updated status list is
forwarded to Procurement
team indicating current
stock position and urgently
required items by priority.

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Finding and Risk (Implication) Recommendation Agreed management
action

Way Forward:
Implementation of an
efficient stock inventory
system that would
interlink IM & Procurement
to track movement of
stock orders, LPO’S,
suppliers, lead time etc to
ensure non stock out gaps.
The current Sharepoint
workflow process does not
adequately provide
tracking data.

Responsibil Head
ity: Inventory
Manageme
nt

Target 30/07/2016
date:
3. Receipt of overdue LPO deliveries Rating of internal audit
finding: High

Procurement unit issues LPOs to the successive bidder to The head Inventory Response:
supply the goods as earlier quoted as per the bid held. The Management and Recommendation noted.
LPOs forms issued under terms and conditions indicates Transport should
that they are valid for 90 days. The validity is pegged on seek approvals from Way Forward: To be
implemented immediately
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

Procurement and the whereby Head Inventory

the LPO date which should correspond with the customer Head Sourcing and Management must seek
LPO collection date after the necessary approvals have Facilities approval to receive goods
been sought. On enquiry from the unit head, she was not Management to and items that are well
familiar of this requirement and the manual was also silent receive goods and past their validity dates.
on how to handle such cases. items that are well
past their validity Responsibil Head
Examples were; dates. ity: Inventory
LPO No. 30921 dated 18/09/2014 awarded to Hill Manageme
Converters (K) Ltd to supply 10,000 LA4 (a) personal loans nt
application forms.
The items were received as below;- Target Immediatel
 09/07/2015 – 1,500 date: y
 29/06/2015 – 8,000
 19/06/2015 – 500

LPO no. 207 dated 25/03/2015 awarded to Art Media to

supply 1,000 ATM NCR receipt rolls. The items were
received as below;
 29/07/2015 – 136
 07/07/2015 – 276
 03/07/2015 – 100
 25/05/2015 – 168

Risk:
Possible dead stock as the goods or items could no longer
be in use hence loss of funds as payments are honoured for
goods received.

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

4. Erroneous charge of inventory costs Rating of internal audit

finding: Medium

Inventory management Staff receive all stationery orders in The head Inventory Response:
form A 105, date stamp and forward them to Head- Management and Recommendation noted.
Supplies & Inventory management unit to assess the orders Transport should
and to ensure that they are reasonable before any issuance engage ICT and the Way Forward:
is made. vendor to enforce The bank to upgrade the
Upon satisfactory verification, these orders are passed to the maker checker sun system from 4.2 to
the Stores staff for processing. mechanism for all Version 6.2 for conclusive
system postings. reconciliation of stock
The original request form A105 is forwarded to the Head - balances.
Inventory Unit daily for posting of issued items in the Sun
Inventory system and debit the user Departments/Branches Responsibil Head
for their consumption costs. ity: Inventory
Manageme
We noted an instance where Credit Operations Unit was nt
charged with 100 tamper proof bags which had been
requested by Market and Communication Unit. This was Target 30/06/2016
requisition number 7514 dated 18/11/2014. date:

On probing, we noted that the posting of stock issued has

no maker checker mechanism.

Risk:
Internal complaints where units/branches are expensed
unwarranted costs.

5. Stock-outs of fast moving stocks. Rating of internal audit

Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

finding: High

The role of Inventory management unit is to ensure that The unit head to Response:
stocks for items centrally purchased and requested by ensure that prompt Recommendation noted.
departments and branches are available at all times. This purchase orders are
means the unit should have in place properly working placed immediately Way Forward: Review of
inventory management procedures to ensure that optimal the stock balances stock levels is a manual
inventory levels are maintained based on consumption hit the re-order continuous process
trends without occurrence of shortages in the bank as well levels. through the year where all
as without overstocking. However, from a sample of lead times have always
requisition forms from branches & departments and stock The unit to review all been major factors to be
levels at Inventory management unit, we established the stock re-order considered. However this
instances in which stocks for critical items used in the Bank levels in line with the will be further enhanced
network were being exhausted and taking extremely long procurement and when the bank upgrades
to be replenished as cited in below examples. delivery lead inventory sun system from
timelines and usage. 4.2 to Version 6.2 for
 Requisition form no. 2958 and 2956 dated 07/06/2015 conclusive reconciliation of
and 25/05/2015 respectively from Co-op House branch stock balances and setting
to supply among other items 5 bundles of IPF forms of stock levels.
which went out of stock on 19/2/2015. None was yet to
be provided as at the audit date 25/08/2015. Reorder levels will be
determined by the system
 A5 envelopes-The bank ran out of stock for two months once we do the upgrade as
from 19/01/2015 to 16/03/2015.This was despite the indicated in point above.
item being in high demand from branches .A sample of
HR and Kisumu branch requests indicated that the Head
two made requests for this item 6 times in this period Responsibil Inventory
without being supplied. ity: Manageme
nt
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

 A4 envelopes -The bank ran out of stock for almost two

months from 25/03/2015 to 20/5/2015, followed by Target 30/06/2016
another stock out from 07/07/2015 to 8/8/2015.A sample date:
of requests by Kisumu branch and HRD on the item
between December 2014 and June 2015 indicated over
16 different times when requests were made and not
supplied.
 Staplers have been out of stock since 30/10/2014 and no
replenishment had been done as at 25/08/2015.
 Staple remover has been out of stock from 23/09/2014
and had not been replenished as at 25/8/2015.This is
despite numerous request by HRD.

