Baker Tilly Report - CIE

8/14/2019 Baker Tilly Report - CIE

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SECTION 1

lARNROD ElREANN

Procurement & InternalControls investigation

Strictly Private &ConfidentialPrepared by:

B A K E R T I L L YR Y A N G L E N N O NI INTERIM| R E P O R T! 31 Jan uaryI 2008


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IARNROI) EIRI-A W - PROCTKKMI-N I ^ 1 NTKRNAL, COM ROL I \ VI-STIGATION 3 P ' JA M \R \ 21)08Interim Report to the Steering Croup CommitteePRIVATE & CONFIDENTIAL

T A B L E O F C O N T E N T SC O N F I D E N T I A L I T Y

1. 1.NT'RODL CTION AND BA C'K CR OI NO 3System s Review 3Forensic Exam ination 3Curr ent Status 5

2 . E X E C U T I V E S U M M A R Y 7IMS N Procurem ent System Review Findings 11IMSN Procurement W alkthrough Findings 16Ma nagement of Stock Findings 22

3 . T E R M S O F R E F E R E N C E & S C O P E O F T H E A S S I G N M E N T 2 7

4 . P R O G R A M M E O F W O R K 2 9

5 . D E T A I L E D F I N D IN G S A N D R E C O M M E N D A T I O N S 3 1

6 . C O N C L U S I O N 3 2

A P P E N D I C E S :AP P ENDI X 1 T E R M S OF REF ERENCEAPPEN DIX 2 PERSONNEL IN T E R V I E W E DAP P ENDI X 3 INFORMATION REQUESTED & RECEIVEDAP P ENDI X 4 P R O C U R E M E N T SYSTEM R E V I E W

- P ROGRAMME OF WORK- FINDINGS & RECOMMENDATIONS- SAMPLE QUESTIONNAIRE & RESULTS

! - P ROGRAMME OF WORK- FINDINGS & RECOMMENDATIONS

L a p p e n d i x 6 T MANAGEMENT O F S T O C K REVIEW: - PROGRAMME O F W O R K! - FINDINGS & RECOMMENDA TIONS

AP P ENDI X 7- SAMPLE QUESTIONN AIRE & RESULTS __ _ __PROCUREMENT & MATERIALS DEPARTMENT B I S I N E S S PLAN 2 0 0 6 - 2 0 0 9

! APPENDIX 8 ! P R O C L R E \ IE NT \ IO D K L G R A P HI AP P ENDI X 9 _ j COMPA RISON OF PRQCL REM EM MO DELS __ __! A P P E N D I X 10 | BEST PRACTICE PRQCL REME NT MO DEL .VPPRO VC H

APPENDIX I 1APPENDIX 12

S T O C K VALUATION REPORTS A M P L E STOCK TRANSFER FORM IN USE

- \V A T E R F O R D T O PORTLAOISE

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J A R \ R 6 0 I-] IR E A \ N - P R () ( I: R V ^ 1H N ! & IN T E R \ A I . C O M R O L 1 N V E S T I O V T K) \ 3 C ' J A \ ( \ i n 2 0 0 8Interim Report to (lie Steering Group Co nun it teeP R I V A T E & C O M ' I D E N T I \ L _ _

C O N F f D E N I I A L I T V

The contents of this Interim Report are based on the docum ents and information andexplanations made available and provided to us. We have not, except where specificallyindicated in this Interim R eport, indepe nden tly verified the information provided orrepresentations made to us.

This Interim Report is confidential and is for the benefit of the Jarnrod Eirea nn SteeringGrou p Co mm ittee set-up for the purposes of this assignment in accordance w ith the Terms o fReference provided. This report should be treated as highly commercially sensitive and thecopies issued to the Steering Group have been numbered. No responsibility or liability isextended or shall be extende d to any third party for the whole or any part of its con tents.Should you wish to disclose it to a third party we would request that our permission is soughtin advance.

The schedule of information requested by Bak er Til ly Ryan Glennon provided to IarnrodEireann is set out in Appendix 3 which also shows detai ls of information actually m adeavailable for review by the Comp any. Atten tion is draw n to items which were not receivedor do not exist.

Following considerat ion and any comm ents received from the Steering Group it is intendedto then issue the finalised Interim Report.

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I A R N ROD E l U i - \ V \ - PROCUREMENT & I N T E R N A L C O N T R O L | N \ f . s T K , \ H O NInterim Report to the Steering Group CommitteePRM 'A IT. & CONF IDE NTIAL

3 I"' J AM' \ in 2008

1 . INTRODUCTION AND BACKGROUND

larnrod Eireann (IE) which runs the railw ay system in Ireland, is a subs idiary of Coraslom pair Eireann (CIE) a semi-state com pan y. IE is responsible for m aintain ing RailPass eng er and Freight Services in the R epub lic o f Ireland as well as Port and on train cateringoperat ions.

Bak er Tilly Ryan Glen non have been eng age d to carry out a full review of the Procurem entDep artment within Infrastructure M ainten ance , Signal Electrical & Telecom mu nications(SE&T) and New Works (IMSN) and Internal Control Systems within the InfrastructureM aintenan ce, Signal Electr ical & Telec om mu nication s (SE& T) and New W orks divisions,together with a review of the ma nag em ent of s tock inventory in Port laoise Depot and l ine-side, throughout the rail network.

The ba ckg roun d and events leading to the require me nt for this review arose from an internalinve stigatio n into activities associated with the removal and unauthorised dispos al of trackmaterials and 'suspect ' t ransactions with suppliers of materials and services.

The Assignment is split into two broad categories:

Systems Review> Review of the IMSN Procurem ent System from Policy formulation at the highest

level through to transaction compliance testing at the lowest level a - "root andbranch review".

^ Rev iew of the Stock M anagem ent system for controll ing and recording slockmo vem ent s in to am! out of Por tlaoise Depot and line-side materials throu gho ut theOrganisat ion.

Forensic Examination

r Exam ination of conduct in the acquisi t ion, deployment and managem ent of services,resou rces and plant equipme nt pro cured during the pen od from Jan uary 2 004 to date.

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I,\RSHOD IO RE ANN - !>f-FO( t RE ME NT A I v rE R \ \ i. C O N T R O L f \ \ ESTIMATION 3 E' J A M \R\ 2008Interim Report to (he Steering Group CommitteePRIV ATE & C ON EIDE VITAL

> Exam ination of the relationships with contractors of goods an d services to theCom pany du ring the period from January 2004 to date.Assessm ent of the extent of actual loss or misapp ropriation from January 2004 todate.Identification of respon sibility for any breach in procurem ent policy specifically toidentify any neglect to duty or lack of com petence in the acquisition of goods andservices and to report on areas where loss or misappropriation has occurred and theassociated value from January 2004 to date and com me nt on w here p otential futurerisk arises.

This Interim Report has p rimarily focused on the first of these areas, the Systems Review.Interim findings and recom me nda tions are included in this Interim Re port for considerationand discussion. It is to be noted that throughout the period of our review, management havebeen im plemen ting changes in proced ures following receipt of Reports from the GroupInternal Audit Unit and we understand this work is ongoing.

It is also to be noted that the Company is engaged on an extensive Capital and InfrastructuralDevelopment Programme in l ine with the stated Government ini t iat ives outl ined in Transport21. This involves very substantial ca pital investme nt over the life of the pro gram me from1999 to 2013.

To place the IMSN procure me nt review in context, the first capital exp end iture program me(1999-2003) resulted in expenditure of 661 million, the bulk of which was on infrastructuralsafety investment. The second prog ram me (2004-2008} has a budget of 512 mil lion andplaces more em phasis on the safety man agem ent systems of larnrod E ireann. By the end of200 8. over 1.1 billion will have been exp end ed on railway safety resulting in a much saferrailwa y netwo rk for both passeng ers and staff. The program me is of 15 year duration (1999-2013 ). in 3 five-year tranches. The seco nd progra mm e co mm ence d in 2004 and will run untilend 2008 . The third program me will run from 2009 to 2013.

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I \ us ROD EIRE \ \N - PIH XTR I; \n;vr & INTERNAL CONTROL INVESTIGATION 3 P 1 J \ N r \ R \ 2008Interim Report to the Steering Group CommitteePRIVATE FTCONFIDENTIAL

To place our Procurement Review in context of annua] spend by the com pan y for the areasunder review, the Infrastructure M ainten anc e Budget alone for 2007 has an annual spend ofin excess of 75 million including direct labour.

The purchase order value expenditure raised for infrastructure Ma intenance, S E& T and NewW orks co llectively, with external vendors, for the years 2005, 2006 and 2007 have totalled1 76 million, 235 million and 252 million respectively.

To place our Review of manage ment of s tock in Port laoise D epot and of l ine-side materialsinto contex t. Append ix 9 lists the value of stock at each location as at Nov em ber 2007. Itsho ws that the value of stock in Portlaoise depot was circa 11.2 m illion and stock at bothKildare and Connolly was valued at circa 2.1 million and 1.3 million respectively.Current Status

Systems Review

Our f indings of the IMSN Procurem ent system to date are sum ma rised in the ExecutiveSummary and are included in more detail in Appendices 4 and 5.

Fieldwo rk on the Man agem ent of Stock system is completed in the Port laoise Depot andwithin the Divisions and l ine-side. Our f indings are summ arised in the Execu tive Summ aryand are included in more detail in A p p e n d i x 6.

The Systems Review was completed in January 2008.Forensic Exam in at ion

W ith regard to the Forensic element of the assignm ent, to date concentration has been placedon estab lishin g the extent to which the source records of the comp any and in particular thema nag em ent information system (S AP ) can facilitate the interrogation and gathering ofrelevant data to enable fulfilment of Term s of Reference 2 and 4.

