In accordance with the West Wimmera Shire Council resolution of 16 August 2017, an audit of the Kaniva Community Hub project was conducted by Crowe-Horwath Auditors in November 2017. Following the distribution and discussions of the draft document, it was resolved at the 21 February 2018 Ordinary Meeting of Council to formally adopt the audit document and release it publicly.
The objective for conducting the audit was to identify any weaknesses in the overall West Wimmera Shire Council tender and procurement processes associated with the project, and to follow any recommendations that may mitigate risks to any future major project over-runs.
The overarching objectives of the review were to answer the following questions:
- Did the project deliver what was envisaged?
- Was Council adequately informed of the risks involved prior to committing to the project?
- Was Council advised of changes to the project (or risk) in a timely matter?
- Did Council comply with its legal (procurement) requirements?
- Did any Council employees or the project management committee exceed its delegated authority?
- Have appropriate learnings being identified and acted upon?
The project did deliver what was envisaged - a great community building - and the Community Hub is in line with the original specifications which were used as the basis for the procurement (tender) process. The financial cost to the West Wimmera Shire Council was significantly more than that which was approved through Council resolution in awarding a contract for the construction, but not the fit-out of the Hub.
No formal project risk assessment was prepared prior to the project commencement. The report prepared for Council to approve the awarding of the construction contract did not indicate that it was the expectation of management that the full contract would be delivered without further reference to Council. Nor did the report indicate that Council would provide any additional funding.
In summary, significant risks associated with this project were not formally communicated to Council. Further, given the lack of a formal risk assessment prior to the commencement of the project it is not possible to determine if these risks had been identified by management. Reporting to Council was minimal. A quarterly capital works report was prepared during the project, however this did not specifically mention the Kaniva Community Hub project.
The total variations to the project were approximately $350,000, which are all related to the fit-out of the Hub.
Since completion of the project and after negotiations with the Kaniva Leeor United Football Club (KLUFC), Council has agreed to write off/waive a significant portion ($151,000) of the funds initially recognised as owing from the project. The basis for the write off/waiver was that a range of costs incurred during the project related to permit/regulation requirements that were not within the control of the Kaniva Community Hub Group and identified as unreasonably imposed. These costs were not identified or documented at the beginning of the project, nor were they included in any project scoping.
The outstanding $200,000 owing from the Kaniva Community Hub Group will be repaid to the West Wimmera Shire Council via a loan agreement with the KLUFC over an agreed timeframe.
Overall, significant weaknesses were found in the West Wimmera Shire Council's procurement and delegation processes associated with the Hub Project. A review of documentation indicated a disconnect between management's intentions and the information provided to Council through both the budget and contract awarding process.
The auditor made the following recommendations (amongst other recommendations that are available in the publicly released document) for management/Council consideration:
1. Management should continue to develop and implement processes to report to Council. This should include the use of appropriate, documented feedback mechanisms to measure the effectiveness of the improved processes.
2. A review of the current processes involved in the preparation of documentation and approval of proposed tender specifications be undertaken. The objective of this is to ensure that appropriate, senior level, oversight is provided for proposed specifications prior to the release of tenders.
3. Once the new processes have been implemented and operating for a reasonable period, a future internal audit program should include a specific review on the effectiveness of internal reporting processes.
Since the Completion of the Audit review, improved processes involving procurement, risk assessment and project management have been implemented to reduce the likelihood of similar failings in future activities.
West Wimmera Shire Council
Tuesday 13 March 2018