The shortage is attributable to lack of scientific way of

computing the economic order quantity by factoring in the
supplier lead times as well as lack of a proper internal SLAs
with the procurement unit within which orders should be
fulfilled. There is also lack of a proper system for managing
the purchase cycles in which staff at Inventory
management unit can easily monitor the progress on their
request forwarded to procurement unit. Currently the only
way of finding out if an LPO has raised is by contacting the
staff at procurement unit.

Other items were;

Requisition no. 2953 dated 13/04/2015.

 NCR journals
 A4 Envelopes
Internal Audit Department
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action

 Black pens
 A5 envelopes

Requisition no. 4096 dated 30/03/2015

 Standing Order amendment forms
 A4 envelopes
 White windowless envelopes

Risk:
 Stock-outs may hinder adequate business support and
continuity.
 Possible high inventory purchase costs as each branch
and/or unit buys separately to bridge the gap as they do
not enjoy the discounts on economies of scale purchase.

6. Inadequate stores record Keeping Rating of internal audit

finding: Medium

At the Inventory management unit, each stationery item The head Inventory Response: Staff
has a bin stock card kept next to the respective stationery and Transport cautioned to be keener
and equally each stationery item has an account in the Sun Management should when issuing stationery
Inventory system. Both the card and the Sun Inventory ensure that all staff and ensure all transactions
record all stationery received/ issued from the store. The are trained on the are correctly posted out in
records in both should always agree and any discrepancy system use and the stock bin cards as is
reconciled. functionality for required.
Items issued from the Store must be knocked off from the business continuity.
bin card immediately while posting in the Sun inventory is Equally all posting to sun
done later, preferably the same day/week. However, we The head Inventory inventory be updated
within the shortest time
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

and Transport
noted that this was not always the case as there were Management should possible to ensure all
discrepancies between the bin cards and the system ensure that the bin records tally at all times.
records. cards and the
This was caused to a large extent by not posting the stock inventory system are Way Forward: Posting
movement in the Inventory System. updated immediately into Sun System to be
there is a stock done within two weeks.
The operating manual stipulates that posting for items movement.
issued should be done same day or week. We confirmed Responsibil Head
that postings had not been done for items issued from ity: Inventory
01/08/2015 to 25/08/2015. The explanation given was that Manageme
only the head Inventory management unit has access to nt &
the system and has been engaged in the reconciliation of Transport
stock items for the stock take conducted in July 2015.This
occasioned variations between the bin card records and the Target Continuous
SUN inventory system which had to be explained orally and date:
vouched on the requisitions to confirm accuracy.
In our opinion ,the provision in the manual to allow for
posting of entries in the system after issuing has been done
promotes reliance on manual systems of managing stock
which is cumbersome and prone to errors.

There were some bin cards where the running tally count
was incorrect as per the stock movements. This was
occasioned by the staff involved not outing the stock upon
issuance. Examples were;-

 Plastic seals GS-043 - On 09/06/2015, the balance on the

bin then was 100 seals were held. However, the next
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

entry was stock taking where no physical seals were

held. Consequently, the balance was indicated as NIL
which was indicated as the running balance from then.

 C5 Envelopes - On 19/01/2015, the balance on the bin

then was 25 envelopes. A spot check on 16/03/2015
indicated the physical balance as NIL which was
indicated as the running balance from then.
 On 05/05/2015, the balance on the bin was indicated as
225 envelopes. On 22/05/2015, the balance was
indicated as NIL which was indicated as the running
balance from then.

There was an item for Marketing and Communication

Department (100 tamper proof bags) that was misposted to
Credit Operations Unit on 18/11/2014 as per the
requisitions form no. 7514.

Risk:
 Lack of counter ability on the bank's inventory.
 Possible concealment of stock theft.

7. Unsupervised stock take Rating of internal audit

finding: Medium

Stock take is usually conducted twice every year and as The head Inventory Response:
stipulated in the operating manual, the head Inventory management unit Recommendation noted.

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

management unit coordinates the stock take assisted by should ensure an Way Forward: As
casual staff provided by HRD count every item and stores independent recommended moving
clerk record the quantity on the bin card sign. We were supervisor is forward Head inventory
informed that stock take is usually conducted by the staff at involved to oversee Management will request
Inventory management unit assisted by casual staff the stock take and HRD to provide an
provided by the HR team after which reconciliation is done the same should be independent supervisor
and a stock take report prepared by the head Inventory updated in the from another unit
management unit and forwarded to the Head sourcing and manual alongside the casuals to
facilities department. carry out the stock takes
The objective of stock take is to confirm that proper and the supervisor to do a
controls over stock management are working including the report on the findings.
personnel dealing with the stock, hence the process needs
to be supervised by an independent personnel from another
unit in the bank .The manual has not made a provision for Responsibil Head
such and thus the staff at Inventory management unit do ity: Inventory
the whole process of receiving, issuing and maintaining Manageme
bank stock without a third party reviewing. nt &
Transport
Risk:
In case of collusion between the stores clerk and the unit Target End year
head, theft /vandalism of bank stock can occur undetected date: 2015 stock
as both manual and sun system data can be manipulated. take.