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lARNROD ElREAVN - PROO Ri:\!i:\T& l\ I I R\ \l ( ()\ IRO! ! \\ (;sM(, \I ION 3 1 s 'J \M \R\ 2008Interim Report (o the Steering Group CommitteePRI v \ ri: & COM'II)I:N riAi.It is clear at this stage that scope limitations will arise due to inter alia, the restricted businessconfiguration of the SAP system which has limited data interrogation capab ilities required foran entity of the size of IE. This w ill impact on the Terms of Reference and is current!) ' underconsideration. In order to fully establish what information is capab le of being extracted forreview, further meetings with IT staff, are scheduled. Prior to this elemen t of the assignm entproceeding in January 2008. the scope and approach has been discussed and agreed with theSteering G roup. A program me for the forensic examination has been completed underseparate cover following this mee ting.

Based on our findings to date it is considered that the level of work required to fully addressthe Terms of Reference as drafted (48 locations and periods from 2004 to date) could involvea considerable degree of additional time and resou rces. It has been agreed with the SteeringGro up that we proceed with this exa min ation focusing on specific lo cation s/hub s w ith highrisk potential. Th is will focus the sc ope of the fieldwork to the loca tions identified asrequiring specific exam ination and to use the findings in those locations to assist furtherdetailed investigation.

A Report detai l ing our f indings and rec om men dations on the Forensic terms of reference isexpected to be issued by the end of March 2008 w ith updates being provided on an on-go ingbasis.

We would like to express our appreciation to the management and staff of IE for the tim e andco-op eration afforded to us during the course' of our review1 to date. In general we arereceiving the cooperat ion and assistance of Com pany personnel . Any exce ptions to this willbe discussed with the Steering Group. We are endeavouring to work within the constraints ofs ta ff ava il ab i li ty and acknowledge in par ti cu l ar the a s si st ance o f 4 B H M H H I I I f t 1 1 1faci li tat ing the considerable volume of meetings and information docum entat ion requestsnecess ary to fulfil our terms of reference to date.

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I-VRNROD i; } H [ . \ \N - PlUK I R L M C M & } N TK K N W. COM I) l . | N \ l> I l


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I A R N R O I ) I-;IKK \ \ \ - PRO( ( Ri- Ml \T & INTERNAL C O M ROI. | \ \ KSTK.A n o \ 3 F J \ M: wo 2008Interim Report to the Steering Group CommitteePRIVATE & CONEI DEN ) I M

based Procurem ent Strategy. This is resulting in focus being lost on the key procurem entactivities necessary in an organisation of this spend and transaction volume.

Our findings indicate that a greater appreciation of Procurement Strategy and SystemDesign through to imp lemen tation of Procure men t Policy is required in the areas underreview. The implem entation of Procurem ent Strategy should then be driven by seniorma nage me nt throu ghou t the organisation, from the top down to the lowest level, as part ofa co-ordinated roll-out plan and approved by the Board.

A feature of a Best Pract ice Procurement Model would be signif icantly more focus onsupplier engagem ent and control outside of the tendering process, than currently exists .

A compa rison of the current procurement model in place under our review to a 'Bestprac tice' C entre-led P rocurem ent has been outlined in brief in Appendix 9. Some of thebenefits o btained with such a 'Best Practice M od el' are also outlined in Appendix 10 andcould be used to prov ide d irection for future areas of focus,

2. There is requirem ent for induction and formal training of procedures for those occupyingnew and existing positions in all areas under review. This is evident in particular wherethere is incidence of recent staff turnover in key positions of the IMSN procurement cycle(i.e. clerical officers), with new incum bents uncertain as to the nature and e xtent of theirduties. Linked to this is a query over the ad equa cy of skill sets and/or training affordedand the absence of detai led job specif icat ions set ting out the param eters of the role.Based on feedback received from various w orksh ops and question naires, it is clear thatthere is a significant requirem ent for edu cation and training both at a business andsystem s level. Th ere is also a need for ups killmg of staff at different stages w ithin theprocu rem ent chain, in order to strengthen the procurem ent chain.

In both the review of the IMSN procure men t and stock systems, it is seen as imp ortantthat coupled with induction and training procedures would be a rigorous independence,com pliance and assurance-checking regime, where instances of non compliance anddiscrep ancie s are seen to be pursued to the fullest, irrespective of the n ature of the breach

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IARNRO D M INI - A\ \ ~ PROC I RIWIRVR & INTERNAL CO NTRO L INVLS TK ; VH ONInterim Report to the Steering Group CommitteePR] \ ATE & COM -TDF.NTIAL

31 M JAM AR\ 200 8

5. The potential risk and cost to the Co mp any of the absence and/or system atic noncompliance with appropriate Procurement and Stock management procedures can take anumb er of forms. These include : Loss of value-added oppo rtunities and eco nom ies to be gamed in the market place

from co ordination of very substantial pu rchas ing pow er within the D ivision sthroughout the company.

The actual cost of known (and unknow n but suspected) breaches of procurem entculm inatin g in procurem ent fraud on the Com pan y by internal personnel either actingalone or in collusion with external suppliers.

Potential exp osure to claims of discrim ination and possible litigation fromunsuccessful suppliers of services to the Comp any, who becom e aware of subsequentnon compliance with tender conditions by competitors, suppliers arising either by lackof internal procurement control procedu res or act ive unauthorised collusion with asuccessful supplier by com pany emp loyees.

The potential impac t and possible cost by wa y of claw back of Grant Aid arising fromgrant condition breaches by external agencies to include Grant Agencies and othersuppliers of external funding to the Co mp any .

Rep utation risk.

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I ARNROD PIRLANN - PROO RLMI;vr & IN I KRN M. CONTROL IN \ L STK; VHON J \NI vm 2008Interim Report to the Steering Croup CommitteePRI\ A I T: A C" QNI'LPLNTIAI,

I M S N P R O C L R K . M E M S Y S T E M R EVI EW F I N D I N G S

The m anner in which the current IMSN procu rem ent process ope rates is more akin to asystem that records and processes purchase transactions rather than applying a business-basedprocu rem ent strategy. IMSN procurem ent has becom e engross ed in administration around thetendering process such that other key procurement activities are not being addressed. Theadm inistration work is cau sing time constraints for key person nel resulting in focus being loston the key procu rem ent activities necessary in an organisa tion of this spend and transactionvolume.

It is appa rent, for the area s un der review , that the current I.T. syste m is not being u tilised toperform an audit of the procurement process. The SAP system is being under-utilised.

Procurement, within the areas reviewed, is regarded as a necessary but subsidiary activitywithin the compan y. We recom men d the em pow erme nt of the procurem ent process throughsenior executive m anag em ent representat ion, the design and establishment of a s ingleCorporate Procurement Structure with additional skill resources and training where requiredto resource this structure.

These com ments su mm arise the specif ic f indings l is ted below.

Review of the exist ing procur em ent organ isational structu res in operation(See Appendix 4, Page 5)

Finding: There is no one corporate procurement organisational structure which exists anddelivers a standard pro cess of procureme nt throu ghout the organ isation, ou tlining the rolesand responsibilities of each individual along the procu rem ent chain.

Reconimendat ion: See App endix 4; Recom mendations 1 & 2> Create one Corporate Procurement Organisation Structure:'r App oint a Head of Procu rem ent to this structure: and

Clearly establish procurement authority and responsibility.

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I \ R N R O D I. 'J R E A N N - PROCUREMENT & I N T E R N A L C O N T R O L | N \ Ls lie, VIIO N 3P ' J \ N L \R ^ 200


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IARN ROD KIREANA - P RO CT RE M E NT & INT E RN \ E CON T RO L INN E S n o M ION 31 M J \N I 2008Interim Report to the Steering Cro up Com mitteePRIVATE We recomm end the review of current activities of the i.MSN procurem ent departm ent,

identifying the activities currently being com pleted on a daily basis. A com pariso n shouldthen be earned out on what activities would prove more effective and imp lemen t a bestpract ice model , taking account of the recomm endations.

Procu rem ent Spend Classif ication w ithin SE& T, New Works and InfrastructureM a i n t e n a n c e (See Appendix 4, Page 8)

F i n d i n g : The IMSN Procurement Department in Inchicore is not conducting any high levelanalytical reviews of spend, commodity, material group, vendor, pricing and market analysis .

R e c o m m e n d a t i o n : See Appendix 4; Recommendation 7> Th e deve lopm ent of excep tion reports which would assist in the analytical review of

procurem ent expenditure and help identify areas of non-com pliance which need furtherinvest igat ion, again taking into account the recommendations,

Procurement Knowledge Development wi th in SE&T, New Works and InfrastructureM a i n t e n a n c e (See Appendix 4, Page 1 1)

Finding: Procurement skill sets and knowledge within the business organisation has beenhighlighted as a concern both from the procurement workshops and walkthroughs conducted.

R e c o m m e n d a t i o n : See Appendix 4: Recommendation 10> We recomm end that within a new Procurement Developm ent programm e, training should

include procurement policy, procedures, best practice, and compliance requirements.

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IA R N R O D P. IRLANN - PROC T K IAII; ST & IN TURN AI. C O N T R O L IN \ L ST K; VNON .1 r ! J \M \in 2008Interim Report to the Steering Group CommitteeP R I V A T E & C O M I D K N T I M .

Procurement Department ski l l -sets within SE&T, New Works and InfrastructureMaintenance (See Appendix 4. Page 1 2)

Finding: Existing skill-sets within IMSN procurement limit the ability to create a bestpractice p rocurem ent model and a lso limit the ability to proac lively identify areas of riskwithin the current process. Re sourc ing of appropriate skill sets to implem ent the aboverecommendations requires to be reviewed by senior management.

R e c o m m e n d a t i o n : General> We recomm end that the ineff iciencies within the exist ing IMSN Procu rement Mode! be

addressed through the recommendations.

Procurem ent Ef ficiency Mea suremen ts (KPIs) wi th in SE& T, New Works andInfrastructure Maintenance (See Appendix 4, Page 13)

Finding: There are no key perform ance indicators (KP Is) that exist to indicate theperformance of the key procurement act ivi ties , such as cri t ical exception reports. KPIs arekey m anagem ent tools established to monitor large volumes of data through report ingindicators used to identify key areas of performance within the organisat io n's procurem entprocess.