8. Inventory management system challenges Rating of internal audit

finding: High

The unit uses SUN inventory system for managing the The department Response:

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

movement of goods; it has been in use since the year 2013. should consider Recommendations noted.
The system has had several challenges/ limitations that investing in a
have made the smooth running of operations difficult. I.e. reliable inventory Way Forward: The bank
management system to upgrade the sun system
 Lack of system vendor support: - The system was that will show the from 4.2 to Version 6.2 for
from a vendor called ‘Advance one’ in the year 2013, visibility of goods conclusive reconciliation of
there has been no support from the vendor since the held at Inventory stock balances.
year 2005 and a call to their representative (Raju) by management unit,
the head inventory management on 4th August 2015 branches and Responsibil Head
confirmed that they no longer support Kenyan departments. The ity: Inventory
customers. This makes resolution of system issues process of ordering Manageme
difficult and rendering the system unreliable. and receiving of nt
goods should also be Target 31/06/2016
 Lack of a working trigger for re-order:- We were automated. I.e. auto- date:
informed that the system has a trigger that should be reconciliation of
set of once the set the re-order level is reached but delivery notes
the same does not work. Once the stock levels reach against LPOs issued.
the re-order point in the system nothing happens.
Ideally there should be a trigger that prompts a re-
order once stock levels reach the re-order point.

 Lack of historical data: - The unit prices for goods are

entered in the system once the goods are received. If
there is a price change on additional goods received,
the unit price for the goods changes to the new one
including the old stock and the valuation of the goods
becomes an average of both unit prices (old and new
stock). However, it is not possible to know the
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

previous unit price once it changes because the

system only displays the new unit price and the
average price.

 System Variances: - The system had a variance on

the amounts of consumption of goods by branches
and departments in the month of May 2015, there
was a variance of Kshs. 364,927.38 in branches
consumption and a variance of Kshs. 1,752,928.94 in
the departments’ consumption between the system
and the actual orders processed for the month. This is
still under investigation and as such the expenditures
for the months of May, June and July 2015 have not
been debited from the respective users accounts.
Also the unit price for a packet of 200 business cards
is Kshs. 1,345 but was reflected as Kshs. 6,688.93 in
the monthly consumption report for Kitui branch and
the transformation division.

 Lack of segregation of duties in the SUN inventory

system: - Supplies are received at the Inventory
management unit by the store staff, two staff sign the
delivery notes and stamp (Goods received stamp)
after verifying that everything is in order. The staff
then record all goods received in a suppliers register
and enter the actual number received in stock bin
cards. The goods received records are then entered in
the SUN inventory system by the head inventory
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

management. Stationery requests from branches/

departments are also forwarded to the head
inventory management daily for posting of issued
items in the inventory system and the debiting of the
user departments/ branches with their consumption.
The head also generates monthly stationery
consumption reports for each user department/
branch containing all items details, quantity, cost, of
each item and the total cost. There are no adequate
segregation of duties in the SUN inventory system
given that the head Inventory management is the
only user created in the system, she does data entry,
reports generation without review and authorises the
physical forms after entry. Ideally data should be
entered and verified by different people.

 Report customization limitations: - The system is not

able to generate a wide range of reports. I.e.

o Statements on demand such as for a day are

not available rather only monthly statements
are available.

o Monthly consumption reports are bulky since

the printouts include items not consumed
within the month. If an item has ever been
consumed by the branch/ department it always
appears on the statement with zero quantities.
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

o Dash board for fast moving goods with an aging

summary that would show the movement of
goods and aid in identifying dead stock.

Risk:
Unreliable system making the unit rely on the manual
process that is prone to abuse.

9. Lack of adequate fire suppression system in one store Rating of internal audit
finding: High

There was one store at Inventory management unit that is The management Response:
not fitted with overhead firefighting equipment. However, should implement an Recommendations noted.
there are portable fire extinguishers inside the side. This automatic
means that in case of a fire during times when the stores firefighting system in Way Forward: We shall
are not manned for example at night, the store does not the new store just pursue the matter with
have a way of extinguishing the fire. like the other stores. Projects & Facilities Unit.
In the meantime, place the
Risk: portable fire extinguishers
The stationery inside the store are exposed to the risk of outside the store.
fire, in case of a fire when staff are not on duty which could
lead to loses. Responsibil Head
ity: Inventory
Manageme
nt &
Transport
Target 31/03/2016
date:
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

10. Obsolete/ dead stock held at Inventory management unit Rating of internal audit
finding: Medium

Our review of stationery held at Inventory management The management Response: The currently
unit established items that have had minimal or no should ensure that implemented stationery
movement over a long period. This is attributed to users in branches and requisition work flow
branches and departments not being aware of their departments are provides a full inventory
existence or some becoming obsolete as a result of aware of stationery catalogue that enables
technological changes such as computer diskettes. The maintained at customers to view all that
head Sourcing and Facilities Management wrote to various Inventory we stock. We carried out a
heads of departments on 10th May 2015 for them to confirm management unit. 5 year stock movement
whether the items should be declared obsolete disposed of Once stationery analysis in Q1 aimed at
or not. However, as at the date of our review there was no items are declared identifying obsolete stock
feedback that had been received on the same. Some of the obsolete they should items/ fast moving etc.
items that have not had movement over a period of five be appropriately Memos in regard to
years are;- disposed. obsoletes identified were
done in Q2 to business
Item Stock at hand Date last owners to confirm
issued obsolescence and approve
Sony video tapes 210 17/01/05 disposal. We are still
Epson printer ribbon 8750 72 25/06/09 pursuing conclusion since
Kodak micro films 2,700 08/04/11 none has ever responded.
Goldfish photo cards 1,498 -
Umbrellas with Bank’s logo 66 01/12/11 Way Forward: Head IM to
push for concluded
Risk: decision to dispose.
Obsolete stationery amounts to loss of funds, since the
envisaged benefit arising from their intended usage is not Responsibil Head
ity: Inventory
Internal Audit Department
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action

realised. Manageme
nt &
Transport

Target 30/03/2016
date:
11. Idle printing press assets Rating of internal audit
finding: Medium

The Bank decommissioned the printing press at Inventory The decommissioned Response: Valuation done
management unit in January 2014 rendering the three printing press in Aug-14 but equipment
printing press machines idle. The machines are machines are note sold as the Bank did
accumulating dust and every day that passes their value gathering dust and not have staff in the Space
decreases without any benefit being accrued from them by their value decrease & Contracts Unit for 10
the Bank. On enquiry of the fate of the machines we were daily. The unit months.
informed that the machines have not been offered for sale should thus hasten
as a result of staffing challenges at Space & Contracts that the process of their Way Forward: Space and
manages disposals. There are also plans to handle their disposal so that the Contracts team to
disposal in October once the unit is fully resourced. Bank can derive the schedule for disposal in
get the best price for Q1-2016.
Risk: the machines.
Idle assets amounts to loss of funds. The bank may not get Responsibil Head space
the best price for the items when they are eventually sold. ity: & Contracts

Target 30/03/2016
date:
12. Execution of contract documents for car hire services Rating of internal audit
finding: High

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

Ten car hire companies were pre-qualified for the provision The department Response:
of car hire services to Bank’s staff on a need basis in should ensure that Recommendation noted.
October 2014. The companies executed contract contract documents
documents after tender awards and the same forwarded to are fully executed Way Forward: The
the Bank’s attorneys for execution. We were informed that and copies transport officer will be
once the documents were forwarded to the legal maintained by the ensuring all contracts
department, they later could not be traced and as such the department. entered are properly
companies were not issued with copies of duly executed executed immediately and
contract documents. In June 2015 the companies were copies of the duly
asked to sign fresh contract documents that are yet to be executed contract
fully executed noting that the contracts are due to expire documents forwarded to
on 30th October 2015. As a result this has made the the companies within the
processing of some payments difficult because the finance first quarter.
department request for duly signed contract documents to
process payments. Responsibil Head
ity: Inventory
Risk: Manageme
The Bank has no recourse in case of disputes when staff nt &
engage the pre-qualified companies for car hire services Transport
without valid contract documents being in place.
Target 31/01/2016
date:
13. Unsigned taxi service contract Rating of internal audit
finding: High

On 22/08/2014,the bank entered into a contract with three The head sourcing Response:
taxi companies for provision of taxi services to bank staff and facilities should Recommendation noted.

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

Way Forward: The

for one year expiring in September 2015.For a written ensure contracts transport officer will be
contract to be fully binding and authentic ,they should be entered into keener to ensure all
signed by a person authorised to contract on behalf of a are properly signed contracts entered are
corporate entity preferably a company secretary and before a contract properly executed and
witnessed signifying that they have observed the signing becomes operational attend to any noted
of the contract .It is expected that signing by both parties or within reasonable discrepancies
should be completed before execution of the obligations time from date of immediately.
begin. Under the law of contract there should be meeting of contracting
mind between the parties entering into a contract which is Responsibil Head
mostly demonstrated by signing of the contract by both ity: Inventory
parties. Our review of the contracts documents provided by Manageme
Sourcing and supplies department confirmed that the nt &
contract entered into between Signature tours and travel Transport
ltd and the bank has not been signed, witnessed and
stamped on behalf of the bank despite the contract being in Target 31/01/2016
operation for over 10 Months. This is attributable to failure date:
by staff in the department to review documents after being
sent to legal for signing.

Risk:
Contract may be unenforceable by law.

14. Bank motor vehicle valuation reports Rating of internal audit

finding: High

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

Our review of the bank motor vehicle insurance covers, we The head Inventory Response: We sought
noted that the insurer normally does the valuation and Management and clarifications from CIC who
upon which they advise the bank on the premium to pay for Transport should confirmed that they held
the year. A sample analysis of the values given indicated seek clarifications on the correct valuations
that some of these values were the same or higher for the any valuation reports as attached and
following year implying that the vehicles were not extremes noted and the credit notes were
depreciating. On enquiry, we were informed that these document the same. passed as attached.
vehicles had been done some over wholes repairs or
bought at a discount of the buying value. The valuations
were accepted as presented with no queries raised with the Adobe Acrobat Microsoft Excel
insurer. Document 97-2003 Worksheet

These were;