R e c o m m e n d a t i o n : See Appendix 4; Recommendation 14> W e recomm end the identification of relevant KPIs for the organ isation (to be outlined

within an Operational Strategy D ocum ent). Subse quen tly, d aily 'weekly/monthly reportsto identify and analyse these key areas of procurement performance should be preparedand rev iewed.

SA P IT review within SE &T . New Works and Infrastructure M ainten ance(See Appendix 4. Page 13)

Finding: SAP system skill sets within IMSN procurement are below what would be expectedfor an organisation involved in such high levels of spend value and volume.

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I A R S R O I ) KIRK ANA - P R O C U R E M E N T & IN T E R N A L CONT ROL . IN V E S T K ; \ T I O N 3 1 J m \ RN 2008Interim Report to the Steering Croup CommitteePRIN ATE & CONI-'IDLNT1M,

Recommendat ion: See Ap pend ix 4: Recom men dations 15 & 16^ We recommend the creation of a Procurement and Developm ent programme whichinvolves ail functional and professional staff involved in the proc urem ent process. This

training should include SAP M odu les such as - Materials Mo del. Financial Model andProjects Model.

Fin ding: SAP is under-utilised within the enterprise and extended supply chain. This has ledto inefficiencies and an inability to cond uct analytical reviews of spen d. Te chnologicalintegration with high volum e third party vendors i.e. the use of electronic SAP PurchaseOrders (P Os) and automatical ly em ail ing or faxing of POs are just some of the automationwhich exists in the current market but are not in use.

R e c o m m e n d a t i o n : See Appendix 4; Recomm endations 15 & 16> W e recom men d the review of the current SAP utilization within the business environment

and i ts extended supp ly chain. W e also recom mend that staff be educa ted regarding thepoten tial of SA P and how it can be utilized within the specific b usin ess environm ent ofprocurement .

The rec om men dations above and further d etai ls in relation to the IM SN Procurement SystemReview are included in Appendix 4 to address the above issues.

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IARNROD KIRI: \N \ - PRC X i RI- M[::N T & INTERNAL CON TR OL JN \ I S I K;A I ION 3 P ' J A M \r\ 2008Interim Report to the Steering Group CommitteeP RI\ MI- & C O NI ID I:M IAI. _ _ _

I M S N P RO C U RE M E N T W A L K I H R O I e n F I N D I N G S

Positive Areas Identified< We understand that a group has been established to draft a Procuremen t Operational

Docum ent for Infrastructure Ma intenance and SE &T . It is not clear as to whether thiswill also app ly to New Wo rks. We advise that acco unt is taken of ourrecommendations under the IMSN Procurement System Review findings.

> A new proced ure w as introduced in Septem ber 2007 in relation to the Al and A2releases, relating to both Infrastructure Ma intenance a nd S E& T. This should helpstrengthen the approv al process for work carried out in these areas, following a morecomprehensive review of the procurement process.

> A labour data bas e was develo ped in June 2007, con taini ng the appro ved labour rates.Prior to this, we un derstan d that there was no pre-a ppro ved rates for labour work. Weunderstand that this databas e is relevant to both Infrastructure Ma intenance an dSE& T. Ag ain, this is helpful, but should be review ed in the context- of our broad errecommendat ions .

Exceptions Noted

Inadequate Docum ented Proced ures(See Appendix 5. Page 4)

Finding: Detailed operational procedures in relation to processing infrastructureMaintenance. SE&T and New Works Construction Unit projects are currently not adequatelydocumented .

Finding: Detailed operational proc edu res in relation to proc essing of mini-tendering are notadequately documented.

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1A UN ROD L;,IR|- \ N N - P R O C U R E M E N T & I N T E R N A ! . C O N T R O L | N \ E S TI G VI T ON 3 P ' J \ M 2 0 0 8Interim Report to the Steering Croup CommitteeP R O V IE & C O N I - I D L N T I A L

Recommendat ion: See Appendix 5: Rec om me nda tions 1. 2. 3 & 4> We recom me nd that a formal op erational m anual should be developed setting out the

procedures required to be followed for the procurement of Infrastructure Maintena nce.SET and New Works Construction Unit projects.

> Once these proc edu res have been finalised, they should be circulated to the relevant staffmembers, reviewed on a regular basis and updated as and when required. These shouldalso include the mini tendering procedures.

Staf f Train ing Requiremen t

Finding: Our m eeting s indicated that formal training did not take place for all staff memberson appointment to their role in the procurement area.

R e c o m m e n d a t i o n : General> W e recomm end that all new staff should be provided w ith adequate training, w hich

should also include the required training on SAP.

Non-gener ic s tandardised documentat ion

Finding: In general, we observed that documentation was submitted by suppliers in a non-generic format which m ade compliance difficult for the Company. Within other largeorga nisatio ns it is accepted p ractice for the organ isation to com mu nicate stand ard proced uresand documents to mam/high volume approved suppliers . Documentat ion not supplied in thatform should be rejected at the outset by the co mp any .

Detailed findings as a result of transa ction testing

Finding:> Proced ures had not been followed and exce ption s were noted for the majo rity oftransactions selected for w alkthrough for Infrastructure Maintenance. SE& T and New

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I.\RM')|; PlRi-ANA - PRO( i RIAII.A I iMf-RYU. COMROi. IWCS | | Requ ests are not formally d ocu me nted .

> It was difficult to determ ine wh o had requested the work as these details were not alwaysincluded on the request form.

There w as no evidence that the recomm ended number of quo tat ions, as set out in thePolicy and Procure me nt Ma nual, had been obtained or that a value for money exercisehad occurred prior to the Contractor being selected.

A con tractor was selected by an Inspector without prior invo lvem ent of the supervisor(i.e. AD E). F rom a review of a note on file the Inspector had requ ested the plant directlyfrom the contractor ,

The required forms (i.e. the 'Requ est for Plant and M achin ery H ire 1 form etc) were notalways completely and/or accurately completed and/or completed on a t imely basis .

Problem s were enco untered in relation to the calculation of the value of plant requested asa resu 11 of i ncomp 1 ete requests being submit!ed to the Divisional Offices.

Analysis was not provided to support the valuation of the work.

Rates included on the Divisions database were not accurate up to date.

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IARNR OD KIRENNN - PR I here was a lack of docum entary evid ence of review and approval at the a ppro priate

levels.

> Service Entry details were based on pro-forma invoices received after the work had beencompleted rather than being based on an original request, prior to the work commencing.

The qua lity of suppo rting timesheets and /work docke ts and the level of informationincluded on these docu me nts varied betw een C ontracto rs from com prehen sive detail tolittle or no detail.

> Differences arose betwe en the original request supp lied by the Inspector and the invoiceand timesh eets/w ork dockets received from the Contrac tor in relation to the value, type ofplant and labo ur requirem ents. There w as no note/ex plana tion on file to suppo rt thedifferences.

> Co ntra cto rs' timesh eets/w ork dock ets had not alw ays been signed by an IE representative.

> Con tractors ' invoices had been submitted to the Divisions, which were not accompan iedby any support ing t imesheets and/work dockets .

> Instances were noted where mini- tendering procedures had not been complied with.

> There was inadequate segregation of duties.

Detailed r ecom me nd ation s as a result of transaction test ing

In relation to our detailed findings, the following reco mm end ation s should be consid ered forimplementa t ion:

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lAKNROI) I'jRI- ANN ~ P R O O L R E M E N T & INTERNAL. C O N T R O L INA E S T K . A I TON 3 P ' J \ M : . \ K \ 2 0 0 8Interim Report to (lie Steering Croup CommitteePRIVATE & CONFIDENT) U.Re c o m m e n d a t io n : See Appe ndix 5: Rec om me nda t ions 106 & 108> A review sho uld be carried out on the vario us forms curre ntly in operation at the

Divisions to consider the layout and content. This will help ensure that the agreed formsare adequate, easy to use complete and provide only and all the relevant information.

Re c o m m e n d a t io n : See App endix 5: Rec omm endat ion 107r The required forms shou ld be completed b y the relevant individuals on a t imely basis and

should contain sufficient detail about the request for w ork. The formal Operat ionalManual ( to be drafted) should clearly set out the required level of informat ion required tobe included on the request forms.

R e c o m m e n d a t i o n : See Appen dix 5 ; Recom mend at ion 109> The review and approv al of ail s teps of Infrast ructure M ainten anc e and SE& T and in the

New Works Const ruct ion Uni t ' s procurement process should take place at the appropriatelevel and should be adequ ately d ocum ented on file . Th e levels should be clearly set out inthe Operat ional M anu al .

Re c o m m e n d a t io n : See Appendix 5; Recommendat ions 14, 26, 35, 46, 65, 74> Standard t imesh eet /del ive ry dockets should be dev elope d and issued to al l contractors.

Certain key informat ion should be required to be included on all del iverydoc kets/ thn esh eets/ inv oices submit ted by contractors to ensur e that all informat ion isavailable to allow a three way check between the original request , the invoice and thesupport ing t imesheetsAvork dockets.

Re c o m m e n d a t io n : Sec Appendix 5 : Recom mend at ion 15> Only invoices that are fully supported by accu rate t im esh eets and in the required format

should be approv ed for paym ent . Suppl ier engage me nt on the format acce ptable to theCompany wi l l be required.

Re c o m m e n d a t io n : See .Appendix 5: Recommendat ions 3s. 6 7 . \>". 16>- Only invoice s that can be recon ciled back to the original request sh ould he app rov ed for

paymen t . Where there are addi t ional requ iremen ts after the original request has been

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I A R N R O D I 'J RI ; \ \ \ - P R O O R E W JL N T& I N T E R N A L C O N T R O L I N V K SI K , VI IO N J \ N I A R V 2 0 0 8Interim Report to the Steering Group CommitteeP R O \TE & CONF ){)[;M )AL

subm itted to the Divisional Office, these should be documen ted and sent to the D ivisio nalOffice to facilitate the reconciliation of the invoice to the supporting documentation to theoriginal request.

R e c o m m e n d a t i o n : See Appendix 5: Recommendations 37. 62. 66> A review shou ld be carried out of the plant hire and labour databases to ensure that the

databases are accurate and up to date in relation to contractor codes, descriptions andrates.

R e c o m m e n d a t i o n : General> Con sistent proce dure s should be followed ac ross all Divisions in relation to the forms

required to be com pleted , together w ith the roles and respo nsibilities of all relevant IEstaff Instances should not ar ise where inadequate segregation could exist .

R e c o m m e n d a t i o n : General> Respo nsibi l i ty should be assigned to the appropriate individuals to monitor com pliance of

the procurement procedures. The appropriate act ion should be taken where noncompliance is noted,

Inconsistencies were noted in the IMSN procurement process between and acrossDivisions.

In our view there are a variety of reasons for these findings:> There is a lack of training / education in operation in the area of procurem ent'r Th ere is a Jack abse nce of adequately documented proceduresA- There is little evidence of activ e supe rvision or monitoring of procurem ent

compliance currently in place

Detai led recommendations are included in Appendix 5 to address the above issues.

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I ARNROD KIRK \NA P ROC URE M E NT & INTKRN U. CONT R OL 1N\ E S I U, \ I ION 3 P 1 J A M \ N \ 2 0 0 8Interim Report to the Steering (.roup C ommitteePRIV.X IT A CQNRDENTI U.

M A N A G E M E N T OF S T O C K F I N D I N G S

Positive Areas Identified

^ On-going efforts of the Materials Manager in Infrastructure and stock counters toimprove stock accuracy.

> Efforts of certain perso nnel in improving the man ner in winch stock is stored inPortlaoise Depot and the system put in place to accurately record the receipts fromLine-side with the help of the team leaders and Superintendent.

> No issues of non-com pliance were identif ied in relat ion to transfers of stock fromPortlaoise Depot.

Exceptions Noted

Portlaoise Stock: Mo vem ent in - Receipts from Line-side(See Appendix 6; Page 5)

Finding: There is substantial eviden ce of non-com pliance with procedures in relat ion toreceipts into Portlaoise D epot from line-side. Instances w ere noted of differences in therecording of 1) quanti ty of stock. 2) classification of s tock and 3} measu rement of stock fromwhat was sent to Portlaoise Dep ot. For instance, the quantity of sleepers received intoPortlaoise Depot would not agree with what was stated on the 'Material Advice ReceiptNote' related to that stock.

R e c o m m e n d a t i o n : General> We recom mend that standard d ocum entat ion for al l s tock m ovem ents be developed as

well as further training on docum enta tion procedures for all invo lved.

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I \ R N N 6 D E MU -A NA - P R O C U R E M E N T & IN T E RY A L C O N T R O L I N \ E M K , V K O N 3 D ' . J A M \ R \ 2 0 0 8Interim Report io the Steering Cr ou p C omm itteeP RIVAT E & CONF IDE NT IAL

Finding: Significant non -co mp lianc e w as noted in the transaction testing earned out onmaterials transferred into Portlao ise Depot. Please refer to Appendix 6 for a breakdow n ofthe non-compliance.

Recommendat ion: See Appendix 6: Recommendation 3> We recom men d that an indepen dent check of what the Inspecto r has recorded as being

sent to Portlaoise is carried out. for exam ple, by an ADE , prior to despatch to Portlaoise.

Portlaoise Stock: Receipts from Waterford(See Appendix 6; Page 7)

Finding: There is no standard stock movement documentation to record stock transferredfrom Waterford stores to Portlaois e Depot inventory.

Recommendat ion: See Appendix 6; Recommendation 6> W e recom me nd that a stand ard docum ent be put in place to record the transfer from

Waterford stores to Portlao ise D epot, as applies to other lo cations.Portlaoise Stock: Security of Stock at Portlaoise(See Appendix 6; Page S)

Finding: Clarification was soug ht on security proced ures in Portlaoise depot. Fromobserv ations the external secu rity agen ts do not appear to have any formal role in thechecking of goods inwards outwa rds from the Depot. Based on qu est ionnaires returned,vario us accounts have been received on the role of the external se curity co mp any and theirdutie s. As an indep enden t entity, security com panies em ploy ed in this function can and doform an important elem ent of internal control on the move me nt o f stock from Depots like thePordaoise Depot.

R e c o m m e n d a t i o n : See Appendix 6: Recommendation 7f We recommend a full review of Security Procedures and the role of the external securi ty

company engaged at the Portlaoise Depot with the output being a documented Report on

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I A R N R O D E IREAN N - PROCT REAIENT & IN TE RN AL CO NT RO L 1N\ R.S I U , \ HON 3 P ' J V NI W RV 2 0 0 8Interim Report to the Steering Croup CommitteeP R I V A T E & C O N F I D E N T I A L

their responsibilities for control of stock mov eme nts of all entry exit points to the Depot.W e observ ed that there were tw o entry exit po ints at Portlaoise Depot bu t were informedthat there was a third entry''exit po int at ano ther part of the site. Based on this review ,ame ndm ents to the terms of engag eme nt for the securi ty company may be appropriate toexpa nd their role and duties for check ing g oods inwards and outwards from the Depot.All security measures introduced should be subject to audit by management on a periodicbasis.

Line s ide Stock: Materials Taken Up(See Appendix 6; Page 9)

F i n d i n g : There is no specif ic docum ent to record the 'planne d' removal of materials whentrack is being taken up to be used for com par ison against the 'Mate rials Tak en U p' form forwhat is actually removed.

R e c o m m e n d a t i o n : See Appendix 6; Rec om me nda tions 8 & 9> W e recom me nd that a standard do cu m en t be put in place to record what is exp ecte d to betaken up, to allow a comparison with what actually is taken up as when no documentation

of expe cted/planned materials exists , reco ncil iat ion can be diff icult , i f not impossible tocarry out.

Line s ide Stock: Materials Used(See Appendix 6: Page 1 1)

Finding: Issues in IE Stock reports highlight incidences where materials are taken up out ofthe ground yet are not recorded on SAP

R e c o m m e n d a t i o n . See Appendix 6: Recommendation 15> W e recom me nd all stock forms be sent to the Divis ions on a weekiv basis.

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I A R N R O D EI RC A N N - P R O C U R E M E N T & I N T E R N U . C O N T R O L I N V T M K . A E I O N \ \ S ] J W E 2 0 0 8Interim Report to the Steering Group CommitteePU N A TE A C O M I QE N I I M.

Line side Stock: Materials Reclassified(See Appendix 6; Page 12)

Finding: Issues in IE Stock reports highlight incidences where;a. Materials Reclassification procedu res are not followed; andb. Dism antled pa nels are not being reclassified into sleepers and rail respectively,

Recommendat ion . See Appendix 6; Recommendation 1 7r We recomm end that reclassification procedu res be followed in accordan ce with the

Iarnrod Eireann "Policies and Procedures for the Control oflnfrusrrucfure Lineslocks".

Stock Takes(See A ppend ix 6; Page 13)

Finding: Nationw ide counts of l ine-side stock are carried out by Per W ay Inspectors (PWIs),and not counted by independent Iarnrod E ireann Representat ives. Therefore PW Is can returnstock sh eets based on what they know to be recorded on the SA P system irrespec tive of whatthe actual count reveals.

R e c o m m e n d a t i o n : See Appendix 6; Recommendation 19We recommend that both nationwide and cycle line-side stock counts be carried out bypersons indepe ndent to the Per W ay Inspector, or if there are resource lim itations that randomindependent verif ication of nation wide counts takes place.

Finding: Prom our review of discre panc ies in nationwid e cou nts, whilst queried, there is noeviden ce to verify that the explan ations given by those respo nsible are in fact, an accurateexplanation. Similarly, in relation to stock cycle counts, when discrepancies are identified,expla nation s are obtained from those responsible. H ow ever it is not clear whom isresponsible for following up at Divisional level with verification of the accura cy orreasonableness of the explanation provided for the discrepancv .

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I A R N R OD I ;;IRE.A\N - Puoci REMENT & INTERN \L ( . O N nun . I N V E S T I GA T I ON 3U ! J A M un 2008Interim Report to the Steerin Group CommitteePRO VIE & ( OM II)I:M I M.

Recom m end at ion: See Appendix 6: Recommendation 23We recommend additional resources, within the Materials Management Unit, be added toprovide more com prehensive independent mo nitoring.

Movement in - Raw Materials(See Appendix 6: Page 15)

Finding: Not all raw materials delivered into Portlaoise Depot are weighed on theweigh bridge; therefore reliance is being placed on th e supplier for a correct accoun t of g oodsbeing delivered.

R e c o m m e n d a t i o n : See Appendix 6; Recommendation 24We recommend that sand, gravel and cement be weighed on delivery into the Port laoiseDepot. (As and from Decem ber 2007 al l raw ma terials are now being weighed as w itnessedby Baker Til ly Ryan Glennon staff in January 2008).

Recommendations are included in Appendix 6 to address the above findings.

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IARN RO D EIRI-ANN - PR O( I RLM LN I & IN I I .RN O. CO NT RO L INN LSI K; NJ IONInterim Report to the Steering Group CommitteeP R I\ A !'!: ,Track 28 locations

Signalling 6 locationsTelecoms 4 locationsThe procurement section at Inchicore as the central hub for pro cure me nt for thedivision.New WorksTotal of 48 L ocations

_ J

We concen trated on the four m ain h ub locations, taking a top dow n app roac h and carried outa detailed review of the high volum e areas for procurement and for s tock mov ement.