Microsoft Excel
M/V Reg. NO. VALUATION AMOUNTS FOR PREMIUMS 97-2003 Worksheet
2013 2014 2015
KBC 237M 2,700,000.00 2,500,000.00 2,700,000.00 Way Forward: We will be
KBK 754D 2,600,000.00 2,400,000.00 2,600,000.00
requesting for copies of
KBB 979M 2,140,000.00 1,950,000.00 2,140,000.00
KBA 769T 1,260,000.0 1,170,000.00 1,260,000.00 valuations reports at the
0 beginning of every year so
KAT 534U 920,000.00 850,000.00 920,000.00 that any extremes are
KBN 286F 3,010,000.0 2,740,000.00 2,740,000.00 noted.
0
KBH 086C 2,330,000.00 2,110,000.00 2,110,000.00
KBH 379C 2,350,000.00 2,130,000.00 2,130,000.00
Responsibil Head
KBK 760D 2,380,000.00 2,140,000.00 2,140,000.00 ity: Inventory
KBK 755D 2,700,000.00 2,400,000.00 2,400,000.00 Manageme
nt &
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

KBN 048V 3,210,000.0 2,990,000.00 2,990,000.00 Transport

0 Target Implemente
KBG 066K 2,470,000.00 2,270,000.00 2,270,000.00
date: d
KBP 639B 3,200,000.00 2,910,000.00 2,910,000.00
KBL 938W 1,870,000.0 1,740,000.00 1,740,000.00
0
KBP 640B 3,210,000.0 2,920,000.00 2,920,000.00
0
KBT 277L 4,260,000.00 4,260,000.00

Risk;
Possible loss of funds due to payment of high insurance
premiums.

HELP DESK

1. Long Outstanding Help desk calls Rating of internal audit

finding: High

The department gets help desk calls from the branches and The head Sourcing Response: Call No
departments for all issues they need addressed through the and Facilities should 440654 was reported
department. Help desk is used in administering services, asimplore on the solved on 21.07.2015 by
a satisfaction tool to ensure all issues are resolved to various unit heads to Benard Oloo and thus
conclusion and user input is given consideration to promotereview and address closed the same day.
efficiency. However, we had instances where some calls all calls lodged on
had taken long to be addressed/ closed as indicated. help with prompt
feedback /actions
 Documentation Centre reported on 17/02/2015, call indicated.
number 440654 of a leaking roof that needed repairs. As
at 28/08/2015, the roof was yet to be repaired. This was
Call No. 479137 was
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Finding and Risk (Implication) Recommendation Agreed management
action

reported again on 23/06/2015, call no. 479137 which are confirmed fixed by Vincent
yet to be closed. Adem on 11.08.2015 and
thus closed on the same
On the second call, the were comments that the day.
previous call was closed before the issue was sorted and
thus a second call on the issue.

 Kariobangi branch reported that their note counting

machine bars 3000 was not sorting notes. This was
through call no. 485469 on 16/07/2015. The technicians
visited the branch on the week starting 24/08/2015 and Call No. 485469 was
carted the machine away to their workshop. No solution confirmed done by Robert
has been provided. Nyangweso on 21.07.2015
and thus closed on the
Risk: same day.
Disgruntled customers as their issues are not dully sorted
and on time.

Business disruptions due to unresolved issues.

Way Forward: Apart from

the weekly Call status
report, we have developed
a bi-weekly status report
and a monthly SLA report
and will keep a track on all
the un-resolved issues.

Internal Audit Department

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Finding and Risk (Implication) Recommendation Agreed management
action

Responsibil Head
ity: Monitoring
Tracking &
Reporting
Target 31/12/15
date: and
thereafter
Monthly

PROCUREMENT MANUAL REVIEW

1. Unclear or undetailed sections of the procurement manual Rating of internal audit

finding: Medium

Our review of the procurement operating manual The management Response: The unit has
established the following sections that were not clear or should ensure that embarked on updating the
lacked pertinent details;- the procurement manual for the ambiguous
manual is reviewed clauses/ sections, with
 The procurement manual on page 14 under section and all sections are guidance from BCM.
5.1 ‘operationalization of the Bank suppliers list’, part clearly elaborated
(h) states that “For those suppliers invited; there and detailed to act
should be a fair distribution among categories – A, B as a reference guide Way Forward: Once the
& C”. However, the categories referenced are not to staff when they exercise is done, the
defined or explained in the manual and thus the perform their roles. manual will be updated
composition of each category is not clear. The and hosted.
process of pre-qualification is not elaborated in the
manual; the manual states that the suppliers shall be Responsibil Head,
pre-qualified by the procurement unit and approved ity: Procuremen
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

t
by head sourcing and facilities management but does
not state how the same will be done; details on how Target 15th
the suppliers will be invited, how the they will be date: December,
ranked and the documents required for pre- 2015
qualification are not indicated. From a review of the
questionnaires for the last comprehensive pre-
qualifications done in February 2014, the main
categories noted are; A - score above 75%, B - score
between 50%-74% and C -score between 25%-
49% and not acceptable-score below 25%. For
the seven suppliers who have been pre-qualified in
the year 2015, no scoring was done at all. This is
attributable to lack of proper guidelines in the
operating manual and the staff in the unit being new
to the role.

 The procurement manual on page 14 section 5.1 on

“Operationalization of the Banks supplier’s list” states
that “where responses are from below half of the
minimum suppliers invited then a telephone follow up
will be done to the non responding suppliers to obtain
their quotations” However, this can lead to collusion
that can disadvantage the responding suppliers.