The list of locations visited are as follows:InchicorePortlaoise DepotAthloneLimerickConnolly-

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IARNROD KIRI-AW - PRO< I RILMIA r A I\ n-:Rv\i. C O N T R O L IN V E S T I G A T I O N 3 I m J A M V M 2008Interim Report to the Steering Croup CommitteePHIV\rr A COM-IDi'ATLAL.

MuilingarOriel StreetHeustonPearseWieklow (hue-side)Wexford ( l ine-side)

Docum entary evide nce was gathered at Divisional level to enable a comprehensive systemsreview covering all Per Way locations.

In all. circa 100 meetings/interviews have taken place in the above locations with variousindividuals . These meetings are summarised in A p p e n d i x 2 .

It is intended that for ou r detailed review of Term s of R eference 2 and 4, that we will carryout detailed transactions testing within other locations.

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I A R N R OD I -U R L A NN - PR OC T R I -ML N T & I N T E R N A L C O N T R O L I N V E S T I GA T I ON 2 0 0 8Interim Report 10 the Steering Group CommitteePRIV \IL-: A C'ONi-IDLNTlAi.We have not undertaken any outside third party verification procedures to date as th iselement is mo re approp riate to the Forensic eleme nt of the assignmen t.

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I A R N R OD PI R I W N N - PKOC I R I : MI ; N T & I N T E R N C o v n m i . INN I-STIG \ HON 3 1 , ) \ M 2008Interim Report to the Steering Croup CommitteeP R I \ A R I- & CO N I-1 D[: N R I \ T.

5 . D E T A I L E D FI N D IN G S A ND R E C O M M E N D A T I O N S

The detai l of the f indings and recom men dations summarised in the Executive Sum mary areprese nted in the attached app end ices and cov er the areas of IMSN Procurem ent SystemReview , IMSN Procurement Walkthrough Test ing and a Review of the Managem ent ofStock.

Und er the detai led f indings of procurem ent, there are comparison f indings between the threeDivisions of Dublin, Limerick Junction and Athlone, together with high level c om mo nfindings acros s the three Divisions.

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IARNROD E IRE ANN - - P ROCU RE ME NT & INT E RN W. CONT ROL 1N\ L SIK, \ I IONInterim Report to the Steering Croup CommitteeP RIV AT E & CON F IDE N T IAL

3 f J \NL \in 2008

6 . CONCLUSION

System s review fieldwork was com pleted in January 2008 . Our finalised Interim Report takesaccount of feedback and com mentary from the Steering G roup on the draft Interim Report .

Clarification and agreem ent has been provided on the scope and focus of the forensicexa min ation elem ent of our review-'. We are now procee ding with our Forensic Exam inationProgramme,

At the point that the Interim report is finalised, a presentation can be prov ided to sum ma risethe f indings to the Steering Group and other appropriate representat ives as advised.

B A K E R T I L L Y R Y A N G L E N N O N

D A T E :

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I A R N R O D E I R E A N N - P R O C U R E M E N T & I N T E RN A L C O N T R O L I NV E ST IG A TI O NInterim Report to the Steering Group Committee -31 s t January 2008P R I V A T E & C O N F I D E N T I A L

A P P E N D I X 1T E R M S O F R E F E R E N C E


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I AR N RO D G R E A N N - I N T E R I M R E P O R T - O P ' J A N UA R Y 2 0 0 8 Appendix 1P RO AT E & CONE IDE NT IAET E RMS OF RE F E RE NCE

T E R M S O F R K F P R K N C K :

Our terms of reference were agreed with the Steering Grou p on the 16th July 2 007and our set out as follows:1. Undertake a full review of the current system of procuring plant hire and contractedlabour to include the authorisation protocols, monitoring processes and transactionvalidation involved. This review will take into account work previously undertaken inthis area by larnrod Eireann.

2. Ca ny out an examination of conduct in the acquisi t ion, deploym ent andma nagem ent of services, resources and plant/equipment procured during the periodfrom January 2004 to date and the relat ionships w ith contractors of goods andservices to the Company. Assess the extent of actual loss or misappropriat ion andasses s where potential future risk arises.

3. Carry out an examination of the m anagem ent of l ine-side materials e .g. Rails andsleepers, a particular focus to be placed on the movement and accounting for s tocksinto and out of the Portlaoise Sleep er Plant as the hub distribution and stock pilingcentre.

4. Identify and determine responsibi l i ty for any breach in procurement policyspecifically to identify any neglect to duty or lack of com peten ce in the acqu isition ofgoods and services and to report on areas where loss or misappropriation has occurredand the associate d value and com m ent o n where potential future risk arises.

5. Produce a com prehensive report and therein make relevant comm ents, observationsand recom men dations in each of the foregoing areas of focus.


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IARNROD EIREANN - PROCUREMENT & INTERNAL CONTRO L INVESTIGATIONInterim Report to the Steering Group Committee -31*' January 2008PRIVATE & CONFIDE.NTIAI

AP P ENDI X 2P ERSO NNEL I NTERVI EW ED


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IARN ROD KIR E.\N.N - INTE RIM REPO RT - . '1st Jan uar y 2008P E R S O N N E L I N T E R V I E W E D

APPENDIX 2

Meetings With: Title No of Meetings

Group Interna! Audit Com mittee Meeting !Steering Group Comm ittee Meeting h

Chief Executive. larnrod Eireann On-G oingDirector; Strategy & Business Development On-G omgManager: Cost Audit & Efficiency Unit Oa-G oingChief Engineer, Infrastructure 1

Procurement Manager 5Finance Manager 4Materials Manager 4SAP Personnel!, Materials Manag ement 4Stock Facilitator, Portlaoise 4Accounts Payable Clerical Officer 3Divisional Accountant, Athlone, Infra/MainDivisional Accountant, Infra/Main & SE& THead of IT, C1EManager of ProcurementProjectsProjectsPurchasingSAP Support ManagementSignalling Engineer. SE&TAccountantAccounts Payable.Accounts Pas ableAccou nts Payable Cost Audit and Efficiency unitADE. Athlone. infra M a mAD E. Heu.ston. Infra Ma;n


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IARNROD EIREANN - INTERIM REPORT - Jlst .January 2008P E R S O N N E L I N T E R V I E W E D

APPENDIX 2

Meetings With: Title No of Met tings

Divisional Engineer. Limerick & AthloncExecutive BuyerFinance ManagerFinancial AccountantFinancial ControllerMead of Group internal AuditInspector. Athlonc. infra. MamInspector, infra-Main & SE& Tinspector, Pearse Station. Infra/MainInternal AuditPlant Co -Ordinator, New WorksPO ExecutivePO ExecutivePO ExecutivePO ExecutiveProcurement ManagerProduction ManagerPurchasingRaw Materials Mgr, PortlaoiseSAP PersonnelSAP PersonnelSenior Purchasing ExecutiveSenior Purchasing ExecutiveSE&T Finance ManagerSE&T InspectorSE&T Inspector. Mulligan SETSE&T inspector. .SE&T'SE&T New Works Construction ManagerSignalling Engineer. SE&TStock Facilitator. Portlaoise

Stock ProccNsor. Vorth W.ii!


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L AR NR OF ) K L R E A N. V - P R O C U R E M E N T & L \ T E R \ A E C O M ' K O L I W E S T I G A H O NInterim Report to the Steering Group Committee -31" January 2008P R I V A T E & C O M - I D K M T \ E

AP P ENDI X 3I N F O R M A T I O N R E Q U E S T E D


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IARNROD EIREANN - INTERIM REPORT - st January 2008 APPENDIXI N F O R M A T I O N R E Q U E S T E D A N D R E C E I V E D

Requested Received

j A tjc!;iif: organisational ch.rt ideiUi'ying reporting lines and resnon


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IARNROD KIKEANN - INTERIM RE PO R T- 3b i January 2008I N F O R M A T I O N R E Q U E S T E D A N D R E C E I V E D

APPENDIX 3

Procurement1 Framework agreement m piace2 Pre-Qiiahhcanon Questionnaire3 Latest draft of nevv framework4 Con tracts lor SLT-Yfiin; Now Work*5 'Mini-tend er' example6 Procurement Evaluation Crstena . Award cntera7 Mon ey being spent annually with each contractor

Procurement1 Work instruction (masterfile; ut;h now diagrams

Plant hire Tender ProcessOrdering MethodologyI fire Receipt

2 Contractor Labour contracts - showing procedure3 Framework C ontract lor Services sn SE&T4 Plant Mire Work Instruction5 Internal Memo re Plant Mire Control 20046 Plan! Hue spend 2006

AW' Works (Finance)1 Audit Workings fife Sample Test2 Authorisation levels of New Works start"

ll'frus!ri'


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IARNR OD EIREANN - INTERIM REPORT - st January 2008 APPENDIXI N F O R M A T I O N R E Q U E S T E D A N D R E C E I V E D

Requested Received^HMMH^- Croup Interna! Audit1 Internal Audi! Report IVs;;ny S.m'.r'es - lUriher meeum j heki 26-Sep-n7 : i -Oct-07JHHHHP' AV>r

) Power point preservation from ir.vcnng 04-Of.-0 72 Organisational Chan - received 0-t-( ki-O " (;>-


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I AKMUM) KHU: \NN - PRO( FRFMFNT & INTERNAL CONTROL INVESTIGATIONInterim Report to the Steering Croup Committee -31" January 2008PRIVATE & CONFIDENTIAL

A P P E N D I X 4PROCUREIMENT SYSTEM REVIEW

- P R O G R A M M E O F W O R K

- FINDING & R E C O M M E N D A T I O N S- S A M P L E Q U E S T I O N N A I RE & R E S U L T S


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I A R N R O D PI R E A N N - PR O C U R E M E N T JT I N T E R N A L C ON T R OL I N V E S T I GA T I ON . ! /> />/ : \ / ) / . \ 4

P R I VA T E & C O M T O E N M A E

P R O C U R E M E N T S Y S T E M R E V I EW -P R OG R A M M E O F W O R K


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IA R N R OD KIRI: VNN ... [NTICRIM RI:I>ORT tV .J VNV AR\ 2 0 0 8 . \ P P H M M \ 4PKJ\ \ 1 [ & (.".'0\ HI) J:\TI.\LI'ROF I RIAII NT SVS I'i 'M K; \ F [ \\P R O G R w o n ; o r W O R K

P R O G R A M M E O F W O R K I N F R A S T R U C T U R E M A I N T E N A N C E , S F & T A NDN E W W O R K S ( I M S N ) P R O C U R E M E N T S Y S T E M R E V I E W

Information Gathering and Exam ination through Workshops, Interviews andQuest ionnaires

Th is section of our report presents the interim findings and recom men dations made inrelation to the workshops and interview s con ducted as well as from exam ining existingprocurem ent documentat ion under Term of Reference 1.