 Page 6 of the operating manual section 2.3.2

‘responsibility’ states that “the evaluation committee
is charged with the responsibility of evaluating and
recommending the following costs for EMC approval;
Internal Audit Department
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Finding and Risk (Implication) Recommendation Agreed management
action

o Purchase of recurrent items

Note: The committee approve prices only once,
for prices to hold for the next 6 months.
 Re-order to be presented to evaluation committee
directly”.

The procurement manual also states on page 18 part

(d) that “The prices quoted shall remain in force for a
period not exceeding 2 years for recurrent and
capital items. Otherwise an explanation may be
provided on request. However, from the knowledge of
the market new price for an item (Capital or
recurrent) should be obtained after every 3 months.
These periods for which quoted prices can be held
without re-tendering are not clear.

Risk:
 Unclear sections of the manual cannot be relied upon
by staff to perform their duties as required.

 Lack of scoring guidelines exposes the process to

subjectivity which may result in pre-qualifying
suppliers whose level of performance is unacceptable
exposing the bank to poor workmanship as well as
non-performance in future.

OTHERS

Internal Audit Department

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 SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

1.2. Implementation of prior year audit recommendations Rating of internal audit

finding: Medium

The management implemented 72% of the internal audit The management Response:
recommendations from the October, 2014 report. should fully Recommendations noted.
implement Internal
Please see Appendix I of this report for the summary. Audit Way Forward: We shall
recommendations in strive to implement all
Risk: both the current and recommendations moving
Risks still exist in areas where no implementation has been prior-year reports. forward.
done.
Responsibil  Head
ity: Procureme
nt

 Head
Monitoring
Tracking &
Reporting.

 Head
Inventory
Manageme
nt &
Transport

Target Continuousl
date: y

Internal Audit Department

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Sourcing and Facilities Management Audit 2015
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SOURCING AND FACILITIES MANAGEMENT AUDIT 2015
INTERNAL AUDIT REPORT AS AT July 2015
Finding and Risk (Implication) Recommendation Agreed management
action

Internal Audit Department

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 SOURCING AND FACILITIES MANAGEMENT
DEPARTMENT APPENDIX I
TO
INTERNAL AUDIT REPORT AS AT JUNE, 2015

Internal Audit Department

Page I of LXVII
Sourcing and Facilities Management Audit 2015
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
PROCUREMENT

1. Local Purchase order drawn at higher price than quoted price

The management should ensure that LPOs are issued at the lowest quoted
prices which have been dully authorised by the procurement committees.
Negotiation with the suppliers should be done to refund cash paid in excess
of the quoted amount.
2. Purchase order not issued to the lowest bidder
The management should always endeavour to procure from the lowest
bidder and where the bidder is unable to supply, the second lowest should
be approached, negotiated with to lower the price and awarded the LPO.
Proper documentation should be maintained and authorization sought from
the procurement committees.
Re-Order level should be adequately assessed to avoid stock outs.
The business units should be advised to assess their business needs well in
advance to avoid hasty purchase which may be costly.
3. Variation of quotation specifications
The management should endeavour to analyse its needs correctly to ensure
the quotations are tailored to the specific need. Where information on the
required item is unclear, request for information should be obtained first
followed by request for quotations.
Whenever there are need changes, fresh quotations should be obtained
from all the suppliers. The management should ensure that requests for
quotations are done whenever new assets specification is adopted in order
to obtain competitive prices.
4. Opening of quotation by one person
The management should ensure opening of quotations is done by at least
two officers who should countersign the documents as evidence of
confirmation. Further, a record of the total quotations received should be
indicated and signed for by the staff opening quotation and the one given to
analyse for accountability.
5. Failure to indicate crucial details in quotation documents
The management should ensure where the bank has preferred models/
make of items, the same should be disclosed on the RFQs document.
6. Undocumented/ irregular price negotiation.
The management should follow the due process in negotiating the prices.
The negotiation should be done with the lowest supplier if the lowest bid
does not reflect the market price to lock in a lower price and the same
approved by ICTPC. Proper documentation should be maintained for such
negotiations indicating the reason, process and outcome.
Where the management engages in price negotiation after quotations have
been obtained, all bidder should be engaged to ensure fairness and
transparency. Such negotiations should be authorised by ICTPC and
documentation maintained to that effect.
7. Undocumented/ missing price discovery report
The Head, procurement should ensure price discovery is done on all
procurements as guided by the Head, Cost & BCM from at least 3 suppliers
and documentation maintained to that effect.
8. Inadequate controls over opening of quotations
The management should consider having a separate box for the RFQ's to
ensure quotations are opened all at the same time.
The quotations should be date stamped on opening and any alteration
should be countersigned by the bidder.
9. Delay in analysing quotation
The management should ensure quotations are analysed as soon as
possible after opening and submitted for approval.
10. Failure to obtain ICTPC/Evaluation committee approvals
The management should ensure all RFQ analyzed are subjected to
evaluation committee & ICTPC committee approval before issuing an LPO.
11. Receipt and payment for out dated stocks
Management should ensure that only relevant stocks are procured and
where suppliers delay in supply of goods the procurement should be
cancelled if the un-supplied items are no longer needed.

Proper mechanism should be put in place for monitoring stock movement

and outstanding supply and flagging any unsupplied items which has or is
about to be faced out.

Internal Audit Department

Page II of LXVII
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
12. Missing price quotations or EMC approvals
The Head, procurement should ensure all LPO's are supported by approved
suppliers quotations and analysis as well as EMC approvals.

For the May 2014 analysis, the whereabouts of the quotations should be
established and compared with the May 2014 analysis to ensure accuracy
and completeness of the information there in otherwise fresh quotations
and price discovery should be done.
13. Engaging Suppliers to supply items without LPOs
Management should ensure that all departments submit their requests for
supplies for analysis and issuance of LPOs before goods and services are
delivered by the suppliers.
14. Enforcement of contractual terms
The department should review the suppliers who have been engaged by
Shekele Communications Ltd to ascertain the price competitiveness.
15. Failure to ensure quotations are obtained from Marketing agents
The management should ensure that quotations are received from the
marketing agent on all productions done on behalf of the bank to achieve
the most competitive prices.
Where services are single sourced proper authorization should be sought by
the respective user departments.
16. Standardization of Printers in the Bank network
The Procurement unit in liaison with ICT and the business should come up
with categories of printers which can suit different department’s needs.
Since technology is dynamic and keeps on changing, the management
should ensure that printer consumables stored are minimal.
17. Errors in quotation analysis
The management should obtain and review all the quotation used to come
up with May 2014 analysis for the lowest suppliers.
Due diligence should be observed by the analyst, reviewers and approvers
to ensure accurate information is captured in all analysis before approval.
18. Delays by Suppliers to pick LPOs
Suppliers should be informed about awarded supplies and picking of the
prepared LPO. Follow up should be made with suppliers to pick the LPOs on
timely bases.
19. Inconsistent details in LPO
Management should ensure quantities captured on the LPO are correct
before authorizing the same.
20. Missing Quotation numbers/ Failure to capture quotation numbers
The procurement unit should ensure that all RFQs have a unique quotation
number which should also be captured on the analysis form when analysing
the quotations.
21. Differing details on Requests for quotation forms
The management should ensure that all requests for quotations are similar
for all suppliers in order to avoid differences during submission and analysis.
MONITORING, TRACKING AND REPORTING

22. Delay in providing audit records

Disciplinary action should be taken against the staff for obstructing audit
work. Due to the staff action, audit period was prolonged by one week.

In future, the management should intervene to ensure audit requests are

addressed timely.
23. Helpdesk SLA violation
Analysts should ensure SLA timelines are adhered to. Management should
be reviewing helpdesk SLA violation report so as to ensure calls are resolved
on time.
24. Outstanding helpdesk calls
The department should ensure prompt resolution of issues placed on the
help desk. All issues logged into the help desk system should be prioritized
and dealt with in accordance to their priority status.
25. Inconsistency of help desk SLAs
Management should develop standard SLAs for helpdesk calls and liaise
with ICT to ensure that helpdesk calls are assigned the correct and the most
appropriate SLAs.
26. Incomplete payment records
The management should ensure all relevant documents and authorizations
are received before processing of payments.
Internal Audit Department
Page III of LXVII
Sourcing and Facilities Management Audit 2015
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
INVENTORY MANAGEMENT UNIT

27. Failure to advise branches on stationery costs

The management should be communicating price changes with
the branches preferably the cost to include transport overheads to enable
the branches make an optimal decision which minimizes operational
expenses.
The department in liaison with Head, Cost & BCM to come up with a policy
to ensure branches only procure items locally only when it’s cost effective
to do so.
28. Items received at Inventory management unit without an LPO
The management should ensure that LPOs are issued to suppliers prior to
supply of goods to the Inventory management unit. Central’s stores should
not accept goods supplied without a duly authorized LPO.
LPO processing should be fast tracked to ensure incidences of “urgent
supply” do not arise and where they do, management approval should be
sought.
29. Delay in delivery of stocks by suppliers
The management should ensure that suppliers adhere to set lead times for
delivery of stock to avoid stock outage for the bank. Suppliers should clearly
indicate lead time for supply of stock.
30. Inadequacy of the Sun Inventory System in stock management
Management to liaise with the system owners/ ICT to enhance/develop a
new system for efficient stock management.
Management should ensure that there is segregation of duties as the unit
head is the in-putter.
31. Inadequate BCP at Inventory management unit
The management should ensure that there is a clear handover process at
the Inventory management unit to ensure continuity.
Staff at the stores should be adequately trained on use of the system
functionalities.
32. Outdated Stocks materials at Inventory management unit
The unit should liaise with the relevant departments to come up with
alternative use of the raw materials or dispose appropriately.
33. Reorders done at nil/very small balances
The unit should ensure that items are requested for at reorder levels.
34. Poor state of stores at Inventory management unit
Management to ensure the raised concerns are addressed.
Inventory management unit should liaise with Projects and facility
maintenance unity to see how best the water seepage can be handled.
Firefighting equipment should regularly be serviced.
35. Printing of monthly consumption statements
The management should explore how the system can be enhanced to be
generating the statements in soft for circulation.
36. Failure to obtain acknowledgement on stocks supplied
Inventory management unit should emphasize to department and
branches the need to acknowledge receipt of stationery deliveries or come
up with an alternative process to confirm delivery.
37. Excess stocks ordered
The management should asses the stock usage and determine the optimum
re-order level and quantity than minimizes the bank cost.
38. Differences in System and Procurement Prices
Management should liaise with ICT to enhance the functionalities of the
inventory management system. A business case should be submitted to
BCM where enhancements on the system are not possible to provide an
inventory management system.
39. Unreliable average consumption guide
The department should standardize the method used to calculate the
average consumption of items by the business.
40. Missing average consumption on the requisition forms
Average consumption rate should be captured on the requisition form.
41. Delay in updating/ Erroneous reconciliation of Bin cards
The Inventory management unit should be more vigilant in ensuring end of
day balances tally with the physical tally. The management should ensure
sign off on bin cards is done immediately on bin cards.
The management should review the stock card, system and goods received
note to ensure all stocks which have been received have been updated
correctly and are in agreement with the physical count.
Internal Audit Department
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
42. Incomplete suppliers register
The receiving officers at Inventory management unit should ensure that all
relevant details for supplies are recorded in the suppliers register. A review
should be done on the register by the head Inventory management unit to
check for completeness.
43. Incomplete gate pass documentation
Management to ensure that the gate passes are completed with all the
details.
INVENTORY MANAGEMENT UNIT-CO-OP TRUST