Th e objec tive of our work w as to establish at a high level the current m odel ofpro cure me nt which is operating within the organisation and the quali ty of the informationsys tem , SAP, suppo rting this function. A comparison was then carried out to a BestPrac tice Procurem ent model identifying the key structural areas for impro vem ent.Ou r work consisted of the fol lowing for Infrastructure Maintenance SE& T and N ewWorks ( IMSN).

1. IMSN Procurem ent Model Rev iew

> Visited the fnchicore P urch asing dep artment and discussed the current IMSNprocurement model operating within the business and staff daily activ ities duties;

^ Carried out a high level review of the Policy and Procurement Manu al and otherprocu rem ent do cume ntation w hich was provided bv manag ement and functional staff:

^ Carried out a workshop with procurem ent m anagement and execut ives to documentthe existing procurement mode!:

^ 1 ssu ed a qu esi\o nn aire sheet to IM SN pro cure ine;it s!aff for c;i>n!ci!oii:A- Docu men ted our und erstand ing of the procedures in place as a result of our

workshops and quest ionnaire: and


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F ARNROO EIREANN - i\< E R IM R E POR T I F ' .1 W I \R Y 2 0 0 8 A PPE N D I X 4PR I V V I E & C o MTOE VITALPR OO RL M EN l S \ S T E M R E V I E WPR OGR A MME OE W OR K

> Identified issues and ma de recom men dations for impro vem ents which w as rev iewedwith m anagement for app roval.

2, SAP I.T. System Review

r Visited the C1E G rou p IT office;> Carried out a review of current configuration and setup of Materials Management

Module and Project Module;> Reviewed the ava ilability of detailed reports;> Documented our un derstan ding of the procedures in place as a result of our

workshops and questionnaires; and> Identified issues and make recom mendations for impro vem ents w hich is reviewed

with managem ent for app roval.Meetings

We met with the following individuals as part of our walkthrough tests;

> Clerical Officers *2> Procurement Ma nagers *2> Senior Executive Procurement Officers *2> Executive Procurement Officers *4> Store Manager * 1> SAP Materials Module Expert m Group ITr SAP Financial Mo dule Expert in Group IT

SAP CO Module Expert in Group IT^ SAP Projects Mo dule Expert in Grou p IT^ Head of Group IT^ IT Man auer


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I A R N R OD E I R E A W - I N T E R I M R E P O R T - . M " 1 J A M A I S 2 0 0 8 A PPE N D I X 4P R I V A T E & C O N f - I D E M | \ LPRoc;i R I : \ n . \ r SN srr ; \I R r.\ IEWPR OGR W I ME OE W O R K

Question naire

A questionnaire has been circulated to all procurement management, senior executives,executives and administrative staff within the IMSN procure men t departme nt, a total of 8in all. We have gained valuab le feedback which is included in this Interim Report.

Reporting

Our findings and recom men dations are set out below.

Acknowledge

During the course of our workshops and fieldwork, we met with a number of personnel inthe CIE G roup IT and Inchicore IMSN Procuremen t departm ent, We are grateful for themanner in which larnrod Eireann staff facilitated us, for the time made available to us andalso for the high level of courtesy, assistance and cooperation afforded to us at all timesduring the assignment.


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I A R NR O D E I R E A N N - P R O C I R K M K NT & I NT E R N A L C O M R UI I N\ I;S ! K. A T I ON A t'l>I:\dix 4Pfil\ATt"& CONTIOI-NN.AT

P R O C U R E M E N T S Y S T E M R E V IE W -F I N D IN G S & R E C O M M E N D A T I O N S


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IA R N R OD E I R E \ N \ - I N T E R I M R E POR T A C ' .1 \N E V R N 2 0 0 8 AIM>EMMX4P l i ) \ V I E & ( O M T D I . N N U .PROCUREMENT S I STEM REVIEWFINDINGS & RECOMMEND VITONS

F I N D I N G S & R E C O M M E N D A T I O N S

IMSN Procurement System Review findings and recommendations are coveredunder the following headings:

I H E A D I N G P A G E

Review of the existing procurement orga nisation al structure s in operation 5IMSN Procurement Organisat ional Compliance wi thin larnrod Eireann 6Procurement Operat ional Requirements wi thin Infrastructure Maintenance. SE& T andNew Works 7Procure men t Spe nd Classification w ithin Infrastructure Mainten ance, SE&T and "NewWorks 8Procurement Suppl ier Base Development wi thin Infrast ructure Maintenance, SE& T andNew Works 9Procurement Kno wled ge D evelopment wi thin Infrastructure Maintenance, SE&T andNew Wo rks 11Procu reme nt D epa rtme nt skil l-sets within Infrastructure Maintenance. . SE& T and NewWorks 12Procurement Efficiency Measurements (KPls) wi thin Infrastructure Maintenance. SE &Tand New- W ork s 13SAP IT review within Infrast ructure Maintenance, SE &T and New Works 13IMSN Procurement Svstem Review-Quest ionnaire \5


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i u m d n E im - ; w v - I v m m i R E P O R T - 3 P ' J A M \r\ 2008 A P P E N D I X 4P R O v n : & C O M ! U I : M I \ I .P R O T I R I : M E M S \ S R R : M R E \ 11:WF I N D I N G S & R I: C O M M I O L ) V I T O N S

Review of the existing procu remen t organisational structures in operation.

FindingOur workshops and questionnaire indicated that:

^ Tw o procurem ent organisational struc tures currently exist within Iarnrod Eireann,both operating to different standard s. Th is does not reflect best practice.

> Curren tly the IMSN procurem ent organisa tion lacks required high level guidance andsupport to ensure corporate acceptance of governing procurement policy, proceduresand initiatives.

Re com m endation1. Ch ange the current procurem ent struc ture within the organisation and rather than

having two separate procurement structures in both 1) CME and 2) InfrastructureMaintenance, SE&T & New Works (IMSN) have one procurement organisation. Thisshould in turn be integrated into the CIE Group procurement structure.

2. Create a new position as overall Head of Procurement of Iarnrod Eireann. Have thisposition take on Board reporting duties and m anagement of the implem entation ofone C orpora te Procurem ent Strategy. To our kno wledg e ill is position does notcurrently exist.

T Introduce and brand a new procurement model with a Bo;!i\l approvedcommunication and appropriate change-management p);m. This model 'Aould need tobe designed with the specific needs of the organ isation as its locus


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J VRNROI) 1'IRK. \ \ \ -INTERIM REPORT A F' J \ M 2008 APPENDIX 4PRO A IT; & CONFIDENTIALP R O C L I U A ! E V ) S N S T E M R [ A IE\SF I N D I N G S & R E C O M M E N D W I ON S

IMSN Procurement Organisational Compliance within larnrod Eireann

Finding> No Manager or Senior Executive Buyer was aware of the existence of a Corporate

Board Proc ureme nt Strategy for the larnrod E ireann Organ isation for InfrastructureMaintenance, SE&T & New W orks) . A number of procurement staff who completedthe ques tionna ire are aware of som e but not all com plianc es which impacted on whatthey procured. See questionnaire result findings 1.1 to 1.6 outlined below .

Recommendation4. Create a Corp orate / Board Pro curem ent S trategy D ocum ent for the entire

organisation which sets a clear framework for procurement throughout theorganisation. T his will allow the Head of Procurem ent to draft up a ProcurementOperational document which would accomplish the following; A mission statement;* Ow nership, monitoring and review; Role, respo nsibility and functions of all procurement staff clearly defined; Establishment of standard work practices for all staff involved in the procurement

process; Com pliance to regulations to ensure continuo us compliance to current and

pending legislation - and the consequ ences of non -comp liance;* Procurement policy and strategy implem entation; The Framework of Procurement of ma jor services goods and partnerships;

1 he development of contract management procedures and guidelines;


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I A R N R OD FI R E A N N - I N I T R I M R E PO R T 3 F ' J A M ON 2 0 0 8 A PPE N D I X 4PR I V A TE & C ON FI D E N T I A LPROO LREM EN 1 S1* STIAL RE VI EWFINDINGS A RECO MM END AT IONS

" T he integration of a financial managem ent system w ith the procurement process: Integration of IT system s such as SAP and other e-procurem ent tech nolog ies with

the procurement process:" Supplier and other 3 K : party extended supply-chain integration Performance measurem ent (key performance indicators (KPIs); Tendering / contracts arrangem ents; On-going monitoring and audit of procurement systems; and Continuous improvem ent review

Procurement O perational Requirem ents within Infrastructure Ma intenance, SE &Tand New Works

Here we review how the IMSN procurement operation was being managed and controlledwithin the area of review through established procurement operational documents.

Finding> The IMSN procurem ent function is currently serving as an adm inistration function

supporting the tendering process at the expense of other key procuremen t activitiesthat are not being addressed such as: Systems and KP1 de\ eiopm ent: implem enting cost >a\ ings prog ram me s:


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IARNROD EIRI: \ N \ -INTCRIM RITORI - JAM AIO 200 8 ,\M :N DL \ 4PRO UT: & C OM-IDL VITALP R 0( T R L MLNT S\SRL\! RL\ I{'WFINDINGS & RECOMMENDATIONS

" Market analysis;" Benchmarking;" Supplier review; and" Audit ~ Compliance

> The majority of IMSN procu rement staff who comp leted the questionnaire were notaware of the need for key operational d ocumentation w hich if developed would assistthem manage a high volume procurement organisation.

Recom m endation5. Review current process es for non-value activities currently being performed by IMSN

procurement and establish a programm e of value-added procurem ent activities. "I biswould be defined in the overall Procurement Strategy do cum ent.

6. Establish key opera tional d ocume ntation for use within the IMSN procurementdepartment which w ould establish a framework for cond ucting performance reviewsagainst established targets.

Procurement Spend Classif ication within Infrastructure Maintena nce, SEAT andNew Works

Here we review procurement reporting and data analysis capabilities, within SAP. anddetermine what reporting tools exist to assist staff com plete these task s for data within theenterprise and extended supply chain.


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1 \ K \ R 6 I-JRK \NN IM S.RIM REPORT J.WT. \\< \ 2008 APPENDIX -4PR I\ VIE & COM IDEN N VI.P u o t . t RE MEN ! SYSTEM REVIEWK! N DI N(;s & R ECOM \ i E N D \ I I Questionnaire results indicate that the ma jority of the IMSN procurem ent

management and staff do not conduct data analysis reports on spend as part ol theirdaily tasks. This is a concern as it is not practical, with the organisation's volume andvalue-spe nd, that an appropriate review of spend could be completed other thanthrough p redefined reports. This raises concern s that this area of review is currentlynot being addressed within the IMSN procurement organisation and could allow torinvalid transactions to be processed without notice. Currently procurement personnelspend time conducting singular supplier purchase order enquiries and are limited intheir reporting capabilities.

Recom m en dat on7. Develop reports which would assist managem ent and staff analyse:

Spend; Understand spending patterns;* Review status of purchase orders; Track spend through plant hire and labour and also material types: and Self audit to ensure compliance.

This work sh ould be done in conju nction with the SAP IT team and finance team topromote a com mon set of standard reports within the organ isation.

Procurem ent Supp lier Base Development within Infrastructure M ai menance.SE&T and New Works

Here we review how the procurement operation manages nnd internets with theorganisations supplier base.

Paae o of I "


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I \ R N R O D F . I R E A N N I N T E R I M REi'our 3l> i ,J wi \in 200S \ M ; M ) E \ 4PRIVATE & ( OMTDI- M I \EP K O C I R E M E NT S \ S I E M R E VI EWFI N D IN GS A R E C O MM E N D V MON S

Finding^ Major key areas of supplier base developm ent are not being utilised m the areas such

as: Supplier integration: implementat ion of a quality system: Transaction docum entation standardisation; and Tran saction inputting verification.

This is suppo rted by other findings, illustrating that procurem ent are mainly involved inthe administration of the tendering process and other key areas of procurement have goneunaddressed.

Recommendation8. Develop a plan for the effective developm ent and review of the supplier base and

allocate responsibilities to senior procurement executives to achieve the goals in thisplan.

9. Review and resource the skill-sets of current IMSN procu rement managem ent andtheir ability to proactively manage procurement resources allowing them toconcentrate on value added procurement activities rather than non-value procurementadministration activities.


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I \H \R O D PI R E A N N I NT E RI M R E POR T - 3 1 " .) \N L \R Y Z OOS A E E E N OI X TP R O M T : & C O M I D EM I WP R O ( i REM ENT S^ STEM RE \ IEWPINI)INC;S & RECOMMEND U IONS

Pro cure me nt Knowledge Development within Infrastructure Maintenance, SE& Tand New Works

Our objective in this case is to determine the procurement skill-sets and knowledgewithin the business and how this is being developed.

Finding> The m ajority of IMSN procurement staff indicated in the questionnaire that the

organisation was limited in terms of procuremen t knowledge and in general, did notunderstand the implications that certain legislation such as Environmental, Health &Safety and Quality have on the procurement p rocess. Also no procurement knowledgedevelopment programme exists .

This wo uld be deemed a critical part of an effective procurement model. O verallpro cure m ent know ledge within the organisation is limited and poses a problem for keyfunctional users who participate in the procurement process.

R ecom m en dat ion10. Set in place a Training and Development procurement programme which would

address these issues and strengthen the procurement process. Create super user groupswithin key area s of potential risk and reward em ploye es for achieving differentexpertise levels within procurement and SAP. Consideration would have to be givento w he the r current interna! resources are sufficient to achieve this task.


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I \ R \ R O N ENU: . \ \ \ I M T R I M R E P O R T - - 3 E ! J A M : \ R\ 2()(HS \ P IM :M ) I \ - JPRIVVH; & C O.N FIO E M ? A I.P R O ( i R C M E V j S Y S T E M R l . \ J j.WF I N D I N G S & R E C O M M E N D A T I O N S

Procurem ent Departm ent skill-sets within Infrastructure Maintenan ce, SE&T andNew Works

Here we asked the personnel within the IMSN procurement department to rank theirskill-set levels within different categories.

Finding> The questionnaire highlighted areas of concern where resources deemed themselves

nor to have adequate skill-sets i.e. benchmarking, market, planning and product /com mo dity know ledge. T he areas where they felt they were strong is as a result of thetendering process which consumes the majority of their time i.e. pricing, negotiations,sourcing, selecting and SA P system s. The con cern here is the lack of attention toother key areas of procurement and the potential consumption of procurement time inadministration duties involved with the tendering process.

Re com m en da f ion11. Review the potential n on-v alue ac tivities wh ich consum es the buyers tim e in the

tendering process and assign these tasks to a more junior resource thereby allowingthe buyer to concentrate on more value-added activities.

12. Clearly identify areas which the buyer or procurem ent ex ecutive should c onc entra tetheir time and effort.

13. Set in place a programme of skills development within the procurement organisation.


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I A R N R O D E I R E A N N - I N T E R I M R E P O R T -- 3 F .1 A M \ I N 2 0 0 8 A P P E N D I X 4P R O A T E & C O N E I D E N T I \EP R O C E R E M E N E S E E M R E M E WFINDINGS & RECOMMEND UIONS

Procurem ent Efficiency Me asurem ents (KPIs) within Infrastructure Maintenance,SE&T and New Works

Our review exa mine s the existenc e of KPIs and their use within the IMSX procurementorganisation.

Finding> No procurem ent KPIs exist currently within the above areas of review which would

be expec ted to be in operation in an orga nisation of this size. KPIs are there to assistmanag ement measure and monitor performance or compliance within key functionalareas of procurement at a high level. It allows them to create exception reports, usingSAP, which would review large v olumes of data and highlight varian ces which needfurther investigation.

Recommendation14. KPIs are an im portant m anage me nt monitoring tool which are necessary when

dealing with large volume s of data. M anagement should establish key KPIs forprocurement and ensure that they are in operation and used as a management tool.

SAP IT review within Infrastructure Ma intenance, SE& T and New W orks

Mere we review how SA P is configured within the .MateriaIs Module (M M) & FinancialModule (FI) and how the business is utilising the current SAP IT expertise available.

Finding'Fiie IMSN Procurem ent Dep artmen t has a low l e\e i of skiM-sots within SAP. This :sapparent from the workgroups held with end-users and m eetings w uh die SAP ITgroup. The SA P FF group are available but under-utilised by die IMSN Procurement


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I A R N R O D I V I R E A N N - I N T E R I M R E P O R T - . I F .) W I A R Y 2 0 0 8 \ I > P E M ) I \ 4P R I V A T E & C O N E I D E N T I A I .P L U X E R E M E N R S Y S T E M R E \ II.WF I N D I N G S & R E C O M M E N D V R IONS

Department. The imp lications of this are the under-utilisation of the SAP applicationwithin procurement.

r A request was m ade for the financial and procuremen t reports for plant hire andlabour, split by Infrastructure Ma intenance, SE& T and New Works, for the years2004, 2005, 2006 and 2007 . This proved im possible to generate m SAP financial* asthere was no split in the ledger cod es for plant hire and labour coverin g the aboveperiod requested. In the materials m odule this is also provin g difficult to obtain. Phisinformation by plant hire and labour is still under review .This will have im plicatio ns for the forensic elem ent of our review.

R ecom m en dation15. Set a training programme in place to address these issues.

16. Determine the procurem ent reporting requirements and configure SAPfmancials/materials mod ule to allow for this. This requires a cross functional team toget together consisting of SAP IT group, finance and procurement to address thisissue.


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I A R N R O D E MU : VN \ - I N T E R I M R E P O R T - 3 V . J A M w u \ 2 0 0 8 A P P E N D I X AP R I V A T E & C O N IT D I.N T I \ EP L KK L - REM EN T S ' TS I EM REV I EWC>I I SNONN \IRI; RESET, IS

IMSN Procurement System Review Questionnaire

The questionnaire was designed to evaluate the procurement environment and assess theperformance of the IMSN procurement department staff and management. The findingsbelow indicate that staff and management have concerns with regard to the currentprocurement model and this is represented in this Report.


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P ^ V - M E & ( O N I | |) |; N H \ I.

P R O C U R E M E N T S Y S T E M R E V I E W -Q U E S T I O N N A I R E R E S U L T S


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Iarn rod Eireann - Interim Report - 31st Jan ua ry 2008 APP END IX 4Private and ConfidentialProcurement System ReviewQuestionnaire Results

Total Consolidated1. Procure men t Compliance Yes .No Total

!. I Procurement Strategy Document Q1.1 0% 100%1.5 Procurement Environmental Feglisauon QS.5 0" y 100% S1.4 Procuremen t Health and Safety Leglisanon 01.4 !3% 88% ,S1.3 Procurement Feglisation (Local Goverment & FI'; Q F3 1 3% H1.6 Procurement Code of F.thies Document QS.6 ! 00 8 ' s4 ." Supp l ier Speci f icat ions For Select ion O 4 0 S

Ove rall av erage d result 49",, 51"..