44. Handover of central store at co-op trust

Management should undertake a stock take to confirm all the assets held
and make an official hand over documentation to the holder and any other
handover be documented henceforth until all the assets held there in are
moved to the main stores.
45. Inadequate controls over assets held in Inventory management unit
at Co-op trust
Management should undertake a stock take to reconcile all the stocks held
against the stock cards and any variance there off investigated and
documented there off.
46. Faulty UPS
The management should liaise with the service provider to replace the
faulty UPS.
47. Inadequate controls over assets held in Inventory management unit
at Co-op trust
The management should preserve assets bought by ensuring parts are not
removed. Where any part is required, the same should be bought as so
instead of removing from other assets.
TRANSPORT SERVICES

48. Taxi hire overcharged

The procurement officer processing the taxi vouchers should be computing
the distance covered before sanctioning payment.

Credit note should be followed up and credited back.

49. Incorrect vehicle mileage on motor vehicle fuel cards
Management should ensure that all bank fuel cards are as per the current
vehicle mileage. Where there are inconsistencies the card should be
immediately corrected by resetting the respective fuel card to correct
mileage
50. Controls over car hire process
The transport officer should endeavour to obtain vehicles from the cheapest
provider and any reason to act otherwise be documented.
51. Inappropriately authorized taxi
Taxi vouchers that are not authorized as per the guidelines should be
surcharged to staff using the taxi services.
The management should liaise with all the departments and branches to
provide names of three (3) officers in each Department / Branch authorized
to Sign Taxi vouchers on behalf of the Department / Branch.

Management should ensure that taxi vouchers are authorized appropriately

by respective departmental heads. Self-authorizing should be surcharged on
the respective staff.
Alterations and additional routes should be counter signed by the
authorizing officer.
52. Taxi cost management
The department should review the guidelines on waiting charges and come
up with a maximum waiting time for distances beyond 10 KMs for return
journeys, which should not be exceeded to benefit from low cost of charges
as compared to drop and pick arrangement and the same be advised to the
staff across network.
53.
Failure to obtain a list of Manag
department taxi authorizers. ement
should
ensur
e that
a list
of
Internal Audit Department
Page V of LXVII
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
names
of
author
ized
signat
ories
of taxi
vouch
ers is
obtain
ed to
facilita
te
review
of
author
ization
s for
taxi
use
before
paym
ent.
The
workfl
ow is
curren
tly
autom
ated
as
imple
menta
tion.
54. Improper use of taxi services
The department should ensure that taxi services are used as per taxi usage
guidance and where users deviate from policy then taxi charges should be
surcharged from their accounts.
55. Undetermined chauffer driven car hire rates
The management should consider for negotiating for chauffer driven
services when drawing new contracts with the car hire service providers.
Predetermined rates (chauffer driven/driver allowance rates) should be
included in the car hire contracts when the contracts are being renewed.
The transport policy should be updated to include guidance on chauffer
driven vehicles.
56. Missing car hire check sheet
The transport officer should ensure a copy of the check sheet is obtained
and attached to the invoice copies held at the department for record and
future reference.
57. Care hire not duly authorized
The officer in charge of transport officer should ensure are car hire orders
are properly authorised before processing.
58. Inconsistent and incomplete Motor vehicle movement books
The in- charge transport and insurance should ensure that review of details
in the movement log book is as per vehicle status at end of day to avoid
such inconsistencies.
Drivers should ensure all fields of the logbook should be adequately
completed at all times.
59. Incomplete taxis vouchers
The department should sensitize departments/branches on importance of
having the taxi vouchers filled with all the details as required.
SPACE & CONTRACTS

60. State of firefighting equipment across the bank's network

The management should make arrangement to have all the firefighting
equipment serviced across the bank network pending the finalization of new
service contracts.
61. Leased printers
Internal Audit Department
Page VI of LXVII
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Appendix 1: Sourcing and Facilities Management 2014 Audit Recommendations Implementations
Report 72% Implemented

Recommendations made to Department Management in the Recommenda Recommenda

month of October 2014 report tion tion
implemented un-
implemented
Management should ensure that the Bank gets value for money spent in
leasing out the copiers by having fast and efficient copiers which do not
interrupt business by frequent breakdowns.
Management should consider the raised concerns as they finalize changing
companies that the bank leases copiers’ from.

Total = 61
Fully implemented - 41
Partially Implemented - 6
Not Implemented - 14

Internal Audit Department

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