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Iar nro d Eireann - Interim Rep ort - 31st Jan ua ry 2008 APPENDIX 4Priv ate ami ConfidentialProcurement System ReviewQuestionnaire Results

Total Consolidated

5. Procurement Knowledge Development Ves No Total5.2 Requisitioned Q5.2 0% 1 ou % "75. J 0 Environmental Q5.10 1 3% s s u 8

5.7 Quality Q5.7 14% 86% 75.1 Users 05.1 14% 86 (- "75.9 Health and Safety Q5.9 25% 75% .85.3 Approvers Q5.3 63% 38",) s5.5 Sup plie rs Q5.5 63% 38% 85.6 Finance Q5.6 63% i.yi)/O II s5.4 Buyers Q5.4 75% 25% 85.8 Audit Q5.8 75 % 25% 8

Overall averaged result 40% 60%6. Procurement Department Key Skill Sets Ves No Total6.8 Benchm arking Knowledge Q6.8 13% 88% 86.11 Supply Chain Knowledge Q 6. il 17% 83% 66.7 Market / Benchm arking Knowledge Q6.7 38% 63% 86.6 Com modity / Product / Material Knowledge Q6.6 38% 63%


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IA R N R O D E I R E A N N - P R O C I R E M E Y J & IN T E R N \ L C O N I R O L I N \ ESTFGA I IONInterim Report to the Steering Croup Committee-3I s ' J a nu an 2008P R I V \ T E & C O N E I D E N T I \ L

AP P ENDI X 5P R O C U R E M E N T W A L K T H R O U G H

- P R O G R A M M E O F W O R K- F I N D I N G S & R E C O M M E N D A T I O N S


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I A R N R O D F I R F \N N P R O O R F M I N I & | N I I; R X M . ( ON I R O I . } N \ E S T I M A T I O N iPl'l. \p/ \ 5

P R O \ I C & C O N M D I . N I ) \ |

P R O CU R E M E N T W A L K T H R O U G H -P R O G R A M M E O F W O R K


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I A R N R O D I-JR L A W I N T E R I M RLI >ORT AE ! .1 V M A in 2008 \ IMM: N D I\ 5P R I V U I ; & F O N N D I . N N M .PROCl RLMLNT \\ vLKTUROLGUH I G H I .L V L I . C O M M O N M N D J N G S T O U L T H R I L D O I M O N S

Information Gathering and Examination

Tins section of our report presents the draft interim findings and recom men dations madein relation to the walk through tests conducted under Term of Reference 1.This work consisted of a high level review of the system s, con trols and procedures inplace at the Dublin, Limerick and Athlone Divisions in relation to InfrastructureM aintenance and SE & T. The table below summ arises the areas reviewed at eachDivision which we visited, based on our discussions with Divisional personnel.

D I V IS IO N I N FR A S T R U CT U R E M A I N T E N A N CE S E & TDublinLimerickAthlone

Plant and labour LabourPlantPlant and labour

Plant and labourPlant

In addition we reviewed the New Works Construction Unit (Plant Hire & ContractedLabour) and SE&T Telecom Maintenance (Labour) and SE&T New Works (Plant,contracted labour and contracted electrical labour), which are all located in Dublin.

The objective of our work w as to ensure that up to date docu m ente d procedu res w ere inplace, which represent good practice and which are being consistently applied within theDivisions and between Divisions. In order to achieve this, we carried out a walkthroughof the systems. proce dures and con trols in place as the three Divisions to obtain anunderstan ding of these. We also selected 'ransac tions in each area a bo \e at each D ivisionto ensure that work earn ed out had been correctK requisitio ned, authorised at theapprop riate level, proce ssed co rrectly and paid in a fully transparent ma nner.


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1 V K NR O D F .I RI- : \ NN | N H R I M R E PO R T .) \ M \ U\ 2 0 0 8 A P P E N D I X 5

P R I W I E & C O M T D E V E I \ I.PR O C I R I .M I .N I W V I. K l i i R O I 0 1 !I II I .IF I.1A ! i CON! M ON i I N D J N O S T O A I J . T UR K! -: D I V I S I O N S

Our work consisted of the following;

r Visited the three Divisions and discussed the system s, controls and procedures moperation, through interview w ith the relevant' individuals;

> Carried out a high level review-' of the Policy and P rocu rem ent Ma nual and the'Plant Hire in the Infrastructure Division s' docu me nt, dated August 2002;

^ Considered w hether documented policies and procedure existed and whetherthese were suitably drafted, provide for appropriate levels of segregation of dutiesand that tasks have been appropriately assigned;

> Carried out a walk throug h of a sample of transactions;> Reviewed documen tation as part of our walkthroughs, for example the 'Request

for Plant and M achinery Hire' form, the 'Request for Requisition1 form, the'Request for Hire of contractor for Signalling & E lectrical ' form, SAP p rintouts,contractors in voices and sup porting time sheets/wo rk dock ets to support our draftinterim findings;

> Documented our understanding of the procedures in place as a result of ourwalkthroug h visits and presented these to the Division s to confirm the accuracy ofour understanding of procedures; and

> Identified issues, both positive areas and areas for imp rovem ent as a result of ourwalkth roughs, which were also forwarded to the Division s in order to confirm theaccuracy of these issues

Meetings

We met \\ ith the following nu lo iduais as pan of our walkthrough

^ Clerical Officers> Perman ent Wa> Inspectors;

SE&T !nspect>;r>:


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Put\ vn: A ('osniM. v! iP R O C U R E M E N T W VL.K 1 I IROL ( ,11H I G H L E V E L C O M M O N F I N D I N G S T O M E I H R E E D I V I SI O N S

^ Assistant Divisiona l Engineers;^ Divisional Eng ineers;'r SE&T Engin eers; and^ Divisional Ac coun tants.

Appendix 2 sets out details of the individuals we met with during our walkthroughs.

Reporting

Our Endings are presented and recommendations are set out below as follows;

> High-level com m on findings;> Dublin Divisio n findings;> Limerick Division findings;> Athlon e Div ision findings;> New W orks Con struction Unit findings;> SE&T Telecom Maintenance f indings;> SE&T New Works f indings; and> Differences in Divisional procedu res.

Further findings and recom men dations may be noted during our jieldwork under ico nsof Reference 2 and 4.

Acknowledge

Dunne (he course of our walkthroughs, we met with a number oi personnel at IE. Ac arcgrateful for the m anner in w hi eh IE staff facilitated us. for die time made awulab ie to usand also tor the hmh level of courtesv. a ssistance ano co ope ration .w'orueo to us at an

Paae oof


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I A K V R O D F I R E A . N N - P R ( ) ( I R(;\||.; V I & I M K R \ A L . C ( ) M R O i . 1 N \ | > L ! ( , \ ) | O \

P R J \ A E E & C O M T O I : M T A I .

Am:\t)i\ 5

P R OC U R E M E NT W A L K T H R O U G H -F INDI NG S & RECO MM ENDATI O NS

COMM ON HIGH LEV EL FINDINGS TO ALL THREE DIVISIONS


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I \KNR6dKJRI: V\\ IVii.RiM RlJ'OI? r 1 O J \M \iO -008 \ I ' P ! . \ I ) I \ 5P R O V1I: & C O M M N V R I \ LP R O U R ! M I N I \ Y \ L K I I F R O L O HH I G H I .I O I:I. C O M M O N R M M M . S r o \ U . i U R I C N I \ M O N S

HIGH I.KVKI. COMMON FINDINGS ro ALL THRKK D I V I S I O N S

High Level tin dings and recommendations are covered under the followingheadings:

!U E A [ ) i s ( ; _ _Documented Procedures 4Mini-Tendering 5Fi ling of Do cume ntat ion 8

Doeu men ted P roced u re s

Finding> Detailed proc edur es followed at the Dublin, Limerick and Athlone Division inrelation to the following areas for Infrastructure Ma intenance and SE& T are not

cu ire n 11 v do c u m en ted :

The request for plant hire/labour by the Permanent Wa y inspector SE &TInspector;

The approval of the request and the selection of the contractor: The valuation of the work for the selected co ntractor; The input of the details into SAP and the creation of a service entry tonn. w here

required; and The receipt. re\ iew and approval of the contracto r invoices and 'he release oi die

sei'\ ice entr\,

> (Jur discu ssion s w ith a num ber of D ;\ i.oona! per>v\nnel nuhcreceived docu mented procedures when the\ co mm enced thei r iarea. nor did thev roe en e an\ iormn) trammi.:.

-ated Fi.ii the\ Fad not


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I \R M < O U I ' J I t i : \ \ \ I N i i .R I M R E P O R T A D J \M VR > 2 0 0 S \ P P I : M ) | \ 5

P m v W E & C O M F {>[. \ N \I .Pnon R E M E N I W A E K T U R O I C MM I C H I . E V E I . C O M M O N L I M ) I X R , S T O M I. I I I R E E D O I M O N S

We do acknowledge that a Policy and Procurement Manual, a SAP Manual and the "PlantHire in the Infrastructure Divisions' guideline exist. H owever, these docum ents do notadequately set out the operational p rocedures required to be followed in relation to theprocesses listed above.

In addition, the findings noted by us during our walkth rough, reflects the disparity ofprocedures that are currently in operation within and between the three Div isions,

Recom m en elationJ. We were informed by a Divisional A ccou ntant that a group has been set up to

develop documented procedures in the areas set out above. Once the aboveprocedures are finalised, these should be circulated to the relevant staff mem bers,reviewed on a regular basis and updated as and when required.

2. This doc um ent should also set out the arran gem ents to be followed should certainstaff not be available to carry out specific tasks (i.e. during holidays).

3. All propo sed proced ures should be introduce d in the context of the broaderrecommendations on a procurement model contained elsewhere in this Report.

Mini- rendering

We met with the Infrastructure M aintenanc e Procu remen t Departm ent to obtain anunderstand ing of the Mini Tend ering P rocedures, winch were reeentlv introduced at lb.As part of our work, we selected two transactions during our visit to one

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